Australia's second largest independent motor repair organisation Ultra Tune is in hot water after failing to act in good faith in its dealings with a prospective franchisee.
The company has been fined $2.6m for breaching both the Franchise Code of Conduct and Australian Consumer law and ordered to pay back a $33,000 deposit which it falsely informed the potential franchisee was refundable.
Ultra Tune also supplied misleading information about the price and age of the franchise, as well as the ongoing rent of the premises and failed to supply marketing fund statements and audit reports to its franchisees.
Adding fuel to the fire it also tried to mislead the court in its defence, implying it had sent certain documents to the prospective franchisee when it had not.
Justice Bromwich made mention of the deception it her ruling, linking it to the company's dishonest behaviour.
"The cover up that Ultra Tune attempted reflects a significantly heightened need for deterrence, in relation to conduct that was already a most serious and fundamental breach of the Franchising Code in taking the deposit in the first place, reflecting as it does Ultra Tune's attitude in relation to its contravening conduct," she says.
"There must be no tolerance for manufacturing evidence to deceive a regulator, and even less when the deception is maintained in this Court."
Deputy chair of the ACCC Mick Keogh says the action should serve as a warning for other franchisors to act in good faith.
"Franchisors often have the stronger bargaining position in their dealings with franchisees, which is why compliance with the Franchising Code and the Australian Consumer Law is so important," he says.
"This outcome should be a strong reminder for franchisors to meet their disclosure obligations or face serious consequences."
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