The ACCC has instituted contempt of court proceedings against Ultra Tune Australia Pty Ltd (Ultra Tune) for allegedly breaching court orders which restrained Ultra Tune from contravening parts of the Franchising Code of Conduct (Franchising Code) and for allegedly failing to comply with the requirements of a court-ordered compliance program.
In 2019, Ultra Tune was found to have breached the Australian Consumer Law and the Franchising Code and the Court made orders that required Ultra Tune to provide disclosure documents and marketing fund statements to franchisees in compliance with the Franchising Code.
The ACCC alleges that between 2019 and 2021, while the court orders were in effect, Ultra Tune failed to update its disclosure document on time and failed to prepare two marketing fund statements within the timeframe required by the Franchising Code.
Ultra Tune allegedly did not prepare marketing fund statements and audit reports for the 2019 and 2020 financial years until well after the date on which the Franchising Code required them to do. These documents provide transparency on how the marketing funds which Ultra Tune required franchisees to pay were spent. Ultra Tune was also late in updating its disclosure document in 2020.
“We allege that Ultra Tune disregarded its obligations under the Franchising Code, which are designed to provide transparency to franchisees,” ACCC Commissioner Liza Carver said.
“In particular, we allege that Ultra Tune repeatedly failed to prepare important documents for franchisees within the required timeframe, which meant they were denied the opportunity to see, in a timely manner, how their contributions to the marketing fund were being used by Ultra Tune.”
“The alleged failure by Ultra Tune to update its disclosure document is also concerning, as this document is used to give prospective franchisees key information about the franchise system, and existing franchisees current information about the running of the franchise.”
In 2019, the Court also ordered Ultra Tune to implement a compliance program to ensure there were no further breaches of the Franchising Code or the ACL. This compliance program required an Ultra Tune compliance officer to provide quarterly reports on the continuing effectiveness of its compliance program to the company.
The ACCC alleges that for the three quarters between April and December 2021, Ultra Tune failed to ensure its compliance officer provided those reports.
“Given Ultra Tune’s previous breaches of the Franchising Code and the consumer law, ongoing monitoring of compliance is important,” Ms Carver said.
“The ACCC will pursue contempt of court action when it considers Court orders, including those obtained for the protection of franchisees, have been breached.”
Ultra Tune is a car servicing franchisor with operations in every mainland state and territory and over 270 centres across Australia.
In 2017, the ACCC instituted proceedings against Ultra Tune in relation to alleged contraventions of the ACL and the Franchising Code.
In January 2019, the Federal Court imposed total pecuniary penalties of $2.604 million against Ultra Tune (reduced to $2.014 million on appeal) for its contravening conduct.
The penalties related to Ultra Tune’s:
- late production and dissemination (by over 6 months in some instances) of marketing fund statements and disclosure documents mandated by the Franchising Code; and
- treatment of a prospective franchisee, whom the Court found Ultra Tune had misled.
In March 2019, the Court ordered Ultra Tune to implement a compliance program and made injunctions restraining Ultra Tune from contravening certain provisions of the ACL and the Franchising Code.