Metricon Homes Qld to pay $800,000 penalty for misleading representations

31 July 2012

The Federal Court in Brisbane has ordered Metricon Homes Qld Pty Ltd to pay $800,000 in penalties and $50,000 towards the Australian Competition and Consumer Commission's costs after it agreed that some of its advertising and promotional material was false or misleading.

"Home building companies should take the penalties ordered in this case as a serious warning," ACCC chairman Rod Sims said.

"Photographs and glossy brochures that promote products should be of what the consumer will be supplied at the advertised price, not an upgraded package that would ultimately cost the consumer much more."

For example, the ACCC was particularly concerned with some photographs in Metricon Qld's brochures that included swimming pools and bali huts adjacent to the house, when Metricon Qld does not supply these features or include them in packages to its customers, and Metricon Qld did not make it clear that these features were not part of the package.

In Her Honour's reasons for ordering penalties of $800,000, Justice Collier described Metricon Qld's conduct as egregious and observed that the houses sold during the relevant period represented a substantial commitment to the consumers involved.

Justice Collier found that the contravening conduct involved participation by senior management of Metricon Qld and observed that its competition and consumer compliance programs in place at the time failed to prevent the contravening conduct.

"If companies run promotions or advertise savings then those savings must be real, not a lure to attract customers to their products over competitors who might be doing the right thing," Mr Sims said.

"This is also another reminder to traders that fine print is not an antidote to misleading headline representations." 

The ACCC was concerned with a number of misrepresentations Metricon Qld made in its promotional material and on its website between January 2009 and August 2011 including:

  • Between July 2010 and January 2011, Metricon Qld published brochures of house designs with photographs that Metricon Qld represented were available from a certain price, when some of those features and fittings were either not available to be provided by Metricon Qld, or were not available at the price represented in the brochures.
  • Between January 2009 and August 2011, Metricon Qld advertised a 'Build Time Guarantee' that guaranteed build times between 14 and 24 weeks for houses it offered to supply, and that it would compensate purchasers for their rental costs if the house was not completed in the guaranteed time.  However, the Build Time Guarantee was subject to terms and conditions which meant that the guarantee did not automatically apply to the majority of houses offered by Metricon Qld during that period.
  • Between July 2009 and December 2010, Metricon Qld ran a number of promotions including the 'Home Expo Promotion' and 'Red Hot Rollback Promotion' containing price lists which included for each of its house designs advertised prices called a 'list price', a 'pay only price' and the amount that would be saved if the house was purchased during the relevant promotion at the 'pay only price'.  Metricon Qld represented that the 'list price' for each of the houses was the price at which each of those houses had been genuinely offered for supply by Metricon Qld immediately prior to the commencement of the promotion.  In fact, the houses had either never been offered for supply by Metricon Qld at all, or had not previously been offered by Metricon Qld at the 'list price' immediately prior to the commencement of the promotion.
  • Between January 2009 and June 2011, Metricon Qld advertised an 'Upgrades Package' which represented that consumers would obtain specific features and fittings which had a normal 'standard price' or 'Recommended Retail Price' and then a discounted 'promotional price' and that consumers would be saving the difference between the total of the 'standard price' or 'Recommended Retail Price' and the 'promotional price' if they acquired the 'Upgrades Package'.  However, immediately before the commencement of the promotion, Metricon Qld had not sold most of the advertised features and fittings at the 'standard price' or the 'Recommended Retail Price' and consumers were accordingly misled about the value and price of the 'Upgrades Package'.

 In addition to the $800,000 in penalties ordered against Metricon Qld, the Federal Court:

  • declared that Metricon Qld had breached sections 52, 53(a), 53(e) and 53(g) of the Trade Practices Act 1974  and in relation to conduct that occurred on or after 1 January 2011, sections 18, 29(1)(a), 29(1)(i) and 29(1)(m) of the Australian Consumer Law;
  • ordered Metricon Qld to pay $50,000 toward the ACCC's costs; and
  • accepted undertakings provided by Metricon Qld that for a period of 3 years it would not make similar misrepresentations.      
Release number: 
NR 159/12
ACCC Infocentre: 

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