Allphones rejects federal court criticism

EMBATTLED mobile phone retailer Allphones, which is under investigation by the competition regulator, has hit back at findings in the Federal Court that it engaged in ""calculated dishonesty"" and ""continuing deceit"" against its retailers.

The Australian
June 6, 2008

Allphones rejects federal court criticism

Mahesh Sharma and Michael Sainsbury

EMBATTLED mobile phone retailer Allphones, which is under investigation by the competition regulator, has hit back at findings in the Federal Court that it engaged in "calculated dishonesty" and "continuing deceit" against its retailers.

Allphones claims it is actually the victim in the whole saga.

The Federal Court found last Friday that Allphones withheld commission payments from its franchisees, and the court was especially critical of Allphones chief Matthew Donnellan, a one-time lawyer at mobile phone group Vodafone.

In an email obtained by The Australian, Mr Donnellan explained to staff that attempts to terminate the franchisees were merely aimed at protecting customers and the Allphones business.

Pressure is increasing on Allphones chairman Tony Mitchell, as the retailer is already under investigation by the Australian Competition and Consumer Commission for a range of alleged breaches of agreements with its franchisees.

Mr Mitchell, whose role in the operations of the company remains unclear, is a member of the Rudd Government's expert broadband panel.

The Australian understands that industry figures have urged Senator Conroy to stand him down from the panel

In a written judgment, Justice Steven Rares said Mr Donnellan knew that the true commission amounts were being concealed from franchisees.

"(Mr Donnellan) would also lack any understanding of contract law if he seriously thought that Allphones could avoid paying commission to franchisees … by relying on (a clause in the contract) as he asserted," Justice Rares wrote.

But Mr Donnellan said the action was necessary. "Had Allphones not acted, we may have jeopardised our whole franchise system with the cancellation of carrier agreements," Mr Donnellan wrote.

"Allphones has a zero tolerance policy on these matters and felt obliged to act in the interest of our franchisees and our carriers."

Allphones said it would consider its options.

Mr Donnellan conceded that Allphones had made a mistake by deducting various fees introduced in mid-2006, including a $150-per-month fee for IT services to franchisees and a $50-per-month fee for renting an eftpos machine.

A number of the deficiencies in Allphones' administration that were highlighted by the decision — from as far back as 2002 — have since been rectified.

The court case was launched by Sydney Allphones franchisee Hoy Mobile.


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Risks: Deceit, Retaliation, Honesty, Australian Competition and Consumer Commission, ACCC, Breach of contract, Termination of franchisee, mass, Sincerity, Excuse du jour, Hubris, Australia, 20080606 Allphones rejects

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