December Blitz – ACCC commences proceedings against Lorna Jane, Facebook and Retail Food Group for alleged misleading claims

In the final weeks of 2020, the ACCC announced that it had commenced three sets of proceedings against several large companies for allegedly either making false or misleading representations or engaging in misleading or deceptive conduct.

 

The December blitz serves as a timely reminder to businesses to review their promotional campaigns, public statements and representations to ensure strict compliance with the Australian Consumer Law.

Anti-virus activewear – Lorna Jane

Late last year, the ACCC commenced litigation against the women's activewear company, Lorna Jane Pty Ltd, for allegedly making false or misleading claims.

In the midst of the COVID-19 pandemic, Lorna Jane promoted a range of activewear said to be sprayed with "LJ Shield", a substance that Lorna Jane claimed would eliminate and stop the spread of COVID-19.

The company made claims that "LJ Shield" would protect the wearer against viruses and pathogens such as COVID-19 and represented that these claims in relation to their "anti-virus activewear" were based on scientific or technological evidence. The statements regarding "LJ Shield" were contained in a range of promotional materials as well as on the garment tags of the relevant clothing.

As the activewear did not in fact protect users from COVID-19, the ACCC alleges that Lorna Jane's claims were false or misleading.

The ACCC is seeking a number of remedies for Lorna Jane's breach of the Australian Consumer Law including declarations, penalties, injunctions, corrective notices and an order to implement a compliance program in the company.

Keep it secret. Keep it safe” – Facebook

Earlier in December, the ACCC also instituted proceedings against Facebook Inc and two of its subsidiaries, Facebook Israel Ltd and Onavo, Inc (together, "the Companies"), for engaging in false, misleading or deceptive conduct.

The claims relate to the Companies' promotion of Facebook's Onavo Protect mobile app which provided a free virtual private network (VPN) service for users.

The ACCC has reported that during 2016 and 2017, the Companies represented to consumers that the Onavo Protect app would protect users' personal activity data, keeping that data private and secret. The Companies also claimed that the data would only be used to provide Onavo Protect's products and not for any other purpose.

The ACCC however alleges that instead, the Onavo Protect app "collected, aggregated and used significant amounts of users' personal activity data for Facebook's commercial benefit", including information about the user's internet and app activity such as details about each other app the Onavo Protect user used on their phone and the time spent on each of those apps.

In their media release regarding the proceedings, the ACCC claimed that this information was used by Facebook for market research purposes including to assist them in "identifying potential future acquisition targets".

In the current proceedings, the ACCC alleges that Facebook and its two subsidiaries misled consumers by making claims about the privacy and protection of their data when in fact the data was being used by Facebook for commercial purposes

The ACCC is seeking declarations and pecuniary penalties.

A failure to disclose - Retail Food Group Limited

Rounding out the trifecta, the ACCC also commenced proceedings against ASX listed Retail Food Group Limited and five of its related entities (together, the Retail Food Group) in December 2020.

The Retail Food Group owns and manages a number of well-known franchises such as Gloria Jean's, Donut King, Crust Pizza and Michel's Patisserie.

The ACCC alleges that the food and beverage group acted unconscionably and made false or misleading representations in its dealings with incoming franchisees in relation to the sale or licencing of "42 loss making corporate stores" between 2015 to 2019.

The ACCC has claimed that the Retail Food Group "withheld important financial information from the incoming franchisees who were purchasing or licensing the loss-making corporate stores, and made false or misleading representations to them about the viability or profitability of the stores." Examples of such behaviour include the Retail Food Group's claims that earnings of particular loss-making franchises could not be estimated which was untrue.

In addition to the claims of unconscionability and false, misleading or deceptive conduct, the ACCC has also brought claims for alleged breaches of the Franchising Code in relation to alleged improper and undisclosed payments.

The ACCC is seeking declarations, injunctions, pecuniary penalties, disclosure and adverse publicity orders, a compliance program order, redress orders and their costs of the proceedings.

Lesson's from the ACCC's recent December Blitz

As can be seen above, the ACCC actively enforces breaches of the Australian Consumer Law and can seek a wide range of remedies against a company in contravention through litigation.

It is critical that businesses understand their obligations pursuant to the Australian Consumer Law and ensure all promotional campaigns, company statements and representations comply with legislative requirements.

To avoid the risk of litigation, it is important to ensure that all promotional material and statements are true and accurate. With the exception of puff claims, the company should be able to substantiate all claims made and statements should not be likely to mislead or deceive customers or create a false impression.

If you are concerned about any statements your company has or intends to make, or you would like training on complying with the Australian Consumer Law, please get in contact with McCabe Curwood today.

McCabe Curwood's Litigation and Dispute Resolution group has experience in advising our clients in relation to their obligations under the Australian Consumer Law, including false, misleading or deceptive conduct, to ensure that you minimize the risk of being pursued by the ACCC.

Contributors

Stephanie Andrews Lawyer