Federal Court finds Advanced Medical Institute engaged in unconscionable conduct

22 April 2015

The Federal Court today declared that Advanced Medical Institute (AMI), NRM Corporation and NRM Trading Pty Ltd (NRM) had engaged in unconscionable conduct in promoting and supplying medical services and medications for men suffering from sexual dysfunction.  The Court also declared that Mr Vaisman aided and abetted and was knowingly concerned in the conduct of AMI and NRM.

ACCC Chairman Rod Sims welcomed the Court’s decision, saying that “the ACCC took action against AMI because it sought to exploit consumers’ vulnerability for its own commercial gain.  The Federal Court has confirmed that AMI’s conduct was indeed unconscionable. This case is a further example of the importance of the ACCC pursuing cases of unconscionable conduct.”

“This case provides a clear message that businesses must not take advantage of consumers who are vulnerable or disadvantaged. Consumer issues in the health and medical sector are a priority for the ACCC and we will not hesitate to hold businesses and responsible individuals to account for the actions,” Mr Sims said.

In his judgment, Justice North said “It is immoral to seek to harness the fears and anxieties of men suffering from ED [erectile dysfunction] or PE [premature ejaculation] for the purpose of selling medical treatments. To target the patient’s vulnerability in this way is to use an unfair tactic and that is a possible marker of unconscionable conduct”.

Justice North also stated “The technique of frightening men by telling them of the dire adverse consequences of not agreeing to treatment and assuring them that the treatment was effective was part of the business system of AMI and NRM. It was formulated by management and imparted in an organised fashion through scripts and training sessions.”

His Honour also found that NRM further breached the Australian Consumer Law by entering into long-term agreements for the treatment which contained unfair contract terms in relation to the termination of a contract.

The Court declared that the conduct of the respondents was unconscionable and made orders:

  • requiring that NRM compensate a number of the patients whose evidence was considered by the Court
  • permanently restraining NRM from:
    • making agreements with a patient or in respect of the supply of medications for the treatment of male sexual dysfunction unless the patient has a consultation with a qualified medical practitioner
    • making any statement about the efficacy of NRM treatments or the patient’s need for those treatments unless that statement is made by a qualified medical practitioner
    • making an agreement with a patient for the supply of medications or medical services for the treatment of male sexual dysfunction without providing a written statement of the terms of the agreement and termination rights;
    • making an agreement with a patient for the supply of medications or medical services for the treatment of male sexual dysfunction unless that agreement has a cooling off period and can be terminated by giving 14 days’ notice.
  • restraining Mr Vaisman from continuing his main role in the business of NRM which was involved in the unconscionable conduct for a period of seven years
  • requiring corrective advertising.

Background

At the time of the AMI conduct (in 2008 and 2009) the AMI business was bringing in revenue of over $59.3 million in 2008 and $71.5 million in 2009.

The ACCC instituted proceedings against AMI and Mr Vaisman in December 2010. At that time the ACCC was concerned that AMI had engaged in conduct that took advantage of vulnerable consumers. When the business was subsequently sold to NRM, the ACCC remained concerned that the conduct was continuing and as a result NRM was joined to the proceedings.

Release number: 
MR 63/15
Media enquiries: 
Media team - 1300 138 917

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