Auto repair business Ultra Tune has copped a $2.6 million Federal Court fine after misleading a prospective franchisee and attempting to cover it up.
The consumer watchdog announced on Friday Ultra Tune was found to have made false or misleading representations to a prospective franchisee about the price of the franchise, the ongoing rent of the premises, and the age of the franchise.
Ultra Tune, the second largest independent motor repair organisation in Australia, also told the franchisee a $33,000 deposit was refundable when it was not.
The Federal Court judgement also noted Ultra Tune’s attempts to mislead the Court in its defence of the ACCC’s action, by relying on documents purportedly sent to the prospective franchisee.
“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,” Justice Bromwich said.
“There must be no tolerance for manufacturing evidence to deceive a regulator, and even less when the deception is maintained in this Court.”
Ultra Tune was also found in breach of the Franchising Code by failing to prepare marketing fund statements within the required timeframes, failing to provide these statements and audit reports to franchisees, and failing to include sufficient detail in the statements.
The court fined Ultra Tune $2,604,000 and ordered it to pay the prospective franchisee his $33,000 deposit back with interest.
Justice Bromwich also awarded the ACCC indemnity costs.
These are the first proceedings that the ACCC has brought against a franchisor alleging a breach of the Franchising Code obligation to act in “good faith” in business dealings with franchisees.