You better watch out, you better not mislead

Published On 24/12/2013 | By Melissa Monks | Consumer protection, Enforcement

Christmas is the time of giving.  Retail outlets are a flurry with last-minute shoppers seeking the perfect gift for their loved ones.  Then comes the post-Christmas sale period, which is typically characterised by consumers returning gifts – either that they do not want, nor like, or that are unsuitable for re-gifting.

In this flood of shopping activity, retailers and manufacturers alike should be careful about the marketing techniques they employ and the claims they make.  The ACCC has been very busy in the lead up to Christmas year – to date, it has issued 53 media releases in December alone, including announcements about action against Reebok and AGL for misleading conduct.

Make sure you know the rules about faulty Christmas gifts

Complaints about consumer guarantees represent a quarter of the consumer protection complaints received by the ACCC with 17,950 complaints made in 2012-2013.  Consumer guarantees are an enforcement priority for the Commission and Chairman Rod Sims has warned repeatedly this year that the ACCC will act where consumers have been misled about their rights.  And it has with three such actions in 2013, including obtaining a $3 million penalty against Hewlett-Packard for such misconduct.

This month the Federal Court ordered five Harvey Norman franchisees to pay a total of $148,000 for making false or misleading representations to customers concerning their consumer guarantee rights under the Australian Consumer Law (ACL).  This included misrepresentations by franchisee managers and sales staff that:

  • the franchisee was not obliged to provide remedies for faulty goods unless notified within a short period such as 24 hours;
  • it was up to the manufacturer to provide a repair or refund for faulty goods not the franchisee; and
  • the franchisee had no obligation to provide a remedy other than an exchange or credit that had to be finalized within a few weeks.

Mr Sims says these penalties ‘send a strong message to all businesses, including franchisees, that they must not mislead consumers about their rights to repair, replacement or refund for faulty goods ‘ under the ACL.  The Court also made declarations, ordered injunctions and compliance programs, while four franchisees were also ordered to display corrective notices instore.

The ACCC is still awaiting judgment in proceedings against another five Harvey Norman franchisees for similar conduct.

With consumer guarantees continuing to be on the ACCC’s radar, it is important to understand the obligations on manufacturers and retailers, particularly in the Christmas and New Year sales period.

Knock, knock. Who’s there?

Businesses should also be sure to respect consumers’ rights in relation to Christmas door-to-door marketing with the Federal Court confirming recently the high price of ignoring ‘do not knock’ signs.  AGL South Australia and its marketing company, CPM Australia, were hit with $60,000 worth of penalties for knocking on a single consumer’s door where a ‘do not knock’ sign hung.  The Court held that the sign constituted a clear and unambiguous request to leave the premises without knocking.

As part of the same proceedings, the Court ordered by consent that AGL pay penalties of $1.55 million for other unlawful selling practices including making false representations to consumers.  CPM were also ordered to pay $200,000 for its role in the conduct.

The unsolicited consumer agreement provisions of the ACL are another enforcement priority for the ACCC who this year, has not hesitated to bring  five proceedings as part of its focus on door-to-door selling practices in the energy industry since March 2012.  These cases have highlighted the compliance risks with this form of selling technique with all three major energy retailers – AGL, Energy Australia and Origin – each now having ceased door-to-door sales. 

Who doesn’t love some jewellery for Christmas?

The ACCC has a successful track record in pursuing misleading jewellery pricing claims and this continues with a recent Full Court of the Federal Court decision confirming that the Jewellery Group Pty Ltd (trading as Zamel’s) made false or misleading representations by its use of two-price ‘WAS’ and ‘NOW’ advertising in catalogues and a flyer.  Justice Lander made declarations in relation to the conduct and imposed a pecuniary penalty of $250,000 as well as ordered Zamel’s to implement a trade practices compliance program, publish corrective notices, and pay the ACCC’s costs.

These cases highlight the importance of ensuring that any savings representations made in the pre- or post-Christmas sales accurately reflect the savings customers are making when purchasing items on sale, including that goods have been retailed at the ‘WAS’ price in the preceding period for a reasonable time.

Remember, when you’re looking for that perfect gift, you shouldn’t always trust what you read online…

According to recent reports, consumers have become heavily reliant on online reviews when purchasing goods and services.  The ACCC is concerned about an increase in fake and paid for reviews that mislead customers and, just in time for Christmas, has released a best practice guide about online reviews for businesses and review platforms. The Guidelines set out three core principles of conduct for businesses to abide by, namely:

  • be transparent about commercial relationships;
  • don’t post or publish misleading reviews; and
  • remember that omitting negative reviews can be as misleading as posting fake reviews.

Businesses would be well advised to ‘keep it real’ this Christmas by ensuring that reviews they post are accurate and reliable.

Make sure you don’t end up with a lump of coal for Christmas

Beware also of getting into trouble for:

  • third line forcing – that is, providing Christmas specials that involve placing a condition on the supply of your goods that requires customers to acquire goods from a third party;
  • bait advertising – being where goods or services are promoted at a specified price when the retailer has reason to believe it won’t be able to supply the goods at that price in reasonable quantities or for a reasonable period.  Of course, unpredictable Christmas trends can sometimes mean demand for particular goods is higher than honestly expected such that a retailer genuinely runs out of stock.  Such circumstances should not amount to bait advertising.

With its very wide powers to investigate potential contraventions of the ACL and issue infringement notices where it has reasonable grounds to believe there has been a contravention of certain consumer protection provisions, the ACCC is well placed to find out who has been naughty or nice this year.

So, be good for goodness sake!

By Melissa Monks and Sarah Werner

Photo credit: kevin dooley / Foter.com / CC BY

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About The Author

Melissa Monks is a Special Counsel in the Melbourne office of King & Wood Mallesons specialising in competition and consumer protection, retail energy, food law and general commercial law.

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