Unconscionable Conduct - A $500,000 mistake
As a result of breaching the Franchising Code of Conduct, the Federal Court slapped the wrists of Franchisor, South East Melbourne Cleaning Pty Ltd, with a $500,000 penalty. The consumer watchdog, Australian Competition and Consumer Commission "ACCC", brought the claim forward against the franchisor for allegedly engaging in unconscionable conduct by:
Undoubtedly, the expensive mistake serves as a caution to other Franchisors who may be in breach of the Franchising Code of Conduct. As at 1 January 2015, the revised Code introduced additional disclosure obligations along with the duty to act in good faith, among other changes. Franchisors have the duty to ensure that their Franchising documentation is amended to reflect such changes. In addition, The Franchising Code of Conduct gives the ACCC authority to issue infringement notices, in respect to certain breaches of the Code. The ACCC are taking breaches of the new Code seriously and expect Franchisors do the same.
If you are a Franchisor and are unsure if your Franchising Agreement complies with the new Franchising Code of Conduct or you suspect that your Franchisor may be in breach of the code, please contact:
Racha Abboud, Senior Associate
Phone: +61 2 9895 9283