Legal representatives say they wish to resolve the dispute at pre-trial mediation or arbitration if possible
Priceline is facing a potential class action in an ongoing dispute with franchisees who claim Priceline has exerted undue control over their pharmacies.
It is alleged that, in breach of the relevant legislation in Victoria, NSW and Queensland, the franchise agreements contain provisions that assert a level of control over franchisees, require franchisees to pay unfair fees, and provide one or more of the Priceline Companies with direct or indirect monetary or financial interest in the pharmacies.
While the Class action has not yet been commenced, all documents necessary to launch the action have reportedly been prepared and duly settled by the Hon Ron Merkel, QC, former Justice of the Federal Court of Australia.
Examples of Priceline’s alleged controlling provisions in the franchise agreements include requirements to stock the Merchandise Range, which is determined by Priceline; place orders through the Auto-Replenishment system; only order through API; and price items as determined by Priceline.
Soon-to-be lead applicants, Chris and Jenny Lemon, had bought into two Priceline pharmacies – one in Sydney’s Central Park and one in Manly – and currently own an independent pharmacy in Frenchs Forest, Sydney.
“As an owner of multiple pharmacies … I was able to see firsthand the difference in the in-store pricing available to me. When I went into Priceline, I expected that the buying at Priceline would significantly better than my independent store, which is with Pharmacy Alliance. But that wasn’t the case at all, in fact the terms were worse,” said Mr Lemon.
Mr Lemon highlighted issues with Priceline’s auto-replenishment system.
“What we noticed was we were getting too much stock of the slow sellers and not enough stock of the fast sellers,” said Mr Lemon. “If you miss two sales to one customer on a line that you’re expected to have, you miss that customer, they’re gone.”
He also alleges that on numerous occasions, API promised and withheld rebates to his businesses.
AJP understands that Mr and Ms Lemon no longer own the Priceline pharmacies.
Stewart Levitt, the Senior Partner at Levitt Robinson Solicitors, said the action will be directed at obtaining compensation for franchisees’ past losses.
This includes recovering damages for the loss of opportunities to acquire stock from API’s competitor at a better price, and/or to obtain rebates from alternative suppliers.
The action also aims to “add value to franchisees’ sizable investment in Priceline through a new, mutually beneficial and legally compliant franchise agreement”.
“Levitt Robinson understands that many Priceline franchisees do not wish ‘to rock the boat’ through litigation, which is why we are committed to take all genuine steps to resolve the dispute at pre-trial mediation and/or arbitration,” Mr Levitt told AJP.
“The ‘boat is already rocking’: State regulators are already investigating the level of control Priceline exerts on franchisees through the Franchise Agreement and, as a corollary, any contraventions of legislation designed to protect the integrity of the pharmacy profession,” he said.
Mr Levitt added that he has spoken to a number of franchisees whose companies have gone into administration or liquidation or they’ve been bankrupted, alleging that Priceline’s system of replenishment led these franchisees into serious debt.
Priceline pointed out that, as of today, there is still no class action against Priceline Pharmacy.
“Apparently, it can only proceed if enough franchisees agree to a funding agreement. We understand the lead applicant in the proposed action is a former Priceline franchisee who is no longer with the brand,” Andrew Vidler, GM Priceline Pharmacy told AJP.
“Priceline remains focused on supporting our franchisees through these difficult times and doing our utmost to help ensure that they can fully play their role in the distribution of COVID-19 vaccinations. We will protect the brand and business we have built together. We have no further comment to make on this matter,” he said.
This story was edited at 10am on 4 March to provide comment from Priceline and add further detail.