Full Federal Court keeps Peter Foster out of weight loss, cosmetic and health industries

The Full Federal Court has dismissed an appeal by Mr Peter Foster against an order restraining his involvement in any business relating to weight loss, cosmetic or health industry products or services for five years.

The Full Court ruling follows ACCC action last year against key persons involved in Chaste Corporation's TRIMit scheme for both resale price maintenance* and misleading and deceptive conduct. The misleading conduct included representations as to:

• the efficacy of the purported diet pill TRIMit
• the genuineness of the Chaste business, and
• the concealment of Mr Foster's role in the business.

For his involvement in the resale price maintenance aspects of the TRIMit scheme, the Federal Court penalised Mr Foster $150,000 and made other orders in relation to misleading and deceptive conduct.

At first instance, Justice Lander noted that: "Mr Foster had convictions in relation to the unlawful sale and promotion of weight loss products, and a reputation as the instigator of dubious and failed schemes for profit for the conduct of businesses promoting and selling weight loss products" and that "from its inception Chaste's business was conducted by Mr Foster and Mr Webb for the purpose of extracting the maximum possible revenue from unsuspecting area managers who had hoped to participate in a genuine business opportunity in selling a researched and effective weight loss aid to retailers".

Justice Lander then made an order restraining Mr Foster from being directly or indirectly involved in the promotion or conduct by a corporation of any business relating to weight loss, cosmetic or health industry products or services of any kind for five years.

In the appeal, Mr Foster challenged the court's power to make such a wide order.

In its unanimous decision on Friday, the Full Court stated: "The evidence and the findings at first instance in the present case gave rise to a real fear that Foster would, unless restrained, commit further conduct of the same general kind".

In confirming the court's power to grant the order against Mr Foster in the terms sought by the ACCC, the Full Court stated: "If the court considers that a complete prohibition, whether permanently or for a specified period, on a respondent's engaging in a particular field of commercial activity or industry is required to protect the public from conduct of the kind which constituted the contravention, s80 is wide enough to support such a prohibition as a matter of power".

Australian Competition and Consumer Commission, Chairman, Mr Graeme Samuel said: "The Full Court's decision supports the importance of protecting the Australian public from serious misleading and deceptive conduct".

Mr Foster has also been ordered to pay the ACCC's court costs.

Background

Record penalties for resale price maintenance* of more than $1 million were imposed by the Federal Court in September 2005 against weight-loss venture Chaste Corporation and three individuals.

Chaste Corporation was penalised $600,000 for its contraventions of resale price maintenance provisions of the Trade Practices Act 1974. The Australian Competition and Consumer Commission had alleged that Chaste Corporation had entered in to 70 Area Management agreements Australia-wide which contained resale price maintenance provisions which prevented area mangers from selling the weight-loss TRIMit product at a discount. The ACCC also alleged that Chaste had misled area managers about TRIMit and support they would receive from Chaste in their businesses. It further alleged breaches of the franchising code of conduct in the way the TRIMit business was promoted to potential area managers.

A $150,000 personal penalty was imposed on Chaste controller, Mr Peter Foster, for being knowingly concerned in Chaste's resale price maintenance. This is twice the penalty previously imposed on a person in connection with resale price maintenance under the Act.

*Section 48 of the Trade Practices Act 1974 prohibits 'resale price maintenance'. A company engages in resale price maintenance where it tries to stop a reseller from discounting a product, or where it supplies a reseller on disadvantageous terms because the reseller had sold, or was likely to sell, the product below a specified price.