A Melbourne cleaning company has been fined half a million dollars in proceedings by the Australian Competition and Consumer Commission (ACCC).
South East Melbourne Cleaning Pty Ltd, formerly known as Coverall Melbourne, was found guilty of contravening Australian Consumer Law (ACL). As declared by the Court in October 2014, Coverall Melbourne had engaged in unconscionable conduct, made false or misleading representations, and had contravened the Franchising Code of Conduct.
The Court found Coverall Melbourne had misled two prospective franchisees regarding the income they would earn. The business had failed to notify the franchisees of the need to seek advice before entering the agreement and then failed to pay franchisees for completed work. Coverall continued to charge payment for the initial franchising fee, which the court placed under the umbrella of ‘unconscionable conduct.’
“This significant penalty decision is important for all involved in the franchise industry. By imposing a penalty of $500,000, the Court is seeking to deter other franchisors from engaging in similar conduct,” ACCC Deputy Chair Dr Michael Schaper said.
“This is a clear message that franchise businesses must ensure they comply with their obligations under the Australian Consumer Law and Franchising Code of Conduct.”
Justice Murphy said that Coverall Melbourne demonstrated “scant regard to the requirement that franchisees should be fully informed and given the opportunity to be independently advised” before they commit to buying a franchise.
His Honour found the business had failed to ensure they had a “system capable of collecting payment and actually paying its franchisees on time.”
Former Coverall Melbourne director Brett Jones had previously been penalised $30,000 and disqualified from managing a corporation for 2 years.
The ACCC was handed significant new powers under the revised Franchising Code of Conduct, which came into effect on 1 January 2015.