The Federal Court of Australia has ordered interim injunctions restraining Allphones from representing that it will give preferential treatment to franchisees who have signed new agreements and/or a deed of release in favour of Allphones, until the final hearing of Australian Competition and Consumer Commission's allegations.
The Federal Court has also ordered an interim injunction restraining Allphones from taking such factors into account in making allocations of stock to its franchisees.
On 31 October 2008* the ACCC applied to the Federal Court of Australia in proceedings number NSD 1567 of 2008 seeking urgent interim injunctions restraining Allphones from giving effect to a stock allocation policy as set out in an email sent by its CFO, Mr Tony Baker, to franchisees on 20 October 2008.
Mr Baker's email stated that once a minimum level of stock was assigned Allphones would preferentially assign further stock to franchisees on what are known as "New Franchise Agreements", those franchisees who have signed a deed of release and Allphones owned stores. In his email, Mr Baker set out various reasons as to why Allphones considered this new policy was necessary. The ACCC alleged that those reasons were facetious and the real reason for the threatened stock allocation policy was to force franchisees to sign a new agreement or a deed releasing Allphones from damages claims. The email was sent one day before Allphones was due to commence negotiations with certain franchisees where it was seeking a resolution which included those franchisees signing a New Franchise Agreement and a deed of settlement and release.
The ACCC alleged Allphones' proposed new stock allocation policy set out in Mr Baker's email was, in the circumstances, unconscionable and/or misleading and deceptive in contravention of sections 51AC and 52 of the Trade Practices Act 1974.
The Federal Court of Australia ordered interim injunctions restraining Allphones, until final determination of the ACCC's allegations, from:
- representing that preferential treatment in relation to the allocation and supply of stock will be given to those Allphones franchisees who enter into the New Franchise Agreement and/or binding release in favour of Allphones; or
- in making allocations of stock to its stores (including withholding or rationing stock) to be delivered to its franchisees and to Allphones stores, in directing transfers of stock between Allphones stores and in supplying stock to Allphones stores, taking into account in any way whatsoever as a criterion for carrying out any of the functions or activities enumerated above the fact that any franchisee:
- has agreed to execute or is party to a New Franchise Agreement;
- has agreed to release or has released the respondent from past breaches of its franchise agreements; or
- is party to a franchise agreement in a form in use prior to September 2007 (Old Franchise Agreement)
The Federal Court of Australia also ordered Allphones to pay the ACCC's costs relating to the application.
This judgment and granting of interim injunctions does not finally determine the ACCC's allegations. The ACCC's allegations are disputed by Allphones and will be determined at a final hearing.
* An undertaking, which ran until Monday's judgment, was given by Allphones on 7 November 2008 in accordance with the attached orders of Justice Foster.