Attn: Small business, consumer writers
The Australian Competition and Consumer Commission has filed proceedings in the Federal Court, Melbourne today alleging that a franchisor engaged in unconscionable conduct towards its franchisees and also breached the mandatory Franchising Code of Conduct.
This is the ACCC’s first action under section 51AC of the Trade Practices Act 1974 involving a franchisor and its first action for alleged breaches of the Franchising Code of Conduct under section 51AD.
The ACCC alleges that Simply No Knead Franchising Pty Ltd, the franchisor, acted unconscionably towards its franchisees by:
- systematically refusing to negotiate reasonably and in good faith in relation to reasonable requests and complaints from the franchisees;
- refusing to supply its products to the franchisees;
- failing to address reasonably and/or meet with the franchisees to discuss matters of concern to the franchisees;
- causing the telephone numbers of the franchisees’ franchised businesses to be deleted from Telstra’s 013 telephone directory assistance service;
- without the consent of the franchisees and contrary to the franchise agreements either sold and/or offered to sell its products in the territories of each of the franchisees, including supplying SNK products to a third party distributor and to various independent outlets, promoting the availability of SNK products in such independent outlets and advertising SNK’s mail order business with free delivery;
- omitting the names of the franchisees from advertising and promotional material distributed in respect of the franchised products;
- failing and refusing to give to the franchisees a current disclosure document in the form of annexure 1 to the Franchising Code of Conduct in response to written requests from those franchisees; and
- failing to disclose to the franchisees at any relevant time that it intended to cease the franchising of the SNK business to the franchisees.
It is also alleged that the said conduct engaged in by SNK caused the franchisees to terminate, or alternatively, not to renew, their respective franchise agreements. It is alleged that SNK has sought to prevent the franchisees from competing with SNK by instituting legal proceedings against their franchisees alleging breaches of the restraint of trade clauses in the respective franchise agreements.
The ACCC alleges that SNK’s reliance on the restraint of trade clauses to prevent the franchisees from selling equivalent products is unconscionable, in the circumstances. As such the ACCC has sought an interlocutory injunction to stay the various SNK proceedings until such time as the substantial case alleged by the ACCC is determined. The interlocutory application has been listed for hearing on 9 July 1999 at 9.30 a.m.
The ACCC is also taking action against the director of Simply No Knead (Franchising) Pty Ltd, for allegedly aiding and abetting or being knowingly concerned in the alleged breaches.
The ACCC is seeking declarations that the conduct as alleged constitutes breaches of sections 51AC and 51AD of the Act, injunctions and findings of fact.
MR 94/99
16 June 1999