Telecommunications company iiNet last week became the first publicly listed company to pay an infringement notice penalty issued by the ACCC for an alleged contravention of the Australian Consumer Law.  The infringement notice, in the amount of $102,000 was issued in response to iiNet’s advertising campaign for its Naked DSL service.

iiNet’s advertisements were displayed on the rear side of buses in metropolitan Sydney in February and March 2013 with the tag line “Free yourself from phone line rental forever”.  The advertisements prominently stated the monthly price of the service of $59.95.  The advertisements also displayed the total minimum price of the service ($59.95 for each month for 24 months plus a $79.95 connection fee amounting to a total price of $1,518.75) but did so in substantially smaller print than the $59.95 monthly fee and towards the bottom corner of the advertisement (see pic below issued by the ACCC).  In the ACCC’s view, the references to the total price did not satisfy the requirements of a “prominent” display as required under section 48 of the Australian Consumer Law and accordingly issued the infringement notice.

The ACCC may issue an infringement notice where it has reasonable grounds to believe that a person has contravened certain consumer protection provisions, including the unfair practices provisions found in Part 3-1 of the Australian Consumer Law such as section 29 (false or misleading representations) and section 48.

The case is a useful illustration of the ACCC’s active enforcement of its extensive powers under the Australian Consumer Law.  The ACCC has repeatedly made it clear that misleading advertising and particularly the “full and honest disclosure of prices” is a priority area, with telco and airline companies being particularly closely scrutinised in recent years.

Penalties are calculated in accordance with section 134C of the Australian Consumer Law, with $102,000 payable for a listed corporation per offence.  Similar conduct by an unlisted corporation would attract an infringement notice of $10,200, whilst a person who is not a corporation could be subject to an infringement notice in the amount of $2,040. Whilst the ACCC cannot force a person or business to pay an infringement notice penalty, if the recipient chooses to do so, they are not, merely because of the payment, to be regarded as having contravened the law.  Moreover, the ACCC cannot commence court proceedings in relation to the alleged contravention if the infringement notice penalty is paid.

The ACCC will use the infringement notice procedure only for relatively minor contraventions of the Australian Consumer Law.  In more serious cases and where there has been significant detriment arising from the alleged conduct, the ACCC is still likely to pursue tougher enforcement options, including Federal Court proceedings.  The ACCC did so in another recent case where it commenced proceedings against the former operator of Abel Rent a Car in Brisbane regarding price information on its website which stated a daily car hire rate of $35 per day without referring to additional mandatory fees, including a $5 per day “vehicle registration recovery fee” and a 7.5% “administration fee”.  In her judgment handed down on 18 June 2013, Gordon J found the advertising to be misleading and that the misrepresentations were not sufficiently negated by the disclosure of the additional fees on subsequent pages of the company’s website.  Her Honour ordered payment of a pecuniary penalty in the amount of $30,000.

Advertisers are reminded by the iiNet and Abel Rent a Car examples to:

  • Take care in the production of any advertising materials and to ensure that they do not convey any false representations, including in regard to price of goods or services;

  • Ensure that reference to the total minimum price of goods as services is displayed equally as prominently as the display of any references to components of the price, such as monthly rental fees;

  • Consider the effect of any advertising on the consumer and be aware that different forms of advertising (for example, a newspaper advertisement which may be looked at carefully by a reader as opposed to the back of a bus which passes the consumers’ view fleetingly) will be understood in different ways;

  • Seek immediate advice if contacted by the ACCC in relation to its advertising.