ACCC takes action against cleaning franchisor alleging unconscionable conduct

21 July 2014

The Australian Competition and Consumer Commission has instituted proceedings against Coverall Cleaning Concepts South East Melbourne Pty Ltd (Coverall Melbourne) alleging that it engaged in unconscionable conduct in contravention of the Australian Consumer Law (ACL).

The ACCC also alleges that Coverall Melbourne made false or misleading representations, engaged in conduct that was misleading or likely to mislead, and contravened the Franchising Code of Conduct. 

Coverall Melbourne is a master franchisor of a franchise system that establishes and operates professional cleaning services.

The ACCC alleges from August 2013 Coverall Melbourne represented to two franchisees that they would receive a volume of work that would enable them to earn specified amounts and that they would receive payment of those amounts each month. The ACCC alleges Coverall Melbourne did not have reasonable grounds for making the representations and failed to make the payments as represented and on the terms required by Coverall Melbourne’s franchise agreements.

Further, it is alleged that Coverall Melbourne failed to comply with requirements of the Franchising Code of Conduct, including by not having reasonable grounds for the earnings information provided to the two franchisees in contravention of the Competition and Consumer Act 2010 (CCA).

The ACCC alleges that Coverall Melbourne’s failure to make payments to the franchisees, as well as other alleged conduct, was unconscionable, particularly as the franchisees had significantly weaker bargaining power than Coverall Melbourne.

“Unconscionable conduct affecting small business is a priority area for the ACCC,” ACCC Deputy Chair Dr Michael Schaper said.

“The ACCC will not hesitate to take court action to enforce compliance with laws that are specifically designed to protect small business from unfair practices.”

“Micro-sized firms, franchisees and self-employed individuals should not be treated in a manner which goes beyond the bounds of commercially-acceptable practice, or which is more than just hard bargaining,” Dr Schaper said.

The ACCC has joined Coverall Melbourne’s sole director, Brett Jones, and sales manager, Astrid Haley, to the proceedings. The ACCC alleges they aided and abetted and were knowingly concerned in Coverall Melbourne’s alleged contraventions of the ACL and CCA.

The ACCC is seeking pecuniary penalties, injunctions (including an interlocutory injunction), compensation for two affected franchisees and costs.

The matter was originally referred to the ACCC by the office of the Victorian Small Business Commissioner.

The matter has been filed in the Federal Court’s Melbourne Registry’s Fast Track List. A date for the interlocutory relief hearing is set for 24 July 2014 at 10.15am before Justice Murphy.

Release number: 
NR 183/14
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