The Australian Competition and Consumer Commission was concerned about difficulties it has to obtain court-ordered refunds in some consumer protection cases, ACCC Deputy Chair, Ms Louise Sylvan, told the Law Institute of Victoria's President's luncheon today.
Using the example of a recent judgment in Danoz Direct*, Ms Sylvan said the Federal Court declared a range of claims made by Danoz about its Abtronic Fitness System were misleading or deceptive to consumers. Danoz also admitted that certain other claims were in breach of the Trade Practices Act 1974.
"The undertakings to the court were that the product would be withdrawn from sale, would not be sold in the future, all existing stock would be destroyed, and that Danoz Direct would not in future sell a similar electronic muscle stimulation device", Ms Sylvan said.
"There are two key points to make here. The first is that the Abtronic sold for $165 and that 94,000 of these were sold in Australia before we could stop them—so, consumers spent about $15.5 million. Naturally, we sought refunds for consumers. The court held that it did not have the power to order Danoz Direct to provide consumer refunds. This was in keeping with the earlier Full Federal Court decision in the Medibank case which ruled that the Court does not have the power to order compensation in favour of non-parties under section 80 of the Act.
"So, this is now the situation. Under section 80 (injunctions), section 82 (damages) and section 87 (other orders), the ACCC cannot seek a court order to pay damages or compensation in favour of consumers unless said consumers are a party to the court action or have given written consent to the Commission to sue on their behalf.
"In cases like the misleading conduct one that I described a moment ago, the administrative impediment to trying to have 94,000 consumers as parties to the action or to have them give written consent are simply not to be imagined. In the Danoz case, the firm said it would offer refunds to consumers who requested them, which relies on consumers coming forward, but what if it hadn't offered even that? Each consumer would have had to pursue their own claim in court; how many consumers will do that for a $165 product?
"The second key point is that corrective advertising orders were made in this case in addition to the undertakings given but no penalties were levied against the company or its directors. Under the consumer protection provisions of the Act, in order to seek a fine, the ACCC must institute criminal action—in other words the level of evidence needed to obtain a conviction is 'proof beyond reasonable doubt'. There is no provision for civil pecuniary penalties with a lower onus of proof for breaches of Part V (consumer protection provisions) and yet there are for Part IV (anti-competitive provisions).
"The Commission is currently considering the problem and the best remedy or remedies for this situation", Ms Sylvan said.