Allphones gives undertaking to court to better inform franchisees
Allphones Retail Pty Limited has undertaken to the Federal Court to stop negotiations with franchisees until it has fulfilled certain obligations.
The undertakings follow Australian Competition and Consumer Commission seeking urgent interlocutory orders against Allphones after the ACCC alleged misleading and deceptive conduct and alleged breaches of the Franchising Code of Conduct.
As a result, Allphones franchisees are better protected in their negotiations to settle a dispute between the company and franchisees.
The ACCC's application alleged that Allphones had breached section 52 of the Trade Practices Act 1974 by sending a Position Paper to its franchisees which was misleading or deceptive. The ACCC also alleged that Allphones had breached the Franchising Code by refusing to allow franchisees to sell their business, when the ACCC alleged that Allphones was not entitled to withhold its consent to such a sale.
The ACCC sought urgent interlocutory orders requiring Allphones to correct and disclose particular information to franchisees relating to the Position Paper. It also sought orders stopping Allphones from refusing to allow its franchisees to sell their businesses to third parties in particular circumstances.
In response, Allphones gave undertakings to the court. A copy of those undertakings is attached. In summary Allphones has undertaken:
that it will not engage in negotiations or mediation with any Allphones franchisee without first providing a statement of the amounts Allphones has received each year which relate to issues 3 and 4 of Allphones Notice of Dispute issued 29 August 2008. It will also provide to franchisees a statement clarifying certain parts of the Allphones Position Statement regarding the Optus Bonus and Optus Super-Bonus and the Hoy decision
to send a notice to franchisees which addresses what the ACCC alleged were misleading representations made by Allphones in the Position Paper regarding particular bonuses which Allphones received, and the extent to which they were passed on to franchisees, and the Hoy decision
to include in any settlement agreement negotiated as part of process provided for in the notice a seven day cooling off period from the time Allphones provides the franchisee a copy of a report detailing the amounts Allphones has received
to not withhold consent to the assignment of any Allphones franchise of the basis that the existing franchise has not and will not release Allphones from liability in respect of the issues the subject of the notice
to give the ACCC seven days of notice in writing when it intends to refuse to consent to the assignment of an Allphones franchise to a franchisee on the basis that the assignee will not enter into a form of franchise agreement that is different to the assignor's franchise agreement.
On 27 March 2008, the ACCC commenced proceedings in the Federal Court in Sydney against franchisor Allphones and others, alleging that in operating this franchise system Allphones contravened sections 51AC, 51AD, 52 and 59 of the Trade Practices Act 1974.[1]
Allphones and the other respondents are defending those proceedings. In August 2008, the ACCC wrote to franchisees, to seek to identify their interest in consenting to the ACCC taking action on their behalf against Allphones under Section 87(1B) of the Trade Practices Act 1974.
On or around 29 August 2008, Allphones issued a Notice of Dispute to franchisees (under the relevant franchise agreements and the Franchising Code of Conduct) seeking to resolve disputes between it and its franchisees arising from the ACCC's proceedings and the judgment of Rares J in Hoy Mobile Pty Ltd ACN 103 105 228 v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 (on appeal).
The ACCC alleged that information provided by Allphones to franchisees in the context of this dispute resolution process was incorrect, incomplete and likely to mislead franchisees. The information related to the quantum and nature of certain income received by Allphones. The ACCC is concerned that without correct information franchisees could not be aware of what they might be giving up in agreeing to any settlement.
