Below is an update on three recent Federal Court of Australia cases targeting deceptive advertising and contraventions of the Australian Consumer Law (ACL). These case updates highlight the ACCC’s continued action in ensuring compliance by businesses with the ACL.

Reckitt Benckiser found to have falsely described certain Nurofen products

Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (No 4) [2015] FCA 1408

As foreshadowed in our article on the ACCC’s 2015 enforcement priorities (which can be found here), in early 2015 the Australian Competition and Consumer Commission (ACCC) took action against Reckitt Benckiser (Australia) Pty Ltd (Reckitt Benckiser) in relation to claims made by the company regarding its Nurofen products targeting specific pain.

The ACCC alleged that Reckitt Benckiser had contravened sections 18 and 33 of the ACL by falsely describing certain Nurofen products in its Nurofen specific pain range. Reckitt Benckiser markets and sells products which target specific sorts of pain, being back pain, period pain, migraine and tension headache, and advertises these products, on the products’ packaging and its website, as being specifically formulated to treat the specific type of pain for which it is labelled.

The ACCC alleged, and the Court held, that as each of these products contained the same active ingredient (in the same quantities) and was of the same formulation, none of the 4 products was any more or less effective than the others in treating any of the particular symptoms. The Court held that the following representations made by Reckitt Benckiser were therefore false:

(a) each product in the Nurofen Specific Pain Range is specifically formulated to treat the particular type of pain specified on the packaging relevant to that product; and
(b) the product solely or specifically treats the particular type of pain specified on the packaging relevant to that product and not other types of pain.

Reckitt Benckiser admitted contravening the ACL and the parties proposed consent orders, which were largely accepted by the Court. On 11 December 2015, Edelman J imposed restraining orders and ordered the publication of a corrective notice and implementation of a more extensive consumer compliance program against Reckitt Benckiser. Reckitt Benckiser was also ordered to pay the ACCC’s costs.

In February 2016, a class action was filed in the Federal Court by Bannister Law on behalf of consumers who purchased the Nurofen Specific Pain Range products, alleging that those consumers were misled into buying more expensive products in the Nurofen pain range believing that they could achieve targeted and specific pain relief, and seeking a refund for those purchases.

Franchisor admits to posting fabricated testimonials

Australian Competition and Consumer Commission v A Whistle & Co (1979) Pty Limited [2015] FCA 1447

On 18 December 2015, Yates J held that A Whistle & Co (1979) Pty Ltd (A Whistle), a franchisor of carpet, drapery, tile, upholstery and mattress cleaning services (the franchised business going by the name "Electrodry Carpet Cleaning"), had contravened section 29(1)(e) of the ACL.

Through a course of conduct set out in an agreed statement of facts submitted by the parties, A Whistle admitted to instigating an advertising initiative whereby, in attempting to increase customer testimonials and favourable internet reviews for the franchised services, A Whistle requested its marketing agent to post fabricated testimonials on various websites which purported to be genuine customer testimonials. In addition, as part of this initiative, A Whistle encouraged its franchisees to fabricate testimonials on various websites, with those franchisees with the most testimonials in any given month being awarded “Franchisee of the Month”. According to the court, “[j]ust as with other forms of false or misleading advertising, the fabricated testimonials had the potential to mislead a large number of consumers, divert customers from law-abiding competitors, and generate a positive perception of Electrodry Carpet Cleaning that was based on falsehoods”.

The Court held that A Whistle had authorised its agent to publish false testimonials and had attempted to induce, and did induce some of, its franchisees to publish similar false testimonials, and ordered that A Whistle:

  • pay pecuniary penalties of $215,000;
  • publish a corrective notice in the Business Franchise Australia and New Zealand Magazine;
  • pay $10,000 by way of contribution to the ACCC’s costs;
  • be restrained for a period of three years from making false or misleading statements that purport to be genuine testimonials, when they are in fact fabricated; and
  • be restrained for a period of three years from inducing franchisees to make false testimonials.

Harvey Norman franchisee ordered to pay penalties for misrepresenting consumer guarantee rights

Australian Competition and Consumer Commission v Bunavit Pty Ltd [2016] FCA 6

On 12 January 2016, the Federal Court handed down its decision in Australian Competition and Consumer Commission v Bunavit Pty Ltd [2016] FCA 6. In this case, Bunavit Pty Ltd, a Harvey Norman franchisee, was ordered to pay a total of $52,000 in penalties for contravening sections 18 and 29(1)(m) of the ACL by making false or misleading representations regarding consumer guarantee rights. It was held that Bunavit staff members had made false or misleading representations concerning the existence, exclusion or effect of a guarantee or right, when they represented to consumers that:

  • Bunavit would not, and had no obligation to provide a remedy for defective goods which it supplied;
  • the consumer would need to pursue the manufacturer’s warranty directly with the manufacturer and not through Bunavit; and
  • Bunavit could not assist further unless the consumer paid for some or all of the cost of the repair of the defective goods.

Other recent ACCC cases involving false or misleading representations

In addition, in 2016, the ACCC has already issued infringement notices to the following companies:

  • online retailer Kogan.com Pty Ltd, for making false or misleading representations about the price of three computer monitors advertised by Kogan in a Father’s Day promotion on its eBay store. Kogan paid penalties totalling $32,400;
  • telecommunication services provider Voiteck Pty Ltd, for making false or misleading representations to residents of particular retirement villages about their right to choose a telecommunications services provider. Voiteck paid $10,200 in penalties; and
  • adjustable bed and mobility equipment suppliers Retailers Clews Holdings Pty Ltd and D Burnz Investments Pty Ltd, for, inter alia, making false or misleading representations that their adjustable beds and associated mobility equipment were sponsored or approved by the Therapeutic Goods Administration, when this was not the case. Clews and D Burnz each paid $20,400 in penalties.