Court grants declarations and injunctions against Meriton for breaches of the Trade Practices Act

The Federal Court of Australia today granted declarations against Meriton Apartments Pty Ltd that it breached the misleading and deceptive conduct provisions of the Trade Practices Act 1974. It also granted injunctions against Meriton.

"The breaches committed by Meriton related to representations made by Meriton in February 2000 in The Sydney Morning Herald about the value of apartments in the Sydney CBD", ACCC Chairman, Professor Allan Fels, said today. "The advertisement stated that the apartments would be 'GST free'. It then stated that there would be an instant 10 per cent increase in value by July 2000.

"The Court injunctions restrain Meriton from making representations in the future to the effect that:

• the price of residential property will increase by 10% by July 2000 from the value of the property at the date the agreement to purchase is signed, because of the GST;
• a GST of 10% will be levied on property after 1 July 2000 in circumstances where it is possible that the effect of the New Tax System will be an increase of less than 10%; and
• the introduction of the GST will lead to an increase in the value of property of 10%, allowing owners of a similar property to increase sale prices by 10%.

The Court also granted a mandatory injunction requiring Meriton to conduct a comprehensive trade practices compliance program as set out as part of the Court's order. Meriton was ordered to pay the ACCC's costs of the proceedings. All of the Orders were made by consent from Meriton.

"The ACCC welcomes Meriton's change of attitude from initially rejecting the ACCC's allegations to now accepting that their conduct was in breach of the Act and that they needed to put in place an effective compliance system. The ACCC acknowledges that Meriton co-operated to resolve this matter. The ACCC also acknowledges that at an early stage Meriton agreed to allow affected consumers to rescind their contracts, if they wished.

"The resolution is virtually totally in accordance with what the ACCC was seeking from Meriton prior to instituting legal proceedings. The ACCC was concerned that consumers may have been misled by the advertisements into thinking that the value of the property would increase substantially as a result of the introduction of the GST", Professor Fels said: "It is very unlikely that the full 10% GST would flow through to property prices in the way suggested by the Meriton advertisements.

"The increased supply of apartments in Sydney's CBD and the effect of the removal of wholesale sales taxes means that increases in property prices are likely to be significantly less than 10%.

"The ACCC will be carefully monitoring advertisements which make representations about the likely impact of the New Tax System and will take action to ensure that consumers are not misled.

"The case shows the need for large advertisers to have an effective trade practices compliance program in place and to regularly monitor and update that program".