The ACCC has swooped in and scooped up penalties of $1 million against Scoopon Pty Ltd (Scoopon) in the Federal Court of Australia .
Scoopon is part of Catch Group (which also runs Catch of the Day, Grocery Run and Mumg), and is one of Australia’s largest group buying websites. Small to medium-sized merchant businesses, such as restaurants, car service centres, beauty service providers and travel promoters, frequently make offers on group buying websites as loss-leaders to attract new customers. The ACCC and other regulators have received a significant number of complaints since the group buying industry emerged in Australia in 2010 (see here).
As discussed in a previous blog, the ACCC issued proceedings against Scoopon in July this year for misleading or deceptive conduct, and making false or misleading representations to businesses and consumers.
The Federal Court declared by consent that Scoopon had contravened sections 18 and 29(1) of the Australian Consumer Law (ACL) in making false or misleading representations to both merchants selling through Scoopon and to consumers. The contraventions involved:
- representing to one merchant business that 30% of vouchers sold through Scoopon would not be redeemed and hence represent a windfall to the merchant (without reasonable grounds for making the representations);
- representing to merchant businesses that there was no cost or risk involved in running deals through Scoopon other than the costs and fees disclosed by Scoopon (when this was not the case – in fact Scoopon would claim the full amount of the voucher price from the merchant if Scoopon refunded the voucher to the consumer; and
- making representations to consumers about the availability of refund rights (particularly in the last 2 weeks of validity); and
- making representations to consumers about the price of certain goods or services advertised in respect of a number of deals involving luggage, ugg boots and electric blankets.
In addition to the pecuniary penalty, the Federal Court has ordered Scoopon:
- to pay an agreed amount of the ACCC’s legal costs;
- to further develop and enhance its existing compliance program; and
- as part of a community service order, to prepare for and hold an educational seminar on ACL issues for other group-buying websites.
The Federal Court has also ordered injunctions restraining Scoopon and its employees from making similar representations for a two-year period.
ACCC Chairman Rod Sims has warned that the ACCC will continue to take action where online traders fail to understand that their obligations are the same as store-front retailers, and make false or misleading representations to businesses and consumers (see here).
Identifying and censuring false or misleading representations – whether in relation to consumer protection and fair trading, energy sector discount claims, consumer guarantees or credence claims – has been an enforcement priority for the ACCC throughout 2013 (see here), with a number of high profile matters brought before the courts. The ACCC recently issued proceedings against two egg producers in relation to allegedly misleading “free range” claims, and succeeded in an appeal to the High Court of Australia against TPG in relation to misleading telephone and internet bundle advertisements (as discussed in previous blogs here and here).
This case serves as another warning to businesses in a variety of industries to improve their competition compliance practices or face potential action from the ACCC.