ACCC welcomes federal court's decision to make consent orders to settle long running case against Medibank Private

The Federal Court late yesterday made orders by consent against Medibank Private Limited for misleading advertising of its health insurance products in two separate advertising campaigns run in relation to the introduction of lifetime health cover in March - June 2000 and August 2000.

As part of the resolution of the proceedings brought by the ACCC against Medibank Private, Medibank Private has agreed to pay $5 million to establish a special fund.  The fund will benefit Medibank Private members by providing benefits to be paid for leading edge clinical intervention procedures normally ineligible for claims under Medibank Private and which would not be likely to be funded from another source.

The ACCC, through its Chief Executive Officer and under a delegation from the Australian Securities and Investment Commission, instituted proceedings against Medibank Private in the Federal Court, Melbourne, on 26 October 2000 alleging false, misleading and deceptive advertising of its health insurance products.

In the first campaign, which included television and magazine advertising, Medibank Private represented that the cost of its PackagePlus health insurance product would not increase in 2000 when in fact the premiums applying to those products rose on 1 July 2000.

In the second campaign, run during August 2000, Medibank Private advertised an offer in newspapers that consumers who switched from another health insurance fund to Medibank Private were eligible to have 'any waiting periods waived' and would 'get 30 days free' health insurance cover. 

The advertisements:

• failed to disclose, or adequately disclose, that only the two-month general waiting period and the six-month optical waiting period were waived; and
  
• failed to disclose, or adequately disclose, that conditions applied to the offer of 30 days free health insurance.

The Federal Court declared, by consent, that Medibank Private's conduct in relation to both advertising campaigns was false misleading and deceptive or likely to mislead or deceive in contravention of sections 12DA(1), 12DB(1)(a)(c)(e) and 12DF of the Australian Securities and Investments Commission Act 1989.

The Federal Court has ordered that Medibank Private Limited publish corrective advertising in 13 national and metropolitan newspapers.

ACCC Chairman, Mr Graeme Samuel, welcomed the resolution of the proceedings.
"The Medibank Private advertising occurred at the time the Federal Government's lifetime health-care initiative was introduced", he said. "During that period, there was a huge increase in the number of Australians taking out private health insurance or switching funds and those consumers were particularly vulnerable at that time to misleading or deceptive claims about health insurance.

"During the introduction of life-time health cover, a number of health funds made misleading or deceptive advertising claims as they aggressively sought to capture market share in the growing market.  The Federal Court has also made orders against MBF for misleading and deceptive advertising during this period.

"It is imperative that advertising information be readily understood, free from jargon and that it enable consumers to make informed purchasing decisions".

BACKGROUND

*The proceedings have been instituted under sections 12DA, 12DB(1)(c), 12DB(1)(e),12DB(1)(g), 12DF of the Australian Securities and Investments Commission Act 1989 (ASIC Act) as opposed to the Trade Practices Act 1974. Health insurance, as it falls within the definition of a financial product, is regulated through the ASIC Act. However, the Australian Securities and Investments Commission has, since December 1998, formally delegated the regulation of all consumer protection aspects of health insurance to the ACCC through the use of nominated ACCC officers as delegates.