The Australian Competition and Consumer Commission has accepted court-enforceable undertakings from Scotty's Premium Pet Foods Pty Ltd following swift action about concerns that Scotty's may have breached the Franchising Code of Conduct and acted unconscionably towards franchisees.
Scotty's Premium Pet Foods is a Queensland based franchisor that distributes its pet food products to a variety of wholesalers and retailers. It also licences franchisees to own and operate small businesses which supply these pet food products to retailers and home delivery customers within exclusive territories in Queensland and NSW.
"The ACCC was concerned at receiving complaints from existing franchisees after Scotty's sent them notices alleging that they had breached their franchise agreements. Further, the franchisees were required to remedy the alleged breaches within 14 days otherwise their franchises would be terminated", ACCC Chairman, Mr Graeme Samuel, said today.
"The ACCC considered that, if Scotty's had concerns about its franchisees' conduct, the notices did not appear to provide a reasonable timeframe or contain sufficient details of the alleged breaches and the remedial steps needed.
"The ACCC was also concerned that Scotty's had attempted to supply product, allegedly without reasonable cause, directly to an existing business customer of a franchisee within their exclusive territory, possibly in contravention of section 51AC of the Trade Practices Act which prohibits unconscionable conduct in business dealings".
When contacted by the ACCC, Scotty's withdrew the breach notices. It provided the ACCC with court-enforceable undertakings to ensure that similar issues will not arise in the future. In particular, Scotty's has undertaken to refrain, for 12 months, from issuing any notice of breach to any franchisee unless the notice:
- complies with the Franchising Code of Conduct
- gives sufficient particularity of any breach alleged and any remedial step sought
- allows at least 30 days for the franchisee to remedy the alleged breach
- is sent after a "solicitor's certificate" is first obtained by Scotty's, certifying that the solicitor considers the breach notice to comply with the Code and that there is a reasonable basis for issuing it, and
- is copied, along with the solicitor's certificate, to the ACCC.
Scotty's has also undertaken to nominate and notify to franchisees a person other than the principal of Scotty's who can be contacted in relation to any franchise dispute, and to not approach customers of an existing franchisee to directly supply them with product within the franchisee's exclusive area unless certain criteria apply.
"These undertakings will act to provide greater certainty for both the franchisees and the franchisor should future disputes arise, as well as limit other influences, such as personality clashes, from the dispute resolution process", Mr Samuel said.
"It is of great importance that franchisors address disputes with franchisees in a reasonable manner and in line with the provisions of the Franchising Code of Conduct."
"The ACCC seeks to ensure that small businesses are treated fairly by larger businesses with greater bargaining power.
"The ACCC will continue to take action to promote compliance on the part of franchisors, particularly given the growth of this sector over the past few years".