The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court against Ultra Tune Australia Pty Ltd (Ultra Tune), a national motor vehicle repair franchisor, for a number of alleged failures to comply with the Franchising Code of Conduct and for alleged breaches of the Australian Consumer Law (ACL).
The ACCC alleges that in 2015 Ultra Tune failed to act in good faith in its dealing with a prospective franchisee, and failed to provide this prospective franchisee with documents the code specifies must be provided before accepting a non-refundable payment. The ACCC further claims Ultra Tune made false or misleading representations about the franchise site, in breach of the ACL.
“A significant feature of the Franchising Code is that it provides that franchisors must act in good faith in dealings with prospective franchisees. In addition the Australian Consumer Law prohibits false or misleading representations,” ACCC Deputy Chair Dr Michael Schaper said
The ACCC also alleges that Ultra Tune failed to provide marketing fund financial statements and audit reports for three financial years to its franchisees. The ACCC alleges that Ultra Tune failed to provide these documents for the 2015 financial year within the time period prescribed by the Code and that Ultra Tune also allegedly failed to update its disclosure document or provide it within the time prescribed by the code.
“Franchisees need accurate and timely information to help them make informed business decisions. For this reason, the Franchising Code requires franchisors to provide disclosure documents before accepting non-refundable payments from prospective franchisees, and to provide annual financial statements detailing receipts and expenses for any marketing fund to which franchisees are required to contribute.”
“Franchising contributes significantly to the retail economy and all franchisors must comply with the code and be transparent in dealings with franchisees. Ensuring that small businesses receive the protections of industry codes is a current ACCC compliance and enforcement priority,” said Dr Schaper.
The ACCC is seeking a refund of the prospective franchisee’s payment, declarations, injunctions, pecuniary penalties, compliance and adverse publicity orders.
The first case management conference is at 9:30 am on 16 June 2017 before Justice Bromwich in Sydney.
Notes to editors
Ultra Tune is the second largest motor repair organisation in Australia and has franchises in New South Wales, Queensland, Victoria, and Western Australia. (An unrelated entity, which is not a party to this matter, operates Ultra Tune branded businesses in South Australia and the Northern Territory.)
If franchisees are required to contribute to a marketing fund, the Code requires a franchisor to prepare an annual financial statement to franchisees, disclosing the fund’s receipts and expenses, and to give a copy of the financial statement to franchisees by no later than four months after the end of the financial year.
The Code also requires the fund to be audited (unless 75 per cent of franchisees agree the franchisor does not have to comply with this requirement) and for the auditor’s report to be provided to franchisees within 30 days of the report being prepared.