Going to Market - Consumer law update - July 2016

Contents Cases 1 Commerce Commission 3 Banking Ombudsman 3 Advertising Standards Authority (ASA) 4 Australian Competition and Consumer Commission 5 Australian Securities and Investment Commission 6 Financial Conduct Authority (UK) 7 1 | July 2016 G ing to Market Consumer law update Cases NEW ZEALAND COURTS Mobile traders fined under strengthened penalty regime Two more mobile traders, Goodring Company Limited (Goodring) and Betterlife Corporation Limited (Betterlife), have been prosecuted under the Credit Contract and Consumer Finance Act (CCCFA), bringing the total number of prosecutions to six. Both admitted that they had not provided customers with legally required information and that the information they did provide (such as terms and conditions) was not provided in a clear and concise way. Betterlife was fined $73,500 and Goodring $98,000, as it had also failed to register on the Financial Services Providers Register. The companies sell consumer goods on credit, either from trucks or through door-to-door sales. Fourteen other investigations into mobile traders are ongoing. Link: Commission media release Going to Market is a monthly publication tracking developments in consumer 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. Contents Cases 1 Commerce Commission 3 Banking Ombudsman 3 Advertising Standards Authority (ASA) 4 Australian Competition and Consumer Commission 5 Australian Securities and Investment Commission 6 Financial Conduct Authority (UK) 7 2 | July 2016 G ing to Market Consumer law update Payday lender Twenty Fifty Club guilty of CCCFA and FTA charges Twenty Fifty Club Ltd and its sole director Gavin John Marsich have been found guilty of 16 charges under the CCCFA and Fair Trading Act (FTA) in relation to a payday lending business in South Auckland. Charges included: • failure to disclose loan information to borrowers • charging unreasonable default and establishment fees • misrepresenting that it was a registered financial service provider, and • misrepresenting its rights to repossess goods Mr Marsich’s argument that the Court had no jurisdiction to hear the proceedings because he had not entered into a contract with the Commerce Commission was rejected. Link: Commission media release Builder fined for false representations about Homefirst building guarantees Gerard James Thomson, director of construction firm Flaxmill Ltd, has been fined $12,800 and ordered to pay $16,700 in compensation for making false representations. He had contracted to apply for an independent CBANZ Homefirst guarantee but failed to do this with the result that, when the two property owners subsequently discovered faults in Flaxmill’s workmanship, they didn’t receive the cover that they expected. Link: Commission media release AUSTRALIAN COURTS Bet365 ‘free bet’ gamble incurs $2.75 million fine The Australian and English companies behind online bookmakers Bet365.com have been penalised $2.75 million following false representations about a ‘free bets’ offer to new customers. The Federal Court found that Bet365’s promotion of “$200 FREE BETS FOR NEW CUSTOMERS”, offered in Australia between March 2013 and January 2014, was misleading and deceptive under the Australian Consumer Law, and a misrepresentation as to the price of the services. There were a number of restrictions and limitations that were not brought to the customer’s attention, including: • a requirement that new customers deposit and gamble $200 of their own money before receiving their free bet • customers having to gamble their deposit and bonus three times before being able to withdraw any winnings, and • application of the offer only to bets where the odds were higher than 1.50. In the financial year that covered most of the contravening period, the Bet365 Australian operation’s betting revenues increased from $7,700,000 to $29,100,000 – causing some commentators to wonder whether the regulatory gamble had, perhaps, paid off. Link: ACCC media release Contents Cases 1 Commerce Commission 3 Banking Ombudsman 3 Advertising Standards Authority (ASA) 4 Australian Competition and Consumer Commission 5 Australian Securities and Investment Commission 6 Financial Conduct Authority (UK) 7 3 | July 2016 G ing to Market Consumer law update Commerce Commission Commission lifts ‘stop’ on Brilliance Steel’s sales of steel mesh The Commission has reached an interim agreement with Brilliance Steel, allowing it to resume selling steel mesh, as long as the products pass independent tests, the results of which must be given to the Commission. The sales ban was imposed in March after evidence emerged that much of the steel mesh product on the market – from Brilliance and other companies - did not meet the required standards of “ductility”. Link: Commerce Commission media release Commission files charges against Software Provider The Commission has filed 37 charges against the Auckland Academy of Learning Limited (AAL), after receiving over 180 complaints about the company following a series of stories on current affairs show Campbell Live. The proceeding alleges misrepresentations and breaches of consumer credit and direct selling laws. AAL went to people’s homes with the ostensible purpose of carrying out educational assessments and evaluations of children but the Commission alleges that the real purpose of the visits was for AAL to sell its educational software package, CAMI. It also alleges that the educational assessments: • were not related to the New Zealand curriculum, and • did not correctly correspond to the level of learning that AAL claimed to be assessing. Other allegations relate to failure to disclose key information, failure to inform consumers of a right to cancel agreements, and misrepresentation of prices. Link: Commerce Commission media release Banking Ombudsman Warning about bogus cheques from UK “common law bank” The Ombudsman has investigated a complaint against a New Zealand bank for refusing to honour a cheque from UK “common law bank” WeRe Bank. WeRe purports to be a people’s or community bank and appears to have created its own currency, the RE. Members send the bank the promissory note of £150,000, payable “within a ten-year anniversary”, and then pay membership fees of £10 a month for an account. WeRe supplies the customer with a cheque book to write ‘cheques’ against the promissory note. Banking Ombudsman Nicola Sladden concluded “our investigation revealed the ‘cheque’ was not actually a cheque because the issuing ‘bank’ was not actually a bank”. The FCA has previously warned consumers that they would be unlikely to be able to pay any debts using a WeRe cheque and may end up with additional charges or sanctions for late payment. Link: Banking Ombudsman media release Contents Cases 1 Commerce Commission 3 Banking Ombudsman 3 Advertising Standards Authority (ASA) 4 Australian Competition and Consumer Commission 5 Australian Securities and Investment Commission 6 Financial Conduct Authority (UK) 7 4 | July 2016 G ing to Market Consumer law update Advertising Standards Authority (ASA) Complaint against ACC and Worksafe New Zealand not upheld The ASA Complaints Board has dismissed a complaint against ACC and WorkSafe New Zealand over a TV advertisement stating that 23,000 people were severely injured or killed in New Zealand workplaces last year, and that the New Zealand rates were twice as bad as Australia’s. The complainant said the 23,000 figure was misleading as there were only 44 deaths (the rest being severe injuries, defined by WorkSafe as requiring more than 7 days off work). The Complaints Board considered that the statistics were substantiated but agreed that the source of the 23,000 total could have been made clearer as could the fact that the comparison with Australia was of death rates only. The complainant intends to appeal the decision. Links: ASA decision, stuff article Advertisements removed after alleged breaches of Therapeutic Products Advertising Code A number of advertisements have been removed for breaches of the Therapeutic Products Advertising Code. The various claims found to be unsubstantiated related to: • foot patches that could remove toxins from the body and increase energy levels • ear candles that could treat conditions such as ear irritations, sinus problems, ear ache and glue ear • hair testing that could diagnose various deficiencies including organ stress, and food and environmental sensitivity • dietary supplements that could reduce high cholesterol and sugar levels and arthritis, and • PEMF therapy, vibrational essences, reiki, and white stone carillon that could treat a range of conditions. In each case, the ASA concluded that the removal of the advertisement had cured the breach and the claims were settled. Links: Decision 16/146, Decision 16/166, Decision 16/170, Decision 16/152, Decision 16/149 Contents Cases 1 Commerce Commission 3 Banking Ombudsman 3 Advertising Standards Authority (ASA) 4 Australian Competition and Consumer Commission 5 Australian Securities and Investment Commission 6 Financial Conduct Authority (UK) 7 5 | July 2016 G ing to Market Consumer law update Australian Competition and Consumer Commission Woolworths fined $9 million for knowledge of laundry detergent cartel Woolworths has been fined $9 million for contraventions of Australian competition law after admitting to being “knowingly concerned” in the making of, and giving effect to, an illegal understanding reached by laundry detergent suppliers. Colgate-Palmolive, PZ Cussons, and Unilever agreed that they would only supply Woolworths with ultra-concentrate detergents (rather than standard concentrates). Ultra concentrates are cheaper to manufacture but the ACCC did not think that the price advantage was passed on to consumers, and concluded that the suppliers were receiving a range of benefits. The $9 million penalty is the highest the ACCC has obtained against a party that was an accessory by being knowingly concerned in anticompetitive conduct and reflects the ACCC’s belief that the success of the agreement was dependent on Woolworths’ involvement. Colgate-Palmolive was fined $18 million for its conduct, Unilever was granted immunity as it alerted the ACCC to the arrangement, and Cussons will face court proceedings. Link: ACCC media release Sportscraft pays $21,600 for incorrect receipts APG & Co Pty Ltd (trading as Sportscraft) has paid $21,600 in penalties after the ACCC issued it with two infringement notices for making false or misleading representations about consumer guarantees. Sportscraft’s tax invoice receipts stated that customers were not entitled to return or exchange faulty goods if purchased from a clearance store. The ACCC alleged that this condition breached consumer rights under the Australian Consumer Law. Sportscraft has since changed its refund and returns policy. Link: ACCC media release Not so sweet: ACCC sues Heinz over toddler nutrition claims The ACCC has issued proceedings against HJ Heinz Company Australia Ltd, alleging that it made misleading claims about the nutritional value of its Little Kids Shredz products. The Shredz packaging features statements such as “99% fruit and veg” and “our range of snacks and meals encourages your toddler to independently discover the delicious taste of nutritious food” whereas the products in fact contain over 60% sugar and could encourage a child to develop a sweet tooth. The action follows a complaint by the Obesity Policy Coalition about food products for toddlers that claim to be made from fruit and vegetables but are predominantly made from fruit juice concentrate and pastes. Link: ACCC media release Contents Cases 1 Commerce Commission 3 Banking Ombudsman 3 Advertising Standards Authority (ASA) 4 Australian Competition and Consumer Commission 5 Australian Securities and Investment Commission 6 Financial Conduct Authority (UK) 7 6 | July 2016 G ing to Market Consumer law update ACCC challenges e-cigarettes “no toxic chemicals” claim Separate proceedings are being taken against two e-cigarette online retailers - Social-Lites Pty Ltd and Elusion New Zealand Limited - over claims that their products did not contain toxic chemicals when independent testing commissioned by the ACCC found that they contained carcinogens and formaldehyde, acetaldehyde, and acrolein. ACCC Chairman Rod Sims said that the ACCC would continue to work with its local and international counterparts to ensure consumers receive accurate information about the composition of e-cigarettes and the likely effects of their use. Link: ACCC media release ACCC brings proceedings against Australia’s largest private health insurer The ACCC has instituted proceedings in the Federal Court against Medibank Private Limited, Australia’s largest private health insurer, for failing to inform its members that it was now limiting benefits relating to in-hospital and radiology services. Medibank had cancelled out of agreements with pathology and radiology providers under which it would pick up the tab for charges above the Medicare Benefit Schedule fee with the result that these had now to be paid by the patient. The ACCC alleges that Medibank: • did not provide advance notice of the change, even though it had previously represented that it would • kept communications about the change contained and reactive • was aware that many members thought (incorrectly) that all of their in-hospital medical expenses were covered, and • thought there was a risk that, if the change was disclosed, members might leave Medibank and Medibank’s brand and reputation would be damaged. These issues also apply to Medibank’s subsidiary brand, ahm. The ACCC seeks declarations, injunctions, compensation orders, pecuniary penalties, findings of fact, implementation of a trade practices compliance program, corrective notices and costs. Link: ACCC media release Australian Securities and Investment Commission ASIC keeps pet insurance advertising on a tight leash Allianz Australia Insurance Limited and its agent Petplan Australasia Pty Ltd (Petplan) have compensated 740 Petplan policy holders over $231,000 and corrected Petplan advertising after ASIC action. Petplan promoted its insurance as providing a 100% rebate on claims for veterinary bills when in fact the cover was subject to either a fixed excess or a variable excess (for pets older than eight) and to nonclaimable items. Link: ASIC media release Kovac Property Group pays penalty to comply with ASIC infringement notice Kovac Property Group Pty Ltd has paid a $10,800 penalty to comply with an ASIC infringement notice for publishing potentially misleading advertisements online in late 2015 and early 2016. The promotion was for the Investment Samaritan Offer, in which the funds invested were loaned to Investment Samaritan Pty Ltd. ASIC was concerned that the website did not properly explain the key risks involved in the investment, and did not give an adequately balanced picture of the returns and risks associated with the product. In particular, it did not explain the risk of Investment Samaritan Pty Ltd defaulting on the loan. Contents Cases 1 Commerce Commission 3 Banking Ombudsman 3 Advertising Standards Authority (ASA) 4 Australian Competition and Consumer Commission 5 Australian Securities and Investment Commission 6 Financial Conduct Authority (UK) 7 7 | July 2016 G ing to Market Consumer law update Infringement notices can be used when ASIC has reasonable grounds to believe a provision of the ASIC Act has been contravened. Payment of a notice does not constitute admission of a contravention of the ASIC Act. Link: ASIC media release Financial Conduct Authority (UK) FCA urges over 55s to be wary of investment fraud The FCA has released a study showing sustained low interest rates in the UK have caused over 55s to adopt riskier investment behaviour to try and get a better rate of return. It follows previous FCA research which found that those over 65 with savings in excess of £10,000 were three and half times more likely to fall victim to investment fraud than the wider population. Over a quarter of those questioned had chosen to invest in unregulated investment products – of whom 13% were unaware that they had put themselves beyond the protection of the Financial Ombudsman or the Financial Services Compensation Scheme. FCA Director of Enforcement Mark Steward urged investors to be sceptical, noting that “if you are contacted out of the blue about an investment opportunity that sounds too good to be true then it probably is”. Link: FCA media release If you would prefer to receive this newsletter by email, or if you would like to be removed from the mailing list, please send us an email at [email protected] Every effort has been made to ensure accuracy in this newsletter. However, the items are necessarily generalised and readers are urged to seek specific advice on particular matters and not rely solely on this text. © Chapman Tripp For further information, contact Victoria Heine – Partner T: +64 4 498 6327 M: +64 27 561 3707 E: [email protected] Tim Sherman – Senior Associate T: +64 4 498 2400 M: +64 27 345 3250 E: [email protected] Kelly MCfadzien – Partner T: +64 9 357 9278 M: +64 27 473 2230 E: [email protected] Sarah Quilliam-Mayne – Senior Solicitor T: +64 4 498 6307 M: +64 22 136 2601 E: [email protected] Our thanks to Rose Goss for her help with this edition of Going to Market.