ACCC initiates action against Megasave Couriers

17 Jul 2020

By Ryan Attard, Law Clerk and Alicia Hill, Principal

On 3 July 2020, the Australian Competition and Consumer Commission (ACCC) initiated proceedings against franchisor Megasave Couriers Australia Pty Ltd (Megasave) in the Federal Court of Australia. The ACCC is alleging that Megasave conducted misleading and deceptive conduct in contravention of section 18 of the Australian Consumer Law (ACL), while also making false and misleading representations regarding its services pursuant to section 29(1)(g), and misleading representations about their business activities pursuant to section 37(2).

The ACCC’s media release indicates that this action was based on more than 30 complaints received by the ACCC from franchisees. They alleged that Megasave and its sole director, Gary Bourne, misled prospective franchisees in relation to guaranteed minimum weekly payments that they would receive and annual income which would be made whilst operating the franchise.

Background

Megasave is a parcel courier delivery business that claims to have more than 50 franchises across Australia. It has been marketing and selling courier franchises in Australia since April 2019 via its website and other online forums. Each franchisee has its own defined territory where it would deliver parcels. Prices for the franchises have differed over time, with the common price being $27,500 since the commencement of operations.

Allegations

The ACCC alleges that Megasave represented to prospective franchises from June 2019 to July 2020 that they would receive guaranteed minimum weekly payments (generally specified at $2,000 per week) for a set period of time (generally specified as the first six months of operation).

It was also alleged than from June 2019 to April 2020 Megasave represented to prospective franchisees that they would be guaranteed a minimum annual income (generally specified at $91,000 per annum).

These representations were made in promotional statements and marketing material on Megasave’s website, online advertisements, and documents given to prospective franchisees. Megasave continued these practices even after minimum weekly payments were not made to existing franchisees.

Megasave further allegedly breached ACL and its contractual obligations with franchisees when it introduced an Operations Manual which added a condition that all franchisees were required to submit weekly sales leads in order to qualify for the minimum weekly payment.

Consequences

If the Federal Court finds in favour of the ACCC, major penalties could be ordered against Megasave pursuant to ACL, including:

Due to his alleged knowledge and involvement, Mr Bourne may have the following issued against him:

  • Pecuniary penalties under section 224; and
  • Disqualification orders from his role as director of Megasave under section 248.

The Federal Court may also issue an injunction against Megasave to prohibit and halt the alleged practices and restrain them in future dealings.

We will continue to monitor this case and keep you informed of the outcome once determined.

Franchisors should be wary when making statements, publishing marketing material or website information about financial support that may be available or income likely to be earned by potential franchisees when discussing the possible grant of a franchise. Most critically if a guarantee of income is given, franchisors generally have an obligation to ensure that it is provided. 

If you are concerned about the effect of  your advertising material and how or what might be offered to potential franchisees by way of support please contact Alicia Hill (03) 8450 0292 or Raynia Theodore (03) 8540 0242 of our office.