Australian Industries Group Pty Ltd* has been ordered to compensate three small business owners $77,594 following declarations by the Federal Court that it engaged in unconscionable conduct, breached the Franchising Code of Conduct and made false representations about the profitability of the businesses in breach of the Trade Practices Act 1974.
The ACCC took action against AIG, its former director, Mr Robert Keirle and manager Mr Tony Gullotti, following approaches from small business owners about licences they had bought from the company to install roller shutters for Half Price Shutters. At the time the company operated Half Price Shutters in Perth.
The court found the company:
- published an advertisement for employment when the position related to a business opportunity
- breached the mandatory Franchising Code of Conduct in relation to licence agreements it made with installers and a dealership
- made false representations to the prospective licensees about the potential profitability of the installation and dealership businesses
- acted in an unconscionable manner towards its installers.
Justice Lee granted, by consent:
- declarations that AIG breached the Act
- injunctions restraining AIG from engaging in such conduct in the future
- compensation to installers Shaldonwaters Pty Ltd $25 000 and R&J Electrical Services $20,000 and to dealer Danro Pty Ltd $32 594
- orders that AIG institute a trade practices compliance program
- the ACCC's costs.
The court also found Mr Keirle party to the breaches of the Act by AIG and Mr Gullotti party to the unconscionable conduct towards the installers.
The Franchising Code of Conduct, which has the force of law, helps franchisees make more informed decisions and franchisors to follow rules in their dealings with franchisees. Along with the unconscionable conduct provisions of the Act it strengthens the rights of small business and is a priority area for the ACCC.
“The ACCC is concerned to ensure that franchise agreements are not passed off as licence arrangements", ACCC Chairman, Professor Allan Fels, said today. "This action demonstrates the ACCC's commitment to enforcing the code and consumer protection provisions of the Act on behalf of small business".
*This company is not the Australian Industry Group.