Bakers Delight

The Australian Competition and Consumer Commission ("ACCC"] has finalised its investigation into the Bakers Delight franchise chain. The investigation was commenced to investigate complaints regarding unconscionable conduct allegations including churning (selling franchises destined to fail and then reselling them to other franchisees) and collusion with banks.

The ACCC has now announced that it does not consider that Bakers Delight has engaged in unconscionable conduct, nor misleading and deceptive conduct. The ACCC found that:

• the evidence available did not demonstrate unconscionable conduct;
• franchisee allegations were difficult to substantiate;
• Bakers Delight's actions to rectify situations regarding alleged misleading verbal representations were reasonable, or there were other causes of franchisee losses;
• there was no evidence of widespread or systematic compliance problems

The ACCC does not usually make comment on its investigations, however it has done so in this case due to the high level of publicity which has surrounded the allegations and the ACCC's investigation. This is a timely reminder that if there is actual or suspected conduct of a misleading, deceptive or unconscionable nature, Franchisors may face not only the inconvenience, cost and stress of an investigation, but also publicity and public scrutiny of the operation of the franchise system.

The ACCC noted that the relative "bargaining disadvantage" that franchisees face will lead to ACCC action where there is evidence supporting claims of unconscionable or misleading behaviour.  Franchisors must be mindful of the position of power they have in respect of bargaining and avoid abusing the power imbalance.

This article appears courtesy of Macpherson & Kelley Lawyers