Withholding Consent On Transfers

A recent action commenced by the Australian Competition and Consumer Commission in the Federal Court against a franchisor could potentially become a landmark case on the issue of withholding consent to the transfer of a franchised business.

The ACCC is alleging that the actions of the franchisor in withholding its consent to the proposed transfer of franchised businesses within its network, among other things, was both unconscionable under section 51AC of the Trade Practice Act and in breach of the Franchising Code of Conduct (Code).

Regulation 20(2) of the Code provides that a franchisor must not unreasonably withhold consent to the transfer of a franchise. Regulation 20(3) then goes on to provide a non-exhaustive list of circumstances in which it is reasonable for a franchisor to withhold consent. A franchisor is taken to have given consent to the transfer under Regulation 20(4) if the