Last week, in the case of ACCC v DuluxGroup (Australia) Pty Limited (Dulux), the Federal Court held that Dulux had engaged in misleading or deceptive conduct and had made false or misleading representations in contravention of the Australian Consumer Law (and its predecessor legislation) by representing that its paints could lower the inside temperature of a house by 10 – 15 degrees, reduce cooling energy consumption and reduce the carbon footprint of a house (all of which were not true).
The decision is instructive because even though Dulux undertook scientific testing of its paints, those results did not substantiate the corresponding marketing claims that were ultimately made by Dulux. The mistake was serious – costing Dulux half a million in fines and contribution to the ACCC’s costs (which is about half of what the ACCC actually sought in terms of a penalty amount).
The facts of the case
Dulux manufactured and sought to market its InfraCOOL roof paint and Weathershield Heat Reflect wall paint. In preparing the paints for sale, Dulux undertook a range of independent scientific testing including:
- sending panels coated with paint samples for exposure to sun testing
- conducted a trial by painting the roof of a house in Highgate, South Australia and measuring the surface temperature
- performing a case study by painting a portion of a metal roof of its AcraTex factory in South Australia and recording the temperature on and directly below the roof.
In marketing these products however, Dulux represented that the paints could lower the inside temperature of a house by 10 – 15 degrees, reduce cooling energy consumption and reduce the carbon footprint of a house (all of which were not true).
Settlement with ACCC
Dulux admitted that it had not tested its InfraCOOL roof paint and Weathershield Heat Reflect wall paint for the reduction in the room temperature of buildings painted with these products. It also admitted that it did not have any reasonable grounds for making the relevant representations.
Indeed the court held that none of the tests were structured in a manner directed towards substantiating the representations ultimately made by Dulux in its marketing of the paints in question.
In light of admissions by Dulux that its conduct was misleading or deceptive and involved false representations, Dulux and the ACCC settled the matter on the question of liability with agreement on a statement of facts, an undertaking to be given by Dulux to the Court and declarations and other orders. The parties however, did not agree on the amount of pecuniary penalty to be paid which was the subject of a two day hearing in early December 2015.
At the penalty hearing, the ACCC submitted that the appropriate penalty in respect of the totality of the contravening conduct was $800,000. Dulux submitted that an appropriate pecuniary penalty ought to be in the range of $200,000 to $250,000.
The court considered a number of relevant factors in assessing the appropriate penalty including:
- the nature of the conduct and the circumstances in which it took place
- the extent of the conduct
- whether the conduct was deliberate
- cooperation by Dulux
- deterrence and the size and financial position of Dulux.
On 2 November 2016, Justice Siopis ordered Dulux to pay a $400,000 penalty and to pay a contribution of $150,000 to the ACCC’s costs. These costs would have been in addition to Dulux’s own legal costs.
What you need to know
If you are seeking to make marketing claims based on the energy efficient characteristics of products, you should ensure that such claims can be substantiated on objective and independent grounds.
To the extent that you undertake scientific or technical testing of products, the marketing claims for such products should accurately correspond to the results of such testing.