Infringement Notice Penalties for alleged Franchising Code Breach

The ACCC announced on 6 October 2022 that it had issued Jim's Group Pty Ltd with two infringement notices and that Jim's Group Pty Ltd had paid $24,420.00 in penalties.

The infringement notices related to an alleged failure to comply with the Franchising Code of Conduct and an alleged failure to comply with the Australian Consumer Law. 

When Can the ACCC Issue an Infringement Notice?

The ACCC can issue an infringement notice where it has reasonable grounds to believe that a person has contravened a civil penalty provision of an industry code.

In addition, the ACCC can issue an infringement notice where it has reasonable grounds to believe that a person has  contravened certain consumer protection provisions including:

• provisions prohibiting the making of false or misleading representations (but not including section 18 of the ACL); 
• provisions prohibiting unconscionable conduct;
• provisions prohibiting unfair practices such as pyramid schemes;
• certain gift card provisions;
• certain product safety and product information provisions; and
• certain unsolicited consumer agreement and lay-by-agreement provisions.

The infringement notice must be issued within 12 months of the alleged contravention and cannot relate to more than one alleged contravention of an infringement notice provision.

However, the ACCC can issue more than one infringement notice, each relating to a separate contravention.

When is the ACCC More Likely to Issue an Infringement Notice?

The ACCC has indicated that it is more likely to issue an infringement notice:

• where it forms the view that the contravening conduct is relatively minor or less serious;
• where there have been isolated or non-systemic instances of non-compliance;
• where there have been lower levels of consumer harm or detriment;
• where the facts are not in dispute or where the ACCC considers the circumstances giving rise to the allegations are not controversial; and
• where infringement notices form part of a broader industry or sectoral compliance and enforcement program following the ACCC raising concerns about industry wide conduct.

The ACCC has also indicated that in appropriate cases, as well as issuing an infringement notice, the ACCC may seek additional remedies, including by way of court-enforceable undertakings.

Infringement Notice Penalties for Alleged Franchising Code Breaches

The issue of an infringement notice is separate to the enforcement of a Franchising Code penalty provision. 

The penalty payable in respect of an infringement notice will be different for each notice, but in most cases the penalty is 60 units (from 7 November 2024 $19,800.00) for a corporation, 600 units (from 7 November 2024 $198,000.00) for a listed corporation and 12 units (from 7 November 2024 $3,960.00) for an individual.

If a person pays the penalty set out in the infringement notice, the ACCC cannot commence court proceedings in relation to the alleged contravention. That is, if an infringement notice relates to an allegation that the person has contravened a civil penalty provision of the Franchising Code, the ACCC cannot then by way of court proceedings, seek the penalty payable for the contravention of the Franchising Code (which penalties are in most instances a maximum of 600 units (from 7 November 2024 $198,000.00).

It is important to note that payment of the infringement notice is not regarded as an admission that the person has breached the Competition and Consumer Act 2010 or a penalty provision of the Franchising Code .

However, the ACCC does keep a public register of infringement notices which sets out the date of payment, the section of the relevant act which the person has allegedly contravened and the name (and ABN or ACN where applicable) of the person.

Jim's Dog Wash - Infringement Notices

Jim's Group Pty Ltd has paid $24,420.00 in penalties after the ACCC issued it with two infringement notices for an alleged contravention of the Franchising Code and an alleged contravention of the Australian Consumer Law.

The first infringement notice related to the alleged failure of Jim's Group to disclose certain information in its disclosure document. In particular, the ACCC alleged that the disclosure document significantly understated the number of former franchisees in the Dog Wash division and failed to provide the contact details for those franchisees.

The ACCC deputy chair Mr Mick Keogh said:

"If someone is thinking about buying a franchise, being able to contact former franchisees is critical for making informed decisions".

"Under the Franchising Code, franchisors must provide prospective franchisees with a compliant disclosure document which provides specified information which is important to prospective franchisees".

The second infringement notice alleged that Jim's Group had made a false or misleading representation to a franchisee about their cooling off rights.

The ACCC alleged that Jim's Group misrepresented to a Jim's Dog Wash franchisee that their cooling off rights under the Franchising Code ended 14 days after entering into the franchise agreement or the making of a payment to the franchisor, whichever was earlier.

Under the Franchising Code, a franchisee can terminate the franchise agreement within 14 days' of signing the franchise agreement, regardless of whether they have previously paid a deposit.

Key Takeaways

• Franchisor's must ensure that their disclosure documents are compliant with the Franchising Code (and that all information required to be disclosed is disclosed);
• The ACCC may issue an infringement notice if it takes the view that a disclosure document does not comply with the Franchising Code;
• If a franchisor receives an infringement notice from the ACCC they should immediately seek legal advice.

Disclaimer

The information in this article is general in nature and is not intended to address the circumstances of any person or other entity. Although we do our best to provide timely and accurate information, we do not guarantee that the information in this article is accurate or that it will continue to be accurate in the future.