ACCC investigates Ultra Tune and Geowash for alleged breaches of the Franchising Code of Conduct
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The Australian Competition and Consumer Commission (ACCC) has instituted proceedings against Ultra Tune Australia Pty Ltd (Ultra Tune) and Geowash Pty Ltd (Geowash) for a number of alleged failures under the Franchising Code of Conduct (Code) and the Australian Consumer Law (ACL). These are the first two court proceedings commenced by the ACCC for alleged breaches of the new “good faith” provisions under the Code.
The alleged breaches
The ACCC alleges that in 2015, Ultra Tune failed to act in good faith in its dealing with a prospective franchisee and made false or misleading representations about the franchise site. The ACCC have also investigated Geowash (car wash franchisor) for using a significant portion of franchisee funds for purposes not permitted under the franchise agreement, and, for failing to act in good faith in dealing with its franchisees. These acts constitute breaches of the Code and ACL.
Under the Code, franchisors and franchisees must act in good faith in their dealings with each other, not only when subject to a franchise agreement, but also when dealing with each other in relation to a proposed agreement. In deciding if the parties have done this, the courts will consider if the parties have acted honestly and cooperated with each other to achieve the purpose of the agreement.
Ultra Tune failed to provide the prospective franchisee with documents the Code specifies must be provided before accepting a non-refundable payment. It also failed to provide marketing fund financial statements and audit reports in the timeframe required under the Code. The Code requires these documents be provided to prospective franchisees to enable them to make an informed decision about entering into a franchise.
Geowash Pty Ltd made false or misleading representation on its website relating to potential revenue and profits that could be made by a prospective franchisee with no basis for the representations, and further, stated it had an affiliation with a range of businesses which it did not. Geowash therefore failed to act honestly.
Priority for the ACCC
Compliance with industry codes is a priority for the ACCC. These cases are further examples of the ACCC demonstrating this. Between these two cases, the ACCC is seeking a refund of the prospective franchisee’s payment, declarations, injunctions, pecuniary penalties, compliance, non-party consumer redress, corrective notice orders, adverse publicity orders and costs. This is a stark warning of the implications for not complying with the Code.
Macpherson Kelley will be monitoring the outcomes and developments of both these cases and will report back on outcomes as they are made available.
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ACCC investigates Ultra Tune and Geowash for alleged breaches of the Franchising Code of Conduct
The Australian Competition and Consumer Commission (ACCC) has instituted proceedings against Ultra Tune Australia Pty Ltd (Ultra Tune) and Geowash Pty Ltd (Geowash) for a number of alleged failures under the Franchising Code of Conduct (Code) and the Australian Consumer Law (ACL). These are the first two court proceedings commenced by the ACCC for alleged breaches of the new “good faith” provisions under the Code.
The alleged breaches
The ACCC alleges that in 2015, Ultra Tune failed to act in good faith in its dealing with a prospective franchisee and made false or misleading representations about the franchise site. The ACCC have also investigated Geowash (car wash franchisor) for using a significant portion of franchisee funds for purposes not permitted under the franchise agreement, and, for failing to act in good faith in dealing with its franchisees. These acts constitute breaches of the Code and ACL.
Under the Code, franchisors and franchisees must act in good faith in their dealings with each other, not only when subject to a franchise agreement, but also when dealing with each other in relation to a proposed agreement. In deciding if the parties have done this, the courts will consider if the parties have acted honestly and cooperated with each other to achieve the purpose of the agreement.
Ultra Tune failed to provide the prospective franchisee with documents the Code specifies must be provided before accepting a non-refundable payment. It also failed to provide marketing fund financial statements and audit reports in the timeframe required under the Code. The Code requires these documents be provided to prospective franchisees to enable them to make an informed decision about entering into a franchise.
Geowash Pty Ltd made false or misleading representation on its website relating to potential revenue and profits that could be made by a prospective franchisee with no basis for the representations, and further, stated it had an affiliation with a range of businesses which it did not. Geowash therefore failed to act honestly.
Priority for the ACCC
Compliance with industry codes is a priority for the ACCC. These cases are further examples of the ACCC demonstrating this. Between these two cases, the ACCC is seeking a refund of the prospective franchisee’s payment, declarations, injunctions, pecuniary penalties, compliance, non-party consumer redress, corrective notice orders, adverse publicity orders and costs. This is a stark warning of the implications for not complying with the Code.
Macpherson Kelley will be monitoring the outcomes and developments of both these cases and will report back on outcomes as they are made available.