Domino’s Pizza Enterprises Ltd (Domino’s) has recently paid $18,000 to the ACCC in relation to two alleged breaches of the Franchising Code of Conduct (the Code). According to the ACCC, this represents the first ‘penalty’ for an alleged breach of the Code since it was revamped in 2015.

The ‘penalty’ was paid after the ACCC issued Domino’s with an infringement notice. Under the Competition and Consumer Act 2010 (the Act), the ACCC can issue infringement notices if it has reasonable grounds to believe that a person has breached certain parts of the Code or the Act. According to the ACCC’s enforcement guidelines, infringement notices are likely to be issued for relatively isolated, minor breaches.

The infringement notices related to Domino’s failure to provide documents about its marketing fund. In many franchise systems, franchisees pay into a marketing fund. According to the Code, franchisors must maintain a separate bank account for this fund and must generally use it for legitimate advertising expenses.

Unless 75% of all franchisees agree, within 4 months of the end of each financial year franchisors must give franchisees a copy of the annual financial statement for the marketing fund. Franchisors must also have the marketing fund audited and provide franchisees with a copy of the auditor’s report within the same time period.

Domino’s admitted to the ACCC that it had not provided its franchisees with the 2015/16 annual financial statement or auditor’s report until February 2017 (that is, about 4 months late). The ACCC issued an infringement notice in respect of those two breaches of the Code.

Domino’s elected to pay the infringement notice. The Act provides that payment of an infringement notice:

• does not constitute an admission that the Code has been breached; and
• means the ACCC can’t bring proceedings against Domino’s for the breach.

Accordingly, while the ACCC has referred to the payment as a ‘penalty’, there has not been any finding of wrongdoing against Domino’s. Rather, the payment effectively ends the ACCC’s investigation into the alleged breaches of the Code. However, the payment does not prevent the ACCC investigating and prosecuting Domino’s for a different breach of the Code, nor does it require the ACCC to keep the infringement notice confidential. The fact that paying the infringement notice is not an admission of guilt may get lost in the surrounding publicity, especially when the word ‘penalty’ is used.

There are some valuable lessons from these events. Firstly, the ACCC has signalled an intent to pursue franchisors for breaching the Code. Secondly, infringement notices can be both an effective way for the ACCC to enforce breaches of the Code and allow parties to quickly (and relatively cheaply) resolve the allegation, however it won’t stop the allegation going public. Lastly, it is critical that franchisors make sure that they comply with the deadlines for providing information to franchisees under the Code- otherwise they may be on the receiving end of an infringement notice (or worse!).