ACCC wins Allphones court battle on behalf of franchisees

The Australian Competition and Consumer Commission (ACCC) has won its Federal court battle against retail outlet, Allphones, on behalf of franchisees. In August last year, the ACCC commenced class action proceedings against the retailer and its CEO, Matthew Donnellan, director and COO, Tony Barker and former national franchising manager, Ian Harkin. The regulatory watchdog was acting on behalf of 74 current and former franchisees who alleged Allphones received commissions and bonus payments from telcos and handset suppliers that weren’t discussed with or passed onto them.

There were also claims of undue pressure and harassment of franchisees.

In his judgement passed on April 28, Justice Lindsay Graeme Foster found Allphones refused to provide stock and pay commissions owed to some of its franchisees on several cases since August 2004, when it knew it had no right to do so. The retailer also imposed fines on franchisees it wasn’t entitled to provide.

Foster also ordered Allphones and its directors to restrain from using threats, intimidation or undue pressure on franchisees. The court declared in mid-2004 that the retailer and its directors threatened to ‘crush’ franchisees if they did not cease to associate with each other.

Justice Foster also found Allphones had negotiated bonuses and rebates for its own benefit, which it did not share with franchises, leading to misleading and deceptive conduct which was in contravention of section 52 of the Trade Practises Act 1974.

“Allphones could, if it needed to, use stock supply as a weapon. It could punish franchisees and put them on stock-hold for a considerable period of time,” ACCC representative senior counsel, Stephen Rushton, claimed during the hearing. “Allphones could and did put franchisees on commission hold and, on occasions, franchisees got a double whammy and were put on both stock and commission hold.”

The court has ordered Allphones to inform each of its franchisees at least once a month in writing of the amount paid to the retailer by each telco carrier, the number of connections to each carrier’s network sold by Allphones and its franchisees, and part of those amounts attributable in whole or in part to sales made by the franchisee.

On top of this, Allphones has to establish an education, training and trade practises compliance program for employees and others involved in the business. Allphones and its directors will now have to pay ACCC court costs.

Donnellan did not respond to requests for comment on the court’s decision at time of press.

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