Dead men walking as competition watchdog turns a blind eye

De Leeuw is flabbergasted, as are many franchisees who have learnt that there is no safety in numbers before the ACCC. "I know the quality of the evidence that we personally gave the ACCC," she says. "I know that over 20 complainants from around Australia who have never met and yet have experienced the same treatment that has resulted in everyone losing everything they owned."

http://www.theaustralian.com.au
June 17, 2008

Dead men walking as competition watchdog turns a blind eye
Peter Switzer

AS the franchise industry fights in the High Court to ensure its agreements are not rendered null and void, disputes in well-known franchise systems underline simmering problems in the industry.

One franchisee thinks his Bank of Queensland colleagues are dead men walking.

Another, from the Bakers Delight group, who thought the Australian Competition and Consumer Commission erred in their investigation, was told that her request for all relevant information under Freedom of Information was to be denied because of the cost to the ACCC.

Many reasonable thinking Australians might conclude that someone in the ACCC has taken insensitivity and hubris to a new, obnoxious level.

People who have lost a decision made by the commission, and who next could lose their home, should be entitled to see why they have lost out.

Leicester Ramsey, a former owner manager of the Bank of Queensland branch at Campbelltown, is the man who thinks the owner-manager network of the bank's NSW branches are "dead men walking".

"I regularly receive phone calls from existing owner managers who say they are going broke financially and suffering stress owning a Bank of Queensland branch while the bank announces record profits," he says.

Ramsey says some franchisees have said that the bank has funded further loans to keep them afloat, which in normal circumstances they would not be able to borrow because they would be considered insolvent.

"One owner manager said he had need to sell his investment property, had no equity left in his house and now had a debt of $80,000 on his credit cards."

Ramsey has taken legal action in the Federal Court alleging misrepresentations and unconscionable conduct under the Trade Practices Act.

"The bank had said $4 million in loans a month was achievable and these figures were reported to the ASX," he says.

"With all my efforts I was not able to achieve $4 million a month and the majority of owner managers have consistently been unable to achieve that figure and, because of this, the branches are financially unviable."

Ramsey nominates nine branches in NSW where the owner managers said they could not make it work. In an ironic twist, someone like Ramsay, who went into franchising to give people loans to buy their dream homes, looks set to lose his.

He will be in court later this month seeking an historic injunction to stop the bank from selling his home, arguing that he would not be in his current financial position but for the bank's actions.

The outcome of this case will hold a lot of interest for other franchisees in dispute and fearing that they might lose their homes.

Deanne de Leeuw is a franchisee who has asked for help following a rejection from the ACCC after the body cleared Bakers Delight of unconscionable conduct. De Leeuw can't even access the information on the case through the Freedom of Information Act because the commission says it would be too costly.

"This decision has again highlighted fundamental problems within the ACCC, and I would question their investigators understanding of the Trade Practices Act," she says.

"It appears that the ACCC has conducted a 'he-said, she-said' investigation, and once again the highly paid lawyers of the franchisor have managed to make the issue contractual, rather than looking at the conduct."

The commission's view is substantially different.

"Having conducted an in-depth investigation, including analysing a large amount of documentary evidence and conducting a number of detailed interviews with various witnesses, the ACCC has decided not to take any further action," it reports.

It concludes that Bakers Delight did not engage in unconscionable conduct or breach the franchising code.

Claims made by franchisees were sometimes unsubstantiated and even contradictory with the evidence, it says.

"It should not be assumed that where there is smoke there is always fire," ACCC chairman Graeme Samuel says.

"The ACCC is experienced in testing matters raised with it and often its investigations lead it to the conclusion that those matters cannot be substantiated."

De Leeuw is flabbergasted, as are many franchisees who have learnt that there is no safety in numbers before the ACCC. "I know the quality of the evidence that we personally gave the ACCC," she says.

"I know that over 20 complainants from around Australia who have never met and yet have experienced the same treatment that has resulted in everyone losing everything they owned."

She thinks the reasons given by the ACCC as to why they would not proceed any further were couched in "contract" speak.

Samuel and his team aren't heartless bastards but they have to be able to see that if they run a legal case, there is a good chance the ACCC will win. A new resolution system, like the consumer and building disputes tribunals, which excludes the lawyers, is needed. And a franchise ombudsman is needed to identify the bad franchisors and the hopeless, whingeing franchisees, but politicians don't give a toss.

I don't know if the Bank of Queensland or Bakers Delight have cases to answer, and they are innocent until proved otherwise, but I do believe where there is smoke there is fire.

Maybe franchisees need a compulsory education program before they jump into franchising.

Whatever it is, someone in the federal Government, such as Small Business Minister Craig Emerson, should show some interest in small business owners who are losing their homes.

Peter Switzer is a founding director of Switzer Business Coaching, www.switzer.com.au

http://www.theaustralian.com.au/business/opinion/competition-watchdog-turns-blind-eye/story-e6frg9lf-1111116652313


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