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Allphones penalised $45,000 for contempt of court orders

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The Australian Competition and Consumer Commission (ACCC) announced in July that the Federal Court had penalised Allphones Retail Pty Ltd (Allphones) $45,000 for contempt of court orders made by the Federal Court in October 2008.

The contempt of court involved breaches by Allphones of two undertakings they had given to the Court, which were:

  1. Not to withhold consent to an assignment of an Allphones franchise if the franchisee would not sign a deed releasing Allphones from liability; and
  2. To provide seven days’ written notice to the ACCC of Allphones’ intention to withhold consent to the assignment of an Allphones franchise on the basis that the assignee must enter into a form of franchise agreement which was different to the assignor’s franchise agreement.

The Federal Court found that Allphones had breached the first of the above undertakings on one occasion, had breached the second on three occasions, and that such conduct by a number of the company’s senior personnel was ‘serious’ and ‘deliberate’.

This decision is the latest in a series of four actions by the ACCC against the mobile phone retailer and three of its directors which commenced in 2008. These proceedings included:

• Breaches of the Franchising Code of Conduct (the Code) and Trade Practices Act 1974 (now known as the Competition and Consumer Act 2010 – CCA) commenced in March 2008;

  • An urgent interlocutory action in October 2008 alleging misleading and deceptive conduct and breaches of the Code, the result of which was that Allphones gave 9 undertakings to the Federal Court in relation to its future conduct, and was restrained from further negotiations with franchisees; and
  • A class action on behalf of 74 franchisees seeking damages for losses sustained by the franchisees flowing from unconscionable conduct.

While some may criticise the ACCC for perceived inaction, in the case of Allphones, the ACCC has shown itself to be relentless in its pursuit of justice and its desire to make an examples of the continued misconduct of this franchisor. The ACCC’s vigilance sends a very clear message to all franchisors about the importance of conducting their businesses within the law, and that breaches of the Code, the CCA and undertakings given to the Court will not be tolerated.

MST can assist franchisors with matters involving the ACCC. We can also assist franchisees (or groups of franchisees) requiring advice about the conduct of their franchisor.

For further assistance, please contact a member of our Franchising or Corporate Advisory teams.

Author: Louise Wolf

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