The Australian Competition and Consumer Commission has obtained final orders by consent in the Federal Court in Brisbane against Duco Magic (Australia) Pty Ltd and its director, Mr Warwick Lindsay, for misleading prospective purchasers about the profitability and demand for Duco Magic business opportunities and services.
Duco Magic offered business opportunities to people with the promise of earnings of up to $150,000 per annum and "proven massive demand" for Duco Magic services. The Federal Court declared that Duco Magic had no reasonable grounds for making these representations and that Mr Lindsay was knowingly concerned in the company's offending conduct.
"This sort of conduct can have a devastating effect on families who invest their savings in reliance on these sorts of statements," ACCC Chairman, Mr Graeme Samuel, said today.
Duco Magic technician kits, including training DVDs and materials, paints, and ancillary products that could be used to repair damaged paint on motor vehicles, mostly in car yards, were sold for up to $36,641.
The ACCC's proceedings, which began on 4 March 2008, concerned two key representations by Duco Magic, namely:
- the profitability of the Duco Magic business opportunity. For example, in advertisements run in both the Courier Mail and Sun Herald, it was represented that purchasers of the business opportunity could earn an income of $3,177.00 per week, and profits of $150,000 per annum. The ACCC alleged that in the case of all but one technician, who operated as part of a team rather than as a sole operator, technician earnings were significantly less. It was declared that there were no reasonable grounds for making such claims.
- the high demand for services provided by Duco Magic technicians. In the Info Pak sent to prospective purchasers and on the company's website, it was represented that there was "proven massive demand" and "so much demand that operators will 'never satisfy it all'". The ACCC alleged that in certain cases some of the car dealers assigned to technicians had closed, had been assigned to other Duco Magic technicians or were not interested in Duco Magic's services. Again it was declared that there were no reasonable grounds for making such claims.
Justice Dowsett also made a number of other orders by consent including:
- injunctions restraining Duco Magic, for a period of four years, from making representations about the profitability or demand for any business opportunities or services offered by the company unless having regard to the time, location, competitive and economic circumstances and all other relevant matters, there are reasonable grounds for making the representations
- injunctions similarly restraining Mr Lindsay from being knowingly concerned in the making of such representations by any corporation or by himself, without reasonable grounds
- an order requiring Duco Magic and Mr Lindsay to keep any documents that are relied on by them as reasonable grounds for making such representations and ensure these records are available for inspection by prospective and actual purchasers of business opportunities offered by them
- an order that Duco Magic and Mr Lindsay pay an agreed amount towards the ACCC's legal costs.
"This judgment underscores the importance of ensuring that claims about profitability of a business venture can be reasonably substantiated and are relevant to the time, location and circumstances in which the business venture is offered," Mr Samuel said.
"Companies and individuals who engage in this sort of reckless behaviour are at risk of legal action by the ACCC and potentially also class actions by those who have been misled."