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ACCC highlights Luxottica transparency concerns

11/09/2018By Matthew Woodley
An Australian Competition and Consumer Commission (ACCC) investigation has found that Luxottica has likely not been complying with the ethical watchdog’s Franchising Code of Conduct.

The investigation related to transparency issues surrounding marketing information given to OPSM and Laubman & Pank franchisees. According to a statement released by the ACCC, Luxottica hadn’t been providing sufficient detail in marketing fund statements.

Under the Franchising Code, franchisors must prepare an annual financial statement detailing the marketing fund’s receipts and expenses, including who contributes to the fund and what the money is spent on. However, the statement provided to franchisees didn’t say how much money the Luxottica associate that operated the corporate stores paid for marketing, or what marketing services were purchased using money contributed by company-owned stores.

ACCC deputy chair Mr Mick Keogh.
“People can spend significant amounts of money buying into a franchise or renewing a contract, so it’s only fair they know the exact details of how the system works.”
Mick Keogh, ACCC

Additionally, according to the ACCC the statement did not disclose enough specifics about marketing expenses, such as brands the marketing funds were being spent on (OPSM or Laubman & Pank), or the locations where advertising was to be run.

“Marketing fund contributions allow a franchisor to promote and improve their brands. The money franchisees are required to pay towards the marketing fund can be significant, so it’s very important franchisors are clear and transparent with franchisees about how the money is spent,” ACCC deputy chair Mr Mick Keogh said.

The ACCC added that Luxottica’s disclosure document was also unlikely to comply with the code, as it did not identify the Luxottica associate that operated the corporate stores, or that they managed the marketing for all corporate-owned and franchised stores.

“Disclosure documents are a vital piece of information franchisors are required to provide their current and prospective franchisees to help them make informed decisions about whether they will buy into the franchise or renew their existing agreement,” Keogh said.

“It’s important this document gives an open and transparent assessment of how the franchise works. People can spend significant amounts of money buying into a franchise or renewing a contract, so it’s only fair they know the exact details of how the system works.”

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As a result of the investigation, Luxottica has voluntarily committed to changing the documents to give franchisees a more open and transparent account of the business.

“Following the ACCC’s concern that Luxottica should provide more meaningful disclosure regarding monetary contributions made to marketing the optometry businesses, and marketing and administrative expenses in its marketing statement, we are happy to include some additional details in our statement going forward,” a Luxottica spokesperson said.

“Luxottica Franchising is committed to franchise code compliance, including its marketing disclosure obligations and co-operated with the ACCC relating to its concerns. We trust these clarifications and disclosures will make our marketing statement more meaningful for our franchisees.”

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