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Wednesday, May 24, 2017

Car Trouble – ACCC pursues Ultra Tune for Franchising Code breaches

By David Hunt, Lawyer

Less than two weeks after the Australian Competition and Consumer Commission announced that Domino's Pizza paid penalties for alleged non-compliance with the Franchising Code of Conduct (see our earlier article), the ACCC has commenced proceedings against Ultra Tune for a number of alleged breaches of the Code.

In its media release, the ACCC states that it has commenced proceedings in the Federal Court against the entity responsible for the car-servicing franchisor's operations in NSW, Queensland, Victoria and Western Australia. The ACCC is alleging that Ultra Tune failed to act in good faith when dealing with a prospective franchisee and failed to provide that prospective franchisee with all required documentation before accepting a non-refundable payment, failed to provide marketing fund financial statements and audit reports to its franchisees and failed to update its disclosure document or provide it to franchisees within the prescribed time.

The ACCC also alleges that Ultra Tune made false or misleading representations to the prospective franchisee about the franchise site in breach of the Australian Consumer Law.

Based on these alleged breaches, the ACCC is seeking a refund of the prospective franchisee's payment, declarations, injunctions, pecuniary penalties and compliance and adverse publicity orders.

The ACCC's actions serve as a reminder to franchisors of the importance of understanding and complying with their obligations under the Code within the prescribed timeframes, which relevantly include:

  • the obligation to act in good faith;
  • the obligation to provide a copy of the Code, disclosure document and franchise agreement to franchisees and prospective franchisees at least two weeks prior to entering into or renewing a franchise agreement;
  • the obligation to provide franchisees with an annual marketing fund financial statement and an auditor's report; and
  • the obligation to update disclosure documents within four months after the end of each financial year.

They also demonstrate that the ACCC is  actively monitoring and investigating the franchise sector to ensure that franchisees receive the protection of the Code, as stated in its Compliance and Enforcement Policy for 2017.

To assist, Allens is offering its franchising clients a helpful free reminder system, which monitors the Code-specific timelines. Contact us to find out more.

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