The ACCC imposes penalties under the Franchising Code

Public news

The ACCC has imposed penalties under the Franchising Code. These are the first proceedings that the ACCC has brought against a franchisor alleging a breach of the Franchising Code obligation to act in “good faith” in business dealings with franchisees.

As a result, the Federal Court has imposed a $2,604,000 penalty against Ultra Tune Australia Pty Ltd for breaching both the Franchising Code of Conduct and Australian Consumer Law (ACL).

This demonstrates that the ACCC's Chairman Rod Sims has in fact made good on his promise that this year, the regulator will act as more of a prosecutor than peacemaker.

Justice Bromwich found that Ultra Tune Australia had made false or misleading representations to a prospective franchisee in regards to the price of the franchise, the ongoing rent of premises, and the age of the franchise. The prospective franchisee was also told that a $33,000 deposit was refundable when it was not. Ultra Tune Australia was ordered to pay the prospective franchisee the $33,000 deposit back plus interest.

Ultra Tune Australia also breached the Franchising Code by failing to prepare marketing fund statements within the required time frames, failing to provide these statements and audit reports to franchisees, as well as failing to include sufficient detail in the statements.

This decision represents a positive step towards ensuring the rights of franchisees are protected.

Click here to read the full media release from the ACCC.

The maximum penalty for a breach of ACL was recently increased to the greater of $10 million, or three times the value of the benefit obtained, or 10 per cent of annual turnover in the preceding 12 months if the value of the benefit cannot be determined. In this case, the increased maximum penalty did not apply to the Ultra Tune case, which preceded the change.

Click here to read the MTA’s recent article on new fines and penalties under Australian Consumer Law.