The Federal Court has declared Mailpost founder Peter Kritas and the NSW master franchisor Mailpost Postie Network Pty Ltd (MPNS) guilty of breaching the Franchising Code of Conduct by misleading Mailpost franchisees.
Legal proceedings initiated in December 2009 by the Australian Competition and Consumer Commission were halted when Mailpost Australia Ltd (MPA) was put into liquidation in February 2010.
Following the ACCC’s action, the Federal Court has declared by consent that MPNS failed to provide and obtain all necessary franchising documentation to/from prospective Mailpost franchisees, as required under the Franchising Code, with Peter Kritas’ knowledge.
It also found that Kritas knew of MPA’s deceptive conduct and false claims that the Mailpost business included iMailPost and Thunderprint as franchisee revenue streams; that the Mailpost business was not a franchise and therefore franchisees did not have any rights under the Franchising Code; that the Mailpost business, a print and distribution business for unaddressed promotional mail, was “recession proof” and was “probably the fastest growing franchise type operation in the whole world”; and in relation to prospective franchisee income.
The court has ordered injunctions restraining Kritas and MPNS from future breaches of the Act, and instructed they provide copies of the court’s orders and reasons for judgment to all Mailpost franchisees and undertake trade practices compliance training.
Kritas was also ordered to pay a contribution to the ACCC’s costs of the proceedings.
ACCC chairman Graeme Samuel said this outcome is a reminder to all franchise operators of the importance of compliance with the requirements of the Franchising Code.
“The ACCC will not hesitate to take court action against franchisors and associated individuals that use misleading statements when attempting to recruit new franchisees to a franchise operation.”
The Franchising Code of Conduct, which was introduced in 1998, is a prescribed industry code under the Trade Practices Act 1974. Failure to comply with the code amounts to a contravention of section 51AD of the Act.