On 2 August 2011, the Federal Court held that SMS Global had engaged in misleading and deceptive conduct and made false representations in contravention of sections 52 and 53 of the Trade Practices Act. The court made declarations, granted injunctive relief and awarded pecuniary penalties in the amount of $85,000.
SMS Global provides online SMS and MMS messaging services.
SMS Global's website displayed a logo containing the words "Australian Government Endorsed Supplier" from at least 1 July 2010 until 31 December 2010, thereby representing that it was endorsed by the Australian Government as a supplier under what had been an Endorsed Supplier Arrangement ("ESA"). Through the use of this logo, SMS Global represented it was endorsed by the Australian Government as a supplier under the ESA when in fact it was never so endorsed.
The website also represented that SMS Global had been established and providing its services to thousands of clients since 2003, when in fact the business commenced in 2004 and had not cumulatively provided services to a total of 2000 until October 2007. The site further claimed that its development of SMS communication systems had commenced in 1999, when in fact the development commenced in 2003.
SMS Global had admitted that they were never so endorsed or approved and that their conduct was "misleading" in contravention of s 52 but argued that it was not "deceptive" or "likely to deceive" because it had not been deliberately misleading. Justice Murphy found that the conduct was misleading and deceptive, one meaning of which is "to lead into error".
The defendant had also used the AIMIA (Australian Interactive Media Industry Association) logo when it was not authorised but the Court found that this misleading conduct was an administrative oversight and did not require a pecuniary penalty.
Justice Murphy ordered that SMS Global:
be restrained from:
- using the ESA logo in any way;
- making any representation to the effect that it has a government endorsement that it does not have.
- pay a pecuniary penalty of $85,000;
- publish a notice of the decision on their website; and
- undertake a compliance program provided by Minter Ellison or such other legal practitioner proposed by SMS Global and approved by the ACCC.
Mr Krumins, the founding director, was also found to be knowingly concerned in, or party to, the contraventions.
Postscript: The ACCC has issued proceedings against SMS Global Pty Ltd alleging contempt of court. The ACCC alleges that SMS Global breached an order made by Justice Murphy. The order of the court required the company to publish and maintain for 90 days a corrective notice that would be accessed by clicking on an icon that prominently displayed in red text on a black background the words:
"False and Misleading Conduct by SMS Global Pty Ltd – Notice Ordered by the Federal Court of Australia" The ACCC alleges that SMS Global did not prominently display the required click through icon text on its website. The matter has been listed for hearing on 12 December 2011.