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Dominos required to pay $18,000 penalties issued under the Franchising Code of Conduct

The ACCC has issued its first penalties under the Franchising Code of Conduct (Code), fining Domino’s Pizza Enterprises Ltd (Domino’s) $18,000.

Two infringement notices were issued to Domino’s for failing to provide an annual marketing fund financial statement and auditor’s report within the timeframe specified under the Code. Whilst Domino’s provided these documents to its franchisees, they were provided in late 2017 for the 15-16 financial year, therefore well outside of the required timeframe.

Requirements under the Code

The financial statement is required so as to inform franchisees in relation to income and expenditure, particularly with respect to advertising and marketing, where franchisees contribute to a marketing fund. This statement should be provided to franchisees within 4 months of the end of the financial year. The Code specifies that the marketing fund be audited (unless 75 percent of franchisees agree by vote that this is not required), and once completed, provided to franchisees within 30 days.

ACCC powers under the code

Since the amendments to the Code in January 2015, the ACCC can issue infringement notices where they believe an alleged breach under the Code has taken place. Currently the penalty amount for an infringement notice is $9,000.

Court civil penalties of up to $54,000 can also be ordered for certain breaches of the Code which include the provisions relating to marketing fund statement and associated reports.

The ACCC has announced that the enforcement of industry codes are a priority for them in 2017, particularly having regards to small businesses. These first penalties are a demonstration of this and serve as a warning to franchisors about the importance of compliance with the Code.

If you have any questions relating to your obligations under the Code or franchising more generally, please contact Paul Kirton.

This article was written by Georgia Davies-Jackson, Lawyer – Commercial.