Allphones fined $45k for contempt of court

Stuart Corner
Wednesday, 20 July 2011 16:07

IT Policy - Regulation

The Federal Court has penalised mobile phone store franchisor Allphones Retail Pty Ltd $45,000 for contempt of court orders following action by the ACCC.

Following an earlier action by the ACCC, Allphones gave undertakings to the court in 2008 that prohibited it from withholding consent to the assignment of an Allphones franchise if the franchisee would not sign a deed releasing Allphones from liability; and requiring it to give the ACCC seven days written notice of its intention to withhold consent to the assignment of an Allphones franchise on the basis that the new franchisee must enter into a new franchise agreement.

Justice Nicholas found that the conduct was both 'serious' and 'deliberate', having been undertaken by a number of Allphones' senior personnel.

ACCC chairman, Graeme Samuel said: "This decision sends a clear message that the ACCC and the Court regard breaches of court orders very seriously. Those who act in contempt of court can expect to be vigorously pursued by the ACCC," Mr Samuel said.

According to the ACCC, "Allphones acknowledged that its conduct was both wrongful and culpable, and apologised to the Court and franchisees'¦[and] made joint recommendations with the ACCC to the court as to the appropriate fine."

The court's decision is the final chapter in a saga of misconduct by Allphones dating back to 2004, and which has already cost it $3m in court-ordered payments to franchisees as a result of a class action mounted by the ACCC on behalf of 55 then current and former franchisees. Allphones

In April 2010 when the court imposed that $3m penalty, the ACCC said: "In 2006, Allphones identified a group of franchisees referring to them in its management reports as 'dickhead franchisees'. To try to ensure franchisees did what they were told, Allphones implemented a business plan targeting franchisees who did not meet performance criteria unilaterally adopted by Allphones, or who were identified as not being 'loyal' to Allphones, to pressure them to sell, transfer or otherwise terminate their franchise.

"These tactics included: withholding stock; stopping a franchisee's income while simultaneously requiring that franchisees continue to bank daily takings in Allphones' account and meet other obligations like rent and wages; and threatening franchisees with 'breach' notices suggesting the company would take steps to terminate their franchise."

Commenting on the judgement, then acting ACCC chairman Peter Kell said: "This is some of the worst conduct encountered by the ACCC in dealing with franchisees. It was both systemic and prolonged. I can only imagine how a franchisee caught on the wrong side of such policies, with their livelihood on the line, must have felt."