A recent Federal Court decision [1] should serve as a warning of the need to ensure promotional materials comply with the Australian Consumer Law (“ACL”).
The ACCC commenced proceedings against Metricon Homes Qld Pty Ltd alleging false and misleading representations and misleading and deceptive conduct in relation to advertising brochures and other materials. The Trade Practices Act 1974 (Cth) was applied to the conduct of Metricon Homes prior to 1 January 2011 and the ACL under the Competition and Consumer Act 2010 (Cth) following 1 January 2011.
Metricon Homes was ordered to pay $800,000 in respect of contraventions of the TPA and ACL, and an additional $50,000 towards the costs incurred by the ACCC.
What did Metricon Homes do wrong?
There were a number of problems with the advertising materials distributed by Metricon Homes:
- many of the features and fittings depicted in the photographs of the house designs displayed in a brochure were not included in the represented price, and some items shown in the photographs were not supplied by Metricon Homes at all, e.g. swimming pools and Bali huts. Metricon Homes did not make it clear that these features were not part of the package on offer;
- all advertising brochures it published included representations that Metricon Homes would guarantee build times for the houses it offered and that it would compensate purchasers for rental costs if the build time was not met. The build time guarantee did not, however, apply to the majority of houses on offer and the terms and conditions stating this were not properly communicated in the materials. In reality, very few customers would have been able to take advantage of the build time guarantee;
- they advertised price discounts, but the houses represented in the brochures had either never previously been offered for supply by Metricon Homes at all, or had not been offered for supply at the “list” price immediately before the start of the promotion. This conduct was intended to make customers believe they were making substantial savings, when in fact that was not the case; and
- ‘Upgrades Package’ brochures which advertised additional features and fittings available when purchasing a specific house design misled customers about the value of the features and the savings available if an ‘Upgrades Package’ was purchased. Metricon Homes had on only very few occasions entered into transactions for the supply of the particular feature or fitting at the standard price, and had, therefore, misled customers in relation to the value of the features and savings available.
Take away
As stated by ACCC Chairman, Rod Sims:
‘Home building companies should take the penalties ordered in this case as a serious warning.
Photographs and glossy brochures that promote products should be of what the consumer will be supplied at the advertised price, not an upgraded package that would ultimately cost the consumer much more.
If companies run promotions or advertise savings then those savings must be real, not a lure to attract customers to their products over competitors who might be doing the right thing.’ [2]
Of course, this decision does not just apply to home building companies. It is a reminder that when preparing promotional material all businesses must:
- carefully contemplate what representations are actually being made when preparing advertisements and promotions, and consider whether any representation is misleading or deceptive or is likely to mislead or deceive. Remember, what is key is not your intended representation, but what the understanding of a typical member of your target audience would be;
- implement and monitor competition and consumer compliance policies and programs to prevent conduct that would be considered to contravene the ACL; and
- vet promotional materials for ACL compliance prior to their release.
Failure to prepare compliant materials can give rise to claims under the ACL and significant financial penalties.
For more information, please contact:
Michael Sutton | Senior Associate
T +61 2 8233 9587
F +61 2 8233 9555
E michael.sutton@dibbsbarker.com Scott Sloan | Partner
T +61 2 8233 9554
F +61 2 8233 9555
E scott.sloan@dibbsbarker.com Footnotes:
1. Australian Competition and Consumer Commission v Metricon Homes Qld Pty Ltd [2012] FCA 797.
2. ACCC Media Release issued 31 July 2012, ‘Metricon Homes Qld to pay $800,000 penalty for misleading representations’.
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