ACCC settles Allphones case for $3m

Allphones franchisees will split $3 million in damages after a long-running case brought about by Australia's competition watchdog was resolved in the Federal Court yesterday.

The Australian Competition and Consumer Commission (ACCC) was acting on behalf of numerous franchisees in a case alleging unconscionable conduct by Allphones and its executives.

Barristers for the Australian Competition and Consumer Commission (ACCC) told the Court that there had been an "enormous effort by all involved to put together something" that addressed concerns raised by Justice Foster when the matter was last heard.

"There's been considerable concessions by both sides," the ACCC's barrister said.

"We'd ask that your Honour makes orders and directions to the dispersement of funds to franchisees."

Justice Foster ended proceedings by congratulating the parties "in this difficult litigation for coming to a sensible resolution of it."

The ACCC said 55 current and former Allphones franchisees would share the damages payout.

Allphones and its executives would also be forced to pay the ACCC's legal costs.

The case centred on now-proven claims of unconscionable conduct by Allphones and its executives towards franchisees.

Specifically, Allphones withheld income from franchisees including commissions and bonuses from suppliers and by altering documents from carriers to disguise charges.

This was despite an assurance by the company that it would use its bargaining power to the franchisees' benefit.

Allphones also pressured a group of franchises - identified in management reports as "dickhead franchisees" - to sell, transfer or terminate their franchisee licenses.

Pressure tactics included withholding stock, "stopping a franchisee's income while simultaneously requiring that franchisees continue to bank daily takings in Allphones' account and meet other obligations like rent and wages" and threatening the franchisees with "breach" notices.

Those who tried to rely on the Franchising Code of Conduct or implement dispute resolution procedures were blocked by Allphones.

"Bullying franchisees by withholding stock and income is egregious conduct that will not be tolerated," acting ACCC chairman Peter Kell said in a statement following the case.

"This is some of the worst conduct encountered by the ACCC in dealing with franchisees. It was both systemic and prolonged.

"I can only imagine how a franchisee caught on the wrong side of such policies, with their livelihood on the line, must have felt."

The orders, which Justice Foster made with the consent of both sides, do not relate to contempt proceedings the ACCC took against Allphones.

The court has reserved its judgment on that matter, although it was raised briefly yesterday. It is due to continue hearings on May 17.

"The orders are also in addition to a number of other injunctions obtained by the ACCC against Allphones in 2008 and 2009 preventing misleading and deceptive conduct, breaches of the Franchising Code and unconscionable conduct," the ACCC said.