The Federal Court has declared that L&L Supply, an international office supply company based in Florida in the United States and selling into Australia, misled its customers in relation to the supply of packing tape.
The Federal Court has ordered that L&L Supply compensate a number of its customers and undertake a range of corrective steps to prevent the illegal conduct from recurring.
The Federal Court made the orders sought by the ACCC by default following the failure by L&L Supply to meet its obligations under the Court ordered timetable.
In March 2005, the ACCC instituted legal proceedings against L&L Supply alleging that the company was operating an office supply scam from two locations – Wickham, Newcastle in NSW and Miami, Florida in the United States.
The ACCC alleged that L&L Supply employed sales representatives based in a call centre in Miami which targeted Australian businesses with an offer to supply them with packing tape either at no cost or at very low prices.
The ACCC claimed that offshore sales representatives would telephone employees of Australian businesses, usually in the purchasing or accounts area, and make false representations that they were calling on behalf of their recently deceased father who was the former owner of L&L Supply, a small office supply company.
The L&L Supply sales representative would then claim that their deceased father was a very good friend of a senior executive of the target company who had agreed to help out L&L Supply by buying some packing tape. Alternatively the caller would say that the owner of L&L Supply was seriously ill. At this stage the offshore sales representative sought the customer's agreement to accept some packing tape either for free or at a very low price.
The ACCC alleged that after speaking to the target company, L&L Supply in Miami would forward details of the Australian 'customer' to its warehouse in Wickham in Newcastle which then despatched an order of packing tape with an invoice (usually for about $2000) to the customer.
Business customers generally agreed to purchasing packaging tape from L&L Supply out of sympathy for the caller due to the alleged recent death of their father.
At the commencement of legal proceedings, the ACCC obtained an order from the Court freezing L&L Supply's funds in Australia pending the ACCC taking action to obtain compensation for Australian businesses who have suffered loss as a result of L&L Supply's conduct.
The Federal Court declared that L&L Supply misled its customers in a number of respects, including by making claims that:
- the owner of L&L Supply had recently passed away when he had not
- the owner of L&L Supply was seriously ill when he was not
- the deceased owner of L&L Supply was a good friend of a senior manager of the relevant Australian business when he was not
- L&L Supply was closing down due to a family tragedy when this was not true, and
- L&L Supply had excess supplies of packaging tape which it was proposing to liquidate when this was not true.
The Federal Court declared that L&L Supply contravened section 52, 53, and 64* of the Trade Practices Act 1974 and ordered:
- a range of injunctions to prevent L&L Supply engaging in the illegal conduct in the future
- L&L Supply to compensate** a number of businesses misled by the illegal conduct of L&L Supply
- L&L Supply to send letters to its customers and publish notices in newspapers to advise its customers of the Federal Court's orders, and
- L&L Supply to pay the ACCC's costs.
Justice Madgwick has set the matter down for 28 March 2006 to hear submissions on the disposition of the frozen funds. On this date, the ACCC will be seeking further orders in relation to the frozen funds, including orders for the payment of compensation to some of the affected businesses.
ACCC Deputy Chair, Ms Louise Sylvan said this case demonstrates that the ACCC will remain vigilant in relation to scammers regardless of where they are located.
"The fact that L&L Supply was located in the United States did not mean that the ACCC could not take effective action. Also, in such cases the ACCC will seek to obtain orders freezing the scammers' bank accounts in the first instance so that funds are preserved for the payment of compensation to affected businesses.
"The ACCC would like to thank each of the individuals who spent the time and effort to provide witness statements in this matter", Ms Sylvan said. "With their assistance, the ACCC has prevented L&L Supply from continuing to scam other Australian businesses".
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