ACCC & AER annual report 2016-17

Analysis of performance: Deliver priority consumer law outcomes

Deliverable 2.1: Deliver outcomes to address harm to consumers and small businesses resulting from non-compliance with the Australian Consumer Law

The ACL gives the ACCC a range of remedies and powers to effectively respond to breaches of fair trading and consumer protection laws. To enforce these consumer protection laws, we:

  • institute court proceedings. This year, we commenced 19 new consumer protection- and business protection-related court proceedings
  • accept court enforceable s. 87B undertakings where a breach, or a potential breach, might otherwise justify litigation. This year, we accepted 14 consumer protection-related s. 87B undertakings
  • issue infringement notices. This year, we received payment for 11 infringement notices from nine traders, with penalties totalling $115 200
  • accept an administrative resolution. These generally involve a business agreeing to stop a particular type of conduct, compensate consumers and take other measures to ensure that the conduct does not recur. This year, we resolved a number of matters administratively, with five matters resolved through a formal administrative resolution.

The ACCC action relates to consumer issues in a range of businesses and priority areas including health and medical, vulnerable and disadvantaged consumers, Indigenous consumers and product safety.

A complete list of these proceedings is included in appendix 9.

We achieved significant outcomes in litigated consumer protection matters in 2016–17 in:

  • Reckitt Benckiser—penalties of $6 million
  • Acquire Learning—penalties of $4.5 million
  • Valve Corporation—penalties of $3 million
  • Lifestyle Photographers—penalties of $1.1 million
  • Social-Lites, Elusion and The Joystick Company—penalties totalling $175 000 against the companies and individual CEO and directors
  • Jetstar Airways and Virgin Australia—penalties of $545 000 and $200 000 respectively
  • Ozsale Pty Ltd—penalties of $500 000
  • Advanced Medical Institute—penalties of $350 000
  • Harrison Telecommunication Companies (SoleNet and Sure Telecom)—penalties of $250 000.

Our Compliance and Enforcement Policy governs our annual priorities in this area. In line with these, in this section we have grouped our outcomes under:

  • vulnerable and disadvantaged consumers
  • Indigenous consumers
  • consumer guarantees
  • new car retailing
  • health and medical including private health insurance
  • small business
  • scam disruption
  • other consumer protection outcomes include those in relation to truth in advertising, online consumer issues, issues in telecommunications and energy and contempt of court action.

Vulnerable and disadvantaged consumers

We actively address business practices that affect the interests of vulnerable and disadvantaged consumers, particularly where awareness of consumer rights is low. Where awareness of consumer rights is lower, there is more scope for opportunistic business practices. We address this through education about consumer rights and issues as well as enforcement action.

Consumer rights may be less known by people:

  • who are elderly
  • who are newly arrived in Australia or from a non-English-speaking background
  • with a disability or illness
  • with low reading, writing and numerical skills
  • from a low socio-economic background
  • who are homeless
  • who are living in remote areas.

Protecting Indigenous consumers in remote areas is an enduring priority area for the ACCC which overlaps with the outcomes achieved in relation to vulnerable and disadvantaged consumers. This is further discussed on pages 72 to 74.

In 2016–17, we prioritised the protection of consumers with poor literacy or from Indigenous or non-English-speaking backgrounds. By concentrating our efforts, we can give these consumers extra confidence that their rights are being protected.

Vulnerable and disadvantaged consumers are often subject to unfair or high pressure sales tactics and misleading and deceptive conduct as well as unconscionable conduct. Unconscionable conduct is defined as conduct that is so harsh it goes against good conscience as judged against the norms of society.

Case study: Examples of the protection of vulnerable and disadvantaged consumers—VET FEE-HELP education and training courses

In 2015, the ACCC launched a joint investigation with NSW Fair Trading and worked with other federal and state agencies, including the Department of Education and Training, the Australian Skills and Quality Authority, the Australian Taxation Office, and state-based agencies and consumer protection bodies.

Proceedings were instituted in 2015–16 by the ACCC, and in some matters the Commonwealth on behalf of the Department of Education and Training, in relation to:

  • Unique International College Pty Ltd (Unique), which sells VET FEE-HELP diploma courses
  • Phoenix Institute of Australia Pty Ltd (Phoenix), which sold VET FEE-HELP funded courses in New South Wales, Victoria, Queensland, the Northern Territory and Western Australia between January and October 2015. Community Training Initiatives Pty Ltd (CTI), which assisted Phoenix by providing administrative support and processing enrolment forms
  • Cornerstone Investment Australia Pty Ltd trading as Empower Institute (Empower), which marketed and sold VET FEE-HELP funded courses to consumers in New South Wales, Western Australia, Victoria, Queensland and South Australia.
  • Acquire Learning and Careers Pty Ltd, which is a broker of education services that markets on behalf of registered training organisations that offer vocational courses under the VET FEE-HELP system
  • Australian Institute of Professional Education Pty Ltd (AIPE), which markets and provides courses in Queensland, New South Wales and Western Australia.

It is alleged that the colleges and brokers engaged in door-to-door or face-to-face marketing of VET FEE-HELP courses across various parts of Australia and made false or misleading representations that diploma courses were ‘free’ or government funded, engaged in unconscionable conduct and did not comply with door-to-door selling legislation when enrolling consumers into Commonwealth-funded VET FEE-HELP education and training courses.

It is also alleged that some private colleges and recruiters adopted a strategy and used sales tactics to target low socio-economic areas, including remote and regional communities and Indigenous consumers. In some cases, this included offering ‘free’ gifts or gifts that were ‘free’ if they did not earn more than approximately $50 000 per annum. These gifts included laptops and tablets as an incentive to encourage consumers to sign up to courses. In fact, the laptops or tablets students received were on loan and to be repaid with their VET FEE-HELP debt.

In relation to the private colleges, the ACCC and the Commonwealth sought declarations, injunctions and orders for the repayment of course fees paid by the Commonwealth to the private colleges in respect of any VET FEE-HELP loans cancelled by the court order, as well as costs.

The cases against Phoenix, Empower and AIPE are ongoing.

In May 2017, the Federal Court ordered Acquire to pay penalties of $4.5 million for engaging in unconscionable conduct, making false or misleading representations and breaching the unsolicited consumer agreements provisions in the ACL. This was the second-highest penalty awarded under the ACL. In particular, Justice Murphy acknowledged ‘the deliberateness of the contravening conduct, its nature in targeting vulnerable people, the losses suffered by the Commonwealth, and Acquire’s status as a market leader, indicates a strong requirement for general and specific deterrence.’

The Court also made orders restraining Acquire from making representations about the uses or benefits of enrolling in a course without having a reasonable basis for doing so, that Acquire Learning undertake six-monthly reviews of its existing compliance program for a period of three years to ensure its effectiveness, and that Acquire pay $100 000 towards the ACCC’s costs.

Acquire cooperated with the ACCC’s action, including by making admissions and agreeing joint submissions on penalty which were filed with the Court.

In June 2017, the Federal Court found that Unique made false or misleading representations and engaged in a pattern of behaviour that amounted to unconscionable conduct in breach of the ACL.

The Court found that the use of gifts, including laptops and tablets was part of a system of conduct used to ‘supercharge the exploitation of the disadvantaged group that was being targeted (and also Unique’s remarkable profits)’.

The matter is now listed for a hearing on penalties and other relief on a date to be determined.

In addition to these proceedings, in March 2017 the Australian Vocational Learning Centre Pty Ltd agreed in a court enforceable s. 87B undertaking to cancel enrolments and repay VET FEE-HELP funding to the Commonwealth for students affected by certain marketing practices it admitted breached the ACL, following ACCC investigation.

This s. 87B undertaking follows on from the s. 87B undertaking the ACCC accepted from Careers Australia in May 2016 in relation to in relation to similar conduct.

Court cases

The following cases were finalised in 2016–17.

Table 3.19: Vulnerable and disadvantaged cases finalised

Vulnerable and disadvantaged consumers

Acquire Learning and Careers Pty Ltd

Conduct

commenced

concluded

jurisdiction

outcome

17 December 2015

30 May 2017

Federal Court Melbourne

Pecuniary penalties of $4.5 million

Declarations

Audits of compliance programs

Costs of $100 000

The ACCC alleged that Acquire engaged in unconscionable conduct, making false or misleading representations and breaching the unsolicited consumer agreements provisions in the ACL by its conduct in telemarketing VET FEE-HELP diploma courses between July 2014 and March 2015.

Vulnerable consumers

NRM Corporation Pty Ltd and NRM Trading Pty Ltd t/a Advanced Medical Institute and Jacov Vaisman

Conduct

commenced

concluded

jurisdiction

outcome

21 December 2010

1 December 2016

Federal Court Melbourne

Federal Court fined NRM $350 000 for contempt of court and imposed cost orders on an indemnity basis.

Earlier in July 2016, NRM’s appeal was dismissed

The ACCC alleged that, in promoting and supplying medical services and medications for men suffering from erectile dysfunction and premature ejaculation, AMI and NRM Corporation and NRM Trading Pty Ltd (NRM) engaged in unconscionable conduct.

The ACCC took contempt proceedings in August 2015. NRM has appealed various aspects of the April 2015 judgment. The appeal was dismissed in July 2016.

The following cases were instituted in 2016–17.

Table 3.20: Vulnerable and disadvantaged cases instituted

Vulnerable and disadvantaged consumers

Swishette Pty Ltd and Letore Pty Ltd

Conduct

commenced

jurisdiction

30 March 2017

Federal Court Melbourne

The ACCC alleges that Swishette and Letore were directly or indirectly knowingly concerned in false, misleading and unconscionable conduct engaged in by Clinica Internationale Pty Ltd in relation to a program offering permanent residency to migrants between August 2012 and June 2013.

Vulnerable and disadvantaged

Get Qualified Australia Pty Ltd

Conduct

commenced

jurisdiction

30 March 2017

Federal Court Melbourne

9 September 2016

Federal Court Melbourne

On 27 June 2017, the Federal Court has found that Get Qualified Australia made false or misleading representations and engaged in unconscionable conduct in its supply of services to consumers seeking recognition of their prior learning to gain qualifications, in contravention of the ACL.

Relief hearing to take place on a date to be fixed.

The ACCC alleged that Get Qualified Australia made false or misleading representations and engaged in misleading and unconscionable conduct in connection with its supply of services to consumers seeking recognition of their prior learning to gain qualifications.

The following cases were ongoing at the end of 2016–17.

Table 3.21: Vulnerable and disadvantaged cases ongoing

Vulnerable and disadvantaged consumers

ACM Group Ltd

Conduct

commenced

jurisdiction

2 June 2016

Federal Court Sydney

The ACCC alleges that, between 2011 and 2015, ACM engaged in misleading or deceptive conduct, harassment and coercion, and unconscionable conduct in debt collection dealings with two consumers. In each case, the debt being pursued had been sold to ACM by Telstra.

Vulnerable and disadvantaged consumers

Australian Institute of Professional Education Pty Ltd

Conduct

commenced

jurisdiction

31 March 2016

Federal Court Sydney

The ACCC and the Commonwealth allege that AIPE made false or misleading representations and engaged in unconscionable conduct when marketing and selling VET FEE-HELP funded courses between 1 May 2013 and 1 December 2015 in NSW, Queensland and WA.

Vulnerable and disadvantaged consumers

Cornerstone Investment Australia Pty Ltd t/a Empower Institute

Conduct

commenced

jurisdiction

9 December 2015

Federal Court Sydney

The ACCC alleges that, from March 2014, Empower made false or misleading representations and engaged in misleading or deceptive and unconscionable conduct when marketing and selling VET FEE-HELP funded courses to consumers in remote communities and low socio-economic areas in NSW, WA, Victoria, Queensland and SA.

Vulnerable and disadvantaged consumers

Phoenix Institute of Australia Pty Ltd & Community Training Initiatives

Conduct

commenced

jurisdiction

24 November 2015

Federal Court Sydney

The ACCC alleges that Phoenix made false or misleading representations and engaged in unconscionable conduct when marketing and selling VET FEE-HELP funded courses between January 2015 and October 2015 in NSW, Victoria, Queensland, NT and WA.

Vulnerable and disadvantaged consumers

Unique International College Pty Ltd

Conduct

commenced

jurisdiction

27 October 2015

Federal Court Sydney

ACCC alleged that Unique made false or misleading representations and engaged in misleading or deceptive and unconscionable conduct when selling VET FEE-HELP funded courses between July 2014 and September 2015 in NSW.

Vulnerable and disadvantaged consumers

Clinical Internationale Pty Ltd (appeal)

Conduct

commenced

jurisdiction

15 May 2015

Federal Court Melbourne

Mr Radovan Laski, Swishette Pty Ltd and Letore Pty Ltd (companies controlled by Mr Laski) lodged an appeal against some of the orders that Mortimer J made on 23 March 2016, which included refund payments, penalties totalling $1.025 million and disqualification orders against Mr Laski from managing corporations for five years.

The ACCC alleged that Clinica made false or misleading representations and engaged in misleading conduct and unconscionable conduct in relation to a program offering migrants training and employment that it represented would lead to permanent residency in Australia.

Undertakings

The following s. 87B court enforceable undertakings were finalised in 2016–17. Details of the s. 87B undertakings are in appendix 8.

Table 3.22: Undertakings regarding vulnerable and disadvantaged consumers finalised

Australian Vocational Learning Centre Pty Ltd

s. 87B undertaking dated 22 March 2017

The ACCC accepted a court enforceable undertaking from Australian Vocational Learning Centre Pty Ltd in relation to its marketing practices and enrolment of consumers in its VET FEE-HELP courses.

Easy Meals by Flavour Makers Pty Ltd

s. 87B undertaking dated 16 August 2016

The ACCC accepted a court enforceable undertaking from Easy Meals by Flavour Makers Pty Ltd (Easy Meals) in relation to its conduct in the marketing and supply of its pre-packaged meals to consumers, particularly those with diabetic conditions.

Consumers with disability

In 2016–17 the ACCC led a joint project with the other ACL regulators to provide information to consumers with disability, as well as businesses and not-for-profit organisations, in the newly introduced National Disability Insurance Scheme (NDIS) about their rights and obligations under the ACL.

In December 2016 the ACCC and ACL regulators released seven educational resources that seek to empower people with disability to use their consumer rights when buying goods and services under the NDIS and also educate new and existing businesses about their obligations under the ACL.

The resources are designed to cater to different levels of comprehension and literacy. The resources include an industry guide, a consumer guide, a fact sheet, an Easy English guide (translated into eight languages), stakeholder training PowerPoint presentations and two educational videos. The videos are available in a variety of accessibility formats, including closed captions, AUSLAN with audio descriptions and DVD.

Indigenous consumers

In 2016–17 Indigenous consumer issues were elevated to an enduring priority. This is a significant change to our policy, recognising that Indigenous consumers, particularly those living in remote areas, continue to face challenges in asserting their consumer rights. This means that we will always prioritise our work in this area while challenges remain.

Our work this year has also aimed to assist Indigenous consumers by:

  • raising awareness of their rights
  • improving access to our services
  • increasing our capacity to detect unscrupulous traders operating in remote communities
  • vigorously enforcing the law.

Unfortunately, Indigenous communities are often the target of unfair sales tactics.

We continue to forge partnerships with remote communities and key stakeholders to improve consumer literacy, build Indigenous consumers’ confidence to report consumer law breaches, and detect and stop illegal conduct at an early stage.

The Do Not Knock informed (DNKi) project seeks to remind traders of their ACL obligations and empower consumers to enforce their consumer rights by reporting unlawful conduct to the ACCC. DNKi is a collaboration between the ACCC, the Queensland Office of Fair Trading, the Indigenous Consumer Assistance Network (ICAN) and Aboriginal shire councils.

In April 2016 the first DNKi Indigenous community signage project was launched in Wujal Wujal in northern Queensland. In May 2017 the project was rolled out in the Yarrabah community. We have plans to introduce the project to the Hope Vale community in July 2017.

Six months after the Wujal Wujal DNKi project launch, that community’s justice group advised the ACCC that they had noticed a ‘significant reduction’ in the number of itinerant traders visiting that community. Also, they said that residents were much more confident to question trader activity.

In addition to the case study on page 72 involving VET FEE-HELP education and training courses and the protection of vulnerable and disadvantaged consumers (including some Indigenous consumers), the following case study highlights outcomes in relation to this enduring priority.

Case study: Examples of consumer protection issues affecting Indigenous consumers

The ACL contains rules governing unsolicited sales and ‘free’ offers. Businesses must comply with these rules when selling to customers.

‘Free’ offers to disadvantaged consumers

In 2015 the ACCC took legal action against Expression Sessions, alleging that their representations to consumers were false or misleading.

We alleged that between 2012 and 2014 Expression Sessions, which sells photography packages, was offering customers a ‘free’ photo shoot or ‘free’ photographs, telling customers they would be able to receive photographs of their children at no cost and without entering into a contract. In fact, customers were not able to receive free photographs and were required to enter into a contract with Expression Sessions to purchase photographs.

Expression Sessions’ customers were in many cases Aboriginal or Torres Strait Islander people or were financially disadvantaged. In addition, it appeared that some of the customers were in considerable financial distress or had a limited capacity to understand commercial contracts.

Expression Sessions failed to clearly advise its customers of the total price of their photographic products at the time the customers signed the contract.

We considered that Expression Sessions acted unconscionably by using unfair sales tactics, putting undue pressure on customers and failing to provide clear and accurate information about its contractual terms.

The judgment noted that Lifestyle’s conduct involved ‘a system of conduct in respect of a number of consumers, and potentially numerous individual consumers’.

In considering whether the proposed penalty was appropriate, it stated that Lifestyle’s ‘behaviour and use of unfair sales tactics was intentional and deliberate … the acts or omissions arose out of an intentional exploitation of the characteristics of consumers, namely parents or grandparents … the non-disclosure of price information at the time of the photo shoot was devised and directed by senior management …’.

The Federal Court ordered by consent that Lifestyle pay a pecuniary penalty of $1.1 million. The Court also ordered a declaration, injunctions, a corrective notice, refunds through the consumer redress scheme and payment of the ACCC’s costs.

Court cases

Table 3.23: Cases finalised regarding Indigenous consumers

Indigenous consumers

Lifestyle Photographers Pty Ltd t/a Expression Sessions

Conduct

commenced

concluded

jurisdiction

outcome

18 September 2015

20 December 2016

Federal Court Sydney

Pecuniary penalty of $1.1 million

Declarations that conduct unconscionable and contracts void ab initio

Injunctions

Corrective notice

Payment of ACCC’s costs.

The ACCC alleged that Expression Sessions made false or misleading representations and engaged in misleading or deceptive and unconscionable conduct when selling photography products.

Lifestyle entered into voluntary administration on 4 January 2016. On 29 December 2015, six days prior to entering into voluntary administration, Lifestyle was sold to a company called Easy Payments Pty Ltd, controlled by the respondent’s director’s wife, Mrs Zelda Baravykas.

Consumer guarantees

Under the Australian Consumer Law, when a consumer buys products and services, those products and services come with automatic guarantees that they will work and do what the consumer expects them to do. If the consumer buys a product that does not perform as expected, they have consumer rights. If a business fails to deliver any of these guarantees, there are consumer rights for repair, replacement or refund; cancelling a service; or compensation for damages and loss. The ACCC has powers to enforce compliance with the ACL where businesses mislead consumers about their rights under consumer guarantees.

Consumer guarantees ensure that consumers are not disadvantaged if they unknowingly buy defective products. It is important that consumers are aware of their rights when purchasing goods; and that businesses act in accordance with the ACL and do not try to mislead consumers about the extent of these rights.

Questions and complaints about guarantees and warranties are one of the most common reasons why consumers contact us and other ACL regulators.

In 2016–17, under our Compliance and Enforcement Policy, the ACCC continued to focus on representations that large retailers make about express and extended warranties as well as consumer guarantee claims in relation to the airline industry.

Case study: Example of action to prevent companies misleading consumers about extended warranties

In 2017, the ACCC conducted an industry-wide review of extended warranty selling practices including the content of extended warranty plan brochures provided to consumers at the point of sale. In particular, the ACCC was concerned with the conduct of some retailers overstating the benefits of buying an extended warranty, when consumers have the free protection of consumer guarantees under the ACL.

After further investigation, the ACCC accepted s. 87B undertakings from Domestic & General Services Pty Ltd (DGSP) which provides support services to retailers offering extended warranty products and Yoogalu Pty Ltd (Yoogalu) which is owned by the Harvey Norman Group and designed the extended warranty program sold at stores branded with the trademarks Harvey Norman®, Domayne® and Joyce Mayne®.

DGSP and Yoogalu were engaging in marketing practices that the ACCC considered could confuse and in some cases mislead consumers by insufficiently disclosing or misrepresenting the degree of overlap and differences between extended warranty rights and rights and remedies automatically available under the ACL.

The undertakings require each of DGSP and Yoogalu to:

  • engage with retailers to revise extended warranty brochures to include additional information to assist consumers in comparing the features of the extended warranty being sold with the existing remedies available under the ACL
  • provide ACL compliance training to those retailers
  • develop and implement a program for monitoring retailers’ extended warranty selling practices, including by mystery shopping, and if necessary take action to improve those practices.

The DGSP and Yoogalu s. 87B undertakings follow similar measures agreed with Lumley and Virginia Surety Company last year. As a result of these four s. 87B undertakings, all major Australian retailers that offer extended warranties to consumers of electronics, domestic appliances and white goods will receive compliance training and have their selling practices monitored. The s. 87B undertakings also require the retailers to provide regular reports to the ACCC on the implementation of their obligations.

Details of the s. 87B undertakings are provided in appendix 8.

Court cases

The following proceedings were instituted in 2016–17.

Table 3.24: Consumer guarantees proceedings instituted

Misleading representations—consumer guarantees

Apple Pty Ltd and Apple Inc.

Conduct

commenced

jurisdiction

6 April 2017

Federal Court Melbourne

The ACCC alleges that Apple and Apple Inc made false, misleading or deceptive representations to consumers in-store, online and during telephone calls about consumers’ rights in respect of defective Apple devices if those devices had been repaired by a ‘third party’.

The following matters were ongoing at the end of 2016–17.

Table 3.25: Consumer guarantees ongoing proceedings

Misleading representations—consumer guarantees

MSY Technology Pty Ltd

Conduct

commenced

jurisdiction

1 December 2016

Federal Court Sydney

The ACCC alleges that MSY, MSY Group Pty Ltd and MSY Technology (NSW) Pty Ltd misrepresented consumers’ rights to remedies for faulty products in contravention of the ACL.

Misleading representations—consumer guarantees

LG Electronics Australia Pty Ltd

Conduct

commenced

jurisdiction

15 December 2015

Federal Court Melbourne

The ACCC alleges that LG made false or misleading representations to consumers about their rights in relation to faulty LG products.

Misleading representations—consumer guarantees

Valve Corporation Pty Ltd (appeal)

Conduct

commenced

jurisdiction

10 December 2015

Federal Court Sydney

Pecuniary penalty of $3 million

Injunction for three years

Publish a consumer rights notice

Establish a consumer law compliance program under the ACL for each Valve employee and maintain it for threee years Pay ACCC costs as ordered.

The ACCC has filed a cross- appeal in relation to two findings. Valve has filed an appeal against the findings of the Court, penalties and other orders.

The ACCC alleges that Valve made false or misleading representations to consumers about their rights in relation to refunds concerning computer games sold by Valve through the online platform known as ‘Steam’.

Undertakings

The following s. 87B undertakings were finalised in 2016–17. Details of the s. 87B undertakings are in appendix 8.

Table 3.26: Consumer guarantees undertakings finalised

Yoogalu Pty Ltd

s. 87B undertaking dated 11 May 2017

The ACCC accepted a court enforceable undertaking from Yoogalu to revise its extended warranty drafting and selling practices.

Domestic & General Services Pty Ltd

s. 87B undertaking dated 11 May 2017

The ACCC accepted a court enforceable undertaking from Domestic & General Services to revise its extended warranty drafting and selling practices.

Virginia Surety Company, Inc.

s. 87B undertaking dated 7 November 2016

The ACCC accepted a court enforceable undertaking from Virginia Surety Company, Inc. to revise its extended warranty drafting and selling practices.

Ozsale Pty Ltd

s. 87B undertaking dated 27 July 2016

The ACCC accepted a court enforceable undertaking from Ozsale Pty Ltd in relation to terms and conditions displayed across its multiple online platforms. The terms and conditions included a number of false or misleading representations to consumers regarding their consumer guarantee rights.

Infringement notices

The following infringement notice was paid in 2016–17.

Table 3.27: Consumer guarantees infringement notices paid

Ozsale Pty Ltd

26 July 2016

One notice totalling $10 800

The ACCC issued an infringement notice because it had reasonable grounds to believe that the terms and conditions displayed across all online sales platforms operated by Ozsale included a number of false or misleading representations about consumers’ rights to remedies for faulty goods.

New car retailing

Consumer issues arising in relation to new car retailing is a priority area in the 2017 ACCC Compliance and Enforcement Policy. This also includes car retailers’ and manufacturers’ responses to consumer guarantee claims. More recently, the ACCC’s focus in new car retailing has related to misleading or deceptive conduct and false and misleading representations made by car manufacturers about vehicle emission claims.

On 17 June 2016 we announced that we would be undertaking a market study of the new car retailing industry.

The market study’s purpose is to gain a better understanding of how the industry operates while focusing on key issues that have come to the ACCC’s attention. In particular, these are practices relating to:

  • consumer guarantees and warranties
  • fuel consumption, carbon dioxide (CO2) and noxious emissions, and car performance
  • access to repair and service information and data.

The draft report was released on 10 August 2017 and the final report is due to be released in late 2017.

The following proceedings were instituted in 2016–17.

Table 3.28: New car retailing proceedings instituted

Car retailing

Audi Aktiengesellschaft, Audi Australia Pty Ltd and Volkswagen Aktiengesellschaft

Conduct

commenced

jurisdiction

7 March 2017

Federal Court Sydney

The ACCC alleges that Audi Aktiengesellschaft (Audi AG) and its Australian subsidiary Audi Australia Pty Ltd (Audi Australia) engaged in misleading or deceptive conduct, made false or misleading representations and engaged in conduct liable to mislead the public in relation to certain diesel vehicle emission claims, and that their owner German company Volkswagen Aktiengesellschaft (VWAG) was knowingly concerned in this conduct.

Car retailing

Volkswagen Aktiengesellschaft and Volkswagen Group Australia Pty Ltd

Conduct

commenced

jurisdiction

31 August 2016

Federal Court Sydney

The ACCC alleges misleading or deceptive conduct, false or misleading representations and conduct liable to mislead the public by Volkswagen in relation to diesel vehicle emission claims.

Medical and health

In 2016–17 competition and consumer issues in the health and medical sector were an ACCC priority, including in relation to the private health industry.

Our work in this area aims to increase awareness within the medical profession and the broader health industry about both rights and obligations under the law. We use market research and analysis to identify risks to consumers and the competitive process that may require intervention. These reviews also help us to identify industry good practice and encourage it more broadly within the sector. Publicising this work can help inform consumers, encourage public debate over competition and consumer matters and inform policy consideration.

In October 2016 we released our report on the private health industry, Communicating changes to private health insurance benefits. The report focused on how changes in private health insurance benefits affect, and are communicated to, consumers.

The ACCC found that that some insurers had poor practices around notifying consumers of cuts to their insurance coverage and benefits. These practices can lead to bill shock, inadequate cover and reduced access to healthcare. The report found examples of insurers:

  • not notifying consumers of reductions in their coverage or benefits, including changes to insurers’ arrangements with healthcare service providers
  • using unclear, uninformative or misleading information to notify consumers of reductions in their insurance coverage or benefits.

Also, the ACCC found that complexity in the Australian private health insurance market continues to increase. This is making it harder for consumers to understand and react when insurers change their coverage or benefits.

In 2016–17 we began work on our 18th annual report to the Senate on anti-competitive practices in the private health insurance industry for the 2015–16 financial year (Private health insurance 2015–16 report). The focus of this year’s report will be on providing an update on key consumer and competition developments and trends for 2015–16. In February 2017 we invited public submissions to the report. The report was published Ju;y 2017.

Our work in the area of health extends to investigating claims made by companies such as Reckitt Benckiser (Australia) Pty Ltd (in the following case study), and Elusion, Joystick and Social-Lites (in the case study on page 92). We also continued our work on representations made by health funds relating to their health insurance products with the institution of proceedings against NIB Health Funds Ltd.

Case study: Reckitt Benckiser Australia Pty Ltd

In December 2016 the Full Federal Court ordered Reckitt Benckiser Australia Pty Ltd to pay a penalty of $6 million for engaging in misleading or deceptive conduct in relation to advertising of its Nurofen Specific Pain products. This is the highest corporate penalty ever awarded for misleading conduct under the ACL.

The ACCC originally instituted proceedings in 2015 alleging that, between 2011 and 2015, Reckitt Benckiser had made representations on its website and product packaging that Nurofen Specific Pain products were each formulated to specifically treat a particular type of pain, when this was not the case.

In fact, each Nurofen Specific Pain product contains the same active ingredient—ibuprofen lysine 342 mg, which treats a wide variety of pain conditions—and is no more effective at treating the type of pain described on its packaging than any of the other Nurofen Specific Pain products.

In December 2015, following admissions by Reckitt Benckiser, the Federal Court found that Reckitt Benckiser had engaged in misleading or deceptive conduct and ordered Reckitt Benckiser to pay penalties totalling $1.7 million.

In May 2016 the ACCC appealed the decision of the Federal Court in respect of the amount of the penalty. The ACCC submitted that, to send a strong deterrence message, a penalty of at least $6 million was appropriate, taking into account the longstanding and widespread nature of the conduct and the substantial sales and profit that the company made by selling the product.

In December 2016 the Full Court ordered Benckiser to pay a revised penalty of $6 million (up from $1.7 million).

Following the Full Court’s decision, Reckitt Benckiser applied for special leave to appeal to the High Court of Australia on a number of grounds, including that the Full Court had erred in its assessment of consumer loss and in finding that the original penalty was manifestly inadequate.

On 5 April 2017 the High Court dismissed Reckitt Benckiser’s special leave application with costs.

Court cases

The following cases were finalised in 2016–17.

Table 3.29: Health and medical cases finalised

Elusion New Zealand Ltd

Social-Lites Pty Ltd

The Joystick Company Pty Ltd

See the case study on page 94 for details.

The following proceedings were instituted in 2016–17.

Table 3.30: Health and medical proceedings instituted

Misleading representations

NIB Health Funds Ltd

commenced

jurisdiction

30 May 2017

Federal Court Melbourne

The ACCC alleges that NIB failed to notify members in advance of its decision to remove certain eye procedures from its ‘MediGap Scheme’ (MediGap Change) in 2015. Under the MediGap Scheme, members had previously been able to obtain these eye procedures without facing out-of-pocket costs when doctors participated in the scheme.

The following cases were ongoing at the end of 2016–17.

Table 3.31: Health and medical cases ongoing

Misleading representations and unconscionable conduct

Medibank Private Ltd

commenced

jurisdiction

16 June 2016

Federal Court Melbourne

The ACCC alleges that Medibank engaged in misleading and unconscionable conduct when it failed to notify Medibank members and members of its subsidiary brand, ahm, of its decision to limit benefits paid to members for in-hospital pathology and radiology services.

Administrative resolutions

We continue to analyse selected industries to improve our understanding of industry practices and dynamics. In particular, in 2017 the ACCC is looking closely at misleading behaviour that may be driven by sales commissions, particularly in industries that enjoy a high level of trust and where commissions may not be expected, including the medical industry.

Case study: Hearing aid industry

In 2016–17, the ACCC was alerted to potential consumer protection issues in the hearing aid industry through ABC Radio National’s Background Briefing program, Have I got a hearing aid for you. To better understand the issues, the ACCC conducted enquiries with consumers and industry participants, including an online survey.

As part of its enquiries, the ACCC conducted an online survey through its public consultation hub and received 85 responses: 59 from consumers and 26 from industry. We contacted a number of survey respondents to obtain further information about their concerns. The ACCC also contacted the 10 largest hearing clinic operators to obtain information about their sales practices.

The ACCC identified that sales in the supply of hearing aids may be driven by commission-based sales models and other incentives rather than the consumer’s needs. This often involved vulnerable consumers in what might have been considered a trusted healthcare relationship.

Not all clinics or clinicians engage in the concerning conduct that was brought to our attention however, sales models in the hearing aid industry are contributing to clinicians supplying hearing aids that are unnecessary or more expensive than a consumer needs, and this has the potential to cause widespread consumer detriment.

The ACCC put the industry on notice and released a public report to encourage industry to reconsider commissions, disclosures and sales practices in the context of the ACL. Guidance material was also published to assist consumers to make an informed choice when purchasing hearing aids.

We encouraged consumers and clinicians to contact the ACCC with any specific consumer protection concerns about the sale of hearing aids and will not hesitate to take further enforcement action.

The following administrative resolutions were finalised in 2016–17.

Table 3.32: Health and medical administrative resolutions finalised

EBOS Group Ltd, on behalf of its subsidiary Symbion Pty Ltd, the owner of the Chemmart pharmacy franchise

12 September 2016

The ACCC accepted an administrative undertaking on behalf of Chemmart in relation to representations about the effectiveness of a myDNA genetic test in identifying an individual’s response to certain drugs.

The ACCC was concerned that statements in Chemmart’s catalogues, television infomercials, in-store brochures and other promotional materials about the myDNA test could give a false or misleading impression regarding the usefulness of the genetic test and the consumers for whom it may be appropriate.

Chemmart withdrew all of the promotional materials containing the statements of concern to the ACCC. Chemmart also agreed to refrain from making any statements in the future about the myDNA test that have the potential to mislead consumers about the applicability and effectiveness of the test.

IVF clinics

14 November 2016

Following an ACCC investigation, several major IVF clinics made changes to claims published on their websites about the success rate for clinical pregnancy.

The ACCC was concerned that website content from all major Australian IVF clinics made success-rate comparisons without adequate disclosure about, or qualification of, the nature of the data or graphics used to make the claim. In addition, some IVF clinics used technical terms understood by industry participants but which may be misleading to consumers without further clarification or explanation.

For example, some IVF clinics used ‘clinical pregnancy rate’ data to compare their success rates where that data reflected the clinic’s success in creating an embryo, rather than live birth rates. These comparisons were sometimes accompanied by photographs of newborn babies. The ACCC considered that this was likely to lead to consumers being given a misleading impression about the rate of successful pregnancies achieved by the clinic.

The ACCC’s investigation followed a complaint from the Australian Health Practitioner Regulation Agency.

As part of its review, the ACCC worked with the Fertility Society of Australia, the IVF industry’s peak body, to improve industry-wide awareness of, and compliance with, the Australian Consumer Law. The Fertility Society of Australia is continuing to work with industry participants to improve transparency about success.

Small business

Small business is an important part of the Australian economy. Currently there are more than two million small businesses actively trading across the country. However, small businesses are vulnerable given the comparatively low levels of resources and market power they have when compared with large businesses.

For further information in relation to the ACCC’s enforcement outcomes in protecting small businesses under the 2016 and 2017 Compliance and Enforcement Policy, see page 127 under Deliverable 2.4: Support a vibrant small business sector. There is often overlap between the ACCC’s consumer protection enforcement outcomes in relation to small business and competition and consumer issues in the agriculture sector (including in relation to industry codes). These outcomes are also included under Deliverable 2.4.

Scam disruption

The ACCC plays an important role in educating Australians about how to protect themselves from scams. This remained a priority issue in 2016–17.

A scam is a fraudulent business or scheme which takes money or other goods from an unsuspecting person. Scams can have a significant financial impact on individuals and businesses. They target people of all backgrounds, ages and income levels. Every year scams cost Australians millions of dollars and cause considerable non-financial harm.

The ACCC actively targets scam activity and works on several fronts to prevent and minimise the harm that scams cause, including through ongoing education, communication and media stories, and disruption work and enforcement action where possible.

In May 2017 we released Targeting scams, which reported on scams activity in the calendar year 2016. In 2016 we received 155 035 scam-related contacts from consumers and small businesses, with reported financial losses totalling $83 563 599. We also reviewed data from other jurisdictions that receive reports or detect scams to gain a clearer picture of the significance of losses caused by scam activity in Australia. Reports to the Australian Cybercrime Online Reporting Network (ACORN) revealed losses of over $204 million.1

Additionally, various scam disruption programs operated by the ACCC and other agencies detect instances of Australians sending funds to high-risk jurisdictions. A combined estimate of losses to this unreported scam activity is $11.5 million. Scamwatch and ACORN data in combination with losses detected through scam disruption work, indicates total scam losses of almost $300 million.

The little black book of scams

The little black book of scams is an ACCC publication that highlights a variety of popular scams that regularly target Australian consumers and small businesses.

In 2016–17 the ACCC released a new version of this publication, updated to reflect the latest scam data. The updated version is now available to the public to help educate them on avoiding scams.

The little black book of scams is recognised internationally as an important tool that helps consumers and small businesses to learn about scams. It has been used as a model overseas: in 2012 the Competition Bureau in Canada and the Metropolitan Police Service in the UK released their own versions of The little black book of scams.

Australasian Consumer Fraud Taskforce

The ACCC is the chair of the Australasian Consumer Fraud Taskforce (ACFT). The ACFT is made up of over 20 government regulatory agencies and departments in Australia and New Zealand that work alongside private sector, community and non-government partners to prevent fraud. This coordinated response is the most effective approach to minimising consumer harm.

National Consumer Fraud Week

National Consumer Fraud Week is an annual campaign run by the ACFT to raise awareness of scam activity within our community. In 2017 the focus of the campaign was on social media scams.

Using the theme ‘Spot social media scams’, the campaign encouraged users of social media to be particularly alert to dating and romance scams and fake trader scams. The aim was to raise awareness about the types of social scams that exist, how to identify and avoid scams, and actions that consumers can take if they have been scammed.

Every National Consumer Fraud Week campaign is supported by ACFT members and campaign partners. For the 2017 Fraud Week, ACFT members and campaign partners promoted the campaign by posting social media content, publicising online content, generating media coverage, developing images and discussing the campaign in their electronic newsletters.

Scamwatch

The ACCC uses a range of media and communications channels to raise community awareness about scams.

Our Scamwatch website (www.scamwatch.gov.au) received over 2.3 million visitors in 2016–17. We also distributed 15 Scamwatch radar email alerts on emerging scams to almost 59 000 subscribers as part of our free alert service.

We use our Scamwatch Twitter profile (@Scamwatch_gov) to provide information to Australian consumers and businesses about scams that are targeting them. In 2016–17 we posted almost 230 tweets and retweets to our 14 000 followers.

Scam disruption project

In August 2014 we commenced a scam disruption project aimed at stopping scam victims from sending more money to scammers.

The project alerts at-risk individuals to the possibility that they may be a victim of a scam. The project uses financial intelligence to identify Australians who are sending funds to two high-risk jurisdictions and advises them they may have been targeted by a scam.

Since the program commenced, the ACCC has sent more than 8700 letters to potential scam victims.

Approximately 68 per cent of those who received our warning letters stopped sending money overseas within six weeks of receiving the letter.

Court cases

The following case was finalised in 2016–17.

Table 3.33: Scam cases finalised

Scam

Sensaslim Australia Pty Ltd & Ors

Conduct

commenced

concluded

jurisdiction

outcome

15 July 2011

24 November 2016

Federal Court Sydney

Injunctions

Pecuniary penalty of $3.55 million against Sensaslim.

Penalty of $660 000 against Mr Peter Foster and permanent disqualification from managing corporation.

Penalty of $75 000 against Mr Michael Boyle and 3-year disqualification from managing a corporation.

Penalty of $55 000 against Mr Peter O’Brien and 10-year disqualification from managing a corporation.

Mr Foster and Mr O’Brien to pay ACCC costs.

Appeal by Mr Foster dismissed by Federal Court in November 2016.

The ACCC alleged that Sensaslim and several of its officers engaged in misleading and deceptive conduct and made false representations in relation to the identity of Sensaslim officers, the Sensaslim Spray and the business opportunities offered by Sensaslim.

The following case was ongoing at the end of 2016–17.

Table 3.34: Scam cases instituted

Scam

ABG Pages Pty Ltd

Conduct

commenced

jurisdiction

15 December 2016
Federal Court Brisbane

The ACCC alleges that ABG Pages engaged in misleading or deceptive conduct, false or misleading representations, undue harassment and systemic unconscionable conduct in its dealings with small businesses that were actual or potential customers of its online business directory service.

For details see the case study on page 128.

Product safety

Consumers have a right to expect that products they buy work properly and do not present an unreasonable risk of causing illness or injury. Under the ACL consumer products are expected to meet the consumer guarantee by being of acceptable quality, including being safe.

The ACCC’s product safety enforcement work is discussed further on page 124.

Other work promoting consumer protection

Truth in advertising

In 2015, truth in advertising was a priority area for the ACCC, with a focus on stopping consumers from being misled and ensuring honest traders were not put at a competitive disadvantage.

The ACCC has ongoing cases in this priority area but in 2016–17 we also prioritised matters where misleading claims are made by large business with the potential to result in greater consumer detriment from their actions, and the likelihood that conduct of larger businesses can influence the behaviour of other market participants. This action demonstrates these priority factors outlined in the 2017 Compliance and Enforcement Policy.

Case study: Truth in advertising

In December 2016 the ACCC instituted proceedings in the Federal Court against Kimberly-Clark Australia Pty Ltd (Kimberly-Clark) and separately against Pental Limited and Pental Products Pty Ltd (together Pental) alleging that they each made false or misleading representations in relation to ‘flushable’ wipes they marketed and supplied in Australia.

The companies marketed products as ‘flushable’, which suggests that the wipes are similar to toilet paper and are suitable to be flushed down the toilet. However, ACCC inquiries indicated that these products were not suitable to be flushed because they do not disintegrate like toilet paper. Australian water authorities face significant problems when non-suitable products are flushed down the toilet, as they contribute to blockages in household and municipal sewerage systems.

We were concerned that, by labelling these products as ‘flushable’, consumers would be led to believe that the products had similar characteristics to toilet paper, would break up or disintegrate in a time frame and manner similar to toilet paper, and are suitable to be flushed down the toilet, when this is not the case.

In the proceedings brought against Kimberley-Clark, the ACCC alleges that, between May 2013 and May 2016, Kimberly-Clark variously advertised its personal hygiene wipes, Kleenex Cottonelle Flushable Cleansing Cloths, as ‘flushable’, ‘completely flushable’, ‘able to be flushed in the toilet’, and able to ‘break down in sewerage system or septic tank’.

On its FAQ website for flushable wipes for children, Kimberly-Clark also stated that the wipes would ‘break up in the sewerage or septic system like toilet paper’.

The ACCC also alleges that Kimberly-Clark advertised that these products were made in Australia when that was not the case.

In the proceedings brought against Pental, the ACCC alleges that, between February 2011 and August 2016, Pental advertised its bathroom cleaning wipes, White King Power Clean Flushable Toilet Wipes (also called White King Flushable Bathroom Power Wipes) as a ‘flushable toilet wipe’ that disintegrated like toilet paper.

Pental’s packaging and promotional materials included statements such as ‘Simply wipe over the hard surface of the toilet … and just flush away’, and that its flushable wipes ‘are made from a specially designed material, which will disintegrate in the sewage system when flushed, just like toilet paper’.

The ACCC alleges that, by making these representations, Kimberly-Clark and Pental engaged in misleading and deceptive conduct and made false or misleading representations, in contravention of the ACL.

In both proceedings, the ACCC is seeking declarations, pecuniary penalties, injunctions, corrective notices, compliance program orders and costs.

ACCC action concerning representations regarding toxic chemicals in e-cigarettes

In 2017 the Federal Court ordered online retailers Social-Lites Pty Ltd (Social-Lites), Elusion New Zealand Limited (Elusion) and The Joystick Company Pty Ltd (Joystick) and their directors to pay pecuniary penalties for misleading representations and engaging in misleading conduct by making statements on their websites that their e-cigarette products did not contain the carcinogens or toxic chemicals found in conventional cigarettes.

The ACCC instituted separate proceedings against the companies in June and September 2016 in the Federal Court.

Independent testing commissioned by the ACCC found that the e-cigarette products sold by Social-Lites and Elusion did in fact contain carcinogens and toxic chemicals found in conventional cigarettes, including formaldehyde, acetaldehyde and acrolein.

Formaldehyde is classified by the World Health Organization International Agency for Cancer Research (IARC) as a Group 1A carcinogen, meaning there is sufficient evidence to show it is carcinogenic to humans. The IARC classifies acetaldehyde as a Group 2B carcinogen. That classification is applied to a chemical agent that has been evaluated as being possibly carcinogenic to humans. The World Health Organization classifies acrolein as a toxic chemical. It is also listed as a dangerous poison in Schedule 7 of the Poisons Standard of the Therapeutic Goods Act 1989 (Cth).

The ACCC took these cases because of concerns that the representations related to consumers’ health and that consumers are likely to base their purchasing decisions on these types of representations. Also, the ACCC was concerned that consumers had no easy way to validate the representations that the companies made.

The ACCC took action against Joystick and its director after the company failed to pay infringement notices issued by the ACCC in respect of its conduct. This reflects the ACCC’s policy to consider litigation against businesses that do not pay infringement notices.

In May 2017 the Federal Court found that Social-Lites, Elusion and Joystick had breached the ACL by making false and misleading representations about the content of their e-cigarette products. The Federal Court also found that the directors of Joystick and Elusion, and the CEO of Social-Lites, were knowingly concerned in the contravening conduct of their respective companies. Following admissions made by each of the companies and individuals and joint submissions on penalties, the Federal Court ordered that:

  • Joystick pay a pecuniary penalty of $50 000 and its director pay a penalty of $10 000
  • Social-Lites pay a pecuniary penalty of $50 000 and its CEO pay a penalty of $10 000
  • Elusion pay a pecuniary penalty of $40 000 and its director pay a penalty of $15 000.

The ACCC understands that this is the first time any regulator in the world has successfully taken action for false and misleading claims about the presence of carcinogens in e-cigarettes.

Since instituting proceedings, the ACCC has written to over 30 Australian e-cigarette suppliers reminding them of their ACL obligations—in particular, to ensure that information they provide to consumers is accurate.

Court cases

The following cases were finalised in 2016–17.

Table 3.35: Truth in advertising claims cases finalised

False and misleading conduct

Duluxgroup (Australia) Pty Ltd

Conduct

commenced

concluded

jurisdiction

outcome

5 December 2012

2 November 2016

Federal Court Perth

Pecuniary penalty of $400 000, undertaking to court, declarations, corrective notices in newspaper and on Dulux’s webpage, and payment of 150 000 costs.

The ACCC alleged that Dulux made false, misleading or deceptive representations about the temperature reducing capabilities of its InfraCOOL and Weathershield Heat Reflect paints.

The following truth in advertising claims cases were instituted in 2016–17.

Table 3.36: Truth in advertising claims cases instituted

Credence claims

Kimberley-Clark Australia Pty Ltd

Conduct

commenced

jurisdiction

12 December 2016

Federal Court Sydney

The ACCC alleges that Kimberley-Clark made false or misleading representations in relation to ‘flushable’ wipes it marketed and supplied in Australia.

For details see the case study on page 91.

Credence claims

Pental Limited & Pental Products Pty Ltd

Conduct

commenced

jurisdiction

12 December 2016

Federal Court Sydney

The ACCC alleges that Pental made false or misleading representations in relation to ‘flushable’ wipes it marketed and supplied in Australia.

For details see the case study on page 91.

The following cases are ongoing.

Table 3.37: Truth in advertising claims cases ongoing

Credence claims

HJ Heinz Company Australia Ltd

Conduct

commenced

jurisdiction

21 June 2016

Federal Court Adelaide

The ACCC alleges that Heinz used particular statements and images on certain products that represented to consumers that those products are of equivalent nutritional value to fruit and vegetables and are a healthy and nutritious food for children aged one to three years, when this is not the case.

Credence claims

Snowdale Holdings Pty Ltd

Conduct

commenced

jurisdiction

outcome

9 December 2013

Federal Court Perth

In May 2016 Federal Court found that Snowdale made false or misleading representations that its eggs were ‘free range’, in contravention of the ACL.

The Court has asked ACCC to reconsider the agreed position on appropriate penalty following the judgment in the matter of Reckitt Benckiser (Australia) Pty Ltd.

Awaiting judgment on relief.

The ACCC alleges that Snowdale in WA made false, misleading or deceptive representations by the images and wording on their egg cartons and website in that the eggs supplied and labelled as ‘free range’ were produced by hens that were not able to move about freely on an open range each day.

Undertakings

The following s. 87B court undertakings were finalised in 2016–17. Details of the s. 87B undertakings are in appendix 8.

Table 3.38: Truth in advertising claims undertakings finalised

Anchor Foods Pty Ltd trading as Spencers Gourmet Trading

s. 87B undertaking dated 15 December 2016

The ACCC accepted a court enforceable undertaking from in Anchor Foods Pty Ltd trading as Spencers Gourmet Trading relation to false or misleading representations on the packaging of its ‘Oregano’ labelled products.

Aldi Foods Pty Limited

s. 87B undertaking dated 8 November 2016

The ACCC accepted a court enforceable undertaking from Aldi Foods Pty Ltd in relation to false or misleading representations on the packaging of its ‘Oregano’ labelled products.

Monde Nissin (Australia) Pty Ltd trading as Menora Foods

s. 87B undertaking dated 8 November 2016

The ACCC accepted a court enforceable undertaking from Monde Nissin (Australia) Pty Ltd trading as Menora Foods in relation to false or misleading representations on the packaging of its ‘Oregano’ labelled products.

Infringement notices

The following infringement notices were paid in 2016–17.

Table 3.39: Truth in advertising claims infringement notices paid

Hoyt Food Manufacturing Industries Pty Ltd

2 March 2017

One notice totalling $10 800

The ACCC issued the infringement notice because it had reasonable grounds to believe that Hoyt had contravened the ACL by making false or misleading representations that its oregano product, 25 g variety ‘Hoyts Oregano Leaves Rubbed’ was only oregano, except for trace ingredients, when batch testing commissioned by the ACCC indicated that the product contained approximately 50 per cent olive leaf.

Charles Tyrwhitt LLP OC 305896 (UK)

15 September 2016

One notice totalling $10 800

The ACCC issued the infringement notice because it had reasonable grounds to believe that Charles Tyrwhitt had made a false or misleading representation in relation to the ‘was’ price of a men’s ‘slim fit non-iron micro-spot white’ shirt in ‘was/now’ pricing on its website between February 2016 and March 2016, in breach of the ACL.

Felton Grimwade & Bosisto’s Pty Ltd

7 September 2016

One notice totalling $10 800

The ACCC issued the infringement notice because it had reasonable grounds to believe that Bosisto’s had made a false or misleading representation in breach of the ACL by labelling its tea tree oil as 100 per cent pure, when that was not the case. The ACCC formed this view on the basis of testing it commissioned, which indicated that the Bosisto’s tea tree oil product was not 100 per cent pure tea tree oil.

The Smith’s Snackfood Company Pty Ltd

7 July 2016

One notice totalling $10 800

The ACCC issued an infringement notice because it had reasonable grounds to believe that Smith’s made false or misleading representations on the packaging of a popular product it supplies. The representations were that the product had been approved or was suitable as a healthy option for school canteens. Smith’s Sakata Paws Pizza Supreme Rice Snacks included a logo with the words ‘Meets School Canteen Guidelines’ and an image of a sandwich and an apple.

Online consumer issues

Emerging systemic consumer issues in the online marketplace remained an ACCC priority in 2016–17.

Under the ACL, Australian consumers are entitled to the same safety protections and outcomes when shopping online as they have when shopping with traditional ‘bricks and mortar’ retailers.

We have been actively monitoring and engaging with businesses about online supply to make sure that they continue to comply with the consumer protections in the ACL, regardless of their geographic location or business model.

We have focused on:

  • the safety of products purchased from online businesses
  • issues in relation to the expanding ‘sharing economy’
  • drip pricing
  • fake online testimonials
  • misleading representations
  • misleading claims on comparator websites.

Supply of unsafe products by online retailers

In 2017, an ACCC priority is to work with internet platform providers to prevent the supply of unsafe products into Australia. The ACCC aims to form partnerships with internet platforms to ensure that unsafe products are removed from sale in the Australian marketplace.

The ACCC continues to work collaboratively with its international counterparts both bilaterally and through global and regional forums. Where relevant, the ACCC aligns its surveillance programs with global activities. The ACCC looks to opportunities to enter into memoranda of understanding and other reciprocal arrangements with its Organisation for Economic Co-operation and Development (OECD) partners to improve communication, information sharing and cooperation.

In 2014 we produced the Consumer Product Safety Online publication to educate suppliers about their obligations to comply with product safety laws. In addition to supplier guidance the ACCC commenced a project to educate consumers about their rights and responsibilities when purchasing products from offshore suppliers. We produced guidance on our website advising consumers to check that purchases meet mandatory Australian requirements. The online medium and the supply of safe products is an ongoing focus for the ACCC.

Sharing economy

The sharing economy is a rapidly expanding part of the Australian economy. It is made up of businesses operating online platforms that facilitate the connection of suppliers of goods and services with consumers who generally need short-term use of those goods or services, such as cars or accommodation.

On 3 November 2016 the ACCC released guidance materials for participants in the sharing economy, which outlines their rights and obligations under the ACL. The materials include guidance for platform operators, service providers and sellers, as well as information for consumers on our website.

Drip pricing

‘Drip pricing’ is a pricing strategy where consumers see a ‘headline’ price advertised but find that additional fees and charges have been added at the payment stage. Drip pricing is not transparent, may mislead consumers and makes it difficult for businesses to compete on a level playing field. Under the ACL, businesses must not use drip pricing.

Drip pricing conduct was a priority area in the ACCC’s 2014 Compliance and Enforcement Policy. The ACCC took action in relation to consumer pricing issues across a number of industries.

The ACCC’s drip pricing project concluded in early 2017 with two penalty decisions in the airline industry.

Case study: Drip pricing by Jetstar and Virgin airlines in respect of online airfares

In March 2017 the Federal Court ordered Jetstar Airways Pty Ltd (Jetstar) to pay a $545 000 penalty and Virgin Australia Airlines Pty Ltd (Virgin) to pay a $200 000 penalty for breaches of the ACL in respect of drip pricing.

The ACCC commenced proceedings against Jetstar and Virgin in 2015. The ACCC alleged that, for specific advertised airfares, Jetstar and Virgin did not adequately disclose that consumers would be charged additional booking and service fees ($8.50 and $7.70 respectively) for bookings paid for using most credit cards or PayPal (Virgin also applied the fees to payments by debit card). The fees were only disclosed to consumers once they had moved through a number of stages of the booking process.

In November 2015 the Federal Court found that Jetstar had made false or misleading representations about specific advertised airfares on its website in 2013 and on its mobile site in 2014. The Court found that Virgin had made false or misleading representations about specific advertised airfares on its mobile site in 2014.

In 2017, when imposing the penalty against Jetstar, Justice Foster commented upon the importance of the use of penalties as a deterrent and noted that the penalty imposed on Jetstar was designed to discourage similar behaviour by others.

Foster J imposed the penalty on Virgin following joint submissions to the Court by Virgin and the ACCC.

Online preselection issues

In June 2016 the ACCC received numerous complaints that airlines operating in Australia were preselecting one or more optional extras during the online booking process.

Where an option is preselected, the cost of that option—for example, travel insurance or a charity donation—is automatically added to the fare unless a customer notices the option is preselected and actively unticks it.

This ongoing consumer issue in the online marketplace was addressed through an administrative resolution with Virgin Australia Airways Ltd, Jetstar Airways Pty Ltd and Tigerair Australia airlines. Details of the administrative resolutions are on page 99.

Fake online reviews

Fake online reviews and testimonials were a past priority area for the ACCC. More recently, the ACCC has prioritised action involving larger companies engaging in misleading and deceptive conduct in relation to reviews of their business on review websites which gives them a potential competitive edge in the market and has the potential to result in consumer detriment.

Table 3.40: Fake online reviews cases instituted

Fake online reviews—misleading or deceptive conduct

Aveling Homes Pty Ltd

Conduct

commenced

jurisdiction

9 March 2017

Federal Court Perth

The ACCC alleges that Aveling engaged in misleading conduct and false or misleading representations in relation to review websites Aveling created for its businesses: Aveling Homes and First Home Owner’s Centre.

Fake online reviews—misleading or deceptive conduct

Meriton Property Services Pty Ltd

Conduct

commenced

jurisdiction

24 November 2016

Federal Court Melbourne

The ACCC alleges that that Meriton engaged in misleading or deceptive conduct in connection with the posting of reviews of its properties on the TripAdvisor website. In particular that from November 2014 to October 2015, Meriton took steps to prevent guests it suspected would give a negative review from receiving TripAdvisor’s Review Express email to avoid them posting potentially negative reviews.

Administrative resolutions

The following administrative resolutions for online preselection issues were finalised in 2016–17.

Table 3.41: Administrative resolutions for online preselection issues

The ACCC engaged with domestic airlines seeking their agreement to cease the practice of preselection. The ACCC was concerned that the ‘opt-out’ model meant that a number of consumers inadvertently paid for unwanted ‘pre-ticked’ extras.

Jetstar Airways Pty Ltd

2 December 2016

After discussions with the ACCC, Jetstar agreed to stop the practice of preselecting checked baggage, seat selection, travel insurance and charity donations on its online booking platform from 1 July 2017.

Tigerair Australia

2 December 2016

After discussions with the ACCC, Tigerair Australia announced that it had stopped the practice of preselecting travel insurance and baggage on its online booking platforms.

Virgin Australia Airways Pty Ltd

1 December 2016

After discussions with the ACCC, Virgin Australia agreed to stop the practice of preselecting travel insurance on its online booking platform.

Infringement notices

The following infringement notice for online drip pricing issues was paid in 2016–17.

Table 3.42: Infringement notices paid online drip pricing

Palace Cinemas Pty Ltd

4 July 2016

One notice totalling $10 800

The ACCC issued an infringement notice to Palace Cinemas because it had reasonable grounds to believe that Palace Cinemas had breached the ACL by failing to prominently disclose the total single price, including the compulsory booking fee, for cinema tickets purchased using its online booking process.

Telecommunications and energy sectors

Misleading and deceptive conduct and false or misleading representations in the telecommunications and energy sectors have been past priority areas for the ACCC. More recently, the ACCC has taken enforcement action in relation to unconscionable conduct and false or misleading representations made in these utility industries due to these services being widespread and therefore the potential for large scale consumer detriment to arise.

Court cases

The following case was finalised in 2016–17.

Unconscionable conduct in telecommunications sector

Harrison Companies Pty Ltd

Conduct

commenced

concluded

jurisdiction

outcome

11 March 2016

2 March 2017

Federal Court Melbourne

Finding that Harrison Companies engaged in unconscionable conduct Finding that Mr James Harrison was involved in the contraventions

Finding that undue harassment was used in respect of four customers.

SoleNet, Sure Telecom and Mr Harrison to pay penalties totalling $250 000 as follows:

three corporate respondents to pay $50 000 each

four corporate respondents to pay $12 500 each

Mr Harrison to pay $50 000 and disqualified from managing a corporation for three years

    Injunction restraining Mr Harrison for two years.

    Refunds to customers whose contracts were transferred without express written consent.

    Payment of the ACCC’s costs.

    The ACCC alleged that 11 corporations trading as SoleNet and Sure Telecom (the Harrison Companies) and their director Mr James Harrison engaged in unconscionable conduct in the supply of telecommunications services and undue harassment, in breach of the ACL.

    Undertakings

    The following s. 87B court enforceable undertakings were finalised in 2016–17. Details of the s. 87B undertakings are in appendix 8.

    Table 3.43: Telecommunications undertakings finalised

    Optus Mobile Pty Ltd

    s. 87B undertaking dated 1 June 2017

    The ACCC accepted a court enforceable undertaking from Optus Mobile Pty Ltd (Optus) in relation to alleged misrepresentations about the amount and period of validity of data, calls and texts provided with certain prepaid products and services.

    Infringement notices

    The following infringement notices were paid in 2016–17.

    Table 3.44: Telecommunications and energy infringement notices paid

    Sprint Telco Pty Ltd

    8 June 2017

    One notice totalling $10 800>

    The ACCC issued the infringement notice because it had reasonable grounds to believe that Sprint Telco made a false or misleading representation to a consumer during a telemarketing call in October 2016, in which the consumer was transferred from Telstra Corporation Limited (Telstra) to Sprint Telco.

    Lumo Energy Australia Pty Ltd

    1 June 2017

    One notice totalling $10 800

    The ACCC issued the infringement notice because it had reasonable grounds to believe that Lumo had contravened the ACL by making a false or misleading representation about energy discounts. Lumo made a representation on its website in February 2017 that consumers, including those outside of Victoria, could save 33 per cent off their total electricity bill and 17 per cent off their total gas bill if they switched to Lumo.

    In fact, these discounts were only available to residents of Victoria. Maximum discounts for electricity were substantially less in other states. In addition, Lumo does not offer gas outside Victoria.

    Lumo Energy Australia Pty Ltd

    16 February 2017

    One notice totalling $10 800

    The ACCC issued the infringement notice because it had reasonable grounds to believe that Lumo had contravened the ACL by making representations to a number of consumers that the Australian Energy Regulator (AER) was responsible for increases to Lumo’s retail gas tariffs when the rise was due to a commercial pricing decision made by Lumo.

    NBN speed claims and monitoring

    See ‘ACCC to monitor Australia’s broadband performance’ on page 155.

    Non-compliance with court orders and contempt of court

    The ACCC must take contempt of court action when it considers that court orders, obtained for the protection of consumers, have been breached. Contempt of court action is a criminal offence punishable by imprisonment and/or a fine.

    Court cases

    The following cases were finalised in 2016–17.

    Table 3.45: Non-compliance with court orders cases finalised

    Misleading representations

    Dhruv Chopra

    Conduct

    commenced

    concluded

    jurisdiction

    outcome

    4 November 2016

    28 June 2017

    Federal Court Melbourne

    Mr Chopra sentenced to imprisonment for three months (one month to be served immediately and the balance suspended on conditions set by the Court.

    Payment of ACCC costs.

    The ACCC filed proceedings for contempt on 14 December 2015 alleging that Mr Hann had breached injunctions ordered by the Court in May 2012 by being involved in a business selling household cleaning products and claiming that some of the money from the sale of those goods would be donated to charity and recruiting a person to sell and distribute products in connection with that business.

    Contempt of court and vulnerable consumers

    Laurence Glynne Hann

    Conduct

    commenced

    concluded

    jurisdiction

    outcome

    5 December 2015

    17 May 2017

    Federal Court Melbourne

    Mr Hann sentenced to imprisonment for a period of five months with:

    two weeks to be served in any event

    the rest of the sentence suspended on condition that Mr Hann refrain from contravening any of the 28 May 2012 orders for a period of two years.

      Mr Hann ordered to pay the ACCC’s costs on an indemnity basis.

      The ACCC filed proceedings for contempt on 14 December 2015 alleging that Mr Hann had breached injunctions ordered by the Court in May 2012 by being involved in a business selling household cleaning products and claiming that some of the money from the sale of those goods would be donated to charity and recruiting a person to sell and distribute products in connection with that business.

      Contempt of court and vulnerable consumers

      NRM Corporation Pty Ltd and NRM Trading Pty Ltd t/a Advanced Medical Institute

      Conduct

      commenced

      concluded

      jurisdiction

      outcome

      20 August 2015

      17 December 2016

      Federal Court Melbourne

      On 20 August 2015, the ACCC filed contempt proceedings against NRM for their alleged failure to comply with Justice North’s orders in relation to statements made by NRM in the promotion or supply of sexual dysfunction products.

      On 17 December 2015, Justice Moshinsky found NRM guilty of contempt and decided not to consider the issue of penalty for NRM’s contempt of court until the appeal process had concluded. NRM’s appeal was dismissed on 22 July 2016.

      1 ACCC analysis of ACORN data specifically excludes reports that have been made to Scamwatch and those that do not identify whether they have reported elsewhere.