Conducting advertising campaigns which contain unsubstantiated claims is very risky and never advisable. If a claim is “too good to be true”, this is likely the case as is evidenced by the recent Australian Competition and Consumer Commission (ACCC) investigation of Danoz Direct Pty Ltd (Danoz).

In early September 2015, the ACCC accepted a court enforceable undertaking from Danoz in respect of misleading claims in infomercials for its Abtronic X2 Fitness System (Abtronic X2), which were considered to be in breach of the Australian Consumer Law (ACL).

This matter is a timely reminder that when undertaking advertising campaigns, claims in advertisements (regardless of the medium) must be reviewed carefully to ensure that they are truthful, accurate and able to be substantiated. Testimonials must be verified and genuine. When making representations in respect of future matters, such as weight loss, an advertiser must have reasonable grounds for making the claims.

Background

Danoz is a direct marketing company which promotes and sells products on its website www.danozdirect.com.au and in infomercials broadcast on Australian television. The Abtronic X2 is a gadget worn around a person’s midriff, which is similar to a belt and which emits an electrical current.

During 2013 and 2014, Danoz promoted the Abtronic X2 as having health, fitness and weight loss benefits during infomercials which were broadcast on at least five free-to-air Australian television channels. The infomercials included “before and after” testimonials from consumers who appeared to have used the Abtronic X2 to lose weight without exercise or changing their diets.

False and Misleading Representations

The ACCC contended that the infomercials contained misleading representations about the Abtronic X2’s effectiveness as a fitness and weight loss device including, for example:

  • using the Abtronic X2 will result in, without exercise or diet changes:
    • weight loss;
    • firm and flat abdominal muscles; and
    • a tightened, toned and sculpted stomach.
  • the Abtronic X2 provides the user with an intense workout, even if watching television or sitting down while using the product; and
  • use of the Abtronic for one minute will provide the same result as completing up to 400 sit-ups.

The ACCC considered that Danoz did not have reasonable grounds for making those representations and that the representations breached the following sections of the ACL:

  • section 18, which prohibits conduct which is misleading or deceptive or likely to be misleading or deceptive; and
  • section 29(1)(g), which prohibits representations that a product has performance characteristics, uses or benefits which are false or misleading.

Court Enforceable Undertaking

Danoz has provided the ACCC with a court enforceable undertaking that:

  • it will not make unsubstantiated claims in relation to the weight loss and fitness benefits of the Abtronic X2 in the future;
  • it will establish and implement a Competition and Consumer Compliance program (Compliance Program);
  • the CEO and Compliance Officer of Danoz will review personally all current and future advertising for the  Abtronic X2 product before the advertisements are broadcast or published; and
  • a corrective notice will be published on the Danoz website within 28 days of the undertaking.

Details of the Compliance Program and the content of the corrective notice may be viewed on the ACCC’s website, together with the undertaking provided by Danoz.1

We note that, if a Court were to determine that representations were false and misleading, there are serious consequences. Maximum fines for a company are $1.1 million and for an individual $220,000.

Accordingly, when undertaking advertising campaigns, claims in advertisements (regardless of the medium) must be reviewed carefully to ensure that they are truthful, accurate and able to be substantiated. When making representations in respect of future matters, such as weight loss, an advertiser must have reasonable grounds for making the claims. Any testimonials must be verified and genuine.