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AUS: Franchisees Awarded Over $400,000 In Case

Franchisees Awarded Over $400,000 In Snack Food Case

Release from ACCC

The Federal Court yesterday ordered the payment of more than $400,000 to four couples and one individual, all franchisees of Top Snack Foods Pty Ltd, after Australian Competition and Consumer Commission action. The Court also ordered that Top Snack Foods pay the ACCC's costs.

Justice Tamberlin in his judgment handed down on 4 June 1999 found that Top Snack Foods Pty Ltd, the franchisor, had engaged in misleading and deceptive conduct in breach of sections 52 and 59 of the Trade Practices Act

1974. He also found that George Manera, a director and manager, of Top Snack Foods, and Nick Kritharas, General Manager, were knowingly concerned in breaches of the Act.

"The ACCC initiated a representative action on behalf of the franchisees alleging that Top Snack Foods, George Manera and Nick Kritharas engaged in misleading or deceptive conduct," ACCC Chairman, Professor Allan Fels, said today

"Many small businesses are based on franchises. Those considering entering franchises must be confident that they have received correct information to allow them to make their decision."

The Court found that Top Snack Foods, in the course of selling or granting licences or rights for the distribution of products and in the course of conducting its business of distributing products, contravened sections 52 and 59 of the Trade Practices Act by:

(i) engaging in conduct that was, in all the circumstances, misleading or deceptive or likely to mislead or deceive;

(ii) making representations that were false or misleading in a material particular concerning the profitability of a business activity that the Top Snack Foods had represented could be carried on at or from the residences of members of the public; and

(iii) inviting, by advertisement and representations, members of the public to engage in the business of distribution for Top Snack Foods by becoming distribution agents of Top Snack Foods, requiring of such persons the performance of work, and making representations with respect to the profitability of such business and the work required to perform such business that were false and misleading in a material particular;

The Court found that George Manera and Nick Kritharis were knowingly concerned in the conduct and ordered that both George Manera and Nick Krithasis be restrained from being knowingly concerned in the conduct of a corporation, in the course of selling or granting licences or rights for the distribution of products or in the course of conducting any business of distributing products, publishing, broadcasting or otherwise making a representation concerning

(i) expected gross or net profit for work to be done or carried out by, and for goods sold by, distribution agents;

(ii) the extent of work required of distribution agents to produce the profits referred to in sub-paragraph (a) above;

(iii) the extent of work, in the nature of distributing and selling products, which could be performed by distribution agents in any specified period;

(iv) the existence and identity of genuine and established sale outlets for products to be sold pursuant to any licence granted;

(v) the previous sale or grant of a licence or right for the geographic area specified in a licence proposed to be sold or granted to an incoming licensee; or

1.expected losses or outgoings from the gross profit for work to be done or carried out by, and for goods sold by, distribution agents ;

that is untrue or which they respectively have no reasonable grounds to believe is true.

Justice Tamberlin stated in his judgment that it was an important consideration that these proceedings were initiated by the ACCC not simply for the benefit of private interests but in vindication of the public interest.

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