Australian Billboard Connections Pty Ltd, a Melbourne franchisor and producer of Real Estate sign boards will pay a total of almost $250,000 after an Australian Competition and Consumer Commission action concluded before Justice Mansfield in the Federal Court, Adelaide recently.
The ACCC had alleged that Australian Billboard Connections Pty Ltd, its Managing Director, Michael Hollingsworth and its National Sales Manager, Kevin Hall, made false representations in a newspaper advertisement, verbally, and in a projected cash flow spread sheet. The representations were made to three small business operators who eventually bought franchises.
ABC and its two managers represented that: ABC already had clients who wanted to purchase signboards from the franchisees; the franchisees could expect to earn $2000 per week from their franchises; Australian Billboard Connections would provide full support and training to get the franchisees established and in the field; and no Australian Billboard Connections franchisee's business had failed.
The ACCC also alleged that Australian Billboard Connections and its two managers made the representations without reasonable grounds and that the representations were false or misleading.
Justice Mansfield ordered that in selling franchises, ABC must not: estimate the prospective franchisee's earnings without stating details of how those estimates were calculated; tell prospective franchisees that ABC has existing or established customers for the prospective franchisee without also giving details of those customers' history of dealing with ABC; or disclose the cash flow or earnings of other franchisees without giving details about the number and earnings of other franchisees in the same State as the prospective franchisee and any other information which may affect the prospective franchisee's earning capacity.
He also ordered Messrs Hollingsworth and Hall not to make, or aid or abet ABC in making, these types of statements.
In private settlements with ABC, each of the three franchisees received refunds of the initial purchase price of their franchise as well as compensation for interest losses made by borrowing to purchase the franchises. These refunds and compensation totalled in excess of $210,000. ABC paid a further $35,000 towards the ACCC's investigation and legal costs.
"This is an excellent result for the three small businesses involved", ACCC Chairman, Professor Allan Fels, said today. "This is yet another example of the ACCC's strong focus on protecting small businesses from unfair or misleading conduct by larger businesses.
"The matter also sends a strong message to businesses that make statements about future matters, they must beware that they have a reasonable basis for making those statements. If they have no reasonable grounds, their statements can be deemed to be misleading under the Trade Practices Act.
"The $245,000 payout made by Australian Billboard Connections highlights the dangers of making false or misleading statements."
"This successful result also highlights the ACCC's presence across Australia, particularly in the south east of South Australia where one of the franchisees is located".
The ACCC had alleged that Australian Billboard Connections Pty Ltd, its Managing Director, Michael Hollingsworth and its National Sales Manager, Kevin Hall, made false representations in a newspaper advertisement, verbally, and in a projected cash flow spread sheet. The representations were made to three small business operators who eventually bought franchises.
ABC and its two managers represented that: ABC already had clients who wanted to purchase signboards from the franchisees; the franchisees could expect to earn $2000 per week from their franchises; Australian Billboard Connections would provide full support and training to get the franchisees established and in the field; and no Australian Billboard Connections franchisee's business had failed.
The ACCC also alleged that Australian Billboard Connections and its two managers made the representations without reasonable grounds and that the representations were false or misleading.
Justice Mansfield ordered that in selling franchises, ABC must not: estimate the prospective franchisee's earnings without stating details of how those estimates were calculated; tell prospective franchisees that ABC has existing or established customers for the prospective franchisee without also giving details of those customers' history of dealing with ABC; or disclose the cash flow or earnings of other franchisees without giving details about the number and earnings of other franchisees in the same State as the prospective franchisee and any other information which may affect the prospective franchisee's earning capacity.
He also ordered Messrs Hollingsworth and Hall not to make, or aid or abet ABC in making, these types of statements.
In private settlements with ABC, each of the three franchisees received refunds of the initial purchase price of their franchise as well as compensation for interest losses made by borrowing to purchase the franchises. These refunds and compensation totalled in excess of $210,000. ABC paid a further $35,000 towards the ACCC's investigation and legal costs.
"This is an excellent result for the three small businesses involved", ACCC Chairman, Professor Allan Fels, said today. "This is yet another example of the ACCC's strong focus on protecting small businesses from unfair or misleading conduct by larger businesses.
"The matter also sends a strong message to businesses that make statements about future matters, they must beware that they have a reasonable basis for making those statements. If they have no reasonable grounds, their statements can be deemed to be misleading under the Trade Practices Act.
"The $245,000 payout made by Australian Billboard Connections highlights the dangers of making false or misleading statements."
"This successful result also highlights the ACCC's presence across Australia, particularly in the south east of South Australia where one of the franchisees is located".