ACCC launches unconscionable conduct action against franchisor

The Australian Competition and Consumer Commission has launched legal action against franchisor Seal-A-Fridge and its director Nigel Rooney, alleging the company engaged in unconscionable conduct towards its franchisees.

The Australian Competition and Consumer Commission has launched legal action against franchisor Seal-A-Fridge and its director Nigel Rooney, alleging the company engaged in unconscionable conduct towards its franchisees.

Seal-A-Fridge, which is the franchisor of a mobile refrigeration seal replacement business, operates franchises throughout Australia.

The ACCC claims Seal-A-Fridge engaged in unconscionable conduct under section 51AC of the Trade Practices Act by:

• Unreasonably withholding consent to the transfer of franchises.
• Unilaterally increasing the fees associated with the national Seal-A-Fridge telephone number contrary to franchise agreements.
• Disconnecting franchisees from the national Seal-A-Fridge telephone number to force franchisees to agree to the increased fees.

The ACCC also alleges Seal-A-Fridge contravened the Franchising Code of Conduct and therefore section 51AD of the act by failing to provide adequate disclosure to franchisees before they entered into franchise agreements. “It is alleged that Seal-A-Fridge later failed to provide current disclosure documents to franchisees after receiving written requests,” the competition watchdog said in a statement.

The matter is due to appear in the Federal Court in Brisbane before Justice Logan on 25 July, where the ACCC will seek a number of court orders. It wants declarations that Seal-a-Fridge contravened the Trade Practices Act and that Rooney “was knowingly concerned in the contraventions” and injunctions preventing the company and Rooney from engaging in similar conduct in the future.

It also wants Seal-A-Fridge to implement a complaint handling system and Rooney to attend training. The ACCC will be seeking costs.

Nigel Rooney did not respond to SmartCompany’s calls.

The ACCC’s action comes as a Federal Parliamentary inquiry prepares to look at the franchising industry. The inquiry will specifically look at changes to the franchising code and interaction between the franchising code and the Trade Practices Act on the issue of unconscionable conduct.

Related stories:

• Federal Government launches inquiry into franchising industry
• Franchising 2008 – crunch time: Challenges and opportunities
• SA inquiry recommends tighter disclosure rules for franchisors

Read more on the franchising code of conduct