A Melbourne man who bought a franchised business will get a refund because the Australian Competition and Consumer Commission has alleged he did not receive proper disclosure in accordance with the Franchising Code of Conduct.
The man bought a mobile computer cleaning franchise in December 1998 from Adelaide-based franchisor Mobile Computer Cleaning Pty Ltd. The company has franchisees in three States and advertised its franchises in the Melbourne Age newspaper. The man inquired about the franchise and a few weeks later paid a non-refundable $9,950 for a franchise.
He subsequently complained to the ACCC that he had not received a disclosure document and had been induced to buy a franchise which, if he had proper disclosure according to the code, he may not have bought.
Failure to provide a disclosure document and a copy of the code at least 14 days before a prospective franchisee enters a franchise agreement, or pays non-refundable money to a franchisor in connection with the proposed franchise agreement, breaches Clause 10 of the Franchising Code of Conduct. Section 51AD of the Trade Practices Act 1974 prohibits a corporation from contravening a mandatory industry code.
"This Code, which took full effect on 1 October 1998, was introduced to assist franchisees to make an informed decision before entering into a franchise agreement and to provide a framework for dispute resolution," ACCC Chairman, Professor Allan Fels, said today. "This legislation is relatively new and this is the first time the ACCC has intervened when a franchisee has allegedly failed to receive proper disclosure in accordance with the code.
"The matter has been satisfactorily resolved by the franchisor entering into enforceable undertakings to let the franchisee end the agreement and get a refund, less some costs.
"However, franchisors who do not meet with the provisions of the code may be liable to not only compensation and refunds but also penalties of up to $200,000 for corporations and $40,000 for individuals under the Act".
Further information regarding the Franchising Code of Conduct is available from all ACCC offices or alternatively from the ACCC website.
