Various industry players in the franchising sector have argued that the Act should not be made applicable to franchise agreements because of the nature of franchising as a business model.
Some of the arguments are that franchising should be seen as a specialist field with different elements and should be distinguished from ‘normal’ business entities. It is also argued that since franchising has generally a low rate of failure, it should be left alone unregulated so that it can continue to grow.
The Commission recognizes the contribution of franchising to job creation and the fact that it is one of the best vehicles and an effective way to opening up markets for small and medium-sized enterprises (hereinafter “SMEs”) and the historically disadvantaged persons to participate in the mainstream economy of the country.
Whilst franchising is a successful, common and often efficient method of distribution or manufacture of goods and services in the country, it is important to realize that at the same time it may be problematic from a competition law perspective.
This notice thus highlights the various aspects of franchising that may be affected by the Act. However, this should not be interpreted to exhaust all instances or activities in franchising arrangements that could be affected by the Act. For easy understanding and clarity, decided cases and approaches adopted in other international jurisdictions have been considered.