Wesfarmers might be buying more than a chain of pharmacies, as Australian Pharmaceutical Industries faces a pending class action suit from current and former franchisees who claim excessive control and various breaches of regulations.
Wesfarmers may a $687 million all-cash bid on Monday for the company, an offer that has been labelled as “opportunistic” and “underwhelming” by investors.
Under pressure to up the offer, lest other investors make a higher bid, Wesfarmers might take this pending class action as a sign to cut and run.
Pharmacist Chris Lemon is the lead plaintiff in a pending class action against API, which controls a network of around 474 national Priceline Pharmacy stores.
Stewart Levitt, of Levitt Robinson Solicitors, is leading the class action, which is being funded “by a company associated with New York firm Galactic Litigation Partners.”
Levitt says at least 30 current or former franchisees are involved in the suit, which will be lodged in the Supreme Court of Victoria next month.
The class action will allege API charges unacceptable fees, including a 6 per cent cut of over-the-counter items sold, and a 3 per cent cut of loyalty card sales.
Priceline also allegedly withheld rebates for non compliance with mandated in-store displays, overcharged for product, and used POS systems to dump stock in stores.
“Our stock in the city store went from $500,000 to $1.02 million over the six-month period after API botched the integration of the new SAP system, which did not allow us to make any alterations to allocation orders for our health and beauty products for catalogue sales,” Lemon said.
An API spokesman said of the suit: “Apparently, it can only proceed if enough franchisees agree to a funding agreement.
“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.”
