The Australian Competition and Consumer Commission (ACCC) has instituted proceedings in the Federal Court against automotive services franchisor Ultra Tune Australia Pty Ltd (Ultra Tune) for a number of alleged failures to comply with the Franchising Code (the Code) 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,” said ACCC deputy chair Dr Michael Schaper.
The ACCC also alleges that Ultra Tune failed to provide marketing fund financial statements and audit reports for three financial years to its franchisees. Ultra Tune reportedly failed to provide these documents for the 2015 financial year within the time period prescribed by the Code. The competition watchdog also alleges that Ultra Tune also 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,” continued Schaper.
“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.”
The ACCC is seeking a refund of the prospective franchisee’s payment, declarations, injunctions (authoritative orders), monetary penalties, compliance and adverse publicity orders.
The first case management conference is scheduled for 16 June.
Inside Franchise Business contacted Ultra Tune for comment, but did not receive a response prior to publication.