The Federal Court has ordered Tuan Nguyen, the sole director, and Thuan Nguyen, the sales manager, of Artorios Ink (now in liquidation) to pay a penalty of $50,000 each after they admitted to being knowingly concerned in contraventions of the Australian Consumer Law.
The Court also made declarations by consent, and accepted undertakings from Tuan Nguyen and Thuan Nguyen that they would not manage or be a director of a corporation for five years.
Tuan Nguyen and Thuan Nguyen admitted to acting deliberately to mislead and deceive small businesses to generate ink cartridge sales.
Artorios Ink was a telemarketing company that sold printer cartridges to businesses from 2008 to 2012. The company was placed into voluntary liquidation on 25 February 2013 after the ACCC instituted proceedings against it in September 2012.
The Federal Court found that, during 2011 and 2012, Artorios Ink engaged in conduct that was misleading or deceptive and made false or misleading representations to five small businesses. The Court found that the false or misleading representations included:
- that the business had agreed to purchase printer cartridges from Artorios Ink, when in fact there was no such agreement;
- that Artorios Ink was an approved, regular or current supplier of the business, when in fact it was not; and
- that Artorios Ink had instituted proceedings in the Magistrates’ Court of Victoria against the business to obtain payment for printer cartridges, when in fact Artorios Ink had not instituted any such proceedings.
The Federal Court also found that Artorios Ink asserted a right to payment for unsolicited goods, by sending demands for payments for ink cartridges which the small businesses had never agreed to purchase.
In her reasons for judgment, Justice Mortimer stated “The conduct involved deceit of these businesses for the financial benefit of Artorios”. Her Honour also inferred that “there was a deliberate and calculated plan constructed to misrepresent to small businesses (through calls to unsuspecting employees or shop managers) some kind of existing supply relationship, then to take advantage of the misrepresentation to supply goods and then demand payment”.
Justice Mortimer stated “The most serious aspect of the conduct was its premeditated character, the implementation of a system of deceiving unsuspecting employees and owners of small businesses into believing that they had ordered printer cartridges and were obliged to pay for them.”
“These penalties send a warning to traders that dishonest business practices can result in substantial penalties being imposed against the individuals responsible,” ACCC Deputy Chair Dr Michael Shaper said.
“These individuals have also undertaken not to manage, or be a director of, a corporation for five years. The ACCC will continue to intervene to protect small businesses from traders who attempt to trick them into paying for goods or services they did not purchase.”
Dr Schaper warned that small businesses should be especially vigilant of traders that use one or more of the following strategies to deceive employees into confirming orders that the business did not place:
- targeting junior staff members and using information gathered from previous calls, such as names of other employees and printer models, to trick people into thinking that they are a regular supplier when they are not;
- recording a second phone call which has a staff member confirming an order which is based on previous misrepresentations about the trader’s relationship with the target business; and
- offering gifts (such as gift vouchers, discounts or cameras) to entice staff members to orally agree to receiving those gifts. The oral agreement is recorded by the trader and used out of context to corner the business into paying for goods (such as ink cartridges in this case) that are unsolicited.
For further information, see Small business scams.