The release of the report resulting from the Parliamentary Inquiry into the Operation and Effectiveness of the Franchising Code of Conduct (the Code) is the next shake-up to the franchising sector.
The report recommends several changes to the Code that will have wide-reaching implications for both franchisors and franchisees. For franchisors, the report signals more stringent disclosure requirements and significantly higher penalties for infringement of the Code.
In contrast, for franchisees, the report indicates a move towards working with other franchisees to negotiate with franchisors and protections concerning significant capital expenditure.
This article provides a summary of the report’s key issues, including:

why the issues are of concern;
how existing law is likely to change as a result of the report; and
what franchisors and franchisees can do in the wake of the report.

Disclosure of the Likely Financial Performance of a Franchise
Current Legal Requirement
At present, franchisors are not required to provide any:

historical financial information relating to the franchise a prospective franchisee is proposing to acquire; and
projection or estimation of earnings.

The Current Problem
Franchisors are not always transparent about the likely financial performance of the franchise that prospective franchisees are looking to purchase. They also may not provide meaningful financial information to help a franchisee assess how their franchise may perform.
As a result, this can make estimating the return on their investment very difficult for prospective franchisees and can result in franchisees feeling misled if the franchise does not perform as well as hoped. For franchisors, this can breed tension and turn franchisees into brand detractors.
Regulatory Change Recommended by the Report
The report recommends that prospective franchisees must receive:

business activity statements for the last two years;
a profit and loss statement;
balance sheets (statement of financial position); and
an assessment of labour costs.

If the franchise is a new site, the franchisor must provide the prospective franchisee the business activity statements, profit and loss statements and balance sheets of a comparable franchise.

Franchisors should consider what historical financial information they currently offer to prospective franchisees.
Prospective franchisees may wish to request this information in the process of buying a franchise, noting they may be legally entitled to receive this information in a timely manner.

The Need for a Public Register of Franchise Documents
Current Legal Requirement
Presently, franchisors must:

provide their franchise agreement and disclosure documents to prospective franchisees at least 14 days before signing; and
update their disclosure document each year unless certain exceptions apply.

Furthermore, franchisors do not need to make their documents public.
The Current Problem
The report identified that a lack of public disclosure means that it is challenging for the Australian Competition and Consumer Commission (ACCC) to ensure franchisors are meeting disclosure requirements under the Code. As a result, prospective franchisees may be receiving inadequate disclosure before entering into a franchise agreement.
The report also noted that the lack of a requirement for public disclosure might be a factor in some franchisors failing to regularly update their disclosure document.
Regulatory Change Recommended by the Report
Although it recognised the potential benefits of a public register of franchise systems, the report did not make it an outright recommendation.
Instead, the report recommends the establishment of the franchising taskforce, a body that will further consider some of the issues identified in the report. The franchising taskforce will investigate options for a public franchise register with franchisors providing updated documents annually.

Franchisors should ensure they are compliant with the disclosure document updating requirements of the Code, in preparation for the possibility of a public register.

Franchisees Engaging in Collective Action
Current Legal Requirement
At present, the Code does not reference or facilitate any form of collective bargaining. Instead, the Code governs individual franchise agreements between a franchisor and franchisee.
The Current Problem
Often, franchisees lack bargaining power in negotiations with their franchisor. In part, this is due to the notable difference in resources between franchisors and franchisees, with franchisees unable to engage in lengthy negotiations.
Further, the report notes that franchisors have an uninhibited ability to force system-wide changes even where a majority of franchisees oppose it.
Regulatory Change Recommended by the Report
The report recommends that it be lawful for all franchisees to collectively bargain with their franchisor, regardless of their size or other characteristics.

Some franchisors facilitate a form of collective bargaining within their franchise systems, where a group of representative franchisees must approve system changes.
Franchisors should consider embracing this model and working out now how best collective action could be utilised in their systems. Franchisees may wish to inquire with their franchisor about the possibility of establishing a franchisee committee for this purpose.

Disclosure of Rebates and Supply Chain Requirements
Current Legal Requirement
At present, franchisors must:

firstly, disclose the names of all suppliers from whom rebates are received (but not the amounts);
secondly, indicate whether they will share rebates with franchisees; and
finally, disclose whether franchisees must acquire goods or services from a specific source.

The Current Problem
The report notes that franchisees often appear to be required to purchase stock or equipment from suppliers that are far more expensive than others in the market, with the franchisor receiving an undisclosed amount back as a rebate.
Regulatory Change Recommended by the Report
The report recommends mandatory disclosure by franchisors in percentage terms of all:

supplier rebates;
commissions; and
other payments concerning the supply of goods or services to franchisees.

It also recommends that franchisors be required to disclose, for the prior two years:

any instance where the maximum resale price of an item has been below the cost price; and
the margin between the purchase price and the maximum price or recommended resale price of the top five goods or services sold.

Franchisors should begin calculating and tracking this data and consider reviewing any practices where franchisees’ acquisition cost of goods is higher than maximum resale prices, noting that these costs will likely have to be clearly disclosing this in the future.
Franchisees may wish to refer to the report recommendation to request disclosure of rebate amounts on a percentage basis.

Dispute Resolution Under the Franchising Code
Current Legal Requirement
Currently, the Code provides for a dispute resolution scheme which amounts to a mandatory mediation procedure administered by the dispute resolution adviser appointed under the Code.
The Current Problem
While mediation provides parties with a forum to air their grievances, the effectiveness of the process is heavily dependant on the willingness of both parties to engage with the mediation process and try to achieve an outcome. Ultimately, many franchisees have complained that the scheme does not produce adequate results.
Further, unless all parties agree, mediation is only between the franchisor and one franchisee, irrespective of there being a common issue faced by several franchisees.
Regulatory Change Recommended by the Report
Firstly, the report recommends that the recommendation concerning collective action should apply to the dispute resolution processes mandated by the Code, to allow for the resolution of disputes affecting several franchisees.
Further to this is the recommendation that the Code is expanded to include binding arbitration with the capacity to award:

remedies;
compensation;
interest; and
costs.

Binding arbitration is a dispute resolution process typically used to achieve the determination of a dispute without the need for court proceedings.

Franchisors should focus on strengthening their internal dispute resolution mechanisms built into their systems to avoid unnecessarily escalating the issue or complaint.
Franchisors should also consider where it may be appropriate to tackle an issue or dispute collectively where the same impacts several franchisees.

The Impact of the ‘Unfair Contract Laws’ on Franchise Agreements
Current Legal Requirement
The unfair contract laws were introduced into the Australian Consumer Law (ACL) to allow a court to strike out unfair terms from standard form contracts with small businesses.
At present, the courts have not thoroughly tested the application of these laws to franchise agreements.
The Current Problem
The report notes that these laws have the potential to provide additional protections for franchisees by prohibiting unfair terms in franchise agreements.
This said, the introduction of these laws has had little impact on the franchising sector to date.
Regulatory Change Recommended by the Report
The report states that it is ‘unacceptable that franchisors can retain unfair contract terms’ such as unilateral changes to the business model or setting menu prices below cost. Further, the report recommends that the franchising taskforce examine the appropriateness of:

making unfair contract terms in franchise agreements illegal; and
establishing penalties.

In addition to the above, the report recommends that variations of a franchise agreement are only made with the approval of the majority of franchisees within the franchise system.  

Franchisors should review their standard franchise agreement in light of unfair contract laws. Additionally, franchisors should review how they currently make system changes, and whether they have the approval of a majority of franchisees.
On the other hand, franchisees should request a consultation about system changes before implementation.

Termination Rights for Franchisees
Current Legal Requirement
Currently, the Code provides for termination:

by the exercise of cooling-off rights (by the franchisee);
following an unremedied breach (by the franchisor); and
in ‘special circumstances’, immediate termination (by the franchisor).

The Current Problem
The report considered:

firstly, whether the current status quo of termination rights adequately protect franchisees’ interests; and
secondly, whether franchisees should have an express right of termination in any circumstance, such as in the event of franchisor breach or default.

Submissions made to the Inquiry highlight that franchisees can be, in effect, left without a remedy where their franchisor undergoes a significant change, such as the franchisor going into administration.
Regulatory Change Recommended by the Report
Firstly, the report recommends that the same right of termination for ‘special circumstances’ currently afforded to franchisors also be given to franchisees.
Further, the report has suggested that the Code also incorporate exit and termination rights for franchisees when:

the franchisee faces ‘hardship’, which would include a ‘cap’ on damages the franchisor could claim against the franchisee;
there has been exploitation by the franchisor; or
business failure occurs, with both parties agreeing to terminate.

Irrespective of whether these recommendations become law, franchisors may wish to consider whether there may be some use in providing an express right of termination to franchisees, subject to certain conditions.
If adopted, these changes will potentially result in franchisors having the responsibility of reacquiring sites and assuming leases in certain circumstances.

Compensation for ‘Significant Capital Expenditure’ Undertaken by Franchisees
Current Legal Requirement
Currently, the Code prohibits franchisors from requiring a franchisee to undertake significant capital expenditure except for certain circumstances, including where the:

requirement has been disclosed to the franchisee in the disclosure document;  
all or a majority of franchisees have approved expenditure; or
franchisor considers it necessary as capital investment in the franchised business.

The Current Problem
The Inquiry found that, despite the existing Code requirements, many franchisees were:

required to undertake significant capital expenditure; and
often unable to obtain any return on investment because the expense was not considered in any valuation of the business before a transfer or expiry.

Regulatory Change Recommended by the Report
On this issue, the report recommends that there be appropriate constraints on the ability of franchisors to impose capital expenditure requirements on franchisees to ensure that franchisees:

can make a return on investment within the remaining franchise agreement; or
only have to pay for a pro-rata portion of the capital expenditure to allow for such a return; or
are paid compensation by the franchisor if the franchisor subsequently terminates the franchise agreement (after requiring significant capital expenditure).

In light of this recommendation, franchisors should review their practices with regards to requiring significant capital expenditure to assess whether their current practices are likely to comply with these recommendations.

Franchisees should query their franchisor as to the terms of any significant capital expenditure requirements, including whether the value of such expenditure will be considered in any valuation of the franchise business.
The Effectiveness of Penalties Under the Code as a Deterrent
Current Legal Requirement
At present, a breach of the Franchising Code can attract the imposition of a civil penalty of up to $63,000.
Suspected breaches can also see the ACCC issue infringement notices, resulting in the infringing party paying a fine.
The Current Problem
In their submission to the Inquiry, the ACCC stated that the current penalties available for breaches of the Code:

are  ‘manifestly inadequate’; and
subsequently, fail to provide any meaningful deterrent to large franchisors.

Regulatory Change Recommended by the Report
The report recommends that:

civil monetary penalties and infringement notices be made available for all breaches of the Code; and
that the value of those penalties available for such offences be significantly increased to ensure that sanctions are a meaningful deterrent.

It also recommends that the franchising taskforce examine an amendment to the ACL concerning unfair contract laws.

Franchisors should ensure their strict compliance with the Code. Doing so will mean they are not left open to penalties for infringement notices, with the value of such penalties likely to rise following the report’s recommendation.

Key Takeaways
The Parliamentary Inquiry report provided over 70 recommendations for changes to the franchising sector. Some of the key issues covered in the report include:

disclosure of the likely financial performance of a franchise;
the need for a public register of franchise documents;
the need for franchisees to engage in collective action;
disclosure of rebates and supply chain requirements;
the effectiveness of dispute resolution;
the impact of ‘unfair contract laws’;
termination rights for franchisees;
compensation for significant capital expenditure; and
the effectiveness of penalties under the Code.

An experienced franchise lawyer can:

review your documents to ensure that you are complying with the Code; and
additionally, provide advice about how to best prepare your franchise business for the changes the report may bring.

If you have any questions about the report, contact LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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Are you a developer selling an app through Atlassian’s online marketplace? You would have agreed to the Atlassian Vendor Agreement and the Marketplace Terms of Use before you listed any apps on their marketplace.
From 31 March 2019, the Vendor Agreement and Terms of Use will change. One of the changes includes that you need an end user licence agreement (EULA) between yourself and the end users of your app. If you do not have a EULA by 1 April, Atlassian can delist your app. Previously, Atlassian had included a standard EULA in its Terms of Use but will no longer provide that template. This article will explain what you need to include in a EULA if you wish to sell on Atlassian’s online marketplace. 
How Did The Atlassian Standard EULA Work?
A EULA is a contract between a software publisher and an end user about the use of the publisher’s software. Although every EULA is different, most EULAs cover:

IP ownership;
prohibited use of software (such as reverse engineering the software); and
how you use personal information from end users.

The Terms of Use contains a standard EULA, so many developers have opted to use those standard terms rather than draft a specific EULA. Your prospective users will have agreed to those standard terms when buying apps, as the Terms of Use apply to their use of the marketplace. However, as the standard template will no longer be available, you will lose protections for your software such as:

IP ownership;
prohibited uses; and
limits on authorised users.

IP Ownership
The standard EULA grants end users a licence to use your app. That means end users can use your app but not own it. Otherwise, users can claim rights beyond the limits of the licence or ownership over the app. 
Prohibited Uses
The standard EULA outlines what users cannot do with the app. The clause can ban actions such as:

reverse engineering of the software (where the user figures out how the software works to copy the code);
modifying the software (which may stop the app from working for your other users); or
decompiling or disassembling the software (where the app may not work for others, or the user copies the content).

Limits on Authorised Users
The standard EULA limits the number of people who can use the software. You can only have a permitted number of users for the app. Adding additional users without payment is not permitted.
Why You Need a EULA
Atlassian’s new terms require you to upload your own EULA before you can sell your app on its marketplace. You may want to get a tailored EULA that protects your app and your business from unwanted risks. The new EULA should contain key clauses, such as:

IP ownership; 
prohibited uses; and
privacy. 

1. IP Ownership
Like the standard EULA, your tailored EULA should protect your app from any users claiming unwanted ownership over your product. Make it clear that IP ownership belongs to you. If your software uses licensed software as part of its make-up, extend the ownership of IP to your licensors (people who have licensed their software to you). Furthermore, you should emphasise that using the app does not mean the end user owns the app.
2. Prohibited Use
With a tailored EULA, you can cover a broader range of prohibited uses for your app. Your prohibited use list should be comprehensive to protect your software from misuse. For example, you can state that the user must not:

use the software for illegal means or in any way that breaks any applicable laws;
use any method to attempt to circumvent or disable the software or its features;
try to modify, copy, adapt or reproduce the software except when necessary to operate the software properly;
try to decompile, disassemble, reverse engineer or use other methods to obtain the software’s source code;
distribute, restrict, sell, rent, lease, sub-license, transfer, publish or disclose the software to any third party (unless you explicitly permit one or more of these actions in the EULA);
remove or alter any IP assets such as trade marks, logos, copyright, as well as legends, symbols or labels connected to the software;
use the software to infringe on third party IP rights, such as copyrights, trade secrets and patents;
try to undermine the security or integrity of computer systems owned by yourself or a third party; or
misuse the software in any way to stop the app from functioning properly or stopping other users from using the app. 

3. Privacy
Your EULA should cover your privacy obligations. Users need to know you can handle their personal information (PI) properly. The PI may come from Atlassian’s database or from how you monitor customer use of the app. Your EULA should contain a notice that tells users that you are collecting their PI and summarise how you will use the PI. The notice is not a substitute for a separate privacy policy. However, a privacy notice is still useful to have within a EULA. 
Key Takeaways
From 31 March 2019, you will need your own EULA as Atlassian will no longer provide a standard EULA. A tailored EULA means your app has better protection from user misuse. As part of the EULA, you can:

set out clearly who owns the IP of the app;
cover a wide range of prohibited uses; and
Inform users about privacy obligations.

If you have any questions or need assistance in drafting a EULA, get in touch with LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page.

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There are various ways to promote and market your business. However, if you intend to send electronic messages such as emails or text messages to promote your business, there are laws (such as the Spam Act) that regulate what you can and cannot send. This is relevant if you want to obtain the email addresses or contact details of your customers’ friends, known as refer-a-friend or ‘friend get friend’ marketing. This article will set out the relevant laws that you need to be aware of if you want to market your business through your customers’ friends.
Refer-A-Friend Marketing
Refer-a-friend marketing is when your customers promote your business to their friends or people they know. For example, you may have a promotion that says “provide us with five email addresses of your friends and we will credit your account with 500 points.”
If you obtain the contact details of these friends through your customers and then proceed to send electronic marketing material (i.e. emails or text messages) to these friends, then you need to follow certain rules. For example, you must:

have the recipient’s consent to receive marketing material from you or your business; and
be able to prove such consent.

Consent
There are different ways of gaining consent from your customers’ friends. You may ask your customers first to obtain consent from their friends. For example, you can put a statement on your website or advertisement that your customers must first obtain such consent before providing you with their friends’ contact details.
However, this is not necessarily enough to show that you have consent from the recipient to receive marketing material. Firstly, you need to make sure that the customer has actually obtained consent from their friends. Secondly, you must be able to prove the consent exists (i.e. by way of an email) from every friend who is a recipient. Therefore, asking your customer to obtain consent on your behalf or putting a blanket statement that automatically qualifies that consent has been obtained may not be sufficient to comply with the law. Furthermore, you might not know whether the consent has been withdrawn by the recipient.
The law allows for inferred consent. This is consent that you can obtain indirectly. However, this is usually only applicable between you and an existing customer based on both your conduct and business relationship. Accordingly, inferred consent is unlikely to exist between you and your customer’s friend, as you have not interacted with them before. Furthermore, you cannot assume that there has been inferred consent between your customer and their friend.
Other Requirements
Additional requirements are that you must:

identify your business in your messages, namely your business name and contact information; and
add an option to unsubscribe from receiving the messages.

Who Regulates the Spam Act?
The Australian Communications and Media Authority (ACMA) regulates the Spam Act. A breach of the Spam Act may result in your business receiving a formal warning or infringement notice. There are also financial penalties if your business breaches the Spam Act. For example, a company with no previous record of spamming that has sent a commercial electronic message without consent may receive a maximum fine of 100 penalty units, which is equivalent to $21,000.
Key Takeaways
There are many ways for you to promote and market your business effectively. If you intend to use the refer-a-friend or ‘friend get friend’ marketing strategy, you will need to ensure that you have mechanisms to obtain the required consent to send marketing materials electronically to the recipients. You will also need to have records of such consent. 
If you need assistance in determining whether your marketing strategies comply with the law, you can contact LegalVision’s advertising compliance lawyers on 1300 544 755 or fill out the form on this page.

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Strong franchises succeed from the start, grow rapidly and even end up moving beyond Australia and into international markets. Others face various roadblocks, and may have spurts of growth but struggle to find their footing. While there is no foolproof formula for success, the best franchises tend to share certain characteristics. This article explains the top five to emulate ton give your franchise the best chance of success.
A Strong Brand
Picture some of the world’s best-known fast-food franchises. More likely than not, what immediately comes to mind is their logo or a particular colour. A distinctive image leaves a lasting impression on customers. The strong franchises have a strategy for branding, and they know how to implement and protect it.
Savvy franchisors will register trade marks, such as:

logos;
slogans; and
business names.

Additionally, they will monitor potential misuse of their trade marks. This protection ensures that their franchisees have the exclusive right to use the brand.
A Point of Difference
The most successful and strong franchises have an innovative offering. They provide distinctive goods or services that separate the franchise from competitors. This may be a secret recipe for a dessert or a unique way of hiring alcohol for weddings. For a network to grow, the products or services offered have to be able to capture the attention of a sufficient number of customers. The best franchises identify demand, or perhaps even create it.
Innovation can also encompass how a franchise offers their product or service. Great franchisors also know how to make themselves the best at what they do. Take courier franchises for example. With many entering the market, the ones that have staying power and higher market share are the ones that offer the best customer experience, faster delivery times, lower prices for the same quality of service or some similar competitive edge.
Ongoing Support and Training
Strong franchisors know that educating and supporting franchisees does not end with the initial training program. Part of the appeal of buying a franchised business is that you are purchasing the systems and processes of a franchisor, and can draw on their knowledge and experience.
Many franchise agreements give franchisors significant discretion about how much ongoing assistance they offer to franchisees. Model franchisors act to improve the overall health of their network. They set up systems and processes to support franchisees and help them become profitable from the outset. However, good franchisors are also willing to provide additional assistance to a franchisee who may be going through a rough month. Knowing when to step in and provide extra one-on-one assistance is valuable. Potential franchisees will often speak with existing franchisees before buying into the franchise. If franchisees feel supported and happy, you are more likely to grow the franchise.
Strong Franchisor-Franchisee Relations
Franchises that have a good relationship between the franchisor and franchisees tend to perform better. By demonstrating a willingness to proactively address issues as they arise, strong franchisors can build loyalty and commitment among their franchisees. This keeps franchisees in the franchise, and stops problems from snowballing into expensive disputes that can slow down the franchise growth.
Franchisees like to feel as though they can approach their franchisors as needed, and that their concerns will be given genuine consideration. The best franchises foster a culture where both sides are encouraged to act reasonably and honestly in pursuit of joint business goals.
Reasonable Fees
Profitable franchisees contribute to the strong reputation of the brand and help scale the network. Therefore, although franchisors need to ensure that their fees cover the expenses of operating the network, this should not come at the cost of a franchisee’s profits. The strong franchises strike the right balance between the financial interests of franchisees and franchisors.
This also means that the fees charged should come with some value. For example, if a franchisor requires fees to be paid into a marketing fund, franchisees will be more willing to pay if they know that the franchisor has a history of strong advertising practices that boost the visibility of the entire franchise.
Key Takeaways
If you want to grow your franchise fast, it pays to emulate what works. While all franchises are different, the best share important characteristics, including having a strong brand and building good relations with franchisees.
If you have any questions about setting up a franchise, call LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.
 

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Courier franchises are a growing opportunity. In 2015, the Australian courier industry reached $4 billion. With delivery speed becoming a key indicator of customer satisfaction (and complaints), courier services are particularly attractive to small businesses and e-commerce retailers. This article summarises five critical considerations for anyone thinking of starting a delivery courier franchise.
Territories
Courier franchisees will be interested in whether the franchisor will offer them an exclusive territory. Typically, the higher the level of exclusivity, the more valuable the franchise business.

Exclusivity Level
Explanation

Operational and marketing exclusivity
The franchisor promises that they will not allow other franchisees to operate or advertise within that area

Marketing exclusivity (“local marketing area”)
The franchisor allows franchisees to operate in the same area but restricts them from advertising in similar areas

Individual territories, but no guarantee against deliveries
The franchisor restricts franchisees to operating within a particular area but offers no guarantee that another franchisee may not occasionally deliver to the territory

No exclusivity
The franchisor puts no restrictions on where each franchisee operates

If you are planning to offer a territory or local marketing area to your future franchisees, you should think about how you will identify these areas. For example, you may want to consider population size and competitor businesses. A higher population size will increase the value of a territory, whereas having strong competitors will lower it.
Bookings
You should take care to have a fair and functional booking system to allow customers to book delivery jobs. Your franchisees will want to know how customers make bookings and how you will guarantee that each franchisee receives a fair distribution of customers.
You may find it more efficient to set up a centralised booking system that you manage. In this case, it will be essential to have a transparent policy on how you pass bookings to franchisees. For example, you would typically have an obligation to send customers who booked inside a territory to the relevant franchisee. When starting out, you may also want to have a policy of referring bookings to the nearest franchisee. This covers instances where customers book from outside the areas you cover.
However, you may want the ability to withhold bookings from a franchisee if you believe they are incapable of fulfilling the booking. To keep these decisions fair, you should refer to objective criteria such as key performance indicators.
You should also consider whether franchisees will be able to generate their booking leads. If not, during pre-contractual negotiations, franchisees may focus on ensuring that you are taking reasonable steps to market the courier service, generate bookings, and pass on a sufficient number of customers to each franchisee.
Vehicles
Courier franchises with strong branding typically use delivery vehicles with a consistent appearance. Therefore, your franchise documents should include requirements for each vehicle, including their:

roadworthiness;
model;
fit-out, such as a particular type of internal storage;
cleanliness; and
colour and external signage.

You should also consider whether you will require a minimum number of vehicles according to the size of each franchisee’s territory. A minimum number ensures that each franchisee can meet demand.
Vehicle Costs
When putting together your franchise documents, you should map out all expenses related to the vehicles. As stated by the Franchising Code of Conduct, the disclosure document you provide to franchisees must detail all costs relating to purchase and maintenance of vehicles.
Failure to disclose expenses may lead to a dispute if a franchisee feels that you misled them about the actual costs involved in running the courier franchise. Common vehicle costs include:

purchasing or leasing;
the fit-out, including signage;
updating the appearance and fit-out to reflect any changes to the franchise brand;
insurance, including comprehensive vehicle cover and courier goods;
maintenance and repair; and
running expenses.

You should also consider whether you include some of these costs in the initial setup fee. For example, you may offer to include signage as part of the initial setup, but require the franchisee to purchase the vehicle as an additional expense.
Operations Manual
An essential step in developing a new franchise is creating your operations manual. This is a go-to guide that covers, in detail, how franchisees must run the business. A well-drafted operations manual helps ensure that your franchisees follow a consistent and proven system.
For a courier franchise, the operations manual should take care to detail the process for dealing with customer complaints. Surveys have shown that handling of customer complaints (most often arising from delivery delays) is the biggest gripe that consumers have with courier services. Encouraging your franchisees to do their best to resolve customer complaints will help set your franchise apart from competitors.
Laws and Regulations
Your franchise documents should require franchisees to adhere to all road laws, including holding a full driver’s licence. You should also include a condition that if a franchisee commits a serious driving offence while operating the franchise, you have the right to terminate their franchise agreement. To ensure you recruit the right people, you may also wish to inspect a copy of the franchisee’s driving record.
While on the road, the vehicles will be ambassadors for your franchise. Therefore, you may want to require franchisees to notify you of minor road offences committed while driving the courier vehicle. Although a minor offence may not give cause to terminate the franchise agreement, it may indicate that the franchisee needs to improve to meet key performance indicators.
Aside from road laws, you should obtain advice on what other rules and regulations are relevant. For example, occupational health and safety laws may apply to courier delivery services. Above all, your franchise documents should require the franchisee to comply with any relevant laws.
Key Takeaways
Starting a courier franchise offers great potential. However, before you recruit franchisees, ensure you have the important points planned out, including:

deciding on territories;
creating a booking system and policies;
determining vehicle standards and costs;
drafting the operations manual; and
considering relevant laws.

If you have any questions, contact LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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If you are thinking of starting your own business, you should consider the advantage of running a franchise. You may be pro at making burgers. However, would you be more successful starting your own brand of burger flippers, or operating under the tried and tested systems of Grill’d?
There are advantages and disadvantages to running a franchise business. This article will outline what to consider before deciding to run a franchise versus your own independent venture.
Existing Intellectual Property (IP)
A key advantage of operating a franchise business is using the franchise network’s existing IP. An established franchise brings brand recognition and customer goodwill. Indeed, this is usually a large part of what you pay for in purchasing a franchise.
For example, if your accounting business was to join a well-known franchise network, it may be able to obtain publicity from the franchise’s existing marketing. Customers may also trust the franchise brand more than an individual venture. Conversely, if you decided to go it alone, you will also need to build up your own IP, including registering a trade mark.
A Proven Franchise System
If you operate an independent business, you will need to develop your business on your own. You will need to set up your business model, start marketing and establish business relationships. However, by operating a franchise, you will have the advantage of entering a franchise system that has already laid down much of the groundwork.
For example, if your accounting services company were part of a franchise, the franchise may:

include you on their website;
provide you with software, marketing templates and stationary; and
have established business relationships in place for associated services or products.

All this means that the franchise system will allow you to go straight into providing accounting services. You will bypass much of the usual grunt work associated with setting up from scratch.
Advantages of Running an Independent Business
Conversely, there are three advantages to running an independent business. First, you will not be required to adhere to a system. When you enter a franchise, you sign a franchise agreement that creates obligations to follow a specific set of procedures. For example, you may not be allowed to provide additional products or services over those prescribed by the franchise agreement. While following a proven system can be advantageous, it can also be a downside if your commercial experience allows you to spot gaps in the market.
Secondly, running an independent business means you do not need to pay franchise fees for the rights to operate the franchise. In a franchise, a franchisor may require you to pay both an upfront fee and ongoing payments. This may not be a disadvantage if the franchisor gives you added value in the form of extra marketing and training. However, you should investigate what you receive in exchange for your fees.
Thirdly, you are free to run an independent business for as long or as short as you like. However, a franchise agreement will require you to run the franchise for a specific period. You may not be able to exit the franchise system before this period is up. Furthermore, franchise agreements often contain a restraint of trade clause, which restricts you from operating a similar business for several years (and in some cases, up to 10 years). This could be problematic if you intend to build your own franchise network in the future.
Key Takeaways
The main benefits of running a franchise business are that you receive a proven system to run the business and can rely on the existing franchise brand, goodwill and marketing. Conversely, the advantages of running an independent venture are that you have more freedom to run the business how you see fit, can do so for as long as you want and do not need to pay franchise fees. You may also eventually be able to build your business into its own franchise network.
If you want further advice on entering a franchise, including reviewing your obligations under a franchise agreement, contact LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.
 

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Franchises can be a great way to operate a business with a proven record of success. However, hidden key terms in the franchise agreement can derail your franchise business. These contracts are often very long, making it easy to overlook terms that may become important in future. This article explains some of the most important terms to watch out for in the franchise agreement.
1. Financial Terms
The franchise agreement will first state the franchise purchase price. This is often a large amount of money in the range of $20,000 to $1,000,000. Whether this price is worth paying will depend on the reputation of the franchise and its location. However, the agreement will also state ongoing costs. These can include fees for:

stock and supplies;
communal marketing; and
termination or renewal of the agreement.

It is essential to factor these fees into your business plan so that you know you can still make a profit.
2. Exclusive Territories
The franchise agreement will sometimes include a key term that grants an exclusive territory. This is a geographical area in which only one franchisee is allowed to operate or market. If the franchise agreement grants you an exclusive territory, ensure that you know:

how many potential customers are in that territory; and
whether the number of customers in the territory will be enough to make a profit.

Exclusive territories can be more complicated with franchises that operate online. This may require the franchisor to have systems that direct online orders to the right franchisee. Therefore, if you will be running a franchise that operates at least partially online, it is vital to do your research on how this will affect the exclusive territory.
3. The Property Lease
The franchise agreement will set out which party is responsible for the lease. In most cases, neither the franchisee nor franchisor will own the premises from which the franchise operates. Therefore, one party will need to hold a lease. If the franchisor holds the lease, this gives them additional control over your premises.
On the other hand, not holding the lease means you have fewer obligations, especially when it comes time to sell the franchise. If you hold the lease, then the franchise agreement will often require you to get the consent of your landlord before selling your franchise business.
4. Marketing Fees
The franchise agreement will often have a key term that requires you to pay fees into a communal marketing fund. This fund will be used to pay for franchise-wide marketing activities across the entire network. For example, television, radio or internet ads.
The agreement may also specify how much you need to pay towards marketing your business locally. It is essential to understand how both franchise-wide and local marketing will align with your own marketing plans.
5. Length of the Original Term
The length of the original term is how long the franchise agreement requires you to operate the franchise. A shorter term reduces the risk of being locked into an unprofitable business. On the other hand, it also means that you will need to pay renewal costs more often. Furthermore, the franchisor has the opportunity to change the franchise agreement each time it is renewed.
A longer term gives you more opportunity to build a successful business, break even and turn a profit before the agreement is renewed. The franchise agreement may include performance targets to meet, so it is crucial that the business does become profitable before the first renewal.
6. Ending the Franchise Agreement: Termination and Transfer
Termination refers to ending the franchise agreement before the original term is up. In most cases, franchisees cannot terminate a franchise agreement at will and are locked in for the entire duration. In this case, the termination clause will specify that the franchisee is in breach of the agreement if they try to terminate. This breach would allow the franchisor to start court action against the franchisee.
Transfer means selling the business and transferring the franchise agreement over to a new franchisee. The franchise agreement will specify the transfer process. This will allow the franchisor to choose or at least approve an appropriate franchisee and to deny others on stated grounds. Understanding this process gives you greater clarity on how to pick candidates to whom you will be able to sell your franchise business.
7. Restraint of Trade
Almost all franchise agreements will contain a restraint of trade clause. The terms will usually state that you cannot conduct the same or similar business within a certain area for a period of time. In some cases, this time extends up to 10 years. Whether the franchisor can enforce this clause depends on how it has been drafted.
The courts have upheld these clauses where they protect the legitimate business interests of the franchisor. The franchisor will need to show that the new business affects the profitability of the franchise in some way. For example, an independent bakery in the same area as a bakery franchise will directly compete and reduce the franchise’s profits. On the other hand, starting a bakery in a city where the franchise has yet to expand to will not.
Therefore, it is possible that you will not be able to operate the same or similar business under a different name in a similar location after you terminate, sell or complete your franchise agreement, even if this means not working in your profession or area of expertise. If you would like to open a similar business one day, then it is vital that you speak with a franchise lawyer about this before signing a franchise agreement.
8. Dispute Resolution
The franchise agreement will include a dispute resolution clause. These implement the dispute resolution procedure set out in the Franchising Code of Conduct. This allows you to resolve disputes before the franchisor removes you from the franchise. Therefore, ensure that you understand both how disputes will be resolved and the amount of time you have to rectify breaches of the franchise agreement.
Key Takeaways
When entering a franchise agreement, it is tempting to focus on the initial investment and length of the franchise term. However, you should also take time to understand other key terms such as the ongoing costs, the property leasing arrangements and dispute resolution. This will ensure that you can prepare a business plan for your franchise agreement that maximises your chances of making a profit.
If you need assistance with reviewing a franchise agreement, call LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.
 

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As a $146 billion industry, the Australian franchising sector has exciting opportunities. It offers a space for companies looking to expand their offering to a new market. In this article, you will find some practical tips for expanding your international franchise to Australia. Additionally, this article outlines the key regulatory issues to consider if you are planning to move your international franchise Down Under.
1. Consider Finding a Master Franchisee
One way of bringing a franchise to Australia is to find a local entity. This entity will act as your master franchisee. You would grant a master franchisee the right to issue franchises within a particular area. The master franchisee would effectively step into the shoes of a franchisor.
The master franchisee would be responsible for recruiting and training new franchisees and overseeing the Australian franchise network. The written contract used to appoint a master franchisee typically includes specific terms. For example, you would keep the right to approve certain important issues, such as marketing strategies.
You might also place the legal responsibility for complying with Australian franchising law on the master franchisee. Master franchisees must regularly report back to the head company regularly. In this way, you are able to maintain control and oversight of your brand. However, you can still pass day-to-day responsibilities to a trusted entity.
Franchise Fees
You can charge the master franchisee an initial upfront fee to purchase the franchising rights in Australia, as well as ongoing fees. This might include a:

percentage of fees received from Australian franchisees; and
royalty for use of your systems and intellectual property.

2. Run the Franchise Yourself
There are two ways that you can keep your role as the franchisor: 

firstly, you can set up a new Australian company to run the local operation; or
alternatively, you can enter into franchises under your existing company.

If you are establishing an Australian company, you should consider rules around who can be a director. For example, a private company must have at least one director who ordinarily lives in Australia. For public companies, this requirement covers at least two directors.
In the alternative, you may consider using a foreign company to enter into franchise contracts. In this case, you will need to register as a foreign company under the Corporations Act. This is the Australian domestic law governing companies.
3. Prepare Your Franchise Agreement
You will need to put together a template franchise agreement to issue to all prospective franchisees. Your franchise agreement will need to comply with the  Franchising Code of Conduct (the Code).  It is essential that your franchise agreement is not inconsistent with the Code – if it is, the inconsistent parts of your document will be invalid. For example, you cannot require a dispute to be heard in a state or territory outside of the state or territory in which the franchisee is operating.
Mediation under the Code must also be in Australia, which means you cannot force franchisees to attend a compulsory arbitration in the country in which your company is based. There are also other parts of the Code that you can typically find in a franchise agreement, such as a 7-day cooling off period for people who have just purchased a franchised business.
4. Create a Disclosure Document
Aside from your franchise agreement, franchisors operating in Australia also need to have a disclosure document. Franchisors must update this yearly. It provides an overview of:

your business;
the history of the franchise; and
the key points of how the franchise will operate.

However, it is not the legally binding contract between you and the franchisees. This means that you can have one document for all of your franchisees, rather than amending the document for each individual business.
Although it is not the legally binding contract, it must still be accurate and should reflect the terms of the franchise agreement. You must give the document to franchisees at least two weeks before they sign any legally binding documents.
Requirements Under The Code
The Code lists several items which must be addressed in a disclosure document. Some of these items include:

who owns the intellectual property  (IP)  in the business;
who are your business associates (individuals or other companies related to the franchisor entity);
what is your business experience;
any litigation relating to the franchise (including directors of related companies);
financial information on the franchisor;
whether franchisees can sell or promote your goods and services online; and
estimated upfront and ongoing expenses for franchisees.

Master Franchise Agreement
If you are appointing a master franchisee to be in charge of the Australian franchise network, you will not be required to prepare a separate disclosure document for the sub-franchisees that your master franchisee recruits.
Your disclosure document would be issued to your master franchisee. Then,  your master franchisee would be responsible for providing the document to sub-franchisees.
However, it is a good idea to have a clause in your master franchise agreement requiring your pre-approval for the franchise agreement and disclosure document which will be issued to sub-franchisees, so that you can ensure that the:

master franchisee is following Australian laws; and
terms of the contracts are suitable to you.

5. Register Your Trade Marks
If you want to have the exclusive right to use your trade marks in Australia and be able to more easily protect yourself against unauthorised use of your IP, your trademarks should be registered before you start issuing franchises.
Registration is a valuable way of protecting your brand and the goodwill associated with your business. As part of their due diligence before purchasing a business, many franchisees will look at:

firstly, the IP within the international franchise system; and
secondly, whether it is registered.

6. Get Legal Advice
Like any market, there are laws that are specific to Australia which international franchisors should be aware of. Here, you should obtain advice on local rules around:

taxation;
consumer laws;
employment, particularly in light of fair work laws; 
data collection; and
privacy.

Additionally, there are specific regulations that apply to certain industries. While these issues may not necessarily have to be incorporated into your legal documents, having a general understanding of your responsibilities under these different laws will help guide your operation of the franchise network.
Key Takeaways
Moving into the Australian franchise sector may provide the potential for your franchise’s growth. When making this move,  there are some key legal and commercial considerations to make, including:

considering master franchisees;
deciding who will operate the franchise in Australia;
preparing your franchise agreement and disclosure document;
complying with the Code;
protecting your IP; and
getting appropriate legal and tax advice.

If you have any questions, call LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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If you are a grocery supplier wanting to supply to a supermarket, you may or may not know that there are provisions in the Food and Grocery Code of Conduct that may protect you. While the code does not apply to all supermarket retailers or wholesalers, it is binding upon those that voluntarily sign up to it. If you are deciding on (or limited to) which supermarket to supply your groceries to, you might want to consider supplying to the retailer or wholesaler that has signed up to the code. The Australian Competition and Consumer Commission (ACCC) has a record of the businesses that have chosen to be voluntarily bound by the code. This article will discuss some of the most important parts of the code and what you need to know.
1. Who is Bound By the Code?
You do not need to sign up to the code to be protected by it. However, you do need to have a written grocery supply agreement with a retailer or wholesaler that has signed up to the code to benefit from it.
Furthermore, if you want to rely on the code, your written grocery supply agreement with the particular retailer or wholesaler must include:

clauses that outline the delivery requirements in relation to the groceries;
circumstances where the retailer or wholesaler may reject your groceries;
clauses that outline the payment requirements in relation to the groceries;
the quantity and quality requirements of your groceries;
the duration of the agreement; and
how the agreement may be terminated.

2. Payments
Under the code, a retailer must not request that you pay for the loss of groceries in the retailer’s possession. For example, if someone steals groceries in the retailer’s warehouse.
If a retailer requests that you pay for waste that has occurred at the retailer’s premises, you only need to make such payments if:

your grocery supply agreement expressly sets out the reason for the payment and circumstances in which you need to pay;
these circumstances have occurred;
the payment is reasonable; and
the retailer has taken steps to ease the wastage costs.

However, under the code, a retailer must pay you for the groceries that you have delivered:

on a timely basis; or
within a reasonable time after you have provided the retailer with an invoice.

To obtain payment, you must have delivered the groceries in accordance with the grocery supply agreement. For example, groceries must be in the right quantity and meet any quality requirements set out in the grocery supply agreement between yourself and the retailer.
3. Trading in Good Faith
The code specifically requires retailers and wholesalers to deal with suppliers in good faith during the negotiation (as well as during the term) of the grocery supply agreement. Therefore, retailers and wholesalers must not request the supplier to agree to a provision in the agreement that either excludes or limits the ‘good faith’ requirement.
‘Good faith’ may include the expectation for retailers or wholesalers:

to act reasonably under the agreement;
to act honestly and cooperatively; and
not to act with some ulterior motive.

However, it is important to note that you (as the supplier) are also expected, under the code, to act in good faith in your dealings with the retailer or wholesaler.
4. Complaints
Before you take any other action, you should try to resolve any dispute, complaint or concern with the retailers or wholesalers. You must provide the details of your complaint or concerns in writing to the retailer or wholesaler, including the remedy (such as compensation) you are seeking in respect of the alleged breach of the code.
However, you should keep in mind that the ACCC can investigate any dispute, complaint or concern that arises under the code. The ACCC can seek to enforce the code if necessary.
Other Quick Tips
In addition, there are some other rights that you should be aware of. Under the code, retailers must not request that you pay for a better shelf position or space allocation of your groceries in the supermarket or shop. Retailers must also not demand that you make material changes to the supply chain procedures unless they have provided you with reasonable written notice or compensation.
You are also protected under the code from threats retailers may make with the underlying motive to disrupt or terminate their agreement with you. Therefore, you may raise a complaint with the retailer without fear that the retailer may delist your groceries in response.
Key Takeaways
If you are supplying groceries to supermarkets or shops, you should be aware of your rights under the Food and Grocery Code of Conduct. As a supplier, you:

do not need to sign up to the code (but the wholesaler or retailer must be);
usually, do not need to pay for any grocery wastage that occurs in the retailer’s possession;
should always act in good faith; and
should always try to resolve a dispute with the retailer or wholesaler before resorting to legal action.

If you have any questions on how the code protects you and your business, you can contact LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page.

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There are many ways to promote your business in Australia. However, do you know which type of promotion is the most effective for your business? There are many factors to consider, such as the purpose of the promotion and your budget. This article discusses the different types of promotions and how to choose the most appropriate one for your business.
Marketing Devices
There are various marketing devices you can use to promote your business through competitions and offers. Common examples of competitions are:

games of chance (i.e. competitions based solely on luck, such as drawing someone out of a hat); or
games of skill (i.e. competitions that involve skill, such as ‘tell us in 20 words or less why…’).

Common examples of offers are:

loyalty programs; or
gifts given with each purchase.

However, you need to bear in mind that the marketing device that you choose must comply with the relevant laws. So what should you consider when deciding which promotion is best for you and your business?
Purpose
The first question is usually ‘what is the purpose of the promotion’? For example, if you are a startup, you might want to run a promotion to introduce your business to the public or a specific industry. If so, you might want to run a promotion that offers a gift to the purchaser. This may help to introduce your goods or services to the market.
Alternatively, you may wish to run a loyalty program to attract and maintain customers on a long-term basis or to expand your customer base. For example, if you provide social media services, you may consider giving your customers that have signed up for two years or more a free trial of your other products that require a further subscription.
Budget
You will also need to consider the costs of establishing and running the promotion. The costs involved in each type of promotion vary considerably. If you intend to run a game of chance on a national basis, you may need a permit in certain states. In order to obtain the required permits, you must provide the permit offices with the terms and conditions of your promotion which must meet the states and territories’ lottery laws. Although this may be a burden, it is generally a one-off cost at the start of the promotion.
If you want to use a loyalty program, there might be ongoing costs because of its longer lifespan. However, if you want to run a promotion giving gifts with a purchase, this is usually easier to manage the costs, as they are easy to predict.
Resources
You may also want to take into account the resources you will need in order to run the promotion. If you wish to avoid the costs of permit fees, you may decide to run a promotion that involves skill (as it does not require any permits). However, it may require more resources to run. For example, your game of skill may require that entries are individually judged based on their creativity, i.e. “describe in 50 words or less why you deserve this holiday”. If you are expecting 2000 entries or more, consider whether you have enough people to assist you in judging these entries consistently.
Running the Promotion
You might also want to consider how you are going to run your promotion (i.e. online, in-store or at a particular event). You may not receive as many entries or attention to your business as you would like to if you choose to run a game of skill at a particular event. For example, it is unlikely that people will spend the time to think of a creative response as opposed to putting in a quick entry for a lucky draw (game of chance).
Legal Implications
There are legal implications depending on the type of promotion you end up adopting. For example, you have to make sure that you comply with the Australian privacy laws if the promotion involves collecting, storing or using customer information.
Furthermore, if you want to create a loyalty program, you will likely want to make sure you reserve your right to amend the loyalty program over its lifespan.
You will also need to make sure your promotion does not breach the Australian Consumer Law or other industry codes if you advertise the promotion to consumers.
Key Takeaways
There are many types of marketing devices you can consider when promoting your business. However, there are many factors to consider before choosing what type of promotion is most suitable for your business. Regardless of which promotion you choose, you should be aware of the laws and regulations you need to comply with. If you have any questions about running a promotion for your business, you can contact LegalVision’s marketing compliance lawyers on 1300 544 755 or fill out the form on this page.

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In December 2018, the so-called ‘encryption laws’ were passed, allowing law enforcement agencies to ask or compel certain technology companies to assist with criminal or national security investigations. The laws are supposed to help investigate serious crimes such as terrorist activity and child pornography.  As a developer, the laws may affect your current products or services. This article will highlight how the laws will affect your business. 
Encryption Laws Overview
The new encryption laws allow law enforcement agencies such as ASIO or the Australian Federal Police to issue certain requests or notices to ‘designated communications providers’. The laws will cover developers, as well as IT and online businesses. You may receive one (or more) of these types of requests or notices, such as: 

TAR (technical assistance requests);
TAN (technical assistance notices); or
TCN (technical capability notices).

Complying with a technical assistance request is voluntary. However, complying with a technical assistance notice or technical capability notice is compulsory.
What Can The Notice or Request Say?
The notice or request could suggest that you: 

remove electronic protection from your product;
provide technical information about your product;
build a capability into your software to obtain information in a particular format, such as for custom reporting;
provide law enforcement with access to your software;
assist with the testing, modification, development or maintenance of a technology product;
provide notice of developments about your products; and
modify your product.

This list of potential requirements under a notice or request for software developers represents a potential range of requirements. They provide a starting point for whether you can comply with the notice or request. 
Does the Notice Create a Systemic Weakness?
You cannot be required to build a systemic weakness in your product. The law does not clearly define the meaning of systemic weakness. However, a developer may be capable of building a feature that creates a ‘backdoor’ access for law enforcement agencies to investigate crimes. The same backdoor could be exploited by hackers to cause criminal damage or compromise user privacy. 

For example, you have an app that markets itself as providing end-to-end encryption of messages. However, a law enforcement agency may ask you to create a feature that means encryption can be removed in certain situations That might undermine the overall encryption of all messages for the app, which may become a ‘systemic weakness’ for the product.

A proposed amendment to the law will clarify the meaning of ‘systemic weakness’ to provide further guidance. The Federal Parliament will consider the amendment in May 2019.
How Do I Comply with the Encryption Laws?
If you receive a notice or request, you must find out if you received a voluntary request (TAR) or a mandatory notice (TAN or TCN). If you must comply with the notice, you must ensure that you do not disclose that you have received a notice or request in the first place. You can download the following checklist below for your reference. 
LegalVision Encryption Checklist
If you are a startup or small business, you may feel overwhelmed by the time and cost of trying to comply with the laws. However, the laws will allow you to recover any costs incurred for complying with the request.
How Will The Encryption Laws Affect My Business? 
The laws have created enormous uncertainty for Australian software developers. You may be worried that the laws will limit your competitiveness with overseas software developers. However, foreign companies who want to serve Australian customers will have to comply with the encryption laws. 
If you are an Australian-based company with foreign companies, you may consider restructuring your business so that the Australian company deals with Australian customers only. The laws do not apply to any foreign companies who deal with overseas clients. Therefore, you may limit your business’ exposure to complying with the encryption laws if your foreign entities are pitching for overseas business. 
Key Takeaways
The encryption laws are broad-ranging and may affect the security of your products or services. However, as the laws are now operating, you should have an internal plan on how you can comply with the laws. If you have any questions or need assistance on how to comply with the laws, get in touch with LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page. 

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In December 2018, Australia passed the so-called ‘encryption laws’ which gave law enforcement and national security agencies the power to require industry assistance for the investigation of serious crimes. The laws have provoked a backlash among technology startups and small businesses, who fear that the laws will drive their business outside of Australia. This article will answer the frequently asked questions (FAQs) about Australia’s new encryption laws. 
1. What is the Purpose of the Encryption Laws?
The encryption laws allow certain government agencies to compel or request assistance from businesses to investigate serious criminal activity, such as terrorism and child pornography. Law enforcement agencies have long expressed concern about their inability to catch potential criminals who use encrypted products or services.
Law enforcement agencies can request or compel businesses for assistance through one (or multiple) types of notices, which are a:

TAR (technical assistance request);
TAN (technical assistance notice); or
TCN (technical capability notice).

At the time of writing, politicians have proposed amendments to the laws that may expand the use of the laws to anti-corruption agencies. Simultaneously, there are amendments to narrow the scope of the laws, such as specifying the definition of ‘systemic weakness’ in a product or service. This article will be updated if the Federal Parliament passes any future amendments to the encryption laws.
2. Who Will Be Affected by the Laws?
The laws affect anyone who is a “designated communications provider”. The definition is broad, covering any electronic service that serves Australian users, or a service that facilitates or supports the electronic services.
That could mean the laws affect a wide range of businesses, such as:

hosting service providers;
software developers;
e-commerce stores; and
software as a service (SaaS) providers, such as online providers of document storage and management. 

The law also affects foreign companies who serve one or more Australian users.
3. Who Sends the Request or Notice to the Business?
You can receive requests or notices from various law enforcement agencies, such as: 

ASIO (Australian Security Intelligence Organisation);
ASIS (Australian Secret Intelligence Service);
ASD (Australian Signals Directorate); and
the Australian Federal Police (or the police force of the relevant state or territory).

These agencies can send notices and requests as part of carrying out their function, such as ASIO carrying out surveillance on terrorist suspects. However, the notices can relate to serious matters like potential terrorism or child pornography. Additionally, agencies can use the notices to investigate criminal offences that are punishable by at least three years’ imprisonment, either in Australia or overseas. 
Foreign law enforcement agencies can also request notices and requests to be issued on their behalf. The notice or request must relate to investigations of serious criminal offences and any enforcement action which occur overseas.
4. Who Receives the Notice or Request?
The relevant agencies will send the notice or request to a registered address or email address of the business. For companies, the notice will arrive at the registered company address, addressed to the company directors. Otherwise, sole traders will directly receive the notice. 
If the laws apply to your business, you should develop internal procedures that ensure you correctly follow the procedure on complying with the encryption laws.

For example, you are not legally required to comply with the TAR as the request is voluntary. 

5. What Can The Notice or Request Ask You To Do?
There is little guidance as to what you could be asked to do under each type of request or notice. Law enforcement agencies may request your business to:

supply customer data;
create a new version of your software that enables or disables certain behaviour; or
provide the government agency with administrator access to information hosted by you.
remove electronic protection (such as encryption) from your products;
provide technical information;
ensure that the obtained information is in a particular format; and
modify characteristics of a service that you provide. 

6. How Do You Process the Request or Notice?
Whether you receive a notice or request, you are not allowed to disclose that you have received one. You also cannot disclose the contents of the request or the notice. One exception is where you can disclose the notice to your staff or relevant contractors if that disclosure helps you comply with the notice or request. 
After receiving the notice or request, your next steps are to:

determine whether you have received a TAR, TAN or TCN;
find out who needs to know about the notice or request;
disclose what is necessary to comply with notice or request;
check if you are required to comply with the notice (if it is a TAN or TCN);
check if the notice requires you to create a systemic weakness;
comply with the notice, if you have followed the above steps and found no objections; and
keep a record of costs.

You can download a full-size copy of the checklist below.
LegalVision Encryption Checklist
7. Can You Avoid Complying with the Laws?
The law is drafted broadly to cover anyone who provides electronic services to end users in Australia. If you want to avoid the laws, you have to avoid serving Australian customers. You could potentially restructure your business so that your Australian company serves Australian customers only. Therefore, your foreign companies can deal with any global customers without the potential need to comply with Australia’s encryption laws.
Key Takeaways
You may be one of many Australian businesses who provide electronic services to Australian users. Therefore, Australia’s encryption laws are likely to affect your business operations as well as the security of your product. If you must comply with the laws, ensure you have internal procedures in place that allow you to comply with the requirements. If you have any questions or need assistance on how your business can comply with the encryption laws, get in touch with LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page. 

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The most famous franchises around the world all had to start somewhere. While setting up your own franchise can seem overwhelming at first, it also brings significant opportunities for growth. Taking the time to plan your franchise structure can go a long way to making your franchise the next household name. This article outlines 10 steps to start a franchise on the right foot.
1. Create a Solid Business Model
Ideally, you should have an existing business that you want to scale up. It can be harder to sell a franchise model to potential franchisees if you can’t point to an existing business. When you already have a profitable business it is easier to show that you have a proven formula.
However, you do not always need your own business model. Perhaps you are bringing an international brand into Australia, acting as the “local” franchisor and buying the right to issue sub-franchises within the country. If so, you would be setting up shop as a “master franchisee”.
2. Do Your Research
Consider the industry your franchise will be operating in.

who are your competitors?;
are there similar franchises already and what is your point of distinction?; and
what laws are likely to apply to your franchises (such as food safety laws for fast-food franchises)?

A strong understanding of the market will allow you to pre-empt any potential issues and adapt your model accordingly.
3. Speak to the Experts
Get legal, accounting and business advice on the best framework for owning and operating your franchise business. By describing your expectations about how you want the business to run, you can get feedback on whether your vision can work within the confines of Australian law and receive input on how to meet your business goals.
By consulting with professionals who have assisted other franchisors, you can hear their stories and learn what will work best for your particular type of franchise. Different industries favour different franchising models, as do premises-based versus mobile franchises.
Keep in mind that franchisors have ongoing legal and accounting obligations. If you get good advice from the start, you can set up best practices that will minimise long-term headaches.
4. Prioritise Recruitment
Take your time to develop a strategy for recruiting and assessing potential franchisees. Consider what your ideal franchisee looks like, where you will find them and how you will attract them.
Strong recruitment processes are essential, especially for your early franchisees. These franchisees will be pioneers for your business model. Some franchisors recruit their existing employees as their first franchisees. Employees are already across the ins and outs of the business and have a history of being good brand ambassadors.
Given that your network’s reputation depends on your franchisees’ success, it is also important to build trust and cooperation from your very first franchisee. You want to be bringing franchisees on board who “buy-in” to your vision and are committed to high standards.
5. Implement Training Standards
However, maintaining high standards does not end with recruiting the right franchisee. You should also create training materials that give your franchisees the knowledge they need to make their business a success. For example, is there specialised equipment that your franchisees will be operating, or a particular recipe to be followed? Consider what information your franchisees need to be successful.
You should also be ready to update these training materials when there are changes in applicable laws or industry developments. Many franchisors recently found themselves doing this in response to the Vulnerable Workers Legislation, which makes franchisors more responsible for ensuring franchisees comply with employment laws.
6. Plan to Succeed
Reflect on your conversations with the experts and think about what you want your franchise system to look like. It is important to take the time to carefully reflect on the details of what you will offer your franchisees, and what you expect of them in return. With more detailed systems and processes, you will be in a better position to maintain high standards throughout your network and therefore work towards providing the best possible product or service for your customers.
Key questions you should ask include:

will franchisees be able to operate in exclusive areas?;
what are your rules around marketing? Will you be operating a marketing fund?;
what ongoing support will you offer franchisees?; and
what are the minimum requirements franchisees must meet before they are allowed to operate a business? Will they have to obtain licences or provide you with a police check?

7. Decide on Fees
You want your franchisees to be profitable. This will encourage growth and draw other franchisees to your network. A key part of fostering this profitability is ensuring that the fees you charge franchisees are reasonable.
There are two types of fees to consider — initial and ongoing. The initial fee is what the franchisee pays to purchase the business. Ongoing fees give the franchisee the right to use your franchise system and brand. Ongoing fees can also take the form of marketing levies and ancillary fees for items such as software.
When drawing up your fees, you want to ensure that franchisees see value from what they are spending. For example, you may provide ongoing assistance and continual improvements to the franchise system. You also need to strike a balance with making sure that you are able to cover your own costs of running the network.
8. Protect Your Intellectual Property (IP)
Consider registering each type of IP relevant to your franchise. Every franchise will benefit from having their logo as a registered trade mark and having a registered business name. One aspect of building a strong brand is protecting your right to use your trade marks and other IP. As part of setting up your franchise, you give franchisees a licence to use your IP for as long as they are franchisees. To keep your franchise consistent, you can also prohibit franchisees from using any other symbols, logos or business names.
9. Develop Your Operations Manual
An operations manual is a go-to guide that shows your franchisees exactly how to run their business. It will cover everything from how to interact with customers to the format in which franchisees must give you regular reports. Ideally, the manual should be very detailed. The more guidance you give franchisees, the greater your ability to maintain quality throughout the franchise.
Due to being highly detailed, the operations manual will contain confidential information. Typically, the manual will be provided to a franchisee after they have entered into the franchise contract, or signed a document agreeing not to disclose the contents of the manual.
You should also be careful to make sure that your manual matches up with the terms of your franchise agreement and other documents.
10. Create Your Franchise Documents
At a minimum, you will need to prepare a franchise agreement and a disclosure document. You can also require franchisees to sign other documents, including:

property licences;
confidentiality agreements;
non-compete deeds; and
personal guarantees.

Do not take shortcuts when it comes to your legal documents — take the time to consult with franchising lawyers. Franchising is a highly regulated area in Australia, with rules about what you can — and cannot — include in your franchise agreement.
There are also strict rules around how franchisees are to enter into a franchise agreement. For example, you must give franchisees a copy of the Franchising Code of Conduct along with the franchise agreement. You must also provide the franchisee with all relevant documents at least 14 days before they sign the agreement.

The Ultimate Guide to Setting Up a Franchise

Making the decision to franchise your business can be difficult. This Franchisor Toolkit covers all the essential topics you need to know about franchising your business.
This Toolkit also contains case studies from leading franchisors including leading Australian franchises including Just Cuts, FlipOut and Fibonacci Coffee.

Download Now

Key Takeaways
Franchisees buy into franchises to follow a proven system for running a profitable business. Therefore, before turning your business into a franchise, ensure you have everything in place to allow your franchisees to run a turn-key operation. Research and planning gives your franchise the best chance of success.
Our firm has advised some of the biggest franchises in Australia. If you need advice on everything you need to get your franchise ready to grow, call LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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If you are looking to run a real estate business, it is important to understand the different licences that you may need in your state. However, there are also some obligations that business owners all over Australia need to be aware of. Understanding your legal responsibilities is crucial in ensuring that your business is compliant and, subsequently, can run effectively. This article will explain the different licences that your real estate business will need across Australia. 
New South Wales 
In NSW, you need a corporation licence to carry on a real estate business. You will be eligible for a corporation licence if:

your business is competent, of good standing and have no conflicts of interest regarding obtaining the licence (this is known as being a fit and proper person);  
each director of the company is a fit and proper person;
the corporation and each officer of the corporation has not been disqualified;
at least one of the directors hold a real estate license (this person must supervise the business); and
the corporation has paid any fees regarding the granting of the licence.

If you wish to conduct business within NSW, you must have at least one physical office within the state. Furthermore, you must appoint a licensed agent to be in charge of the office and properly supervise it. You must also appoint a different person to be in charge within each different office where you carry on business. Therefore, if you intend to run an online business in multiple states, you must still have an office in NSW with a licensed supervisor.
Victoria
In Victoria, the legal obligations are very similar to those of NSW. If you wish to run a real estate business, it must be licensed as an estate agency. Specifically, your business will need a licence to:

deal with or dispose of land for another person;
negotiate to deal with or dispose of land for another person; and
collect rent for other people.

To be eligible for a licence, your company must have an officer in effective control. This is someone who is in charge and holds a current estate agent’s licence in Victoria. An officer in effective control:

works at the principal office address of the company;
must be regularly at that office;
is fully accountable for the overall day-to-day operations of the estate agency at all offices where the company carries on business; and
does not need to be a director of the company.

Like in NSW, you must have at least one physical office within Victoria and the person in effective control must be different at every office.
Western Australia 
If your real estate business is in WA, you must apply for a corporate licence to carry on a business. You will be eligible if all directors and managers are:

people of good character and repute; and
fit for their role in a real estate business.

The directors must elect a person to be ‘in bona fide control’ of the business. This person must be a licensed agent and will be in charge of the business’ activities.
In WA, you must have a registered office located within the state. However, this does not have to be where you conduct your business. Instead, the registered office can just be a physical address where any legal documents can be served.

For example, it could be the address of your accountants or solicitors in WA.

Queensland
In Queensland, you must hold a corporate real estate licence to run a business that:

buys, sells, leases or exchanges property (or an interest in property);
collects rent;
manages rental properties;
negotiates and facilitates property transactions;
shows property to potential buyers or renters;
inspects properties for sale or rent;
advertises and opens property for inspection; and
operates trust accounts.

Your business will only be eligible to obtain a corporate licence if the person in charge is a licensed real estate agent themselves. However, you are not required to have an office in Queensland. If you have multiple places of business, you must register all of the addresses when applying for a license.
At the principal place of business, the person in charge must have a current individual licence. They must also appoint another licensee or registered real estate agent to be in charge at other places of business.
South Australia
In SA, you must register your real estate business if you carry on activity involving:

selling land belonging to others;
purchasing land for others;
dealing with land on behalf of others; or
conducting negotiations for the above purposes.

You must ensure that your business is properly managed and supervised by a registered agent. You must also ensure that each office is properly managed by a registered agent. As long as your agency itself holds a SA real estate licence, you do not need to have a physical office within SA.
Tasmania
In Tasmania, you must hold a licence to open a real estate agency. If at least one director of your business holds a real estate licence, you can be granted a corporate licence.
There is no requirement to have a fixed office within Tasmania. However, a company that is licensed will need to have a licensed director and managing agent. These can be the same person. However, the manager cannot manage more than one authorised place of business.
Australian Capital Territory
To run a real estate agency in the ACT, you are required to have a corporation licence. Legally, a real estate business is one where agents act on someone’s behalf to:

buy land;
sell land;
exchange land;
lease land;
assign land;
dispose of land; or
collect payments for land.

Your business will be eligible to be licensed if at least one director holds a real estate licence themselves. At each place of business, you must employ a licensed agent who is responsible for the day-to-day management of the place of business. However, this agent cannot be the manager of more than one location of your business. Furthermore, there is no requirement that you must have a registered office in the ACT.
Northern Territory
In NT, you must hold a real estate agent licence to act as agent in the:

sale of land;
purchase of land;
exchange of land;
leasing of land; or
disposition of land.

Your real estate business will be eligible to hold a licence where;

it has the power to carry on business as an agent;
all of the company’s directors and managers are fit and proper people; and
each person nominated to act as a manager is a licensed agent.

A business manager is someone who has control of one or more of the business’ registered offices. Under the licence, they must be specified manager of the specific offices.
There is no requirement that the registered office must be in the NT. However, you must maintain a registered office somewhere in Australia.
Key Takeaways
If you are intending on opening a real estate business, you should be aware of the laws in each of the states regarding licensing. You will need to know:

who in your business must have a real estate licence; and
whether you must have a registered office in the states that you want to carry out business in.

Getting your licence requirements right is crucial in ensuring that you can operate your business effectively. If you have any questions about setting up a real estate business, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

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Creating cheap ‘knock-off’ products is not a new concept as not all consumers can afford luxury items. It is no surprise that there is a large market for products that are inspired by luxury goods but are sold at affordable prices. Aldi, a popular no-frills supermarket chain, has a reputation for creating look-alike goods. However, they have also gotten into legal trouble for their knock-off products. This article will explore what you should keep in mind while branding your products so that you do not get in trouble for infringing the trade mark rights of another business.
Aldi’s Touch
Aldi uses certain marketing methods to ensure that their no-frills goods do not infringe upon the trade marks of other brands. As a consumer, it is easy to guess which brands have inspired some of their products. Aldi even uses the tagline ‘like brands, only cheaper’.
Here are some known brands and their comparable Aldi product:

Brand Name Product
Aldi Comparable Product

Panadol
Hedanol

Nurofen
Hedafen

Sultana Bran
Bran & Sultanas

Mars Bar
Titan Bar (similar look packaging)

Head and Shoulders
Head Strong

 
Below, we explore two cases where Aldi has been sued due to the sale of their lookalike products.  In both cases, Aldi was found to not be infringing the IP rights of the branded products.
Cheezy Twists Case
Aldi sells a cheese flavoured snack under the brand name Cheezy Twists. However, Cheezy Twists are very similar to the well-known snack Twisties, which is owned by Frito-Lay.  Frito-Lay began court proceedings against Aldi for the use of the name Cheezy Twists for the sale of a product that is almost identical to Twisties.
INSERT IMAGES – source 1 , source 2
However, the court found that Aldi was not infringing Frito-Lay’s trade mark. This is because the Cheezy Twists mark was not deceptively similar to the Twisties mark. Essentially, this means that the courts did not believe that consumers would likely be confused about the origin of each of the products.
Morrocan Oil
Aldi sells a Moroccan argan oil hair product that is similar to a product produced and sold by Moroccanoil Ltd. The Moroccanoil bottle and product packaging is recognisable to many consumers and has turquoise and orange packaging. Responding to Aldi’s similar packaging, the Moroccanoil brand took Aldi to court. Here, they claimed that Aldi had infringed their trade mark rights and engaged in misleading and deceptive conduct.
INSERT IMAGE – source 1, source 2
Morrocanoil Ltd lost their case both in the Federal court and on appeal. Here, the judges commented that there was no real tangible danger that a consumer would mistake Aldi’s product for a luxury offering like that which Morrocanoil sells.
The Legal Risks That Aldi Faces
By creating affordable products that are inspired by other brands, Aldi needs to avoid:

deceiving its customers with product names that are similar or identical to the brand name product;
misleading its customers by selling a comparable product; and
having ambiguity in their packaging regarding any association between the Aldi product and the brand named product.

When branding your products, you should observe these rules to avoid any potential court actions. To avoid infringing the trade mark rights of others and prevent committing misleading and deceptive conduct, you should:

ensure that your brand name is sufficiently different from any comparable products;
compare the brands side by side to ensure that there is no confusion about whether the products are likely to deceive consumers;
follow in Aldi’s footsteps and outline ten key points of difference between your products and comparable brands;
create a different price point for your inspired goods in comparison to similar products.

Legal Questions to Ask Yourself
When creating products that you think might be slightly too similar to ones that already exist, you should ask yourself the following legal questions:

Trade Mark Infringement
Is my product deceptively similar or substantially identical to another product?

Copyright Infringement
Have I used an original aspect of other brand’s packaging on my products?

Misleading and Deceptive Conduct
Would an ordinary or reasonable consumer be confused as to the origin of my goods?

Passing Off
Does my product misrepresent a trade connection to consumers?

 
If you answered yes to any of the above, you should change the branding of your product to ensure that it does not infringe upon the IP rights of another business.
Key Takeaways
Aldi’s business practices should how important it is to ensure that you are not infringing on the trade mark rights of others. When creating your own low-cost competitive product, you should:

ensure that your brand name is not deceptively similar to a known brand;
create visual aspects on your packaging that illustrates that your product is not connected or associated with the known brand or product; and
think about the key differences between your product and the known brand.

If you have any questions about ensuring that your trade mark is not too similar to another business’ contact LegalVision’s trade mark lawyers or fill out the form on this page.

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When selling products, customers can become more interested in your brand if you market items in a particular way. For example, this might mean labelling products as natural or organic. However, you cannot label your products as, for example, natural and organic, if they do not meet the requirements for that labelling. Doing so could open your business up to a claim of misleading and deceptive conduct. This article will explain what you need to know about misleading and deceptive conduct so that you don’t market your products with misleading labelling. 
What is Misleading and Deceptive Conduct?
Whether conduct is misleading or deceptive depends on the particular circumstance. However, conduct will generally be misleading or deceptive if it could make a person believe something that isn’t true. 

For example, say a consumer who only purchases natural products buys something with artificial ingredients because the packaging made her believe it was natural. In this circumstance, the labelling may have been misleading.

When labelling your product, ask yourself whether someone might believe something about it that isn’t true because of its label. If so, you should change your labelling to avoid a claim of misleading and deceptive conduct.
The Aldi Decision
A recent case involving supermarket chain Aldi highlighted circumstances where the wording on your labels is likely to mislead and deceive consumers. In this case, a natural hair care brand, Moroccanoil, sued Aldi on the basis of misleading and deceptive conduct. This was due to Aldi’s use of the word ‘naturals’ on the packaging of products that did not substantially include natural ingredients.
The court examined the importance of context when assessing whether conduct could mislead or deceive a consumer. In this circumstance, it looked at how:

Aldi is a discount supermarket selling discounted products;
the word ‘naturals’ was simply a sub-line on the product; and
the product did include a small quantity of natural argan oil.  

After considering this context, the court did not find that Aldi had committed misleading and deceptive conduct.
How This Case Could Affect Consumers and Businesses
When labelling your products in a certain way, you should ask yourself whether a reasonable consumer would believe that the product itself is subject to the regulations of that label.

For example, if you’re labelling your product as ‘natural’, would a consumer believe that it is made of natural ingredients? If so, and it’s not, you could be committing misleading and deceptive conduct.

However, the Aldi case reaffirmed that a court will always look at the context of the situation. This is especially important when considering what a reasonable consumer would believe. Therefore, if you are selling a product that includes terms such as ‘natural’, ensure to take a look at all of the relevant circumstances. These include:

how many ingredients in your product are natural;
how prominently is the word is displayed in the packaging;
who is likely to be purchasing your product;
where you are selling your product; and
what the cost of your product is.

While Aldi escaped legal responsibility, you could still be legally responsible for misleading and deceptive conduct if you label a product falsely. Every situation is different, and the context of your circumstance might prove that your labelling could deceive consumers.
Therefore, you should take precautions to avoid claims of misleading or deceptive conduct. Only use terms like ‘natural’ or ‘organic’ on products that are substantially made of ingredients that are natural or organic. Alternatively, your packaging could contain a prominent disclaimer to ensure that a consumer is not confused.

For example, you should state what percentage of ingredients within the product are actually natural. 

Key Takeaways
When labelling your products, you must ensure that you are not engaging in misleading and deceptive conduct. However, a recent case involving Aldi has proved how the surrounding context of a situation can determine whether or not your labelling is misleading. Therefore, you should always question whether someone might buy your product because of a false representation on the packaging. If so, you may be liable for misleading and deceptive conduct.
If you need assistance to ensure your products are not misleading, contact LegalVision’s advertising compliance lawyers on 1300 544 755 or fill out the form on this page.

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nline marketplaces are digital platforms that facilitate transactions between customers and third parties. A recent case involving media company Pokemon and online artwork marketplace Redbubble showed that Australian marketplaces might face legal ramifications if the parties that use their platform break intellectual property (IP) laws. Therefore, if you run an online marketplace, it is important to understand your legal obligations to prevent illegal activity. This article explains these responsibilities and outlines tips to prevent your online marketplace from getting into legal trouble.
What is an Online Marketplace? 
Several different kinds of online markets facilitate shopping from multiple sources. Some popular global marketplaces where you can buy a variety of different products include:

eBay;
Alibaba; and
Amazon.

However, there are other marketplaces which sell user-submitted artwork and goods online. Some of these include:

Redbubble; and
Etsy.

Legal Issues for an Online Marketplace
If vendors or third parties conduct illegal activities in your online marketplace, your business may become vulnerable to legal consequences. Therefore, as a marketplace, it is important that you do not engage in business processes that could promote infringement of the intellectual property (IP) rights of third parties.
It is important to lessen these risks by having clear terms and conditions that users must agree to if they wish to sell their products on your website. Furthermore, it is important to have a ‘notice and take down policy’. Under this policy, you can subsequently remove any content that infringes on the rights of others.

For example, someone may try to sell content that features the trade mark of another business on your platform. If so, a notice and take down policy would allow you to take it off your online platform.

Copyright Obligations
Copyright law awards automatic protection to original works from being reproduced by unauthorised parties. However, these original works must be written down or recorded and can be:

literary;
dramatic;
musical; or
artistic.

You may come into some issues if you run an online marketplace where users can directly upload content for sale. For instance, one of these problems is that people may try to sell material that infringes on the copyright of others. In the case of Redbubble, their business allowed for and facilitated the communication of infringing works and trade marks via a tagging system.
Measures to Avoid Infringing Copyright
You can minimise the risk of your marketplace infringing on the copyright of others by requiring users to agree to terms of service before uploading their content. Your terms of service agreement should explicitly acknowledge that users cannot upload copyrighted material to the marketplace. Furthermore, the agreement should hold the other party accountable if they breach IP laws or commit any other kind of legal activity. It should also clearly state that your business is not legally responsible for any of these breaches by third parties.
If your marketplace has terms and conditions containing a takedown or penalty system, this may not be enough to show your legal compliance with copyright laws. Instead, you must be actively removing infringing content. You must also block users who consistently infringe upon the IP rights of others. In the case of Redbubble, they were failing to do this.
Consumer Law Obligations
All businesses must not engage in misleading and deceptive conduct by deceiving consumers. In the case at hand, Redbubble was selling Pokemon themed products that users had created. The court found that Redbubble had knowledge of the pricing of authorised Pokemon products and comparably priced their user-created products. In addition, Redbubble did not make any disclaimers showing that they were not affiliated with Pokemon.
Because of Pokemon’s reputation within Australia, an ordinary consumer would likely believe that Redbubble’s products were authorised by Pokemon. The court found that Redbubble had misled and deceived consumers.
Therefore, it is important that none of the content that your online marketplace is selling could create a false impression in the minds of your consumers. Ask yourself, is it clear who has created your products? Have any of the products infringed upon copyrighted material? If you believe that a product may deceive consumers, you should fix the issue or take down the material immediately.
Key Takeaways
If you run an online marketplace, you may be vulnerable to legal risks if your vendors or third parties breach the rights of others. Therefore, it is important that you;

have clear terms and conditions for users to agree to;
have a notify and take down policy where you can remove content that infringes upon the rights of others; and 
do not engage in business processes that could promote the infringement of others’ IP rights.

If you run an online marketplace and would like to discuss how to mitigate the risk of infringing the rights of third parties, contact LegalVison’s IT lawyers on 1300 544 755 or fill out the form on this page.

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In December 2018, the so-called ‘encryption laws’ were passed, allowing law enforcement agencies to ask or compel technology or communication-based companies to assist with law enforcement investigations. These agencies have already started issuing notices and requests. Therefore, you should have a detailed internal plan when you do get a request or notice. This article will explain how your business can handle a request for access to encrypted data under the new encryption laws. 
Encryption Laws Overview 
The new encryption laws aim to crack down on serious crimes such as terrorist activity and child pornography. Law enforcement agencies such as the Australian Federal Police can issue certain requests or notices to anyone who is a “designated communications provider”.
That broad definition can include:

hosting service providers;
software developers;
e-commerce stores; and
software as a service (SaaS) providers. 

You may receive one (or more) of these types of requests or notices, such as: 

TARs (technical assistance requests);
TANs (technical assistance notices); or
TCNs (technical capability notices).

For more information, read ‘FAQs on Australia’s New Encryption Laws‘.

What does the Request or Notice Involve?
The law enforcement agency can send the notice or request to a registered address or email address of your business. If you are a sole trader, you will directly receive the notice or request. Companies can receive the notice at their registered office. 
Technical Assistance Requests
Complying with a TAR is voluntary. You may have to provide technical assistance in any way that the relevant agency believes will assist their investigation. You are not required to act at all if you receive a request, although you can choose to comply with the request. 

For example, you could be asked to: 

supply customer data;
create a new version of your software that enables or disables certain behaviour; or
provide the government agency with administrator access to information hosted by you.

Technical Assistance Notices
Complying with a TAN is compulsory. The law provides a list of activities that you must do if you receive the notice. The TAN will rely on the company’s existing features for law enforcement. 

For example, a notice may ask you to:

remove electronic protection from your products (such as removing end-to-end encryption on messaging);
provide technical information on the operation of the product or service;
ensure any obtained information appears in a particular format; and
change certain features of your service. 

Technical Capability Notice
Complying with a TCN is also compulsory. A TCN is a legal step-up from a TAN, where law enforcement officials will ask you to build new features into your product so they can carry out their enforcement activities. 

For example, a notice could ask you to build a software feature that creates custom reports on data patterns that could signal criminal activity.

Who Can I Tell About the Request or Notice?
If your business receives a request or notice, you are not allowed to disclose that you have received one. You also cannot disclose the contents of the request or notice. Those restrictions apply to:

businesses;
employees of the business;
contractors of the business; and
employees of the contractors.

There are some exceptions to this rule. 

For example, you can disclose the notice to existing staff, contractors, suppliers and other individuals that is necessary for being able to comply with the notice. 

Internal Process Checklist
Complying with a request or notice can be an overwhelming experience, especially if you are a startup or small business with few resources. The checklist below provides an overview of the steps you can take to comply with your encryption law obligations.

Click here to view and download the checklist.
Key Takeaways
Law enforcement agencies have already issued requests or notices under the laws. You should know what you could be asked to provide as part of a specific notice or request. Be sure to educate your staff on these issues. If you have any specific concerns or would like assistance on how to comply, get in touch with LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page.

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What do fitness trackers, home assistance devices, health monitors and smart televisions have in common? They are part of the ‘Internet of Things’, also known as IoT. As a developer of IoT devices, this is a great opportunity for you to develop solutions to improve the convenience the lives of others.
However, a recent international survey has found just 37% of Australian companies could detect an IoT security breach, while only 57% encrypt the data they capture or store in IoT devices. As your customers have become privacy-conscious, you need to reassure your users that you have measures in place to protect the security of your customers’ data. This article explains how your IoT business can prevent security breaches.
Why You Need To Secure Your IoT Device
Your IoT device is a hot target for hackers. For example, if you produce health devices such as a pacemaker, hackers could disrupt its use.  Even businesses are not immune. For example, if you sell an IoT device that measures customer traffic to a retail store, competitors may find a way to steal the data.
Therefore, before you sell any IoT devices on the market, you need to think of security measures to protect your device from data breaches. As customers become increasingly concerned about privacy and data security, you should have security measures in place to reassure your customers and protect your brand.
Key Security Measures
 

Security Measure
Benefit

Include a mandatory password that is updated regularly for your IoT device.
A unique password is hard to hack. Users may feel more confident in the device as they can choose their password.

Ensure you update your IoT device with regular software updates, whether online or on the device. 
The latest software means the latest security features, which also means the device and related software is better protected.

Encrypt all data which passes through or is stored on the IoT device.
Encrypted data is much harder to penetrate than plain text. The hacker must obtain the data and then figure out the password or secret key to unlock the data.

Implement centralised monitoring for your IoT devices and record any security issues.
You can how your customers are using your IoT devices and software. Spot any concerning security trends that will help you pinpoint and diagnose problems faster.

Seek advice from an IT security consultant.
An IT expert can help assess key security risks of your IoT device. They may be able to create a personal plan that outlines additional security measures to secure your customer data and maintain privacy.

 
What Legal Documents Do You Need?
On top of practical security measures, you should protect yourself legally from any data privacy risks with your IoT device. 
At a minimum, you will need:

terms and conditions; and
a privacy policy.

Terms and Conditions
Your terms and conditions can specify how your customers can use IoT services to secure the IoT device and software. Your terms and conditions can also specify how you will manage the security of your device. More importantly, your terms and conditions should limit the liability for any data breaches that are caused by the user’s use of IoT devices.
However, even if a data breach does occur, you should set out how you will recover the data. Furthermore, you will have to reassure customers that they should still have confidence in your device.
Privacy Policy
A privacy policy can help reassure users about the security of your IoT device. Your privacy policy should inform your users about how you collect, use, disclose and secure their personal information.

For example, if your IoT device is a smart heart monitor, your privacy policy may want to explain how you will secure their daily log of heart rhythms as they exercise in the gym. 

You will need a privacy policy if you have an annual turnover of $3 million or more. Some exceptions apply, such as if you are a:

health service provider;
business that buys or sells personal information (such as email lists); or
contractor that provides services under a Commonwealth contract.

Even if you do not legally need a privacy policy, having a document in place reassures your customers about how you will secure their data and maintain your privacy.
If you need a privacy policy, you will need to comply with the Mandatory Data Breach Notification Scheme. The scheme sets out rules on how you must report eligible data breaches.

For example, if a hacker breaks into your smart heart monitor and steals your customers’ names and email address, that could be an eligible data breach that you will need to report.

Your business may want to create a data breach response plan that sets out how you will respond to a data breach in your IoT device.
Key Takeaways
As a business that sells IoT devices, you should have a list of security measures in place to reassure customers about the security of your IoT device. In addition, it is a good idea to have terms and conditions as well as a privacy policy to protect yourself legally if there is a data breach. If you have any questions, get in touch with LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page.

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As a developer, you may develop apps for purposes such as entertainment, information or social networking. Mobile apps may also collect personal information such as names, email addresses or location data. If the data is lost, misused or stolen, you may have a data breach. This article explains the steps you need to take if you discover a data breach in your app.
What is a Data Breach?
A data breach is where someone gets unauthorised access to personal information without the person’s consent. Personal information is any information that identifies a person, such as their email address or their name. 
Hackers can steal data through planned criminal attacks. However, human error or IT failures can lead to data breaches. Examples of data breaches in apps include:

a criminal group that hacks your heart monitoring app to publish sensitive medical information about its users; 
an employee forgetting to encrypt sensitive data on the app; and
a glitch in the app which allows the theft of private photos that are published online without user consent. 

What are Your Legal Requirements?
If a data breach occurs, your business may have to comply with the Notifiable Data Breach (NDB) scheme. The scheme sets out rules on how to report data breaches and applies to any business that has an annual turnover of more than $3 million. Exceptions to this turnover rule apply, such as if your business:

is a health service provider;
a credit reporting body; or
receive tax file numbers (TFNs), such as when you are paying employees and require their TFNs to comply with tax rules.

However, not all data breaches require reporting. The NDB scheme only requires the reporting of an ‘eligible data breach’ where:

there is a loss of personal information, disclosure to an unauthorised person or unauthorised third party access;
the loss, access or disclosure may lead to a risk of serious harm to a person or people; and
your business could not prevent the risk of serious harm.

For example, hackers access data of people who have signed up to use your heart monitor app. They steal information about their names, email addresses and medical conditions. The hacking group then publishes that information online. This situation would be an ‘eligible data breach’.
However, if an app developer accidentally receives customer data from your app because they were testing a feature, they can quickly patch the loss of data. As no one is at risk of serious harm in that situation, there is no need to report the data breach. 

How Do I Respond to a Data Breach in my App?
If you suspect a data breach in your app, you should follow these steps to keep your customers safe and comply with your legal requirements.
1. Contain the Breach
Limit the spread of lost data. Ensure you can recover any lost customer information. Check who has access to back-up data systems. Find out who is in control of the data proceedings and change permission settings immediately.
2. Assess the Breach
You must assess the seriousness of the breach within 30 calendar days. You should analyse the events that led up to the breach as well as the immediate fallout. Determine if any serious harm is likely to occur.
3. Determine if the Breach is Serious.
You should ask yourself questions such as:

what is the harm?;
did the breach cause any loss of sensitive information about users of the app?;
did the breach reveal sensitive information like credit card or driver’s license details;
who has access to the information because of the breach;
is the information encrypted?; and
will there be serious physical, psychological, emotional, financial or reputational harm to the person or people affected by the breach? 

4. Notify Affected Individuals At Risk of Harm
Notify the individuals who use your app. You can email them about the data breach. Explain:

the events that have occurred;
what information has been affected; and
practical steps individuals can take to limit risk, such as removing their credit card details from the app or cancelling their account for a new account. 

5. Notify the Office of the Australian Information Commissioner (OAIC)
You must write a statement that summarises how the breach occurred, any lost data and the impact of the breach on your customers. You must then submit the statement to the OAIC. There is an online form that provides a template for how to write the statement.
5. Review The Incident
To prevent future data breaches, you should carefully review how you handled the incident. You may want to create a data breach response plan that sets out the steps your business will take if there is another data breach. It can be useful for businesses to have a quick reference on how to comply with the NDB scheme requirements.
7. Update or Create New Documents
You should have an IT Security Policy that states how you prevent data breaches within your app. In addition, your policy can explain:

how the business prevents misuse of customer data and information;
how users access devices that hold information and what level of access they receive;
the mobile app’s security standards; and
an incident response procedure.

You can also draft a Privacy Compliance Manual to train employees to comply with any data breach notification requirements if they affect customer privacy. The manual should contain information on: 

the use, disclosure and storage of personal information;
use of personal information for marketing purposes;
a complaint procedure for customers.

Key Takeaways
Keeping your customer data safe is essential for your business’ reputation. Ensure you create a data breach response plan so you know to deal with any future data breaches within your app. Find ways to limit the risk of future data breaches by reviewing existing policies. If a data breach does occur, ensure you comply with all the legal requirements under the NDB Scheme. If you have any questions, get in touch with LegalVision’s IT lawyers on 1300 544 755 or fill out the form on this page. 

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