T Maddocks

Lawyers 140 William Street

ContactGreg Hipwell Melbourne Victoria 3000 Australia Direct0392583354 Emailgreg.hipwell@r 3u

Telephone 61 3 9258 3555

Our RefGHH: 6720268

Facsimile 61 3 9258 3666

info@maddocks.com.au www. mad docks. com . au

28 April 2016 DX 259 Melbourne

Attention: The General Manager

Adjudication Branch Australian Competition and Consumer Commission GPO Box 3131 Canberra ACT 2601

Dear Sir/Madam

Exclusive dealing notification — LCA Franchising Pty Limited

Please find enclosed:

1 .Form G — Notification of Exclusive Dealing from LCA Franchising Pty Limited; and

2.Cheque in the amount of $100 for the lodgement fee.

If you have any queries, please do not hesitate to contact me.

Yours faithfully

Grip e I Par

En

[6720268:16296077_1]

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Form G Commonwealth of Australia

Competition and Consumer Act 20 10 — subsection 93 (1) NOTIFICATION OF EXCLUSIVE DEALING

To the Australian Competition and Consumer Commission:

Notice is hereby given, in accordance with subsection 93 (1) of the Competition and Consumer Act 2010, of particulars of conduct or of proposed conduct of a kind referred to subsections 47 (2), (3), (4), (5), (6), (7), (8) or (9) of that Act in which the person giving notice engages or proposes to engage.

PLEASE FOLLOW DIRECTIONS ON BACK OF THIS FORM

Applicant

(a) Name of person giving notice: (Refer to direction 2)

LCA Franchising Pty Limited ACN 150 499 595 (LCA)

(b) Short description of business carried on by that person: (Refer to direction 3)

LCA is the franchisor of a network of franchisees (Franchisees) that operate "Laser Clinics Australia" businesses in Australia (Clinics). The Clinics provide laser hair removal, cosmetic injections, skin treatment services and skin product sales under the Laser Clinics Australia brand and using LCA's business system.

As part of the operating model of the LCA network, LCA Operations Pty Ltd ACN 600 736 212 (LCA Operations), a related body corporate of LCA, has a shareholding interest of no less than 50% in each Franchisee entity. This model is designed to promote alignment of interest between the Franchisee and the LCA group, and allows for certain capital investments required by a Franchisee to be borne in shareholding proportion. As a result of this model, LCA has a direct interest in ensuring that Franchisees are able to obtain quality goods and services at a competitive price and LCA Operations is involved in all buying decisions of Franchisees.

Franchisees operate the Clinic pursuant to a franchise agreement with LCA (Franchise Agreement). Pursuant to the Franchise Agreement, each Franchisee will be granted the right to operate a Clinic using the "Laser Clinics Australia" brand and associated intellectual property, subject to the terms of the Franchise Agreement.

At present, there are 61 Franchisees operating Clinics in New South Wales, Victoria, Queensland, South Australian and the Australian Capital Territory. As the date of this notification, there is currently 1 un-franchised Clinic which is operated by associates of the Franchisor.

(c) Address in Australia for service of documents on that person:

Unit 31, 6-8 Herbert Street, St Leonards NSW 2065.

[6720268:16155496_2] Page I of 8

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IUGWOBUBJJe POUPONz

(b)Number of those persons: (Refer to direction 6)

(i) At present time: there are currently 61 Franchisees operating in the LCA franchise network and each Franchisee operates 1 Clinic.

(ii) Estimated within the next year: LCA estimates that it will have 80 Franchisees operating in the LCA franchise network within the next year.

(c)Where number of persons stated in item 3 (b) (i) is less than 50, their names and addresses:

Not applicable, there are more than 50 Franchisees.

4.Public benefit claims

(a) Arguments in support of notification: (Refer to direction 7)

Refer to paragraph 4(b).

(b) Facts and evidence relied upon in support of these claims:

The purpose of the notified conduct is not to substantially lessen competition in any market. Rather, the notified conduct will enhance the capacity of Franchisees and provide significant benefit to consumers, as set out below.

The laser hair removal and cosmetic injection industry can provide significant barriers for entry primarily because of the high establishment costs. The notified conduct allows Franchisees, as small businesses, to enjoy the benefits of pricing arrangements with suppliers that may otherwise not be available to them as independent small businesses. By enabling more laser hair removal and cosmetic injection businesses to enter the market, the notified conduct encourages competition among these businesses, increasing availability and quality of these services for consumers and driving down prices. The involvement of LCA Operations in the Franchisee promotes entry into the market by sharing the capital investment required at the outset in proportion to its shareholding.

Competitive price

LCA invests significant time and effort in its supplier relationships and by doing so will ensure that the prices and supply terms it negotiates with Nominated Suppliers constitute fair value for Franchisees. The involvement of LCA Operations in the Franchisee further incentivises LCA to negotiate competitive pricing arrangements with its suppliers and the interests of the LCA group and Franchisees are more closely aligned than they otherwise would be under a traditional franchise model. In LCA's opinion, the prices that LCA can negotiate with Nominated Suppliers will on average be significantly less than Franchisees could obtain independently over any significant period. This is due to the volume of supply that a nominated supply chain provides.

When selecting Nominated Suppliers, LCA will consider a range of factors such as: product consistency, product pricing model, product quality, regulatory compliance, safety, logistical viability, references from other customers and ability to provide uninterrupted supply.

[6720268:16155496_21 Page 3 of 8

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(iii) LCA will be able to manage the price of key inventory and the cost of providing services which in turn enables Franchisees to more easily provide, or to provide enhanced, value for money to customers;

(iv) customers will be able to have confidence that whenever they visit a Clinic, they will be supplied with the same high standard of service and quality products; and

(v) Franchisees will purchase Approved Supplies in the knowledge that the ability of the Nominated Supplier to provide products and services to the standard required by LCA has been investigated by LCA.

Protection of the Laser Clinics Australia brand and system

Since the establishment of the first Laser Clinics Australia branded clinic in 2008, owners and associates of LCA and LCA have invested significant resources in developing a sustainable business model. A key component of the success of this model has been the reputation developed in the "Laser Clinics Australia" brand as an indicator of quality services and products that represent quality, safety and value for money.

LCA has been able to achieve the above by:

(i) managing the pricing structure within its supply chain;

(ii) controlling and monitoring the quality of key equipment, services and products supplied to Clinics; and

(iii) working with suppliers and service providers to ensure equipment, services and products supplied to Clinics appropriately cater for the needs of customers at the Clinics.

These measures are aimed at protecting the integrity and distinctiveness of the Laser Clinics Australia brand and ensuring customers are provided with a safe and quality service. These measures also maintain the value in, and reputation of, the Laser Clinics Australia business, which will enable Franchisees to attract customers.

The views of LCA expressed above are supported by the ACCC's 2011 Addendum to its 2007 Guide to Exclusive Dealing which states that:

The A CCC is of the view that restrictive supply arrangements that require franchisees to purchase goods or services from particular suppliers are often central to the operation of a franchise network. These arrangements enable the franchisor to maintain quality and consistency in each of the franchise outlets that is often important in marketing the franchise network and promoting a standard customer experience. In addition, the use of preferred or nominated suppliers may result in efficiencies and cost savings that will potentially be passed on to the franchisees and ultimately consumers.

(6720268:16155496_21 Page 5 of 8

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LCA controls the establishment and management of the supply chain on

behalf, and for the benefit, of Franchisees. If LCA does not do so,

Franchisees will be required to fulfil this role themselves, at a significant cost

and time burden to their businesses.

Consumers

In regard to consumers, LCA does not consider that the notified conduct will

cause any measurable detriment. Indeed in LCA's opinion, the conduct

will benefit consumers by enabling them to access safe, quality products and

services at a price that constitutes value for money. The notified conduct will

not impact upon a consumer's ability to "shop around" for alternative offerings,

should it wish to do so.

Suppliers

Suppliers of Approved Supplies that have not been approved by LCA, and do not

form part of the supply chain, will be impacted by the conduct to a limited extent.

This is because they are not approved to supply their products to Clinics.

However, LCA contends that the detrimental effect of the notified

conduct is minimal, given that LCA is willing to consider alternatives to existing

suppliers should LCA be satisfied the alternative offerings are better than LCA's

existing ones.

7.Further information

(a)Name, postal address and contact telephone details of the person authorised to

provide additional information in relation to this notification:

Greg Hipwell, Partner, Maddocks

140 William Street, Melbourne, Victoria 3000

Direct line: (03) 9258 3354

Email: greg.hipwell@maddocks.com.au

DatedA -w ff.

....................

Signed by/on behalf of the applicant

................ Grep ^il,

g r Part e

M II

ad cks V

[6720268:16155496_2) Page 7 of 8

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