A swim school franchisor has been ordered to pay a $23 million fine after it falsely told franchisees they would have an operational swim school within a year of signing up.
But because it's in liquidation, it's unlikely to be able to pay up.
The penalty was imposed by the Federal Court on Wednesday in a lawsuit launched by the Australian Competition and Consumer Commission.
Jump Loops, the company that franchised Jump! Swim schools, told 174 franchisees that they would have an operational swim school within 12 months of signing a franchise agreement.
"12 month turnaround from sign-on to open," the brochure read.
It said that in exchange for between $150,000 and $175,000 it would hand over a swim school premises, fitout, training and associated rights.
That was wrong, it would later admit to the court.
It took franchisees' money between 2016 and 2019 knowing that there was no reasonable basis to believe they would get what they were paying for.
At least 152 of the 174 franchisees never ended up with a swim school.
Only 21 got any kind of refund.
All up, Jump Loops got $24 million in payments. Less than $1 million was refunded.
Jump! Swim's founder, Ian Campbell, now has to pay $500,000 in compensation to franchisees on top of a $400,000 fine.
"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.
The ACCC says many franchisees are unlikely to ever be fully compensated for their loss because Jump Loops and related companies are now in liquidation.
What's more, the corporate penalties are "unlikely" to be paid, Mr Keogh admits.
"However, we consider the penalties ordered by the Court send a strong deterrence message."
Most of the money the franchisees had paid over had already been spent by the time the ACCC got freezing orders from the court.
But franchisees should be able to claw back some money from Mr Campbell.
