Underneath the Golden Boy - Robson Hall Faculty of Law

336 Underneath the Golden Boy
The United States Federal Trade Commission (“FTC”), a federal agency
with power to regulate interstate commerce, investigate business activities and
issue enforcement orders, regulates federal franchise law in the United States. 137
The FTC may commence an enforcement action against a franchisor if an
investigation determines that the franchisor has not complied with the FTC
Rule. The enforcement action sought or commenced by the FTC can either be
administrative, wherein the FTC may negotiate an order or a consent decree in
which the franchisor will be enjoined from certain actions, or the enforcement
action may be judicial, wherein the FTC can commence a lawsuit against the
franchisor for their breach or non-compliance, in a court of law. Penalties for
noncompliance are serious and may include the impounding of company assets,
cease and desist orders, injunctions, and mandated rescission or restitution for
injured franchisees. 138
Complementing the FTC, all states have incorporated, in one form or
another, consumer fraud or deceptive trade practice acts, commonly referred to
as “Little FTC Acts.” These little FTC Acts independently create a private cause
of action, wherein a violation of the FTC Act will give rise to an independent
cause of action in state law. 139 If Manitoba chooses to instate a regulatory body,
the FTC model would certainly by one to follow. Since franchisors are not
required to register with the FTC and the FTC does not review or approve of the
initial disclosure documents, 140 the regulatory body would not play an invasive or
cumbersome role in the purchase process. Furthermore, franchisors coming to
Manitoba from the United States, already accustomed to such a system, would
not see it as a deterrent from establishing franchises in the province.
Although implementing a regulatory body would give more “teeth” to any
franchise legislation, several lawyers, primarily those representing franchisors,
oppose such a change. Mr. Joseph Adler, an Ontario based lawyer, argues that
such cumbersome laws will only dissuade honest franchisors from conducting
business in that province and increase the cost of doing business for franchisors
and franchises. 141 Mr. Dillon, who also opposes such a body, blames the amount
of media attention the 3 for 1 Pizza cases have received. He states:
When one considers the number of franchises operating in the province [of Ontario] at
any time, it should not come as a surprise that a certain number of systems will operate
137
Daniel F. So, supra note 69 at 86.
138
Ibid. at 94.
139
Ibid.
140
Manitoba Law Reform Commission, supra note 13 at 55.
141
James Daw, supra note 131.