The Australian Competition and Consumer Commission has again defended the rights of Australian small business franchisees.
In the second action in as many weeks relating to the enforcement of the Franchising Code of Conduct, the ACCC has accepted a court enforceable undertaking from Lawson's Trading Co. Pty Ltd relating to alleged contraventions of the mandatory code*, ensuring adequate disclosure to current and prospective franchisees.
Lawson's Trading offered for sale, by way of licence and supply agreements, the opportunity to take part in a business system involving the application of sprayed polyurethane protective coatings known as 'Armour Linings', commonly found in utilities, trucks and vans.
The ACCC investigated the matter after concerns were raised by franchisees regarding alleged breaches of the Franchising Code by Lawson's Trading.
Although Lawson's Trading claimed the licence and supply agreements offered did not constitute a franchise operation, the ACCC is of the view that the agreements are, in fact, properly characterised as franchise agreements and that Lawson's Trading has contravened the code in a number of respects. Specifically, Lawson's Trading admits that the following conduct contravenes the Franchising Code of Conduct, in particular failure by it at the relevant time, to:
- provide disclosure documents to franchisees
- ensure that it had received signed statements from prospective franchisees confirming that they had received appropriate legal or financial advice or, alternatively, a signed statement that the franchisees declined to obtain such advice, and
- provide a dispute resolution process within its Licence and Supply Agreements.
In resolving this matter with the ACCC, Lawson's Trading provided a court enforceable undertaking to:
- stop engaging in similar conduct in the future;
- create an appropriate disclosure document and provide it to all franchisees;
- where appropriate, provide refunds of the purchase price to some franchisees and assist in organising the resale of franchises for other franchisees;
- implement a trade practices compliance program; and
- ensure that its director attends a trade practices compliance seminar.
"The Franchising Code exists to ensure that best industry practice is observed and that the interests of all parties are protected", ACCC Chairman, Mr Graeme Samuel, said today.
The ACCC recently took similar action in the Federal Court against Synergy in Business Pty Ltd (see MR 02/04) for contraventions of the Franchising Code of Conduct including a failure to provide adequate disclosure information to prospective franchisees. Despite the directors of Synergy characterising the operation as a licensing arrangement, the court made declarations by consent that Synergy was in fact a franchising scheme and its franchises protected by the Franchising Code of Conduct.
* Relates to section 51AD of the Trade Practices Act 1974