The Australian Competition and Consumer Commission has instituted class action proceedings against Allphones Retail Pty Ltd and three individuals seeking damages on behalf of 74 eligible current and former Allphones franchisees.
The individual respondents are Allphones' director and chief executive officer, Matthew Donnellan; director and chief operating officer, Tony Baker; and former national franchising manager, Ian Harkin, for allegedly being knowingly concerned in or party to the contravening conduct.
The action was begun under the Trade Practices Act 1974 for alleged breaches of section 51 AC of the Act, which prohibits unconscionable conduct. It is based, in part, on existing ACCC Federal Court proceedings against the same parties.
Under the class action, the ACCC alleges that Allphones:
- received commission or bonus payments from telecommunication networks which were not paid to franchisees in accordance with their franchise agreements, and which were not disclosed to franchisees
- received rebates from mobile phone handset and other product suppliers which were not paid to franchisees in accordance with their franchise agreements, and which were not disclosed to franchisees, and
- made unilateral deductions from commission payments payable to franchisees which were not permitted by their franchise agreements
in circumstances which, in the context of Allphones' relationship with its franchisees, was unconscionable. Under the class action, the ACCC is seeking damages for losses sustained by the represented franchisees which the ACCC alleges flowed from this alleged unconscionable conduct.
Previously in March 2008, the ACCC had began proceedings against Allphones Retail Pty Limited and others alleging contraventions of the Act. Allphones and the other respondents are defending those proceedings which are set down for hearing from March 23 2010.
The ACCC began further proceedings in October 2008 against Allphones which resulted in Allphones giving interim undertakings to the court and the court ordering injunctions restraining Allphones from engaging in conduct in negotiations with its existing franchisees which the ACCC alleges contravened the Act. The court has not yet set a date for these October proceedings to be heard on a final basis.
Both these earlier proceedings include allegations of contraventions of sections 51AC, 51AD, 52 and 59 of the Act against Allphones. These sections deal with unconscionable conduct, contravention of an industry code, misleading conduct and misleading representations about certain business activities.
To ensure the best prospects of an efficient and effective outcome for the franchisees who are a party to the class action, the ACCC is not seeking damages on behalf of franchisees for these additional alleged contraventions. However, it will continue to pursue declarations, injunctions, compliance programs and costs.
Proceedings for the class action is set for directions hearing on September 8 2009 before Justice Foster.
Under s87(1B) of the Act the ACCC can make an application on behalf of one or more persons who have suffered or are likely to suffer loss or damage by conduct of another person who was engaged in contravention of certain parts of the Act. The ACCC requires the consent of the affected persons to take action on their behalf.
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