Coming hot on the heels of the launch of the ACCC’s 2015 Compliance and Enforcement Policy (2015 Enforcement Policy) (recently discussed here), the ACCC has instituted proceedings in the Federal Court of Australia against Reckitt Benckiser alleging that their Nurofen Specific Pain Products make false or misleading claims.
Allegations against Reckitt Benckiser
The ACCC is alleging that Reckitt Benckiser made representations on its website and on the packaging of each product (Nurofen Back Pain, Nurofen Period Pain, Nurofen Migraine Pain, and Nurofen Tension Headache), that each product:
- was formulated to treat a specific type of pain;
- had efficacy in treating that type of pain; and
- solely treated that type of pain,
despite each product containing the same amount of the active ingredient, Ibuprofen.
The ACCC further alleges that price sampling revealed that these products were being sold at twice the retail price of Nurofen’s standard Ibuprofen products. Reckitt Benckiser denies any wrongdoing and the proceedings have only just been commenced.
While it is too early to say whether the ACCC’s allegations against Reckitt Benckiser will stand up in Court, the enforcement action aligns with the priorities set out in the 2015 Enforcement Policy; which identified the following enforcement priority areas (among other things):
- truth in advertising, especially for large businesses with the potential to result in significant consumer detriment; and
- competition and consumer issues in the health and medical sector.
Potential for Higher Penalties
It appears that, as part of its ‘visible enforcement’ agenda (including, we expect, in the proceedings against Reckitt Benckiser), the ACCC will be advocating for the imposition of higher penalties by the Courts. Indeed, during his launch speech Mr Sims’ made specific comment on penalties, stating:
Penalties should not be seen as simply a cost of doing business. They need to be at a level which achieves both specific and general deterrence. Some companies think they have a lot to gain from breaching our competition and consumer law; they should have much to lose as well.
Further, media reports indicate that the ACCC is seeking a record penalty of $4-5 million in the Coles ‘freshly baked’ case. In that case Coles was found to have engaged in misleading and deceptive conduct by claiming bakery products were ‘freshly baked in-store’ when they had been partially baked prior to being delivered to stores. The ACCC is seeking this penalty despite the fact that the case proceeded on the grounds that what Coles did could legitimately be described as ‘baking’ and that there was no allegation that the par baked product was of inferior quality to bread baked from scratch.
In many ways the ACCC's position regarding penalties should be of no real surprise. Throughout 2014, there have been grumblings both in the media and by the courts for a review of those penalties being ordered, and indeed available, under the CCA. For example:
- when the court awarded penalties of $11m against Flight Centre for attempted price fixing, there was immediate financial media commentary that the penalty was ‘immaterial’ given the size of Flight Centre
- in her December 2014 judgment against Coles for unconscionable conduct Justice Michelle Gordon noted:
It is a matter for the Parliament to review whether the maximum available penalty of $1.1 million for each contravention of Pt 2-2 of the ACL by a body corporate is sufficient when a corporation with annual revenue in excess of $22 billion acts unconscionably. The current maximum penalties are arguably inadequate for a corporation the size of Coles.
2015 – Interesting times ahead
The enforcement proceedings against Reckitt Benckiser give a taste of the ACCC’s likely approach in the year to come and we can expect more high profile cases against large companies, particularly (although not limited to) the healthcare sector.