Full Court upholds unconscionable conduct finding against AMI

22 July 2016

The Full Court of the Federal Court of Australia has dismissed an appeal by NRM Corporation Pty Ltd and NRM Trading Pty Ltd (together, NRM), and NRM director Jacov Vaisman, against the decision of Justice North that NRM had engaged in unconscionable conduct through its Advanced Medical Institute business promoting and supplying medical services and medications for men suffering from sexual dysfunction.

In dismissing NRM’s appeal, the Full Court rejected NRM’s arguments that the trial judge had made errors of fact and law in finding that NRM had engaged in unconscionable conduct targeting vulnerable consumers by its advertising and sales techniques.  The Full Court noted that this vulnerability related to the particularly sensitive and personal nature of the services supplied by NRM and the sales techniques employed by the salespeople, and was well supported by the evidence.  

The Full Court upheld an order made by Justice North permanently restraining NRM from making statements and representations to any patient or prospective patient as to the efficacy of NRM treatments unless they are made by a medical practitioner in a face to face or video consultation.  The Full Court considered “There remains a continuing need, and there remains a factual foundation, for an order restraining the Appellants from advertising in a manner which has the potential to exploit the vulnerable”.

The Full Court also dismissed Mr Vaisman’s appeal against orders restraining him from having a role in connection with training, supervising or counselling or terminating employees, agents or contractors of NRM for a period of seven years.

ACCC Chairman Rod Sims said: “The ACCC brought these proceedings because NRM sought to exploit consumers’ vulnerability for its own commercial gain, by targeting vulnerable consumers with unconscionable advertising and sales techniques”.

“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. We will not hesitate to take appropriate enforcement action where businesses in this sector are exploiting the vulnerability of consumers,” Mr Sims said.

This appeal judgment follows an earlier finding by Justice Moshinsky that NRM was guilty of contempt for failing to comply with the orders made by Justice North prohibiting NRM from making statements about the efficacy of NRM treatments unless the statements are made by a duly qualified medical practitioner during a consultation in-person or by video-link.  A hearing on penalty for NRM’s contempt will be heard on a date to be fixed.

Background

The ACCC instituted proceedings against the companies formerly known as Advanced Medical Institute Pty Ltd and AMI Australia Holdings Pty Ltd (together, the AMI companies) and Mr Jacov Vaisman in December 2010.  At that time the ACCC was concerned that the AMI companies had engaged in conduct that took advantage of vulnerable consumers suffering from sexual dysfunction.

When the AMI 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.

On 22 April 2015 the Federal Court found that the AMI companies and NRM, by operating the AMI business, engaged in unconscionable conduct and used unfair contract terms in the way it promoted or supplied male sexual dysfunction products.

In his judgment, Justice North stated “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.”

The Court also declared that Mr Vaisman, who was a director and CEO of the AMI companies, then subsequently NRM, aided and abetted and was knowingly concerned in the unconscionable conduct by the AMI companies and NRM. Mr Vaisman was restrained for a period of seven years from having a role in connection with training, supervising or counselling or terminating employees, agents or contractors of NRM.

 

Release number: 
MR 134/16
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