Shock move to hide RFG case
AUSTRALIA’S consumer watchdog is pushing for its high-profile case against publicly-listed franchisor Retail Food Group to be held behind closed doors.
In the wake of a damning parliamentary inquiry into franchise operators, the Australian Competition and Consumer Commission brought an unconscionable conduct case against RFG, which operates about 1000 franchise outlets across brands including Donut King, Gloria Jeans and Brumbys.
The case was due to start on Friday morning. Instead, the ACCC applied to the Federal Court for confidentiality orders that would keep the matter out of the public domain.
The commission alleges RFG breached Australian Consumer Law by engaging in false, misleading and deceptive conduct when it sold or licensed 42 loss-making corporate stores to incoming franchisees between 2015 and 2019.
The company’s conduct was a catalyst for a joint parliamentary inquiry which found RFG was at the centre of “systemic” exploitation of franchisees, enabled by legislation that was patently inadequate.
The inquiry recommended investigations by the ACCC as well as the Australian Securities and Investments Commission and the Australian Taxation Office.
ASIC has already decided not to take action, while it is understood the ATO is still investigating RFG’s tax position.
In its half-year results last week, RFG executive chairman Peter George described the ACCC case as “relatively narrow in scope and focus having regard to the broad nature of the ACCC’s 2.5 years investigation of the group”.
His director’s report said “the ACCC has not pursued several of the broad and serious allegations that were raised during the course of the investigation, including in relation to implementation of the Michel’s Patisserie ‘Fresh to Frozen’ model, the level of training and support provided to franchisees, and the competitiveness of the price of goods sourced on behalf of franchisees”.
The Bulletin asked the ACCC for its reasons to keep the case away from public scrutiny and whether it had narrowed the focus on RFG’s activities. It did not respond before deadline.
Mr George said he did not believe the application would make the entire proceeding confidential.
“The matter is before the court and is at an early stage of the process – we still don’t have a detailed statement of claim from the ACCC but after yesterday’s court ruling expect this in six weeks,” he said.
“RFG intends to defend the matter. There is nothing else to report at this stage.”
The action was to begin with a case management hearing via web conference and has been listed for a new case management on August 2.
As well as RFG Ltd, respondents include Brumbys Bakeries, Donut King, Michel’s Patisserie, RFGA Management and Jireh International Retail, which operates Gloria Jeans.
Maddison Johnstone, cofounder of franchisee advocacy group Franchise Redress, said franchisees deserved to have the matter addressed transparently.
“They want this action to be public. It’s important unscrupulous franchisors see that there are consequences for improper conduct,” she said. “Further, it’s important there is public scrutiny of regulator action.
“Unless the ACCC is pushing for this action to be held privately in the best interests of the victims, and perhaps detailing why, we strongly believe this should be open to the public.”
Ms Johnstone said it was not fair for RFG to dismiss the matter as one “from the past”.
“Speaking to franchisees, it’s clear that the way they were treated in the past has caused severe and life-changing consequences that impact them today,” she said.
The ACCC is seeking declarations, injunctions, pecuniary penalties, disclosure and adverse publicity orders, a compliance program order, redress orders and costs.
The Robina-based company reported statutory net profit of $3.86 million for the six months to December 31, down from $13.9 million from the same time last year.