Companies selling products door-to-door have been warned to deal fairly with their customers following legal action today by the Australian Competition and Consumer Commission.
"Companies cannot use unfair pressure or mislead or deceive customers during their sales spiel," Acting Chairman, Mr Peter Kell, said today.
Craftmatic Australia Pty Ltd today agreed to court declarations and injunctions against it for acting in an unconscionable manner against senior citizens after legal action in the Federal Court, Brisbane by the ACCC.
Craftmatic, a door to door seller of adjustable beds admitted that it misled and deceived elderly consumers and subjected them to unfair pressure to buy a bed.
Mr Kell said that Craftmatic's conduct was particularly bad as it took advantage of people who in some cases were house bound, commercially inexperienced, may have had health concerns and were susceptible to high pressure sales techniques.
"Craftmatic's use of unfair pressure tactics was unconscionable," Mr Kell said. "Companies using such unfair tactics or misleading or deceiving consumers in their sales process are breaching the law."
The ACCC's investigation revealed that from August 2005 until at least 1 June 2008, Craftmatic used misleading and unfair tactics to convince elderly people to agree to a home presentation by one of Craftmatic's sales representatives. Once at the consumer's home, an elaborate and well rehearsed sales process was used to persuade the consumer to buy a Craftmatic bed, in some cases costing more than $10,000.
While some consumers were happy to buy a bed, others who indicated that they either didn't want, or could not afford, to buy a bed were subjected to a barrage of unfair sales techniques to change their mind.
The ACCC was particularly concerned with the following tactics used by Craftmatic:
- when initially contacting the consumer, Craftmatic would say that the purpose of the contact was not to sell them anything, but that they could win a free bed. But Craftmatic's sole interest was to convince the consumer to agree to a presentation where the representative would try to make a sale.
- consumers were initially advised that the presentation would only take up to an hour; most presentations took between two and three hours.
- when arriving at the consumer's house the representative would bring a cake or a pot plant as a gift before asking a number of questions, including questions about a consumer's health, purportedly to assist the sales representative to reach a recommendation of which model of bed would best suit the consumer's needs. During this time Craftmatic only had one model of bed. Each consumer was recommended that bed, irrespective of their individual circumstances.
- For those consumers reluctant to buy a bed, Craftmatic would offer a number of discounts that were described as being 'special discounts' only available to limited consumers and only available that day. Again this was not the case, and the discounts were offered to each and every consumer who resisted the sales process.
- Craftmatic representatives were taught not to accept no for an answer and where the consumer said they could not afford a bed would seek to sell on credit.
- Craftmatic provided its representatives with a booklet, Craftmatic – Classic Closes, which outlined how the representative should get around objections to buying a bed that may be raised. These included responses to encourage the consumer to buy a bed even if they said that they wanted to check with their son or daughter before making a decision.
- Sales representatives used codes when speaking to each other, as to whether further discounts were needed to ensure a sale.
Mr Kell said that the ACCC was aware of complainants who said that they only agreed to buy a bed because they were put under so much pressure and they felt that making the purchase was the only way to get the representatives to leave.
"Businesses need to be extra mindful to ensure appropriate conduct with any door to door sales. This is particularly true when dealing with elderly citizens who may be vulnerable to high pressure selling techniques," he said.
"In particular, businesses need to ensure that they do not mislead or deceive consumers about the pricing, the characteristics and need for products. The Craftmatic beds can cost from $4,000 to $15,000. Many elderly consumers need time to consider whether they need such a product or can afford such an amount."
The Federal Court ordered injunctions for a period of seven years restraining Craftmatic from a wide range of conduct that was found to be misleading and unconscionable, in breach of the Trade Practices Act 1974.
Craftmatic must contact each consumer who bought a bed between 20 April 2007 and 31 December 2008. Consumers should respond to that letter if they believe they were subjected to misleading or unfair conduct. Craftmatic must report back to the ACCC on how it resolves all of its complaints.
Alternatively, consumers may choose to contact the ACCC directly on 1300 302 502.
In addition, for the next seven years Craftmatic is required to provide prospective consumers with extra details about their rights.
The ACCC also took action against two individuals, Mr Wayne Lugg (an ex-sales representative) and Mr Ashley Day (an ex-director and part owner of Craftmatic). Mr Lugg has already consented to declarations and injunctions against him in relation to misleading and deceptive conduct in which he was involved. Proceedings against Mr Day for misleading and deceptive conduct and unconscionable conduct continue.
The ACCC acknowledges that the current owner of Craftmatic, Mr Tim Vorbach, has cooperated with the investigation, acknowledged the previous conduct and apologised.