Buckle up, folks! The Federal Court of Australia just laid down the law on Ultra Tune, slapping them with a colossal $1.5 million fine for contempt of court. That’s not just any old parking ticket—it’s a record-breaking penalty, setting the bar high for future misbehaving franchisors.
Rule-Breaking Road Trip: The Backstory
Let’s reverse to early 2019 when Ultra Tune found itself in hot water when the Federal Court determined the Franchisor had breached the Australian Consumer Law and the Franchising Code of Conduct. As a consequence, the franchisor was ordered to implement a compliance regime and take a number of other steps, kind of like being put on a provisional licence. In addition, they were penalised over $2Million (which penalty is additional to that handed down this week).
But Ultra Tune didn’t stick to the track. They missed deadlines faster than a speeding ticket, failing to update their disclosure document and prepare their marketing fund statement on time. In one case, they were almost eight months late—talk about a major pit stop!
The ACCC considered Ultra Tune was not abiding by the orders handed down in 2019. They issued contempt proceedings in June 2022. In initiating the contempt proceedings, ACCC commissioner Liza Carver said in a statement that the ACCC believes Ultra Tune “disregarded” its obligations to franchisees under the Franchising Code, as it “repeatedly failed to prepare important documents for franchisees within the required timeframe”. Those contempt proceedings were the subject of the decision handed down this week.
Repeat Offenders: Pattern of Misconduct
The court hearing the contempt proceedings didn’t buy Ultra Tune’s excuses. These slip-ups weren’t just one-off accidents—they were part of a pattern. It’s like they had a “check engine” light flashing over their corporate character. In handing down the Federal Court decision yesterday, Justice Bromwich found the prior penalty did not deter Ultra Tune from further compliance breaches and that court orders it get its act together were “similarly ineffective”. It found Ultra Tune was in contempt of the 2019 Orders.
The court also ordered Ultra Tune to cover the ACCC’s legal costs on an indemnity basis. This means Ultra Tune will have to pay almost all of the legal fees incurred by the ACCC, which were no doubt significant.
The Road Ahead: Tuning Up or Breaking Down?
So, what’s the moral of the story? When it comes to playing by the rules, there’s no room for burnouts. Franchisors need to be aware the ACCC is revving up to take action. Franchisors should be up to speed on their obligations pursuant to the Australian Consumer Law and the Franchising Code. It is essential they implement measures to ensure compliance. If you would like further advice on this issue reach out to us for an obligation-free initial chat. For further information, the ACCC media release is available here.