ACCC v South East Melbourne Cleaning Pty Ltd (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) (No 2)[ 2015] FCA 257
Friday 24 April 2015 @ 11.25 a.m. | Trade & Commerce
The Federal Court has handed down its decision in the case of Australian Competition and Consumer Commission v South East Melbourne Cleaning Pty Ltd (in liq) (formerly known as Coverall Cleaning Concepts South East Melbourne Pty Ltd) (No 2)[ 2015] FCA 257 ordering the company to $500,000 in penalty for contravention of the Australian Consumer Law.
Background
As we previously reported, South East Melbourne Cleaning Pty Ltd (formerly Coverall Cleaning Concepts South East Melbourne Pty Ltd) was a Victorian franchisor of a national professional cleaning franchise system. In October 2014, the court found that the franchisor had made false and misleading representations concerning the income that two individual prospective franchisees would earn. The Court also found that Coverall Melbourne had contravened the Franchising Code by providing this false or misleading information to the two individuals and by failing to notify one of the franchisees of the need to seek independent advice before entering into the franchise agreement.
Furthermore, Coverall failed to pay the franchisees for the work they completed and continued to demand payment for the initial franchising fee from the individuals. The Court ruled that this contravened the Franchising Code and that Coverall had engaged in unconscionable conduct in its dealings.
Court Findings
Justice Murphy of the Federal Court found that the franchisor did not have a system that allowed it to collect payment and pay its franchisees on time in accordance with their entitlements. He further noted that it did not have the intention to implement such a system. His Honour further commented that Coverall had given scant regard to the requirement that franchisees should be fully informed and given the opportunity to be independently advised before committing to the purchase of a franchise business.
A Revised Code
Earlier this year, a revised Franchising Code of Conduct was introduced which allows for greater penalties and gives the Australian Competition and Consumer Commission the power to issue infringement notices in respect of breaches of certain provisions of the code.
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