Franchisor wins injunction to stop firms making false claims

A franchise company has been granted an injunction to stop two of its former franchisees damaging its business by making false claims to customers.

The case involved a company that manufactured and sold postal franking machines, which were distributed in the UK through franchisees. In July 2014, its contracts with two franchisees were terminated following disagreements.

The following October, the company discovered that the two franchisees had emailed customers saying that they urgently needed to renew their franking machine licences.

The company began legal proceedings on the basis that the email contained 26 misleading false statements. It believed that the reason for the emails was to give customers the false impression that they needed to switch to a different franking machine supplier.

It accepted that this could lead to a court case and so in the meantime, it sought an interim injunction restraining the franchisees from making any more false claims.

The court held that there was obviously a serious matter to be tried in due course, and it was extremely likely that the company could suffer serious loss as a result of the emails before the case could be heard.

It was also likely that, if the company were to win, it would be difficult to assess damages because it would be impossible to tell which customers it had lost as a result of the emails and which it lost for other reasons.

The court therefore granted an interim injunction preventing the franchisees making more false statements. They were also ordered to identify which customers had already received emails so the company could contact them and reassure them there was no need to change suppliers.

Please contact Neil O’Callaghan if you would like more information about the issues raised in this article or any aspect of protecting your business interests.