Allphones may face class action suit

ALLPHONES faces a damaging backlash from its franchisee network and could be slapped with a class action suit, just over a week after it was found guilty of ""calculated dishonesty"" and ""continuing deceit"" against franchisees.

The Australian
June 7, 2008

Allphones may face class action suit

Mahesh Sharma

ALLPHONES faces a damaging backlash from its franchisee network and could be slapped with a class action suit, just over a week after it was found guilty of "calculated dishonesty" and "continuing deceit" against franchisees.

It could face a payout of tens of millions of dollars. The Weekend Australian has learned that last night about 30 franchisees met to discuss the possibility of bringing a class action suit against Allphones for withholding commission payments.

The retailer could be forced to pay out a lump sum of more than $11.25 million to its remaining retailer network, after the Federal Court last awarded Sydney Allphones franchisee Hoy Mobile $75,169 arising out of Allphones' conduct.

Allphones is already under investigation by the Australian Competition and Consumer Commission for a range of alleged breaches of agreements with its franchisees.

The ACCC has alleged Allphones has breached claims to its franchisees that it would share gross profits with them, operate its business as a partnership and work to maximise returns for itself and its franchisees.

Pressure is increasing on chairman Tony Mitchell, who could not be reached for comment last night.

Mr Mitchell is a member of the Rudd Government's expert broadband panel. The Weekend Australian understands industry figures have urged Broadband and Communications Minister Stephen Conroy to stand him down from the panel.

The retailer's CEO, Matthew Donnellan, and two other Allphones executives are also the subject of individual actions by the ACCC.

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

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

A directions hearing for the ACCC case has been set down for July 18.

Additional reporting: Michael Sainsbury


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