The Australian Competition and Consumer Commission has instituted court proceedings in the Federal Court, Brisbane on 26 November 2001 against Chaste Corporation Pty Ltd alleging resale price maintenance*, unconscionable conduct, misleading and deceptive conduct, and breaches of the Franchising Code of Conduct.
The company supplies the weight loss product TRIMit.
The ACCC alleged that since mid-2000 Chaste Corporation entered into agreements that refer to a 'regulated pricing policy' which prevents area managers selling below a specified price.
The alleged conduct affected 70 area managers throughout Australia. They are appointed by Chaste Corporation to be exclusive distributors of TRIMit for specified geographic territories.
The ACCC alleged Chaste Corporation engaged in misleading and deceptive conduct by representing that the Area Management Agreement was lawful when it contained resale price maintenance provisions.
In February 2001, it is alleged that Chaste Corporation engaged in unconscionable conduct by threatening to terminate the Area Management Agreements of area managers who intended to meet to discuss Chaste Corporation.
The ACCC also alleges that Chaste Corporation induced a franchisee not to form an association or not to associate with other franchisees for a lawful purpose; failed to provide franchisees with a disclosure document prior to entering their franchise agreements; failed to meet the requirements of the applicable industry code; and represented that the agreement was not a franchise when it was a franchise agreement.
The ACCC is seeking the following remedies:
- pecuniary penalties for resale price maintenance conduct
- a full refund of all money paid by the area managers for the purchase of the distributorship
- injunctions requiring Chaste Corporation to provide all area managers with disclosure documents and the option for area managers to rescind their agreements within 30 days after receiving that document
- injunctions restraining Chaste Corporation from repeating the alleged conduct
- the implementation of a compliance program by Chaste Corporation
- the ACCC's court costs
The director of the company, Mr Braddon Webb, has been joined to the proceedings as being allegedly involved in the alleged contraventions.
Chaste Corporation Pty Ltd has given undertakings to the ACCC that it:
- will not enforce the alleged resale price maintenance provisions of the agreement nor enter into agreements containing the alleged resale price maintenance provision
- that Chaste Corporation will not suspend or terminate, or threaten to suspend or terminate, area managers if they meet, or attempt to meet, to discuss Chaste Corporation
- that Chaste Corporation will write to all area managers advising them of this
A directions hearing has been set for the Federal Court, Brisbane at 9.30 a.m. on Friday 14 December 2001.
*Section 48 of the Trade Practices Act 1974 prohibits 'resale price maintenance'. A company engages in resale price maintenance where it tries to stop a reseller from discounting a product, or where it supplies a reseller on disadvantageous terms because the reseller had sold, or was likely to sell, the product below a specified price.