ACCC Takes Action Against Cleaning Franchisor Alleging Unconscionable Conduct
Tuesday 22 July 2014 @ 9.26 a.m. | Trade & Commerce
The Australian Competition and Consumer Commission (ACCC) has instituted proceedings against Coverall Cleaning Concepts South East Melbourne Pty Ltd (Coverall Melbourne) alleging that it engaged in unconscionable conduct in contravention of the Australian Consumer Law (ACL).
The ACCC also alleges that Coverall Melbourne made false or misleading representations, engaged in conduct that was misleading or likely to mislead, and contravened the Franchising Code of Conduct.
Coverall Melbourne is a master franchisor of a franchise system that establishes and operates professional cleaning services.
Allegations by the ACCC
The ACCC alleges from August 2013 Coverall Melbourne represented to two franchisees that they would receive a volume of work that would enable them to earn specified amounts and that they would receive payment of those amounts each month. The ACCC alleges Coverall Melbourne did not have reasonable grounds for making the representations and failed to make the payments as represented and on the terms required by Coverall Melbourne’s franchise agreements.
Further, it is alleged that Coverall Melbourne failed to comply with requirements of the Franchising Code of Conduct, including by not having reasonable grounds for the earnings information provided to the two franchisees in contravention of the Competition and Consumer Act 2010 (Cth) (CCA).
The ACCC alleges that Coverall Melbourne’s failure to make payments to the franchisees, as well as other alleged conduct, was unconscionable, particularly as the franchisees had significantly weaker bargaining power than Coverall Melbourne.
ACCC Deputy Chair Dr Michael Schaper said:
“Unconscionable conduct affecting small business is a priority area for the ACCC … The ACCC will not hesitate to take court action to enforce compliance with laws that are specifically designed to protect small business from unfair practices … Micro-sized firms, franchisees and self-employed individuals should not be treated in a manner which goes beyond the bounds of commercially-acceptable practice, or which is more than just hard bargaining.”
The ACCC has joined Coverall Melbourne’s sole director, Brett Jones, and sales manager, Astrid Haley, to the proceedings. The ACCC alleges they aided and abetted and were knowingly concerned in Coverall Melbourne’s alleged contraventions of the ACL and CCA.
Penalties sought against Coverall Melbourne
The ACCC is seeking pecuniary penalties, injunctions (including an interlocutory injunction), compensation for two affected franchisees and costs. The matter was originally referred to the ACCC by the office of the Victorian Small Business Commissioner.
Proposed Reforms to the Franchising Code of Conduct
The Small Business Minister, Bruce Billson introduced the Competition and Consumer Amendment (Industry Code Penalties) Bill 2014 in the House of Representatives on 17 July 2014, seeking to allow the ACCC to issue infringement notices of up to $8500 to businesses that breach industry codes, or seek penalties of up to $51,000 from courts.
The Minister said that he expects the Bill to pass Parliament without any opposition:
“It’s a reform I’ve certainly been calling for for years and we’ve received widespread support from the community and both sides of parliament.”
The Minister says the enabling legislation is one part of a two-step process. The Bill will give the ACCC the power to impose penalties for any business breaching a code of conduct, and the government will specifically apply the clauses as part of its revamp of the Franchising Code of Conduct.
The Coalition announced the changes in early April 2014, along with the introduction of a general duty on franchisors and franchisees to act in good faith during their dealings with each other.
The changes followed the recommendations set out by the 2013 Wein Review, which are set to be codified in the update to the code, which has regulated the sector since 1998.
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Sources:
Article by smartcompany.com.au
ACCC Release NR 183/14
