The Australian Competition and Consumer Commission (ACCC) has launched legal proceedings against JUMP! Swim Schools franchisor Jump Loops Pty Ltd and its parent company Swim Loops Holdings Pty Ltd.
The ACCC is alleging that the franchisor made false, misleading or deceptive statements about franchises, contravening a breach of the Australian Consumer Law (ACL).
The announcement comes just days after the Federal Court declared that there was sufficient evidence to warrant further proceedings.
“I am satisfied that the evidence shows that there is at least a serious question to be tried whether the conduct of Jump Loops and Swim Loops Holdings amounts to contraventions of subsection 18 and 29(1)(g) of the ACL,” Justice O’Bryan told the court last week.
The Federal Court decision required the ACCC to start a proceeding within 14 days of the order. On Tuesday, the watchdog made its intentions clear.
JUMP! Swim Schools franchisor representations
According to the ACCC, the JUMP! Swim Schools franchisor breached the ACL in relation to representations made in its promotional material.
The material suggests a franchisee would have an operational swim school within 12 months of signing the franchise agreement, a statement JUMP! had no grounds for making, the ACCC said.
The last few months have been particularly damaging for the JUMP! Swim School brand, with several high-profile stories coming to light. Reports indicate that there are over 90 franchisees who did not receive an operational swim school within the 12-month timeframe, or at all.
Mick Keogh, ACCC deputy chair said that franchisors need to respect the commitment and financial risk prospective franchisees undertake in signing on to a system. The initial cost of setting up a JUMP! Swim School generally ranges from $150,000 to $175,000.
“Franchisors need to take their obligations under the Australian Consumer Law seriously. Purchasing a franchise is a big decision, and people looking to open a franchise business rely on the information from the franchisor being accurate,” Keogh said.
“We allege this conduct caused substantial harm to franchisees who paid significant sums but did not receive an operational swim school within the time specified, or at all.”
JUMP! founder under fire
The corporate entities aren’t the only ones facing legal action, however. The ACCC revealed that it is also lodging proceedings against JUMP! founder and managing director, Ian Campbell.
According to court documents, Campbell is alleged to have handed down ‘final authorisation and participating in preparing and distributing’ the promotional material in questions.
The founder, along with JUMP! Swim Schools franchisor, Jump Loops Pty Ltd and Swim Loops Holdings Pty Ltd is alleged to have wrongfully accepted payments from franchisees where it failed to supply an operational franchise within a reasonable time.
“Jump Swim continued to accept payments when it knew, or ought to have known at the time it accepted the payments, that the timing for its delivery of operational franchises was dependent on events that were outside its control,” Keogh said.
In previous reports, JUMP! and Ian Campbell maintained that the delays were subject to development and building approvals. However, the ACCC suggests at the time Jump Loops accepted the payments, there were reasonable grounds for believing it would not be able to provide the franchises in the relevant timeframe.
“At all relevant times, Jump Loops was aware, or ought reasonably to have been aware of the absence of those grounds,” the court documents state.
As a result of the action, the ACCC is seeking injunctions, declarations, pecuniary penalties, redress for franchisees, disqualification orders, an order as to findings of fact, and costs.