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Allphones Franchisor In Class Action and Contempt

Australia’s ACCC has instigated a contempt of Court action against franchisor Allphones. The Australian Competition and Consumer Commission is also representing 74 franchisees in a class action against their franchisor.

It is alleged that the franchisor withheld commissions, bonus payments and rebates that are franchisee entitlements under their contracts.  

Allphones originally made headlines when a complaint was lodged in July 2006 by Hoy Mobile but that was not the first; and it was not to be the last.  By the end of 2007 the ACCC indicated it would pursue Allphones.

The decision in the FCA backed Ketchell case outraged many Australian franchisees and following that decision Allphones then pleaded there was no contract to enforce. The Hoy trial was postponed until February 2008.

The Full Court then found Allphones were guilty of calculated dishonesty and unconscionable conduct.  Franchisees claim that Allphones continue to withhold supply rebates and volume commissions to franchisees as ordered by the Full Court.

A directions hearing on the class action is set down for September 8. 

The ACCC contempt action alleges that Allphones breached enforceable undertakings to the court in October 2008 that;

  • Prohibited Allphones from withholding consent to the assignment of a franchise on the basis that a franchisee would not sign a deed releasing Allphones from liability;
  • Required Allphones to give the ACCC seven days notice in writing if it intended to withhold consent to the transfer of a franchise on the basis that the new franchisee must enter into a new franchise agreement.

Additional ACCC proceedings against Allphones are set down from March next year.

Many Allphones franchisees complain that the drawn out ACCC investigation and actions and the Court process manipulated by Allphones has; and will see more franchisees fall by the wayside as their contracts expire or they become ineligible to participate in the class action should they become bankrupt.

One anonymous franchisee suggested;

Let’s say the ACCC have a victory and Allphones have to pay the money and court costs and by the time it makes it through the court system appeals included that might be around 2012. Some 6 years after the Hoy's lodged their complaint.

Do you believe any of the money will be in any Allphones account by then?  So the chance of Allphones going bankrupt is somewhere between moderate to high. Eligible franchisee numbers will have been whittled down and those left may get nothing. Two have already folded under the pressure and could not join the class action.

This is another case where franchisees allege that their due diligence did not prepare them for the problems at Allphones.  They claim the problems all began with a change of CEO in 2004.

This appears to be another case where franchisees potentially lose by default when they cannot last the distance.  That appears to be the Allphones plan and while the ACCC are to be congratulated; perhaps it is too little too late.  

This is the ‘competition balance’ in franchising that the Australian Minister for Small Business, Craig Emerson, appears intent on ignoring.

This is why Australian franchising needs a Tribunal when rogue franchising manipulates the court system and the ACCC.


Related Reading:

Allphones 155AAA judgement.pdf1.53 MB
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