The franchisor Jump Loops Pty Ltd (in liquidation) (Jump Swim) has been ordered to pay penalties of $23 million for making false or misleading representations and wrongly accepting payments from franchisees, in proceedings brought by the ACCC.
Jump Swim offered 'Jump Swim' branded learn-to-swim school franchises for sale between March 2016 and July 2019.
The Federal Court declared, by consent, that Jump Swim falsely represented to 174 franchisees that they would have an operational swim school within 12 months of signing a franchise agreement. Most of those franchisees never received an operational swim school.
It also declared, by consent, that Jump Swim accepted payments from 127 franchisees when Jump Swim knew, or ought to have known, that there was no reasonable basis for believing that they would be able to supply the franchisee within 12 months, or within a reasonable period of time.
The founder and former managing director of Jump Swim, Ian Michael Campbell, was also ordered by the Court to pay $500,000 in compensation to franchisees, and to pay a penalty of $400,000.
The Court also made orders, by consent, restraining Mr Campbell from being involved in carrying on a business as or of a franchisor in Australia for three years and from making representations about timeframes or wrongly accepting payment relating to a franchise for a period of 5 years.
The Court made these orders against Mr Campbell after finding he had been knowingly concerned in Jump Swim's contraventions, being the false and misleading representations made to franchisees who had signed up to operate a swim school, and wrongful acceptance of payments from franchisees.
"We took this action to help franchisees achieve some compensation and to seek orders preventing Mr Campbell and Jump Swim from signing up further franchisees to Jump Swim or another future franchise," ACCC Deputy Chair Mick Keogh said.
"Mr Campbell has been ordered not to be involved in a franchise for three years. Unfortunately, because the companies have been put into liquidation, many franchisees are unlikely to be ever fully compensated for their loss, and the corporate penalties are unlikely to be paid. However, we consider the penalties ordered by the Court send a strong deterrence message."
Additionally, the compensation order made against Mr Campbell means that 131 franchisees will be eligible for some partial compensation for the loss they suffered.
"Unfortunately despite the ACCC seeking freezing orders shortly after becoming aware of the conduct, the money paid by franchisees had already been largely dissipated," Mr Keogh said.
The ACCC will attempt to contact all qualifying franchisees at their last known mail or email address, through the Australian Government Solicitor. Franchisees are not obliged to participate in the compensation scheme.
Mr Campbell made admissions and agreed to make joint submissions with the ACCC in relation to the penalty, compensation and other orders sought against him.
Background
Jump Loops Pty Ltd was an Australian-based franchisor that sold franchises to those wishing to operate their own Jump Swim School to supply learn-to-swim services.
On 17 June 2019, the ACCC instituted court proceedings against Jump Loops Pty Ltd and its parent company Swim Loops Holdings Pty Ltd, and its director, Mr Ian Michael Campbell.
On 7 June 2019, the ACCC obtained a Federal Court order freezing the assets of the companies associated with Jump Swim Schools and Mr Campbell to ensure some assets remained available to compensate franchisees.
In July 2019, the Court separately ordered that Jump Loops Pty Ltd and Swim Loops Holdings Pty Ltd be wound up as insolvent and liquidated.
On 21 December 2020, the ACCC discontinued proceedings against Swim Loops Holdings (in liquidation) with the leave of the court, to enable a swifter resolution of the enforcement proceedings against Jump Swim and Mr Campbell.
