Advertising claims by Danoz Direct Pty Ltd about the benefits of its Abtronic Fitness System have been declared to be misleading or deceptive to consumers.
After action by the Australian Competition and Consumer Commission, Justice Dowsett of the Federal Court, Brisbane has made the declarations about representations by Danoz Direct's national promotion of the Abtronic "electronic muscle stimulation" device.
"Among other things, Justice Dowsett has ordered Danoz Direct to broadcast public announcements on television aimed at correcting the representations made", ACCC Chairman, Mr Graeme Samuel, said today.
"The Abtronic was heavily promoted by Danoz Direct on television during four minute ‘advertorials’ on Network Ten’s Good Morning Australia and Bright Ideas programs. Late night ‘infomercials’, which ran for about half an hour, were also broadcast on Network Ten and the Seven Network, and their affiliate stations throughout Australia. Danoz Direct also promoted the Abtronic on its website and in its product catalogues.
"This is an important win for consumers", Mr Samuel said. "Danoz Direct sold over 94,000 Abtronics in Australia and made over $14 million from their sales. Many consumers may have decided to buy the Abtronic for its advertised fat and weight loss benefits. The Federal Court has declared these claims to be misleading.
"As part of the action, the ACCC sought refunds for consumers. The court held it did not have the power to order Danoz Direct to provide consumer refunds. After discussions with the ACCC, Danoz Direct has requested the ACCC refer consumers who purchased an Abtronic and were misled and who seek a refund, to their customer service number of 1300 135 085. For general information about the court's judgment consumers can contact the ACCC's Infocentre on 1300 302 502 or www.accc.gov.au.
"Danoz Direct also admitted that some claims contained in its Abtronic advertising were misleading or deceptive and in breach of the Trade Practices Act 1974, including that:
the Abtronic had a fat and cellulite blaster setting that could work on fat and not on a person's muscles;
the Abtronic could flatten a person’s stomach once and for all; and
10 minutes use of the Abtronic was the equivalent of up to 600 sit-ups.
"The Federal Court has declared that other claims made by Danoz Direct were misleading or deceptive in breach of the Trade Practices Act, because Danoz Direct did not have reasonable grounds for making the claims. These included that:
the Abtronic was a brilliant training and toning tool;
the Abtronic firms, tones and tightens your upper abs, lower abs and 'love handles', with no sweat;
the Abtronic could provide a vigorous workout for the abdominal region, the love handles, arms, buttocks and thighs;
the Abtronic would tone and firm muscles; and
the Abtronic can work out and tone different muscle groups.
"The Federal Court also declared that Danoz Direct made a false representation when it claimed that the Abtronic normally sold for $220 when in fact the Abtronic had always been sold for $165".
As a result of the ACCC’s litigation, Danoz Direct provided the following undertaking to the court:
that it would withdraw the Abtronic from sale;
that it would not sell the Abtronic in the future;
that all existing stock of the Abtronic would be destroyed; and
that it would not in the future sell a similar electronic muscle stimulation device.
"Promoters of health and exercise related products must ensure that they have reasonable grounds for the claims they make and not exaggerate the benefits consumers could obtain, otherwise consumers will be misled", Mr Samuel said.
Justice Dowsett has ordered that public annoucements be broadcast by Danoz Direct during Network Ten's Good Morning Australia and Bright Ideas programs for a period of two weeks. Further, Danoz Direct has been ordered to broadcast announcements during late night hours for two weeks on the Seven Network and Network Ten. The court also ordered that a consumer notice appear in The Australian, on Danoz Direct's website and in its product catalogue.
In his judgment, Justice Dowsett noted that the purpose of the notices in this case is to inform consumers who purchased the Abtronic of the misleading nature of Danoz Direct's conduct so they will not continue to expect benefits from use of the Abtronic and may seek refunds where it can be shown that the product was purchased as a result of Danoz Direct's misleading claims.
"The broadcasting and publication of consumer notices are important remedies to correct the misleading claims that Danoz Direct made about the benefits of the Abtronic", Mr Samuel said. "We hope this decision will further deter companies from engaging in misleading or deceptive conduct".
The court also found that former Danoz Direct employees, Mr Michael Quinn and Mr Aaron Schereck, were knowingly concerned in Danoz Direct's conduct. Mr Quinn appeared as a presenter of Danoz Direct's Abtronic advertorials on Good Morning Australia and Bright Ideas and Mr Schereck was Danoz Direct's Executive Producer.
* Section 51A of the Trade Practices Act 1974 provides that where a corporation makes a representation with respect to any future matter and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
Release # MR 189/03
Issued: 4th September 2003
Background
The ACCC has recently brought action against a number of promoters of electronic muscle stimulation devices. In April, the Federal Court in Brisbane declared by consent that claims made by The Buyers Group Pty Ltd and two of its employees in the advertising of its Feminique Slimming System were also false, misleading or deceptive in breach of the Trade Practices Act 1974.
The ACCC's action against Danoz Direct is part of an international wave of proceedings against the promoters of the Abtronic. Members of the International Consumer Protection and Enforcement Network (ICPEN) have been able to share information about the conduct in each jurisdiction enabling counterpart agencies to undertake effective enforcement actions. The ACCC is aware that consumer protection agencies from around the globe, including North America, Europe and Asia, are investigating the claims made in relation to the Abtronic and similar products.
Last month, following action by the Federal Trade Commission the United States District Court (District of Nevada) granted summary judgement against the marketers of the Abtronic in the United States, including orders prohibiting the making of certain claims in the promotion of Abtronic, as well as significant financial penalties.
In Canada, the Competition Bureau reached a Consent Agreement with the promoters of the Abtronic whereby the promoters agreed to no longer sell the product in Canada until such time as they satisfy the Competition Bureau that the claims to be made about the product are based on reasonable grounds. The promoters also paid a penalty of $75,000 (Canadian dollars).
