Allphones takes battering by ACCC

Australia's competition watchdog has taken a third swipe at Allphone, levelling contempt of court proceedings against the mobile phone retailer.

The Australian Competition and Consumer Commission (ACCC) has also instituted class action proceedings against Allphones on behalf of franchisees.

In the contempt of court action, the competition watchdog claimed that Allphones breached orders made by Justice Foster in the Federal Court on 9 October.

These orders related to two undertakings given by Allphones to the court. One prohibited Allphones from withholding consent to the assignment of a franchise on the basis that the franchisee will not sign a deed releasing Allphones from liability (undertaking 8).

The second required Allphones to give the ACCC seven days' written notice of its intention to withhold consent to the assignment of an Allphones franchise on the basis that the new franchisee must enter into a new franchise agreement (undertaking 9).

The ACCC claimed Allphones breached undertaking eight on one occasion and undertaking nine on three occasions. A directions hearing has been set down in the Federal Court in Sydney for August 21, 2009.

The contempt of court action follows an announcement yesterday by the ACCC, in which it said it would pursue class action against the retailer and three individuals on behalf of 74 elilgible Allphones franchisees.

Individual respondents to this case included Allphones' director and chief executive officer, Matthew Donnellan; director and chief operating officer, Tony Baker; and former national franchising manager, Ian Harkin, for allegedly being knowingly concerned in or party to the contravening conduct.

Under the class action, the ACCC alleges that Allphones received commission or bonus payments from telecommunication networks which were not paid to franchisees in accordance with their franchise agreements, and which were not disclosed to franchisees.

It is also alleged the retailer received rebates from mobile phone handset and other product suppliers which were not paid to franchisees in accordance with their franchise agreements, and which were not disclosed to franchisees.

It is further alleged that Allphones made unilateral deductions from commission payments payable to franchisees which were not permitted by their franchise agreements in circumstances which, in the context of Allphones' relationship with its franchisees, were unconscionable.

Under the class action, the ACCC is seeking damages for losses sustained by the represented franchisees which the ACCC alleges flowed from this alleged unconscionable conduct.

A proceeding for the class action is set for directions hearing on September 8, 2009 before Justice Foster.

The class action is based, in part, on existing ACCC Federal Court proceedings against the same parties in March 2008.

In October 2008, Allphones gave interim undertakings to the court restraining the company from engaging in certain conduct with its franchisees. This conduct relates to allegations of contraventions of sections 51AC, 51AD, 52 and 59 of the Trade Practices Act.

These sections deal with unconscionable conduct, contravention of an industry code, misleading conduct and misleading representations about certain business activities.

This matter is set down for hearing on March 23, 2010.