The Federal Court of Australia has fined Ultra Tune Australia Pty Ltd (Ultra Tune) $1.5 million for contempt of court.
The $1.5 million fine sets a record as the highest for a contempt of court proceeding brought by the ACCC.
In 2019, of Conduct. 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 Court also ordered Ultra Tune to implement a compliance program designed to reduce the risk of any future breaches.
In breach of these orders, on one occasion Ultra Tune failed to update its disclosure document on time, and it twice failed to prepare its marketing fund statement on time. In one of these instances, Ultra Tune prepared its marketing fund statement almost eight months late.
The compliance program order made by the Court following these findings required Ultra Tune’s compliance officer to provide quarterly reports on the effectiveness of the compliance program
In his decision, Justice Bromwich found that “…the evidence shows that the contempts that were charged were not out of character for Ultra Tune, but in fact a reflection of its corporate character which was insufficiently concerned with, and with effecting, compliance, even when it came to Court orders.”
“It is vital that franchisors prepare marketing fund statements in the timeframe stipulated by the Franchising Code, so that franchisees receive this important information when it is of most use to them,” ACCC Commissioner Liza Carver said.
“The ACCC took this action because it was concerned that Ultra Tune had failed to improve its compliance with the requirements of the Franchising Code despite previous ACCC action and court-imposed penalties. These fines for contempt demonstrate the importance of compliance with court orders.”
In the previous civil penalty proceedings, the Court found that Ultra Tune had failed to update its disclosure document on time on two occasions and failed to prepare its marketing fund statement on time on three occasions.
to the company. Ultra Tune failed to ensure this reporting occurred for three consecutive quarters.
The Court also awarded the ACCC its costs on an indemnity basis, because this was a contempt of court action.
Background
Ultra Tune is a car servicing franchisor with operations in every mainland state and territory and over 260 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 six 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. In June 2022, the ACCC instituted proceedings alleging Ultra Tune had failed to comply with the orders and was in contempt of court.
