Franchising investigations

The ACCC investigates alleged breaches of the Franchising Code or the Competition and Consumer Act 2010 and can take enforcement action where appropriate.

Investigation process

When a complaint is received about an alleged breach of the Code or the Competition and Consumer Act 2010, the ACCC:

  • undertakes a preliminary assessment. An initial interview with the complainant may be necessary as part of this assessment.
  • often recommends mediation as the first step in dealing with a franchising dispute where this process might reasonably facilitate an outcome acceptable to both parties.
  • where the complaint is assessed as substantive, it is progressed to an ACCC enforcement officer. At this stage, further information and evidence will be sought from both parties.
  • may escalate the matter to an in-depth investigation

Decisions about what action, if any, to take in response to a complaint are made in line with the ACCC's Compliance and Enforcement policy.

Breaches of the Franchising Code

The ACCC uses a range of compliance and enforcement tools in order to encourage compliance with the Code. In deciding which tool (or combination of tools) to use, the ACCC takes into account a broad range of factors, which are outlined in the ACCC’s Compliance and Enforcement Policy.

Enforcement tools for resolving concerns include:

  • administrative resolutions (e.g. the party in breach agrees to stop the conduct and compensate those affected)
  • court enforceable undertakings under section 87B of the Act
  • infringement notices (available from 1 January 2015)
  • initiating court action (financial penalties of up to $51,000 will be available from 1 January 2015)

The ACCC or an individual can take court action to enforce the Code. Other orders a court can make include:

  • injunctions to stop the conduct or to require some action to be taken
  • compensation and damages
  • disqualification orders to prevent directors from managing corporations for a period of time.

Recent franchising actions taken by the ACCC

2017

Domino’s
Allegations: breaches of the Franchising Code
Outcome: infringement notice
News release: Domino’s pays penalty for alleged Franchising Code breach

Ultra Tune
Allegations: false representations, misleading and deceptive conduct, breaches of the Franchising Code
Status: The ACCC alleges that in 2015 Ultra Tune failed to act in good faith in its dealing with a prospective franchisee, and failed to provide this prospective franchisee with documents the Code specifies must be provided before accepting a non-refundable payment. The ACCC also alleges that Ultra Tune failed to provide marketing fund financial statements and audit reports for three financial years to its franchisees, and that Ultra Tune also allegedly failed to update its disclosure document or provide it within the time prescribed by the Code.
The ACCC further claims Ultra Tune made false or misleading representations to the prospective franchisee about the franchise site, in breach of the ACL.
The ACCC is seeking a refund of the prospective franchisee’s payment, declarations, injunctions, pecuniary penalties, compliance and adverse publicity orders.
News release: ACCC takes action against Ultra Tune under Franchising Code

2016

SensaSlim
Allegations: false representations, misleading and deceptive conduct
Outcome: Federal Court declarations and orders, disqualification orders
News release: Court finds Sensaslim misled franchisees about Peter Foster’s involvement

Morild Pty Ltd
Allegations: breaches of the Franchising Code
Status: The ACCC alleges that Morild (franchisor of the Pastacup franchise system) and that company’s former director Mr Stuart Bernstein, breached the Franchising Code by failing to disclose Mr Bernstein’s directorship and management of two previous Pastacup franchisor companies that became insolvent. The ACCC also alleges that Mr Bernstein was knowingly concerned in Morild’s conduct. The ACCC is seeking declarations, injunctions, penalties, findings of fact and costs.
News release: ACCC takes action against Pastacup for alleged breaches of Franchising Code

2015

South East Melbourne Cleaning Pty Ltd (formerly Coverall Melbourne)
Allegations: unconscionable conduct, false or misleading representations, breaches of the Franchising Code
Outcome: Federal Court declarations and orders
News release: Federal Court orders $500,000 penalty for cleaning franchise

Electrodry
Allegations: false representations, misleading and deceptive conduct
Outcome: Federal Court declarations and orders by consent
News release: Federal Court orders Electrodry franchisor to pay $215,000 in penalties for fake testimonials

2014

Express Mobile Services
Allegations: false or misleading representations, breaches of the Franchising Code
Outcome: Court enforceable undertaking
News release: Express Mobile Services gives undertaking in relation to alleged misleading representations

Taxsmart
Alleged conduct: false representations, misleading and deceptive conduct.
Outcome: Federal Court declarations and orders by consent.
News release: Taxsmart to repay franchise fees for misleading conduct

2010

Allphones
Conduct: breaches of the Franchising Code, misleading and deceptive conduct, unconscionable conduct
Outcome: Federal Court declarations and orders by consent
News release: $3 million in damages to small businesses and Allphones penalised $45,000 for contempt of court

Ray White
Conduct: potential breaches of the Franchising Code
Outcome: court enforceable undertaking
News release: Ray White provides undertaking after complaint of breach of franchising code

Seal-A-Fridge
Conduct: unconscionable conduct and breaches of the Franchising Code
Outcome: Federal Court declarations and orders
News release: Court finds Seal-A-Fridge franchisor's behaviour 'unconscionable'

Mailpost
Conduct: breaches of the Franchising Code
Outcome: Federal Court declarations and orders by consent
News release: Mailpost founder and NSW master franchisor fail franchising code

Refund Home Loans
Conduct: misleading and/or false representations, misleading and deceptive conduct
Outcome: Federal Court declarations and orders by consent
News release: Refund Home Loans and Wayne Ormond admit false and misleading statements

More information

Franchising code of conduct
Undertakings register
Compliance and Enforcement policy