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.
The following cases were finalised in 2016–17.
The following cases were instituted in 2016–17.
The following s. 87B court enforceable undertakings were finalised in 2016–17. Details of the s. 87B undertakings are in appendix 8.
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.
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.
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.
The following proceedings were instituted in 2016–17.
The following matters were ongoing at the end of 2016–17.
The following s. 87B undertakings were finalised in 2016–17. Details of the s. 87B undertakings are in appendix 8.
The following infringement notice was paid in 2016–17.
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.
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.
The following cases were finalised in 2016–17.
The following proceedings were instituted in 2016–17.
The following cases were ongoing at the end of 2016–17.
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.
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.
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.
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.
The following case was finalised in 2016–17.
The following case was ongoing at the end of 2016–17.
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.
The following cases were finalised in 2016–17.
The following truth in advertising claims cases were instituted in 2016–17.
The following cases are ongoing.
The following s. 87B court undertakings were finalised in 2016–17. Details of the s. 87B undertakings are in appendix 8.
The following infringement notices were paid in 2016–17.
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.
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’ 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.
The following administrative resolutions for online preselection issues were finalised in 2016–17.
The following infringement notice for online drip pricing issues was paid in 2016–17.
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.
The following s. 87B court enforceable undertakings were finalised in 2016–17. Details of the s. 87B undertakings are in appendix 8.
The following infringement notices were paid in 2016–17.
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.
The following cases were finalised in 2016–17.
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.