The first step with a licence or distribution network is to ensure the proposed agreements do not trigger the application of The Franchising Code of Conduct.
If the agreement you intend to enter into with your licensees or distributors meets the criteria in the definition of a franchise agreement in The Franchising Code of Conduct, then the arrangement may legally be a franchise and you will need to either change certain parts of the arrangement or comply with The Franchising Code of Conduct.
A failure to comply with the Code can lead to large penalties and in some cases these can be up to $AU54,000. It is important to get the agreements right in the first place to help to ensure against inadvertent infringement of applicable legislation.
The licensor or distributor will also need to comply with the Competition and Consumer Act and other laws relating to their industry or activities. These obligations can include refraining from (amongst other prohibitions) engaging in:
- misleading and deceptive conduct;
- unconscionable conduct;
- price fixing; and
- third line forcing.