Ultra Tune Australia has been penalised $1.5 million for contempt of court, a record-breaking fine for a contempt of court proceeding brought by the ACCC.
In 2019, the Federal Court found the car servicing franchisor had breached the Australian Consumer Law and the Franchising Code of Conduct.
At the time Ultra Tune copped a $2.604 million fine for two Code breaches concerning the disclosure document and marketing fund statements, and for misleading a prospective franchisee. The penalty was reduced to $2.014 million on appeal.
The Court ordered Ultra Tune to provide disclosure documents and marketing fund statements to franchisees, in compliance with the Code. It also required the franchisor to implement a compliance program, and to report on its effectiveness within the company.
However Ultra Tune failed to comply on several occasions. There was one failure to update its disclosure document on time. Twice it failed to prepare its marketing fund statement promptly; in one instance the statement was overdue by almost eight months.
Compliance reporting failures
The company’s compliance officer also failed three times to provide the mandatory quarterly reports on the effectiveness of the compliance program.
Justice Bromwich found that “…the evidence shows that the contempts that were charged were not out of character for Ultra Tune, but in fact a reflection of its corporate character which was insufficiently concerned with, and with effecting, compliance, even when it came to Court orders”.
ACCC Commissioner Liza Carver said franchisors need to prepare marketing fund statements within the Code’s timeframe so franchisees have the information “when it is of most use to them”.
“The ACCC took this action because it was concerned that Ultra Tune had failed to improve its compliance with the requirements of the Franchising Code despite previous ACCC action and court-imposed penalties. These fines for contempt demonstrate the importance of compliance with court orders,” she said.
The Court awarded the ACCC its costs on an indemnity basis, because this was a contempt of court action.
