In an ACCC investigation into Australian Loans Management Pty
Ltd (ALM), the ACCC has once more confronted a franchisor seeking
to avoid the compliance requirements of the Franchising Code of
Conduct (the Code).
ALM endorsed and sold "licence agreements" for the
financial broking business, Active Money (Aust) Pty Ltd (AM).
Following an investigation, the ACCC determined that these
"licence agreements" met the legal criteria of a
franchise agreement. ALM had not complied with the Code because it
did not believe that it was a franchise.
The ACCC investigation concluded that ALM had breached the Trade
Practices Act 1974 (Cth) (the Act) by misleading licensees into
believing that they were not entitled to the rights and remedies
provided by the Code. The Code provides a number of safeguards to
ensure prospective franchisees are fully informed about what they
are buying including disclosure documents, a seven day cooling off
period and the right to seek advice from independent experts.
The ACCC investigation determined that ALM had failed to:
provide its prospective franchisees/licensees with a copy of
the Code, a disclosure document and the proposed franchise
agreement at least 14 days before the prospective franchisee
entered into the agreement or made a non-refundable payment to the
provide prospective franchisees with a seven day cooling off
collect a signed statement from the prospective franchisee
regarding the provision of independent legal, accounting or
Following the ACCC investigation, ALM admitted that the
"licence agreement" was a franchise agreement that they
had not complied with the Code and agreed that they had misled
ALM and AM provided court enforceable undertakings (which were
accepted by the ACCC) to:
implement measures to ensure Code compliance
provide existing franchisees with a copy of the Code, a
disclosure document and a franchise agreement that complied with
provide existing franchisees with the opportunity to cancel
their existing licence agreements and receive a full refund of all
monies paid to ALM.
While AM did not contravene the Code or the Act itself, it also
offered an undertaking to the ACCC as ALM advised that going
forward it intends that AM will act as the franchisor.
In a statement by ACCC chairman Graeme Samuel, franchisors were
reminded once again that simply claiming that an agreement is not a
franchise agreement will not protect franchisors seeking to
circumvent the Code. The ACCC stressed that the Code's
disclosure requirements are an essential feature of franchising
regulation and any failure to comply with the code is unacceptable
As the ACCC continues to target franchisors who do not comply
with the Code, this case teaches franchisors a costly lesson
– a failure to correctly identify your business as a
franchise and comply with the Code may provide franchisees with the
opportunity to cancel their existing agreements and obtain a full
refund of all monies paid to the franchisor.
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