In late September 2016 the ACCC instituted its first proceedings seeking penalties under the amended Franchising Code of Conduct (which came into effect on 1 January 2015).
Action was taken with respect to the Pastacup food franchise which originated in Perth in 2008. The proceedings alleged that the current franchisor of the Pastacup system (Morild Pty Ltd) and its former director (Stuart Bernstein) failed to disclose the fact that Stuart was a previous director of two previous franchisors of the Pastacup system which became insolvent. By failing to disclose the relevant business experience of its officers, in accordance with the disclosure requirements set out in the Franchising Code, the parties breached the Franchising Code.
The ACCC sought declarations, injunctions, findings of fact and costs against the parties, in addition to seeking penalties for the breach under the Franchising Code.
The ACCC in its media releases regarding the case have reiterated that it is a current enforcement priority for the ACCC to ensure that small businesses receive the protections of industry codes of conduct such as the Franchising Code.
The case, which is due to be heard in the Federal Court, is the first case in which the ACCC have sought to impose penalties under the revised Franchising Code. Franchisors should take note of the ACCC's willingness to seek those penalties for breaches of the Franchising Code, in particular for the failure to provide full and accurate disclosure.
The ACCC Deputy Chair, Dr Michael Schaper said with respect to the case "The ACCC is pleased that the revised Code provides for the Court to impose penalties for serious breaches. We expect that the availability of such remedies will act as a significant deterrent to others."
Franchisors should ensure that associates are fully briefed with respect to the information that must be disclosed in the Disclosure Document, and seek professional advice regarding any areas in which they are uncertain.