The Federal Court has begun hearing an action taken by The Australian Competition and Consumer Commission (ACCC) against mobile retailer, .
In August last year, the ACCC launched class action proceedings on behalf of 74 current and former franchisees against Allphones Retail, CEO Matthew Donnellan, director and COO, Tony Barker, and former national franchising manager, Ian Harkin, for alleged breaches of the Trade Practises Act (1974).
It is alleged that Allphones received commissions and bonus payments from telco partners that weren’t discussed with or passed onto franchisees and that it behaved in a similar manner with mobile phone handset supplier rebates.
Further to that, it is also alleged the company made deductions from commission payments meant for franchisees in breach of franchise agreements.
On the first day of the court hearing (March 23), Senior Counsel, Stephen Rushton, representing the ACCC, further detailed allegations and claimed evidence to be presented would reveal more than widespread bullying.
He said that under the retailer’s franchise model, franchisees could only source stock (except for Vodafone/Hutchinson products) from Allphones and not directly from suppliers. Commissions that the franchisees earned for connecting customers to various post-paid plans, from carriers Optus, Virgin and Vodafone, were not paid to the franchisees directly, but were paid by the carriers to Allphones. It then had to pay franchisees the share of till sales.
“Allphones could, if they needed to, use stock supply as a weapon. It could punish franchisees and put them on stock-hold for a considerable period of time,” Rushton said. “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.”
Rushton said because franchisees didn’t deal directly with suppliers, Allphones was able to negotiate terms of supply with suppliers, which was unknown to franchisees. For example, the retailer was able to negotiate rebates, based on the volume of handsets and accessories sold by the franchisees, but they were unaware of this.
The ACCC is seeking damages for losses sustained by the class action participants and legal costs.
In January last year, the Federal Court ordered interim injunctions on the retailer to restrict it from providing preferential treatment with the supply of stock to franchisees who signed any new agreements and/or deed of release in its favour.
The case continues in front of Justice Lindsay Graeme Foster.