Franchisees Can’t Blame Everything on the Carbon Tax

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Franchisees Can’t Blame Everything on the Carbon Tax

The rising cost of utilities, other business expenses and the introduction of unpopular taxes is no excuse for businesses to incorrectly point the finger to these expenses as the reason for increasing product prices. In recent times, there have been examples of businesses doing just this and they have had to bear the wrath of the public, media and the consumer watchdog.

Brumby Bakeries

Brumby Bakeries decided to increase their prices and sent out an internal newsletter to franchisees advising them to put up their prices and “let the carbon tax take the blame”.

In a copy of the June 2012 edition of the newsletter, the former managing director of Brumby Bakeries Deane Priest said:

“We are doing an RRP review at present which is projected to be in line with CPI, but take an opportunity to make some moves in June and July, let the Carbon tax [sic] take the blame, after all your costs will be going up due to it.”

The comments in the newsletter instigated an investigation by the ACCC. At the time, the ACCC said it “would be concerned if any franchisor encouraged or induced its franchisees to make misleading price claims about the impact of the carbon price”.

As a result of the ACCC’s investigation and the public condemnation, Retail Food Group, owner of Brumby Bakeries took a number of prompt actions to redress any impact of the newsletter. This included writing to franchisees and outlining their legal obligations associated with price representations and the effect of the carbon tax and developing training for staff and franchisees regarding their legal obligations.

Retail Food Group cooperated with the ACCC and offered a court enforceable undertaking that neither Retail Food Group nor its subsidiaries, including Brumby Bakeries will engage in similar conduct in the future.

Genesis Fitness Club

GFC Berwick Pty Ltd trading as Genesis Fitness Club (“Genesis”) intended to increase its membership fees between 9% to 15% blaming the carbon tax. In April 2012 Genesis sent a letter to 2,122 of its members promoting a ‘RATE FREEZE’ offer, offering members a range of lengthy contract extensions at current or reduced membership rates so they could avoid having to pay the increased fees.

The ACCC was of the view that Genesis “did not have a reasonable basis” to claim that the carbon tax would increase the cost of gym memberships and were concerned that the false claims “may have encouraged” people to sign up for lengthy contract extensions they otherwise would not have signed.

As part of the resolution of this matter, all affected members were written to by Genesis Fitness Club offering them the opportunity to withdraw from the contract extensions at no cost.

Genesis also had to pay $6,600 as a result of an infringement notice issued by the ACCC.

These cases are a reminder that all businesses must not:

  • mislead or deceive consumers when advertising and selling goods or services and
  • incorrectly claim the increase in the sale price is the result of other factors when in fact it isn’t.

Our Corporate and Commercial Lawyers