In the firing line: Misleading and deceptive conduct
E-cigarette retailers, Social-Lites Pty Ltd (Social-Lites) and Elusion New Zealand Limited (Elusion), health insurer Medibank and H.J. Heinz Company Australia Ltd (Heinz) are some of the latest culprits under investigation by the Australian Competition and Consumer Commission (ACCC) for misleading and/or deceptive representations to consumers.
The Competition and Consumer Act strictly prohibits business conduct that is likely to, or will mislead or deceive consumers. This conduct can include advertisements and statements that are false, inaccurate or unable to be substantiated that are made via:
- Product packaging (read our blog on how Nurofen experienced a headache in this area)
- A person representing the business.
The ACCC closely monitors and investigates the conduct of businesses with respect to claims about a product’s quality, value, price, age, associated benefits or related guarantees or warranties. When assessing potential contraventions, the ACCC considers the overall impression of a business’s representation or statement and whether it is likely to mislead or deceive.
The following case studies serve as examples of how businesses may engage in conduct that can be perceived as misleading and/or deceptive, and in doing so, contravene Australian Consumer Law.
E-cigarette retailers under fire
Two online e-cigarette retailers, Social-Lites and Elusion, are in the midst of proceedings brought to the Federal Court by the ACCC, under suspicion of making representations that their respective products are absent of toxic chemicals typically found in conventional cigarettes.
Following independent testing conducted by the ACCC, the companies’ products were found to contain carcinogens such as formaldehyde, rendering the statements on their respective websites false. Consequently, the ACCC is seeking various penalties from the Supreme Court. ACCC Chairman, Rod Sims, stressed that prior to making such representations or statements, suppliers should have scientific evidence to support their claims.
Health care provider receives negative results
Health care provider Medibank Private Limited has also found themselves on the radar with the ACCC alleging that Medibank’s subsidiary, ahm, intentionally concealed its decision to limit in-hospital and radiology benefits. The ACCC also alleged the following unconscionable conducts to have occurred on behalf of Medibank:
- Medibank knowing or expecting members to believe that all in-hospital medical expenses were covered
- Medibank acknowledging there was a risk members might leave if they became aware that certain costs were not covered
- Medibank acknowledging there was a risk their brand and reputation may be damaged if the general public discovered certain costs were not covered
- Medibank estimating that a reduction in covered costs would lead to financial gains (both of the treatment and from retaining members).
Mr Sims stressed that health fund members could reasonably expect to be notified in advance when substantial changes to their benefits were imminent. He noted that competition and consumer complaints in the health industry were a priority of the ACCC as the conduct of health insurers is likely to affect vulnerable consumers.
Sugar leaves a bad taste for nutritious food supplier
Finally, Heinz has been accused of engaging in conduct that is likely to mislead the public due to various misrepresentations on the packaging of its ‘Little Kids Shredz’ products. Labelled with 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,”a close read of the nutritional statements reveals that the products are in fact 68.7% sugar.
According to Mr Sims, the Heinz ‘Little Kids Shredz’ are likely to hinder a child’s acceptance of fresh produce due to the extreme difference in taste and consequently, “encourage a child to become accustomed to, and develop a preference for, sweet tastes.”
Before making any representations around your product, contact our Commercial Advice team to make sure what you want to say won’t be considered misleading or deceptive conduct: