Franchise Law: Examining CarTune Australia's Business Practices

This case study examines the business practices of CarTune Australia, focusing on a dispute with Phillip-performance World regarding a software lockout code. The analysis questions the legitimacy of CarTune Australia's actions, particularly the non-disclosure of the code, under the lens of business ethics and franchise code of conduct. It assesses whether the non-disclosure constitutes fraud and violates the Trade Practices (Franchising-Codes) Regulations 1998 (Cth), referencing relevant cases like Civic Video Pty Ltd v Paterson and Guirguis Pty Ltd & Anor v Michel’s Patisserie System Pty Ltd & Ors to support its arguments. The study concludes that CarTune Australia likely breached the franchise code of conduct by failing to act in good faith and provide necessary information to the franchisee.

BUSINESS LAW
Name of the Student
Name of the University

Was the action of CarTune Australia a legitimate business
practice
 The Software package delivered to Phillip-performance world
required a lock-out code.
 The code was not provided to them by CarTune Australia.
 The code was activated after the payment of first year term being
made.
 The software locked out and Phillip-performance World was unable
to use it.

Legitimate Business Practice
Includes oppressive act, fraud or misrepresentation.
A deceptive or unethical method, used for the business should be
illegitimate.
No deceptive way should be used in business practice that does not
disclose the details to the other party.
Franchise has the right to have full access to a product received from
franchise.

Fraud by Franchisee
It was the duty of CarTunes Australia to disclose to code to the
franchisee.
Philip-performance world was entitled to the code.
Non-disclosure of lock-out code to Phillip-performance world, could
be considered as fraud.
It goes against the business ethics.
This is inot a legitimate business practice.

Is there a franchise code of conduct that
might apply here
CarTune Australia did not provide the lock-out code to
Phillip Performance-World.
CarTune Australia was obliged to disclose the code to Phillip
Performance-World under the franchise.
A franchise code of conduct can be applied in this case.
As per the facts of the case, CarTune Australia had
contravened the franchise code of conduct.

Franchise code of conduct
The Trade Practises (Franchising-Codes) Regulations
1998 (Cth) mandates the Franchising Code of Conduct
as an industry code.
The Trade Practices Act 1974 requires a corporation
to not to contravene any industry code which is
applicable.
The regulation can prescribe an industry code for the
purpose of this Part.

Franchise Code of Conduct
In this case Franchise Code of Conduct can be applied.
The code aims to regulate the conduct of the franchise participants
towards the other participant.
The franchisor is required under this code to help the franchisee the
correct information about the franchise business.
Section 6 obliges parties to act in good faith (Legislation.gov.au. 2014).
ACCC can enforce the code conduct if required.

Relevant cases
Civic Video Case:
• Franchisee code of conduct can be enforced.
• Failure to comply can lead to serious consequences.
Guirguis and Michel’s Pattisserie Case:
• Breach of franchise agreement
• Franchising agreement should be accurate.

Application
CarTune Australia did not disclose the pertinent information about
the franchise business.
As per Part 2 of the Code, CarTune Australia was required to create a
disclosure document.
They did not act in good faith.
Non-disclosure can be seemed as a violation of this code.
This is a breach of franchise coder of conduct.

References
Civic Video Pty Ltd v Paterson [2014] WASC 321
Guirguis Pty Ltd & Anor v Michel’s Patisserie System Pty Ltd & Ors [2017]
QCA 83
Legislation.gov.au. (2014). [online] Available at:
https://www.legislation.gov.au/Details/F2017C00182 [Accessed 16 Oct.
2018].
The Trade Practices Act 1974
The Trade Practises (Franchising-Codes) Regulations 1998 (Cth)