Home > News > ACCC commences first action for penalties under new Code

ACCC commences first action for penalties under new Code

Spread the love

By Esther Gutnick, Senior Associate, MST Lawyers

On Thursday, 22 September 2016, the Australian Competition and Consumer Commission (“ACCC”) instigated its first action in the Federal Court to seek penalties under the revised Franchising Code of Conduct (“Code”).   The ACCC is also seeking declarations, injunctions, findings of fact and costs.

The revised Code, which came into effect on 1 January 2015, introduced financial penalties and infringement notices for serious breaches.  The ACCC has expressed its approval of the introduction of such penalties, stating that it anticipates the availability of such remedies will act as a significant deterrent.  The ACCC has also confirmed its intention to make it an enforcement priority to ensure small businesses receive the protections of industry codes of conduct, including the Code.

The proceedings allege breaches of the Code by Morild Pty Ltd (“Morild”), the franchisor of the Perth-based, food franchise system known as Pastacup and its former director Mr Stuart Bernstein.

The alleged breaches relate to Morild’s failure to disclose that Mr Bernstein had been a director of two prior franchisors of Pastacup that had become insolvent. This is in contravention of the Code obliging franchisors to disclose, amongst other things, the relevant business experience of their officers.

The ACCC alleges that Mr Bernstein’s directorship and management of the two defunct former franchisor companies should have been disclosed by Morild to potential franchisees. The ACCC also alleges that Mr Bernstein was knowingly concerned in Morild’s conduct.

This action is an example of the ACCC’s self-proclaimed enforcement priority.  It also serves as a timely reminder to franchisors of the importance of maintaining an up-to-date and compliant disclosure document.

The outcome of this case is eagerly awaited by the franchising sector.

For more information, please contact our Franchise team by email at  franchise@mst.com.au or by telephone +61 3 8540 0200.