StoresOnline found to have breached previous undertakings: Workshops to go ahead under new orders

The Federal Court has declined to grant the Australian Competition and Consumer Commission an interlocutory injunction preventing StoresOnline International Inc and StoresOnline Inc from running various workshops in Australia from today.

But the workshops have been permitted to continue only subject to a number of court orders designed to protect consumers to be made by Justice Tamberlin on Friday.

On 9 October 2007 the ACCC instituted legal proceedings on an ex-parte basis seeking orders for service of the proceedings upon the two StoresOnline companies, both of which are located in the United States. 

The ACCC also sought an urgent interlocutory injunction to restrain StoresOnline from conducting further presentations in Australia to sell and promote their home business e-commence software packages until the proceeding has been determined on a final basis. The application for an interlocutory injunction was heard on 16 October 2007.

The ACCC sought the interlocutory injunction to prevent the StoresOnline workshops from being conducted because of its concern that StoresOnline had breached and would continue at the upcoming workshops to breach the obligations in a s.87B undertaking given to the ACCC in 2006 to settle earlier legal proceedings.  The ACCC argued that StoresOnline had failed to honour the following obligations when conducting workshops in October-November 2006 and March-April 2007:

• to make it known to all participants at workshops that they have a three business day cooling off period in which to seek a full refund of the purchase price
• to ensure that any representations which StoresOnline make to the effect that their product is easy to use or can be used to quickly develop a profitable internet retail business are qualified by advising customers that they should also consider the following factors before deciding to buy the StoresOnline product; namely whether the consumer:
• has a computer
• has a general knowledge of using a computer
• knows little or nothing about e-commerce
• does not presently have a product to sell
• has a business plan for starting or operating a business
• has sufficient money to start and operate a business apart from the cost of the product
• to ensure adequate records are kept by StoresOnline of all testimonials used in Australian workshops
• to maintain audio recordings of all seminars and workshops conducted in Australia
• to give the ACCC advance notice of StoresOnline's intention to conduct any Seminars and Workshops in Australia, and
• to ensure that the StoresOnline product was tailored for use in Australia by  making sure the system could generate tax invoices which comply with Australian laws.

In declining the ACCC's application for an interlocutory injunction Justice Tamberlin said: "While the breaches of the undertaking by StoresOnline do not warrant a blanket order restraining StoresOnline from making any presentations in Australia, I am persuaded that the most appropriate course is to make orders requiring StoresOnline to give effect to the undertaking to which it made a commitment on 24 April 2006, until further order."

However Justice Tamberlin found that StoresOnline had breached the s.87B undertaking on a number of occasions in conduct at earlier workshops. In particular he found that StoresOnline had breached its obligation to make the three business day cooling off period known to consumers. He found that some of the StoresOnline written disclaimers were "manifestly inadequate".

Justice Tamberlin indicated that he would make a number of the orders sought by the ACCC on Friday (27 October 2007), to "discourage (StoresOnline), with the powerful sanction of contempt, from giving those presentations in a way that breaches its undertaking given to the ACCC."

This matter will now proceed to final hearing at which time the ACCC will press for the following orders:

• declarations that StoresOnline has contravened s87B of the Act
• a range of injunctions to ensure that the s.87B undertaking is complied with in the future
• an order that StoresOnline pay to the Commonwealth an amount up to the amount of any financial benefit which it has obtained, directly or indirectly, which is attributable to the alleged breaches of the s.87B undertaking
• an order directing StoresOnline to compensate any other person who has suffered loss or damage as a result of the breach of the s.87B undertaking.

Background

StoresOnline provided the ACCC with a section 87B undertaking under the Trade Practices Act 1974 on 24 April 2006 following court action commenced by the ACCC on 1 June 2005. In that case the ACCC alleged that StoresOnline had engaged in misleading and deceptive conduct in the promotion and sale of its home business e-commerce software packages. These proceedings were settled on the basis that, whilst StoresOnline did not admit that it had contravened of the Act, it agreed to pay refunds of $673,478.88 to 175 consumers who claimed to have been misled by representations made by StoresOnline in promoting its home business e-commerce software packages.