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Competition Law

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Focus: ACCC issues its first warning notice

24 August 2010

In brief: The Australian Competition and Consumer Commission has recently issued its first Public Warning Notice for misleading claims in advertisements. Partner Wendy Peter and Senior Associate Alexander Gelis report on the first time this power has been exercised, following its introduction as part of the Australian Consumer Law amendments to the trade practices legislation.

How does it affect you?

The initial exercise of the Australian Competition and Consumer Commission's (ACCC) public warning powers is a reminder to businesses of the importance of ensuring that they are aware of:

  • their obligations under the Australian Consumer Law; and
  • the potential for a business to be 'named and shamed' in a Public Warning Notice in cases where there is a potentially serious issue warranting this high-impact form of disclosure.

Power to issue Public Warning Notices

The ACCC has previously been empowered to issue public warnings in relation to product safety. The introduction of the Australian Consumer Law on 16 April 2010 has resulted in a widening of these powers to the unconscionable conduct and consumer protection provisions of the Trade Practices Act 1974 (Cth) (the TPA).

The ACCC can now issue public warnings when:

  • on reasonable grounds, it suspects a contravention of the unconscionable conduct or consumer protection provisions in Parts IVA, V or VC of the TPA (which will be replaced by the new consolidated Australian Consumer Law effective 1 January 2011); and
  • the ACCC is satisfied that someone is likely to suffer detriment from the conduct; and
  • it is in the public interest to issue the notice.

Alternatively, a Public Warning Notice may be issued where a person fails to respond to a substantiation notice and the ACCC is satisfied that it is in the public interest to issue a notice warning of this failure.

The first Public Warning Notice

On 20 August 2010, the ACCC issued the first Public Warning Notice under its broader powers against three corporations suspected of making misleading claims about the income that can be derived from delivering 'Heartlink'-branded household products to independent supermarkets. The business opportunity was advertised in metropolitan, regional and rural newspapers as a 'part-time' delivery business and claimed earnings of between $900 and $2000 per week for three to four days' work. The ACCC's action follows complaints from individuals who paid between $10,000 and $30,000 for a business and have earned no income.

The notice is now publicly available on the ACCC's Public Warning Notice register.

Reaction

The ACCC has stated that a key consideration in evaluating whether it is appropriate to issue a Public Warning Notice will be whether it considers there is an imminent need to inform consumers so they can avoid suffering detriment. Clearly, the very public impact of issuing a notice under these provisions is not lost on the ACCC, which has indicated that it will use these powers only when absolutely necessary, in situations when it is reasonably satisfied that a breach of the unconscionable conduct or consumer protection provisions of the TPA has occurred and that the public needs to be alerted to the suspected breach before the breach can actually be proven.

The ACCC may be disappointed that this first example of its use one of its high-profile new powers under the Australian Consumer Law has received little media attention, but this is not surprising given the timing of its release on the eve of the Federal election.

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