Member Article

The Australian Competition and Consumer Commission (ACCC) has recently issued proceedings against a franchisor and its director for allegedly engaging in misleading and deceptive conduct, in breach of section 52 of the Trade Practices Act (TPA).  Various breaches of the Franchising Code of Conduct (Code) have also been alleged.

In its Statement of Claim filed in the Federal Court in Sydney, the ACCC alleges that the franchisor, Personalised Chocolate 4 U Pty Ltd (Franchisor) made false, misleading and deceptive representations in the marketing and sale of personalised chocolate franchises, including the following representations:

 

• franchisees would be provided with software which was essential to the franchise business when in fact it was not
  
  
• franchisees would be provided with a manual relevant to running the franchise business when they entered into the franchise agreement, when they were not, and
  
  
• refunds of franchise fees would be available on certain conditions when some of those conditions were impossible for franchisees to meet.

The ACCC also alleges that the franchisor now promotes itself as a licence system when in fact it is a franchise system and therefore the ACCC alleges various breaches by the franchisor of the Code.
However, the sole director, Mr Patching (who is alleged to have been involved in the contraventions) has publicly disputed that the business is a franchise and we expect that a defence will be filed along these lines. Accordingly, the case may provide further judicial clarification of what constitutes a franchise agreement for the purpose of the Code.


The ACCC seeks various orders against the Franchisor and the director in the proceeding including declarations, injunctions, corrective notices as well as compulsory trade practices compliance training.
The matter is next before the Federal Court on 28 August 2009.

 

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