The Australian Competition and Consumer Commission (the ACCC) has begun using its new power to issue infringement, substantiation and public warning notices in carrying out its compliance and enforcement activities pursuant to the recent amendments to the Trade Practices Act 1974 (the Act).

On 20 August 2010, the ACCC issued its first public warning notice to alert consumers to a suspected breach of certain provisions of the Act and posted the notice on its new Public Warning Notice Register accessible on the ACCC’s website.

It is therefore timely to briefly review the most penetrating features of the ACCC’s new enforcement powers.

Substantiation Notices

The recent amendments to the Act enable the ACCC to issue a substantiation notice requiring a person to give information and/or produce documents that could be capable of substantiating or supporting a claim or representation made by the person.

Unlike the ACCC’s power to require the provision of information and/or the production of documents by a notice issued pursuant to section 155 of the Act, the ACCC is not required to have a “reason to believe” that a contravention of the Act has occurred in order to issue a substantiation notice.

If a person is issued with a substantiation notice they must respond within 21 days (unless an extension is granted). A response must provide information, or produce documents, that are capable of substantiating or supporting the claims or representations made.

It is important to bear in mind that while you must respond to a substantiation notice (failure to respond to a substantiation notice may result in fines of up to $16,500 for corporations and up to $3,300 for individuals) you are not required to prove the relevant claim or representation, but just to provide information capable of supporting or substantiating the claim or representation. In essence, a substantiation notice is a preliminary investigative tool that helps the ACCC determine whether further investigation is warranted.

The Explanatory Memorandum to the relevant amending legislation states that these provisions are framed in such a way that a bona fide attempt to provide information which may support a claim will be sufficient, even if the material provided is not capable of fully substantiating the claim.

The ACCC has said that a substantiation notice is likely to be used to respond to concerns about:

  • two-part advertising claims—such as ‘was/now’ pricing and strikethrough advertising
  • business opportunities—such as projected earnings
  • food claims—such as place of origin claims, composition claims or health claims
  • environmental claims—such as biodegradability claims or claims about carbon emission impacts, and
  • product safety claims—such as meeting a prescribed standard that requires testing.

Infringement Notices

The recent amendments to the Act also enable the ACCC to issue an infringement notice where it has reasonable grounds to believe that a person has contravened certain consumer protection laws.

Infringement notices may be issued for alleged contraventions of various provisions of the Act, including:

  • unconscionable conduct
  • certain unfair practices
  • pyramid selling
  • certain product safety and product information provisions
  • failure to respond to a substantiation notice, and
  • provision of false or misleading information in response to a substantiation notice.

The penalty amount in an infringement notice will vary, depending on the alleged contravention, but in most cases is fixed at $6,600 for a corporation and $1,320 for an individual for each alleged contravention.

The compliance period for payment of an infringement notice penalty is 28 days, but this may be extended for a further 28 days in certain circumstances.

The ACCC will post infringement notices on its Infringement Notice Register accessible on the ACCC’s website.

A person may choose not to pay an infringement notice penalty. However, if a person does not pay the penalty within the prescribed period, the ACCC may commence court-based action in respect of the conduct alleged to have contravened the Act.

Once an infringement notice penalty is paid, the ACCC may not commence court proceedings in relation to the alleged contravention.

Public Warning Notices

The recent amendments to the Act also enable the ACCC to issue a public warning notice to alert consumers to a suspected breach of certain provisions of the Act.

The ACCC may issue such a notice where:

  • it has reasonable grounds to suspect that the conduct may constitute a contravention of a provision of the Act
  • it is satisfied that one or more other persons has suffered, or is or are likely to suffer, detriment as a result of the conduct, and
  • it is satisfied that it is in the public interest to do so.

As mentioned above, the ACCC recently issued its first Public Warning Notice.

What to do

Given the tight timeframe for responding to an infringement or substantiation notice and the impact a public warning notice may have on the reputation of a business, it is important that you contact a competition and consumer law expert immediately in the event that one is issued by the ACCC in respect of you or your business.