ACCC alleges Ultra Tune breached franchising code of conduct

Vehicle servicing business Ultra Tune is being accused of contempt of court by the Australian Competition and Consumer Commission (ACCC) over alleged breaches of the Franchising Code of Conduct.

It's alleged Ultra Tune breached court orders by contravening parts of the Franchising Code, as well as failing to comply with the requirements of a court-ordered compliance program.

The latest legal drama comes off the back of a Federal Court ruling in 2019, which found Ultra Tune had breached Australian Consumer Law and the Franchising Code by providing "no meaningful information" in its marketing fund statements to franchisees.

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This subsequently meant Ultra Tune was required to provide disclosure documents and marketing fund statements to franchisees in compliance with the Franchising Code, in addition to a having to pay penalties totalling $2.014 million (reduced from $2.6m on appeal).

Fast forward to 2022 and the ACCC now alleges that, between 2019 and 2021, Ultra Tune's disclosure document was not updated in time, nor did it prepare two marketing fund statements within the timeframe required by the Franchising Code.

For the 2019 and 2020 financial years, Ultra Tune allegedly failed to prepare marketing fund statements and audit reports until after the date on which the Franchising Code required it to do so, in addition to being late to update its disclosure document in 2020.

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Ultra Tune landed itself in hot water back in 2016 with the most complained about TV ad of the year

With more than 270 service centres throughout Australia, the ACCC believes a lack of transparency on how marketing funds raised by the franchisees are spent by Ultra Tune is a major concern.

“We allege that Ultra Tune disregarded its obligations under the Franchising Code, which are designed to provide transparency to franchisees,” said ACCC Commissioner, Liza Carver.

“In particular, we allege that Ultra Tune repeatedly failed to prepare important documents for franchisees within the required timeframe, which meant they were denied the opportunity to see, in a timely manner, how their contributions to the marketing fund were being used by Ultra Tune.

“The alleged failure by Ultra Tune to update its disclosure document is also concerning, as this document is used to give prospective franchisees key information about the franchise system, and existing franchisees current information about the running of the franchise.”

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In the 2019 ruling, the Federal Court ordered Ultra Tune to implement a compliance program to ensure there were no further breaches of the Franchising Code or the ACL.

The ACCC alleges Ultra Tune failed to ensure its compliance officer provided quarterly reports on the continuing effectiveness of its compliance program to the company, occuring for the three quarters of 2021 between April and December.

“Given Ultra Tune’s previous breaches of the Franchising Code and the consumer law, ongoing monitoring of compliance is important,” added Carver.

“The ACCC will pursue contempt of court action when it considers court orders, including those obtained for the protection of franchisees, have been breached.”

Wheels has contacted Ultra Tune for a response.