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______________________________________________________________________________Stewart McKelveyDoing Business in Atlantic CanadaDecember 1, 2009. The CPBPA will repeal the Consumer Protection Act, the Consumer ReportingAgencies Act, the Cost of Consumer Credit Disclosure Act, the Direct Sellers Act, the Trade PracticesAct, the Unconscionable Transactions Relief Act and the Unsolicited Goods and Services Act and replacethem with a comprehensive and consolidated consumer protection regime.FranchisingFederal lawThere is no federal act specifically dedicated to the regulation of franchises. However, there are manyacts which impact on the operation of franchises, including the Competition Act (with regard to trade andcompetition matters), the Trade-marks Act (with respect to the registration and protection of trade-marks),the Income Tax Act (with respect to taxation rules) and the Investment Canada Act (with respect toinvestment rules governing foreign based franchisors).Prince Edward IslandProvincial lawPrince Edward Island recently passed a new Franchises Act (the “PEI Act”). Alberta and Ontario are theonly other Canadian provinces where franchise legislation has been brought into force. The PEI Actclosely follows the Ontario Franchise legislation, and includes changes that were suggested in theUniform Law Conference of Canada’s Uniform Franchise Act.Duty of Fair DealingThe PEI Act imposes a duty of fair dealing on each party to a franchise agreement and includes a duty toact in good faith and in accordance with reasonable commercial standards. The PEI Act provides anaggrieved party a right of action for damages against a party that breaches this duty of fair dealing. ThePEI Act permits franchisees to join together to form a franchisee association and precludes a franchisorfrom prohibiting or penalizing a franchisee for engaging in this type of activity.Disclosure RequirementsThe PEI Act contains many provisions dealing with the requirement for open disclosure by franchisors. Afranchisor must disclose all material facts about the business operations, capital and control of thefranchisor, about the franchise and about the franchise system. Financial statements, prepared inaccordance with generally accepted accounting principles, must be given to a prospective franchiseeunless the franchisor has a net worth of less than $2-million or the franchisor has had at least 25franchisees conducting business at all times in Canada during a five year period immediately precedingthe disclosure document. The franchisor must provide detailed information about the franchise, includinga list of all the franchisee’s costs associated with the establishment of the franchise, the amounts ofdeposits and fees, etc., the nature of any recurring or isolated fees or payments that would have to bemade by a franchisee, the description of the franchisor’s policies and practices with respect to guaranteesand security that may have to be given by a franchisee, an estimate of the operating costs of thefranchise, earnings projections for a franchise, all terms and conditions on financing, training, advertisingand restrictions on purchase and sale of the business, rebates, commissions and payments of otherbenefits, territory, proximity of other franchisees, trade-mark and other proprietary rights to be given to afranchisee, and rights upon the termination of the agreement and the renewal of the agreement. Afranchisor must also disclose a list of all existing and former franchisees in Prince Edward Island, NewBrunswick and Nova Scotia, including their names, addresses and telephone numbers. The intention isto provide a prospective franchisee with as much disclosure as possible so that a franchisee can make aninformed decision about the franchisor and the franchise.Pursuant to the Franchises Act Regulations (the “Franchise Regulations”), a franchisor may use afranchise disclosure document prepared under the franchise law of another jurisdiction provided that thePage 30