A founder franchise who claimed his business was “recession proof” and “probably the fastest growing franchise type operation in the whole world” has been found to have engaged in misleading and deceptive conduct by the Federal Court.
The ACCC launched legal action against Mailpost Australia founder Peter Kritas and NSW master franchisor, Mailpost Postie Network, after allegations the company had misled and deceived MailPost franchisees.
The case against Mailpost Australia, a print and distribution business for unaddressed promotional mail that was set up by Kritas, was discontinued after the company was placed in liquidation in February.
But the Federal Court found Kritas and Mailpost Postie Network (MPN) breached several sections of the Trade Practices Act.
As well as failing to provide and obtain all the documentation necessary under the Franchising Code of Conduct, Kritas and MPN were found to have made a number of false representations to franchisees and prospective franchisees.
This included claims about sales potential of products and services that never existed, claims about the income franchisees could earn and claims that the business wasn’t actually a franchise and so did not enjoy the protections under 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,” ACCC chairman Graeme Samuel said in a statement.
Kritas and MPNS were ordered to provide copies of the court’s orders and reasons for judgment to all Mailpost franchisees and were hit with injunctions preventing them from engaging in future breaches of the Trade Practices Act.
Kritas was also ordered to pay a contribution to the ACCC’s costs.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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