Federal Court penalises solar panel companies for publishing false testimonials and credence claims
With more and more consumers relying on online product reviews to enlighten their purchasing decisions, the Australian Competition and Consumer Commission (ACCC) is tightening up on businesses that publish false testimonials and make misleading credence claims.
On 17 January 2014, the Federal Court ordered by consent that P & N Pty Ltd and P & N NSW Pty Ltd (Euro Solar) and Worldwide Energy and Manufacturing Pty Ltd (WEMA) pay combined pecuniary penalties of $125,000 for publishing false testimonials and making false or misleading representations about the country of origin of the solar panels they supply. The sole director of the companies was also ordered to pay $20,000 for being knowingly concerned in, and a party to, the conduct.
Specifically, the court found that:
- video testimonials published on YouTube by Euro Solar, and written testimonials published by WEMA on its website, were not made by genuine consumers; and
- Euro Solar and WEMA had made false or misleading representations to consumers that they manufactured or supplied solar panels that were made in Australia, when they were in fact made in China.
Justice Besanko found that the advertisements suggested “that not only were the solar panels made in Australia, but that customers or potential customers ought to be supporting them because of that fact”, which His Honour considered an important factor in assessing the appropriateness of the penalty proposed by the parties. These representations “were a central part of the respondents’ business and marketing strategy”. The Court made additional orders by consent, including declarations, injunctions, corrective advertising and provision for a contribution to the ACCC’s costs.
This is the first litigated outcome in relation to publishing false testimonials under the Australian Consumer Law, and visibly shows that the ACCC is prioritising work in this area. ACCC Chairman Rod Sims has stated (see here):
“Consumers should be able to trust that testimonials give honest feedback about a consumer’s experiences with a service or product. If they are not genuine, consumers may be enticed into making a purchase that they would not have otherwise made.”
Credence claims are also seen as a powerful marketing tool for businesses, with consumers frequently prepared to pay a premium for Australian-made products.
- write or otherwise generate testimonials or reviews about the business;
- copy and alter testimonials or reviews (making them applicable to the business);
- encourage family or friends to write testimonials or reviews about the business without disclosing their personal connection;
- solicit others to write testimonials or reviews about the business if they haven’t experienced the product or service;
- offer incentives to others to write testimonials or reviews (unless the incentives are offered equally to all consumers, consumers are told that the incentive is available whether their reaction is positive or negative, and the incentive is disclosed to those relying on the testimonials or reviews); nor
- selectively omit or edit testimonials or reviews so that the total body fails to reflect genuine consumer opinion.
In light of this case and the ACCC’s enforcement priorities, businesses must ensure that any claims they make are accurate, and that they publish genuine testimonials to promote their products and/or services. We can help.