INSIGHT

Fake Indigenous art leads to $2.3 million penalty; ACCC allegations of misleading claims are dismissed against Kimberly-Clark's 'flushable' wipes; and Woolworths' Select eco range passes the 'biodegradable' muster.

By Jacqueline Downes
Consumer law Infrastructure Technology Telecommunications

6 min read

Fake Indigenous art leads to $2.3 million penalty

The Federal Court has imposed a $2.3 million penalty on Birubi Art Pty Ltd for engaging in misleading or deceptive conduct about products it sold, in breach of the Australian Consumer Law.

Following an action commenced by the ACCC, the court found that Birubi had falsely claimed that its products were genuine Indigenous art. In particular, the court found that between July 2015 and November 2017, Birubi supplied to retail outlets throughout Australia almost 50,000 boomerangs, bullroarers, didgeridoos and message stones, each of which contained words such as 'Authentic Aboriginal Art', 'Hand Painted' and 'Australia', and featured designs associated with Indigenous art, despite having been made in Indonesia.

The court found that the $2.3 million penalty was appropriate in the circumstances, to reflect the economic, social and cultural harms arising from Birubi's conduct and to strongly discourage other operators from undercutting the genuine Indigenous art industry.

Following the decision, the ACCC stated its intention to monitor and take action against other traders of Indigenous Australian style art and souvenirs who mislead consumers about the nature of their products.

Kimberly-Clark's 'flushable' wipes claims not misleading

The Federal Court has dismissed the ACCC's proceedings against Kimberly-Clark Australia for representations in relation to its 'flushable' wipes, sold as Kleenex Cottonelle Flushable Cleansing Cloths (KCFC wipes).

The ACCC brought proceedings against Kimberly-Clark in the Federal Court in December 2016, alleging that in describing its products as 'flushable' on product packaging and its website, Kimberly-Clark had misled consumers about the suitability of its wipes to be flushed down the toilet.

In dismissing the proceedings, the Federal Court found that it was reasonable for Kimberly Clark to rely on guidelines developed by nonwovens industry associations to substantiate its 'flushable' claims. The court acknowledged the ample evidence that 'wipe' products generally can pose a significant management problem for municipal sewerage systems, but found that the ACCC's evidence was insufficient to demonstrate that the KCFC wipes had caused or contributed to such harm in any particular instance. Evidence from the company’s business records revealed 28 consumer complaints about household system blockages during the relevant period, while millions of packets of the wipes were sold during that time. Further, the court noted the existence of other wipe products that were unsuitable to be flushed into the sewerage system, finding that while some wipe products had 'undoubtedly' caused or contributed to sewer system blockages, it was not possible to infer that those were KCFC wipes.

The court also found that the 'flushable' representations were expressions of a characteristic of the KCFC wipes as manufactured (which was either misleading or not), rather than representations about 'future matters' concerning the wipes, which, under the ACL, are taken to be misleading if the person does not have reasonable grounds for the representation at the time it is made.

The court did find that Kimberly-Clark made a false representation by claiming its wipes were made in Australia, when in fact they were manufactured in Germany, South Korea and the UK. The penalty to be paid by Kimberly-Clark in relation to this false representation is yet to be determined.

Woolworths' 'biodegradable and compostable' claims not misleading

The Federal Court has dismissed the ACCC's proceedings against Woolworths Limited, finding Woolworth's environmental claims that its 'Select eco' range of disposable plates, bowls and cutlery were 'biodegradable and compostable' were not false or misleading.

The ACCC argued that Woolworths' claims meant a consumer could reasonably expect the disposable products would decompose in landfills or domestic composting within a reasonable time. However, in dismissing the proceedings, the court found that consumers were unlikely to consider how long disposable cutlery or plates would take to break down, only that they were different from other similar plastic products. The court found that the use of the phrase 'biodegradable and compostable' on the labelling did not convey anything about how long the products might take to degrade or to turn into compost, and it was unrealistic to assume that customers turn their minds to such matters when purchasing the products. Instead, the message conveyed to consumers was that the 'products were capable of breaking down and being turned into something useful in the soil'.  

The court also found that the 'biodegradable and compostable' representations were expressions of an inherent characteristic of the 'Select eco' range as manufactured (which was either misleading or not), rather than representations about 'future matters' concerning the product, which, under the ACL, are taken to be misleading if the person does not have reasonable grounds for the representation at the time it is made. In reaching this finding, the Federal Court noted with approval the approach taken by the court in the proceedings against Kimberly-Clark (summarised above).

ACCC alleges Optus misled consumers re nbn transition

The ACCC has instituted proceedings in the Federal Court against Optus Internet Pty Limited and Optus Mobile Pty Limited, alleging Optus misled consumers in an email about the need to switch to the nbn in the near future or risk being disconnected.

The ACCC alleges that at the time the email was sent, Optus did not have any reasonable basis for asserting the recipients would be disconnected. In particular, the ACCC alleges that Optus was aware that most of the recipients of the email had already switched to the nbn and were receiving nbn-based services from a provider other than Optus. The ACCC states this deprived the recipients of the opportunity to make an informed decision about whether, when and on what terms they would acquire a new nbn-based service.

Optus has acknowledged the ACCC's proceedings and stated that it has apologised to those who received the email.

These proceedings follow previous action the ACCC has taken against Optus regarding claims made concerning the transition to the nbn. Optus was ordered to pay a penalty of $1.5 million in relation to that conduct in May 2018 (see our previous edition of In Touch)

ACCC to enforce new rules for electricity retailers

The new Electricity Retail Code came into effect on 1 July 2019 in New South Wales, South East Queensland and South Australia. 

The Code was introduced under the Competition and Consumer Act 2010 (Cth) following the ACCC's inquiry into retail electricity pricing last year, which made a number of recommendations to increase the transparency and consumer trust in advertising of electricity deals.

Electricity retailers have various new obligations under the code, including:

  • capping their 'standing offer' prices charged to residential and small business at amounts set annually by the Australian Energy Regulator;
  • mandating that any prices and discounts must be calculated and advertised against an independently set benchmark known as the ‘reference price’ to allow consumers to more easily compare market offers; and
  • prohibiting conditional headline discounting such that conditional discounts must not be the most conspicuous price advertised, and requiring all conditions to be clearly stated.

The ACCC has published guidance on the new code and cautioned retailers that it will be monitoring and enforcing compliance with these new requirements. The ACCC will also report on movements in prices and market offers in its next electricity market monitoring report, due in September.