Following my last post (Monday this week), Does your marketing group contract auto-renew? Does it include a lock-out period?, I outline below options you may consider if you find yourself in a marketing group contract you want to leave.
I am not a lawyer. This is not legal advice. In my opinion, a marketing group contract should be so simple straightforward and fair that it does hot need a lawyer to interpret or understand.
If your marketing group contract or agreement is complex and not easy to understand that’s a warning sign right there.
CONTRACT AUTO-RENEWAL.
If you have found your contract has auto-renewed, think about whether it was clear it would and whether the newsagency marketing group contracted you prior to the auto-renewal trigger advising you that auto-renewal was imminent. The ACCC is on record as saying that auto-renewal should be clear and that you should be contacted prior to auto-renewal with enough time for you to say no thanks.
Three newsagents in the last week have told me their newsagency marketing group contracts were auto-renewed without advance warning from the marketing group that it was going to happen. I think any independent party with authority considering this would say renewal action was unfair and that the newsagent could opt to leave the group now.
RESTRAINT OF TRADE – POST CONTRACT LOCK OUT PERIOD.
Some newsagency marketing agreements seek to deny the newsagent the right to join another marketing group for a period of time after the end of the agreement. I have heard marketing groups with such a restraining clause claim that it is to protect their intellectual property shared with the business while they were in the group. The question I have is what intellectual property?
In situations where I have seen newsagents threatened by the group they are leaving, or the lawyers for the group, I have not been able to discover any intellectual property worth protecting.
In a recent report, the ACCC highlighted that restraints which go beyond what is reasonably necessary to protect a franchisor’s legitimate interests are likely to be unfair. For the purposes of this discussion, a franchisor would be the newsagency marketing group.
NEW REGULATIONS.
In November 2023, reforms passed by parliament make unfair contract terms illegal, attracting substantial penalties under the Competition and Consumer Act 2010 and the ASIC Act 2001, with each unfair term forming a separate contravention.
I think it is possible that a newsagent with an agreement that auto-renews and / or with an end of contract lock-out restraint period barring them from joining any other group could challenge the validity of the contract.
While I am not a lawyer and this is not legal advice, if I found myself in this situation I would do several things, all at once:
- Write to the franchisor / marketing group explaining my opinion that the contract is unfair and seeking immediate termination of the contract without penalty and without any restraint period. And, if the letter I would request that all correspondence is in writing and only in writing.
- Contact my local state government level small business ombudsman seeking their help in resolving the matter.
- Seek assistance from Australian Small Business and Family Enterprise Ombudsman on the contract.
- Complain to the Australian Financial Complaints Authority (AFCA). They small businesses with a free and independent dispute resolution scheme to assist with resolving financial complaints.
- Engage with ASIC, lodge a report of misconduct online.
- Write to the ACCC complaining about what I consider to be an unfair contract.
- Contact my local small claims authority (VCAT, QCAT, NCAT, TASCAT, SAT etc) to see if they would accept a case seeking to declare the contract invalid and agreeing my my immediate exit from the group.
My point here is that there are options for you, actions you can take that do not require a lawyer, actions that could free you from a contract you no longer want for your business.
I have seen newsagents consider taking steps to get out of a contract only to give up, saying it is too hard. I have also seen newsagents take a couple of steps and be permitted to exit a group as long as they don’t tell anyone.
If you are in a marketing group for your newsagency and want to leave but have been told you cannot or been told that you have a lock-out restraint period, it is possible one or more of the steps listed above could help you out. Doing nothing achieves nothing for your business.
The difference between being in a group doing little for your business and a group doing plenty could be tens of thousands of dollars in net profit in a year.
A good newsagency marketing group is profitable for the newsagency. Belonging just to belong to something is not commercially astute.
I am not going to list marketing group contracts here that I consider to be unfair in part because I have seen some groups with different contracts for different people, which in itself is odd and somewhat concerning. One group has recently become more threatening against newsagents who want to leave, causing considerable distress for the newsagents impacted.
One final point: everything I have written here could relate to some card company contracts I have seen.
Before you sign any agreement, read it, be sure you understand it and ask someone you trust for their opinion.