Court orders penalties for misleading and deceptive conduct in the franchising industry

16 May 2016
The ACCC has recently concluded a major prosecution of people selling questionable franchises. The Federal Court has ordered a $3.55 million penalty against SensaSlim Australia Pty Ltd (in liquidation) (SensaSlim) for engaging in misleading and deceptive conduct and making false representations, following action by the ACCC. Mr Foster was ordered to pay $660,000, the maximum penalty for each of the contraventions.
The Court has banned Mr Foster for life from being involved with businesses promoting or supplying weight loss products or services, or being involved in any franchising business where his identity and involvement has not been disclosed in writing to prospective franchisees. The Court also permanently disqualified Mr Foster from managing corporations.
On April 9 2014, the Federal Court ruled that SensaSlim engaged in misleading and deceptive conduct by making false representations in its franchise disclosure document about Mr Foster’s involvement in the SensaSlim franchise system. SensaSlim Australia Pty Ltd (in liquidation) supplied an oral spray (the SensaSlim Solution) that was claimed to cause weight loss, and represented that the SensaSlim Solution was the subject of ‘a large worldwide clinical trial’ when it was not. The SensaSlim Solution was distributed through franchisees to be on-sold to consumers through retail outlets. Around 110 areas were sold to franchisees (area managers) for the cost of $59,950 each. SensaSlim earned approximately $6.4 million from the sale of these franchises.
For further information see the ACCC’s media release.
Misleading and deceptive conduct in the franchising sector continues to be a priority for the ACCC. If you are aware of potentially misleading franchise claims, contact the ACCC Infocentre.
Kind regards,
Small Business team
Australian Competition and Consumer Commission (ACCC)