Going to Market is a monthly publication tracking developments in consumer law legislation, regulation and case law.
The risks for organisations from breaching consumer law are high with increased penalties, new fair trading and consumer credit regimes and more intensive regulatory activity.
Our team of consumer law specialists can assist you in all areas of consumer law, including advice on product liability and recall, compliance programmes, contracts review, defending regulatory investigations and prosecutions as well as commercial litigation focusing on consumer law.
Cases
New Zealand Courts
Honey New Zealand (International) Ltd v Ministry of Primary Industries
The High Court has ruled that Honey New Zealand’s trademarks “Manuka Pharm” and “Manuka Doctor” breach the Nutrition, Health and Related Claims Standard 1.2.7 of the Australia New Zealand Foods Standards Code by making an unauthorised health claim about manuka honey.
The Judge noted that:
- a general claim about unidentified benefits will be a health claim, and the purpose of Standard 1.2.7 is to prohibit health claims unless expressly permitted by the Standard, and
- the use of “DOCTOR” and “PHARM” carried a clear possibility that the product would be good for you.
Honey New Zealand has indicated that it will appeal the decision.
Link: Honey New Zealand (International) Ltd v MPI [2015] NZHC 2764
1 | December 2015
Contents
Cases 1
Commerce Commission 3
Australian Competition and Consumer Commission 4
Australian Securities and Investments Commission 5
Contacts 6
Australian Courts
Jetstar and Virgin Australia engaged in misleading ‘drip pricing’ practices
The Federal Court of Australia has found that Jetstar and Virgin Australia were false and misleading in promoting headline airfare prices on their mobile sites without disclosing additional booking and service fees until late in the booking process.
Citing the New Zealand Court of Appeal’s 2014 decision in Godfrey Hirst NZ Ltd v Cavalier Bremworth Ltd, the Judge said that the dominant message of an advertisement was important and that any qualifications to that message must be sufficiently drawn to the consumer’s
attention.
The Court noted that in Virgin’s case, the customer was “required to undertake a series of relatively annoying steps in order to ascertain the existence of the booking and service fee and the circumstances in which it will be charged”.
ACCC had made similar allegations in relation to the two airlines’ website advertising but the Court held that Jetstar (from September 2013) and Virgin throughout had adequately disclosed the extra charges upfront in their website ads.
There are three points of general note in the judgment:
- the fact that a contract has not been individually negotiated is not a relevant consideration in the question of whether the contract term caused a significant imbalance in the parties’ rights and obligations
- the requirement of significant imbalance is met if a contract term is so weighted in favour of the supplier as to tilt the parties’ rights and obligations under the contract significantly in the supplier’s favour. Examples include granting the supplier a beneficial option, discretion or power, or imposing a disadvantageous burden, risk or duty on the consumer, and
- lack of transparency in the terms of a consumer contract is a strong indication of a significant imbalance in the parties’ rights and obligations. A contract term is transparent if it is expressed in reasonably plain language, legible, presented clearly, and readily available to the consumer.
This case offers some useful guidance about unfair contract term as New Zealand’s unfair contract term legislation is similar to the Australian regime.
Link: ACCC v Chrisco Hampers Australia Ltd [2015] FCA 1204
Link: ACCC v Jetstar Airways Pty Ltd [2015] FCA 1263
Chrisco’s lay-by agreements contained unfair contract term
The Federal Court of Australia has found that Chrisco’s 2014 lay-by agreements included an unfair contract term which allowed Chrisco to continue withdrawing funds from the customer’s bank account even after the customer had made full payment for the goods. The term would apply unless the customer opted out of it.
- | December 2015
Contents
Cases 1
Commerce Commission 3
Australian Competition and Consumer Commission 4
Australian Securities and Investments Commission 5
Contacts 6
- | December 2015
Commerce Commission
Enforcement activities for 2016
The Commission has outlined four target areas for the next 6 to 12 months:
- enforcement of new consumer credit laws, in particular targeting mobile truck shops, payday lenders, and peer-to-peer lenders
- investigations into sellers’ unsubstantiated claims
- a greater focus on the credit terms being offered online, and
- transparent pricing, particularly in relation to sales promotions.
Link: Commerce Commission’s annual report 2015
Baa Baa Beads warned over health claims
The Commission has issued a warning to Baa Baa Beads after it failed to substantiate its claims about the therapeutic benefits of the Baltic amber product. When considering whether a business has reasonable grounds for a claim, relevant factors include:
- the nature of the goods or services about which the claim was made
- the nature of the claim
- any research or other steps taken by or on behalf of the business making the claim, before it was made
- the nature and source of any information the business relied on to make the claim
- the actual or potential effects of the claim, and
- compliance with the requirements of any standards, codes or practices relating to the grounds for the claim.
Commissioner Anna Rawlings said: “whether the claim is expressed or implied, businesses should only make claims based upon facts,
figures and credible sources of information that support their accuracy. Traders cannot simply rely on general information they find in books and online”.
Links: Commerce Commission’s media release and warning letter
Prosecutions
The Commission has brought the following Fair Trading Act prosecutions:
- false or misleading representation charges against Yoghurt Story New Zealand Ltd and Frozen Yoghurt Ltd for making false claims about the health benefits of frozen yoghurt and for promoting frozen yoghurt products which did not contain yoghurt, and
- misrepresentation charges against construction business Flaxmill Ltd in relation to HomeFirst Building Guarantees offered in the building contracts of three homeowners in the Canterbury region.
Links: Flaxmill Ltd and Yoghurt Story New Zealand Ltd and Frozen Yoghurt Ltd
Contents
Cases 1
Commerce Commission 3
Australian Competition and Consumer Commission 4
Australian Securities and Investments Commission 5
Contacts 6
Australian Competition and Consumer Commission
ACCC joins international ‘drip pricing’ sweep
The ACCC is sweeping a range of websites and mobile apps offering online bookings for services such as flights, accommodation, transportation, car parking and entertainment ticketing. ACCC’s Deputy Chair said: “if there are additional fees during an online booking process these fees should be adequately disclosed as early as possible in the process”.
‘Drip pricing’ remains a focus area for the ACCC, as part of its current priority area of systematic consumer issues in the online marketplace.
Link: ACCC joins international drip pricing sweep
Arnott’s pays AUD$51,000 for alleged misleading claims
Arnott’s Biscuits Ltd has paid AUD$51,000 in penalties for claiming that its Shapes Light & Crispy biscuits contained “75% less saturated fat” than the original Shapes product, when in fact the difference was only around 60%.
ACCC Chairman said: “truth in advertising, particularly when misleading claims are made by large businesses, is a priority enforcement area for the ACCC”.
Link: Infringement notice – Arnott’s
Uncle Tobys misleading about protein content of oats
The manufacturer and distributor of Uncle Tobys oats (Cereal Partners Australia Pty Ltd), has paid AUD$32,400 in penalties for suggesting that the food was a “Natural Source of Protein* Superfood” and “Naturally Rich in Protein* Superfood” with a disclaimer in fine print saying “when prepared with a [1/2 or 2/3] cup of skim milk”.
In ACCC’s view, by combining the words “natural source/naturally rich”, “protein”, and “Superfood” and representing the word “protein” prominently on the front packaging in a bright colour and in large font sizes, CPA made false or misleading representations that the oats
contained a significant amount of protein, when this was not the case. Further, the ACCC considered that the disclaimer was insufficient to correct the dominate impression created by the statements and their presentation.
The ACCC reminded businesses that they “should be aware that a fine print disclaimer is insufficient to correct or qualify a prominent representation that is false or misleading”.
Link: Infringement notice – Uncle Tobys
Epharmacy misleading about discount savings
Epharmacy Group Pty Ltd has paid AUD$32,400 in penalties in relation to representations that consumers would save money off the recommended retail price (RRP) for certain “Healthy Care” branded products when those products had never been offered at the RRP.
The ACCC Commissioner said: “businesses using statements such as ‘savings’ or ‘discounts’ when comparing a sale price to the RRP of
goods and services suggest to consumers that they are getting a good deal because the sale price is less than the RRP. But if the product has never been previously sold at the RRP, or the RRP does not reflect a current market price, then this type of comparison misrepresents the savings that may be achieved”.
Link: Infringement notice – Epharmacy
- | December 2015
Contents
Cases 1
Commerce Commission 3
Australian Competition and Consumer Commission 4
Australian Securities and Investments Commission 5
Contacts 6
Australian Securities and Investments Commission
Consumer leasing company fined AUD$1.25 million for breaching consumer credit laws
The Federal Court of Australia has ordered consumer leasing company Make it Mine Finance Pty Ltd to pay AUD$1.25 million in penalties
for breaching consumer credit laws, including its responsible lending obligations. The breaches related to failure to make reasonable enquiries regarding the financial position of more than 20,000 customers, verify each customer’s financial position, and assess whether each contract was suitable to individual customer’s objectives and requirements.
The Federal Court said that, as the Australian consumer lease industry is growing, there is a strong public interest in imposing a penalty that will deter future undesirable practices.
- the headline statement “one of the best rates in the market” was
too strong a claim to be effectively qualified
- in some cases, advertising failed to provide any disclaimer or
clarification, and
- the disclaimer on the website failed to disclose the interest rates for risk pricing of loans and how high they could go.
Link: GE Money changes advertising following ASIC concerns
Link: ASIC v Make it Mine Finance Pty Ltd (No 2) [2015] FCA 1255
GE Money changes advertising following ASIC concerns
GE Money has changed its promotion of its personal and debt consolidation loans after concerns raised by ASIC. It had been promoting the loans as available at “one of the best rates in the market, from 12.99%” when in fact they were subject to risk based pricing and consumers could be charged an interest rate of up to 34.95%.
ASIC’s view was that this was misleading as it suggested that all customers would receive an interest rate that was “one of the best rates in the market”, when this was not correct. Other concerns were:
- the use of the qualifying term “from”, in the context of risk based pricing with a significant variation between lowest and highest cost, was insufficient to prevent consumers being potentially misled
- | December 2015
Contents
Cases 1
Commerce Commission 3
Australian Competition and Consumer Commission 4
Australian Securities and Investments Commission 5
Contacts 6
Contacts
VICTORIA HEINE – PARTNER
T: +64 4 498 6327
M: +64 27 561 3707
E: victoria.heine@chapmantripp.com
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KELLY MCFADZIEN – PARTNER
T: +64 9 357 9278
M: +64 27 473 2230
E: kelly.mcfadzien@chapmantripp.com
TIM SHERMAN – SENIOR ASSOCIATE
T: +64 4 498 2400
M: +64 27 345 3250
