In a Federal Court hearing on 8 April Justice Yates found weight loss franchise SensaSlim engaged in misleading or deceptive conduct on multiple counts. 

In his analysis of the case, which was presented to the court by the Australian Competition and Consumer Commission (ACCC), Justice Yates found SensaSlim’s franchise disclosure document failed to divulge information about Peter Foster’s involvement in its franchise system.  

The ACCC’s deputy chairman, Dr Schaper said it was vital franchisees be made aware of Foster’s involvement in the business from the start given his prior convictions.

“The disclosure of Mr Foster as an officer of SensaSlim would have been particularly important to any potential franchisee, given the court orders which prevented Mr Foster from being knowingly concerned in the promotion or conduct of any business relating to weight loss, cosmetic or health industry products or services.”

The court also found SensaSlim engaged in misleading or deceptive conduct regarding:

• The false representation of the roles of SensaSlim’s officers, particularly Peter O’Brien, who was claimed to be the company’s operations director, and Michael Boyle who was said to be a director of the company.
• Claims that the SensaSlim solution, an oral spray, caused weight loss and was subject to a ‘worldwide clinical trial’ to prove its effectiveness.
• The earning potential of SensaSlim franchisees – the company claimed it already had franchisees who were profiting from the business, and that the franchises had a certain earning potential.

In his judgment, Justice Yates described Foster as the “puppeteer” behind the SensaSlim business, and he found O’Brien and Boyle were also knowingly involved in its contraventions. 

“Mr Foster controlled and directed, in an executive capacity, the way in which the SensaSlim business was carried on,” he said.

“The failure to disclose Mr Foster in the Disclosure Document was deliberate”.

Dr Schaper said it’s particularly important misleading representations of this nature come to fore as its effects are all encompassing.

“Misleading representations about important aspects of a business opportunity such as the efficacy of the products and earning potential can cause significant harm to both small business investors and consumers.

“People who decide to buy into a franchise system typically put much of their own savings on the line, and they must be able to make informed business decisions on the basis of full and accurate disclosures by the franchisor.”

The SensaSlim franchise system operated on a distribution model – franchisees would distribute the oral spray to retail outlets who on-sold it to consumers.

Around 110 areas were sold to franchisees or ‘area managers’ for $59,950 each, earning SensaSlim approximately $6.4 million.

There will be a separate hearing to determine the sentence to be handed down. The ACCC is seeking declarations, injunctions, penalties, compensation orders, disqualification orders and costs.