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"Gilding the lily" treads a legal minefield

Consumer Law News | April 2013

Ensure your advertising material does not mislead or deceive your consumers

Builders and other business owners need to take note of a recent decision by the Federal Court, where Metricon Homes Qld Pty Ltd was ordered to pay $800,000 in penalties for engaging in misleading and deceptive conduct in breach of the Australian Consumer Law 2010 (‘ACL’) and the former Trade Practices Act 1974 (‘TPA’).

What did Metricon do wrong?

  • It produced and distributed brochures depicting houses available “from” a certain price. However, many of the features and fittings shown in the brochure were either not included in the “from” price or not supplied by Metricon itself. For example, photographs showed houses with pools and Bali huts, but these features were not available at the “from” price nor were they supplied by Metricon.
  • It guaranteed that build times would range between 14 and 24 weeks for houses supplied, after which time it would compensate purchasers for rental costs of up to $300 per week. However, due to terms and conditions that excluded the application of the guarantee in certain circumstances, the majority of purchasers were not able to take advantage of it.
  • It produced and distributed brochures showing houses available at discounted prices. The brochures set out a “list price” (the price of the house before the promotion) and the discounted "pay now" price. The Court found that Metricon had either never sold the houses depicted in the brochure before, or if it had, that the houses had not been offered at the “list price” immediately before the promotion. Metricon also advertised an “Upgrades Package” where additional features and fittings were available at discounted prices, and the Court made similar findings in relation to this package.

How your business can avoid misleading customers

  • Make sure that advertised savings are “real”. Don’t advertise goods as being available at discounted prices if you have never actually sold the goods at full price in the period before your promotion.
  • Conditions that are written into the fine print will not negate the effect of a headline that is seen to be misleading or deceptive. Don’t rely on fine print to avoid providing advertised benefits to customers.
  • Put a Competition and Consumer Law compliance policy in place, and make sure you stick to it.

Remember that in prosecuted matters, it's not a defence to say that your business's misleading and deceptive practices did not cause loss or damage to anyone. However, the extent of any loss or damage suffered will affect the penalty the Court imposes. Parties making claim under s.18 of the ACL can claim for the damages suffered as a result of the misleading and deceptive conduct and this area of law is one of the most litigated areas in Australia.

If you're confused about any area of consumer law in Australia, Forum Law can assist. Contact us today.

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