The watchdog strikes back

We’re sorry, this feature is currently unavailable. We’re working to restore it. Please try again later.

Advertisement

This was published 13 years ago

The watchdog strikes back

By Chalpat Sonti

The competition watchdog has hit back at claims its actions could force Australia's largest fridge sealing franchise to go out of business, saying there was no evidence that was the case.

Seal-A-Fridge franchisor Nigel Rooney claimed he could be bankrupted by a Federal Court ruling that he pay 60 per cent of the Australian Competition and Consumer Commission's costs.

Seal-A-Fridge franchisor Nigel Rooney says he could go bankrupt after the ACCC successfully pursued him over a $25 a week fee increase.

Seal-A-Fridge franchisor Nigel Rooney says he could go bankrupt after the ACCC successfully pursued him over a $25 a week fee increase.

It was recently found guilty in the Federal Court at Brisbane of unconscionable conduct for disconnecting franchisees who refused to pay its increased fees for access to its national telephone number.

Justice John Logan described the offending - where Seal-A-Fridge twice hiked fees by $25 a week - as a "unilateral profit gouge" and said the company had abused the position of strength it held over franchisees.

Mr Rooney, while admitting the offending, said much of it occurred outside the statute of limitations, and the ACCC argued it was in the public interest to take legal action.

That action should then have been as a test case where the watchdog funded the proceedings. Some of the ACCC's claims were discontinued before the trial started.

The ACCC had indicated costs in the order of $250,000, Mr Rooney said. His share of those costs would be about $150,000.

Seal-A-Fridge is a national franchise which replaces fridge and freezer seals. It has 34 franchisees nationally, including two in WA.

Mr Rooney claimed that it had been impossible to sell a franchise while legal proceedings were continuing, and that having to foot the costs bill was likely to bankrupt him, with little benefit to his franchisees. Just two had backed the court action.

Advertisement

"There's no winners here," he said.

"I wasn't required to pay any money back to franchisees. The brand is degraded. My franchisees will also lose, only the ACCC benefits."

He had represented himself at the trial, after being unable to afford a lawyer following two years of legal proceedings.

Justice Logan, in his costs ruling, said Mr Rooney provided no detailed evidence of his financial position.

ACCC spokeswoman Lin Enright said if Mr Rooney was truly concerned for his franchisees' viability, he should have provided that evidence of his financial position.

"Mr Rooney could have limited his costs exposure but chose not to," she said.

In the lead up to the trial, both sides were close to agreeing on the substantive aspects of the case, but were unable to agree on costs.

Mr Rooney did not provide any evidence which would allow the ACCC to assess his offer, that each party bear their own costs, was appropriate.

The trial was not a test case as all of the facts were in dispute. Justice Logan also found that public interest considerations did not necessarily make a proceeding a test case.

Justice Logan also found the ACCC had not unnecessarily protracted the legal proceedings, or prosecuted after the last offer by Mr Rooney, for the sole purpose of increasing costs.

The amount of the fee raise totalled $32,500 for 2001 - the first year of increases - alone, or $1300 a year for the term of franchisees' agreements, while the actual cost of the service was going down, Ms Enright said.

While "a small number" of victims were relied on in court, about half of Mr Rooney's franchisees had raised concerns between 2001 and 2007, pointing to "systematic problems" with the franchise.

Seal-A-Fridge was also found to have failed to include necessary information in its disclosure documents. Three years after the 2001 fee increase, it did the same thing again, but this time required franchisees to vary their agreements to provide for the increase.

Loading

Mr Rooney said he either "fixed up" all the issues, or franchisees sold out.

Apart from costs, Seal-A-Fridge is required to implement a proper complaints handling system for three years, with Mr Rooney to undergo Trade Practices Act compliance training.

Most Viewed in Business

Loading