Truth in advertising – ACCC to crack down in 2015

Pippa Chambers
By Pippa Chambers | 19 February 2015

Advertisers such as Coles and Flight Centre looking to bend the rules will feel the wrath of the ACCC this year if they step out of line, as the body aims to tighten up on advertisers.

Chairman of the Australian Competition and Consumer Commission (ACCC) Rod Sims has today revealed the watchdog's priorities for the year ahead.

As well as competition and consumer issues in the health sector and industry codes  being new priorities, Sims said truth in advertising is high on the list of topics to tackle.

After receiving about 200,000 enquiries and complaints a year – of which it usually investigates more than 500 matters and takes 30-40 cases to court each year, Sims said the ACCC believes truth in advertising is fundamental to the proper functioning of a market economy.

“From phones to shoes which allegedly tone buttocks, in the past year or so we have seen a steady stream of outcomes,” Sims said.

“Including truth in advertising as a priority is a signal that we will continue taking a firm stance on such matters. Our action in this area serves a dual purpose. When advertising is untruthful consumers are misled, and honest traders are put at a competitive disadvantage.”

He went on to say that the ACCC will prioritise those matters where misleading claims are made by large businesses with the potential to result in significant consumer detriment, or where the conduct is likely to become widespread if the ACCC does not intervene.

He also stressed that 'visible enforcement' would be dominant theme for 2015 and used the recent Coles saga, in which it crossed the line by overcharging suppliers, and Flight Centre's price fixing as examples.

He said as well as knowing where the boundaries are, it is equally important that businesses know the consequences for crossing the line, but that it is here where the ACCC may have a problem.

“Last year when the court awarded penalties of $11m against Flight Centre for attempted price fixing, there was immediate financial media commentary that the penalty was “immaterial” given the size of Flight Centre,” he said.

In her December 2014 judgement against Coles for unconscionable conduct Justice Michelle Gordon noted that it is a matter for the parliament to review whether the maximum available penalty of $1.1 million for each contravention of the code by a body corporate, is sufficient when a corporation with annual revenue in excess of $22 billion acts unconscionably.

“The current maximum penalties are arguably inadequate for a corporation the size of Coles,” Justice Gordon said.
The ACCC now says penalties should not be seen as simply a cost of doing business and that they need to be at a level which achieves both specific and general deterrence.
“Some companies think they have a lot to gain from breaching our competition and consumer law; they should have much to lose as well,” Sims said.

He also said in particular, the ACCC believes the outcome in the Coles’ unconscionable conduct cases, which were finalised late last year, sends a clear signal to larger businesses about appropriate conduct in commercial dealings with smaller suppliers.

The court ordered Coles to pay total pecuniary penalties of $10 million, as well as costs. Coles also provided a court enforceable undertaking to the ACCC to establish a formal process via an independent arbiter, Jeff Kennett, to provide options for significant financial redress for over 200 suppliers referred to in the proceedings.

Speaking at time on the Coles debacle, Justin Gordon said: “Coles’ misconduct was serious, deliberate and repeated. Coles misused its bargaining power. Its conduct was ‘not done in good conscience’. It was contrary to conscience.

“Coles treated its suppliers in a manner not consistent with acceptable business and social standards which apply to commercial dealings. Coles demanded payments from suppliers to which it was not entitled by threatening harm to the suppliers that did not comply with the demand.  Coles withheld money from suppliers it had no right to withhold.”

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