ACCC backs franchisee action against Allphones

MOBILE phone retailer Allphones could be forced to pay millions of dollars in damages after the corporate watchdog agreed to represent more than 100 franchisees pursuing allegedly withheld commissions.

MOBILE phone retailer Allphones could be forced to pay millions of dollars in damages after the corporate watchdog agreed to represent more than 100 franchisees pursuing allegedly withheld commissions.

In the next couple of weeks the Australian Competition and Consumer Commission will meet franchisees across the country to discuss allegations Allphones Retail did not pay bonuses, rebates and compulsory charges. It is not clear when any action may begin.

Allphones has denied and contested the allegations.

The proposed class action will be based on similar grounds to the ongoing proceedings between the ACCC and Allphones Retail and key personnel -- chief executive Matthew Donnellan, chief operating officer Tony Baker and former national franchising manager Ian Harkin -- alleging the retailer breached franchise agreements.

The next directions discussions will take place on July 15.

The action does not include Allphones chairman Tony Mitchell, who was on the federal government's expert panel that advised dropping the original tender process to build a national broadband network.

In January, the ACCC won a court order banning Allphones from offering preferential treatment to franchisees that took up new agreements.

The ACCC alleged Allphones threatened to withhold stock from franchisees unless they signed a new agreement and agreed not to pursue legal action against Allphones for any past breaches of existing franchise agreements.

In a separate case last June, the Federal Court found Allphones acted with "calculated dishonesty" and "continuing deceit" by withholding commission payments from Sydney Allphones franchisee Hoy Mobile.

The court ordered Allphones to pay $75,169 to Hoy Mobile, but the Federal Court deducted $32,000 from the payout for fraudulent activities of Craig Hoy relating to the sale of unlocked mobile phones.

Allphones has appealed against this decision. Thecompany has about 150 stores nationwide, and it is understood this matter will next be dealt with by the court in mid-2009.

Allphones declined to comment on the prospect of ACCC class action or the appeal of the Hoy Mobile decision.

In the proposed class action led by the ACCC, Allphones could be forced to pay in excess of $7.5million if the court awarded damages similar to those in the Hoy Mobile case.

In an email seen by The Australian, the watchdog said it would assist a representative action against Allphones Retail Pty Ltd, Donnellan, Harkin and Baker on behalf of former and current Allphones franchisees.

"The application will only be made in respect of alleged franchisee losses flowing from bonuses, rebates and compulsory charges, which the ACCC alleges Allphones did not pay to, or deducted from, franchisees," an ACCC investigator wrote in the email.

The ACCC declined to comment on the class action.