In Touch: Honda hits a speed bump: penalised $6 million for misleading or deceptive conduct and other developments

The latest in competition and consumer law 6 min read

Honda hits a speed bump: penalised $6 million for misleading or deceptive conduct

On 15 December 2023, the Federal Court imposed $6 million in penalties against Honda Australia Pty Ltd (Honda) for engaging in misleading or deceptive conduct.

The ACCC alleged that from January to June 2021, Honda made misleading representations to thousands of customers via emails, text, and phone conversations that three former authorised Honda dealerships could no longer service their vehicles as they would or had already closed.

Instead, these dealerships continued to operate as independent service and repair centres but had their franchise agreements terminated with Honda as part of a restructuring process.

The Federal Court determined that the $6 million penalty amount was appropriate considering Honda's claim that the dealerships were closed had likely caused financial loss to the dealerships. Honda's misrepresentations had also deprived customers of the ability to make an informed choice about their options for servicing their vehicle.

ACCC accepts divestment undertaking from Petstock: Woolworths' acquisition of Petstock not opposed

On 13 December 2023, the ACCC accepted an undertaking from Petstock to divest over 41 retail stores from past acquisitions that were not notified to the ACCC. These acquisitions came to light shortly after the ACCC started its review of Woolworth's proposed acquisition of a 55% controlling interest in Petstock on 24 January 2023.

The ACCC was concerned that four of Petstock’s past non-notified acquisitions from 2017 to 2022 may have contravened section 50 of the Competition and Consumer Act. The ACCC deemed that the acquisitions removed 'some of the few remaining chains of specialty pet retail stores that competed against Petstock and Petbarn' across multiple local markets in Victoria, Western Australia, New South Wales, the Australian Capital Territory, Queensland, and Tasmania. For example, in Melton (Victoria), Petstock's acquisition resulted in no other specialty retail pet chain stores within a 5-kilometer radius.

Consequently, the undertaking includes Petstock agreeing to divest:

• 41 specialty pet retail stores;
• 25 veterinary hospitals; and
• 2 online retail stores.

As a result of the divestment undertaking, the ACCC will not oppose Woolworth's proposed acquisition of the majority shares in Petstock.

Under the pump: Fitbit penalised $11 million for making misleading representations to consumers 

On 12 December 2023, in proceedings brought by the ACCC, the Federal Court ordered US-based Fitbit to pay $11 million in penalties for misleading 58 consumers about their consumer guarantee rights to a refund or a replacement after claiming their device was faulty.

Fitbit admitted that it had:

• falsely told 40 customers they did not have a right to a replacement product because Fitbit’s two-year ‘warranty period’ had expired; and
• falsely told eighteen customers that they did not have a right to a refund unless they returned the faulty product ‘within 45 days of purchase’.

Fitbit made these representations through their customer service representatives in calls and during in-person store interactions.

Fitbit and the ACCC jointly submitted that the compliance measures implemented under a 2018 court-enforceable undertaking related to similar misconduct were insufficient to prevent these contraventions.

New principles to guide businesses’ environmental claims green lit by the ACCC

On 12 December 2023, the ACCC published its final guidance for businesses on making environmental claims. The final guidance is substantially similar to the draft guidance released in June 2023 but adds new examples and provides important points of clarification.

Some of the key changes (relating to four of the eight principles) are summarised below.

Principle One: Make accurate and truthful claims

The ACCC has clarified that:

• businesses can make claims about compliance with environmental laws where they have gone above and beyond the relevant legal requirement, or where legal requirements have resulted in unique innovations; and
• measurements based on averages may be appropriate when making comparisons.

Principle Two: Have evidence to back up your claim 

The ACCC has clarified that:

• businesses do not need to hold a third-party certification to make an environmental claim but may choose to use third-party certifications to provide credibility to their claims; and
• compliance with industry schemes and standards does not automatically mean that a business is compliant with the ACL. 

Principle Five: Avoid broad and unqualified claims

The ACCC has provided further clarification on claims such as 'recyclable', 'recycled content' and 'free', and where these claims may need to be qualified.

Principle Six: Use clear and easy-to-understand language

The ACCC has indicated that scientific language may be appropriate if it is the clearest way of presenting a claim, except where the scientific term also has a non-technical meaning.

The ACCC also plans to release separate guidance for businesses on emission and offset claims, as well as the use of trust marks, in early 2024. The ACCC will also develop guidance to help consumers confidently assess and rely on environmental claims.

Social media influencers and businesses snapped up in ACCC sweep of online advertising activity 

On 7 December 2023, the ACCC released two reports detailing the findings of recent internet sweeps of social media influencers and online reviews. The report concerning social media influencer advertising can be accessed here while the report relating to fake or misleading online reviews can be accessed here.

Key findings from the social media sweep report include:

• of the 118 influencers reviewed, 81% were found to have made posts that raised misleading advertising concerns;
• the most common issue identified was the lack of disclosure regarding brand relationships in posts;
• a common issue was influencers' use of vague or confusing language to disclose advertising relationships; and
• many influencers used formatting to hide disclosures of advertising relationships in posts.

Key findings from the advertising sweep report include:

• of the 137 businesses reviewed, 37% engaged in 'concerning conduct' that included businesses directly engaging in review manipulation through creating fake positive reviews, removing negative reviews, preventing negative reviews, or inflating online ratings;
• the prevalence of third-party review management services to engage in review manipulation; and
• most businesses and third-party review platforms were not disclosing when reviews were incentivised by a business.

The ACCC will release guidance in early 2024 for influencers and businesses to remind them of their obligations under the Australian Consumer Law to disclose advertising in social media posts.

ACCC hits power tool supplier with record penalty for resale price maintenance conduct

The Federal Court imposed a $15 million penalty on Techtronic for engaging in resale price maintenance conduct in relation to a range of power tools, hand tools, and accessory products. This penalty stands as the highest ever imposed for resale price maintenance in Australia.

Techtronic is a major wholesale supplier of power tools to retailers across Australia. The company admitted to entering into 97 agreements with dealers and retailers to restrict the sale of its products below a specified minimum price between January 2016 and July 2021. Techtronic admitted to enforcing this provision 29 times between December 2016 and May 2020. This included by way of issuing warnings to dealers who offered to sell or sold the relevant products below the specified minimum price or by withholding supply from two dealers.

The Federal Court noted that the penalty figure was appropriate due to the seriousness, duration, and extent of Techtronic's conduct.

In addition to the penalty, Techtronic was ordered to post corrective notices to its dealers and implement an internal compliance program.

ACCC not opposed to Coles' acquisition of dairy processing plants from Saputo 

On 1 December 2023, the ACCC announced that it would not oppose Coles' acquisition of two milk dairy processing plants from Saputo in Erskine Park, NSW and Laverton, Victoria. Coles and Saputo both currently acquire raw milk from dairy farmers in Victoria and New South Wales. Saputo is one of Australia's largest dairy processers, owning 10 manufacturing facilities across the country.

Prior to the acquisition, Coles had its milk processed at the Erskine Park and Laverton plants by Saputo. After the acquisition, Saputo will have its raw milk processed by Coles at these facilities under similar arrangements.

The ACCC concluded that the acquisition was unlikely to result in a substantial lessening of competition for multiple reasons, including:

• most of the capacity at the two facilities was already contracted to Coles;
• financial data indicated Saputo had a continued commercial incentive to acquire raw milk from NSW farmers for the next five years;
• Coles continued to face financial incentives to stock branded milk from other processors due to the higher retail margins earnt on these products;
• the continued presence of competitors such as Lactalis and Bega in central NSW; and
• Coles' commercial incentives to consolidate its milk supply would exist with or without the transaction due to the significant excess capacity at the Laverton and Erskine Park facilities.

The ACCC further noted that the mandatory Dairy Code of Conduct will operate as a safeguard in relation to Coles’ relationships with the farmers from whom it purchases raw milk.

ACCC rattled by infant sleep toy adverts: Riff Raff penalised

On 28 November 2023, online national retailer Riff Raff Baby Pty Ltd (Riff Raff) provided a court-enforceable undertaking in which it paid $132,000 in penalties for making false or misleading statements about its comforter toys being safe for sleep from birth.

Riff Raff advertised multiple sleep aid comforter toys on its website, Facebook, and Instagram pages. These advertisements contained images of sleeping babies accompanied with statements that the ACCC alleged conveyed a misleading meaning that sleep aid toys were safe in unsupervised sleep environments for infants under seven months old.

Statements included remarks such as 'we always recommend the introduction of your Riff Raff Sleep Toy from birth where possible', '…Did you introduce your Riff Raff from birth? If you didn’t…, do you wish you had?' and 'designed with safety in mind'.

However, public health advice stipulates that it is unsafe to place soft toys in the sleep environment of babies less than seven months old due to the serious risk of fatal suffocation.

In its court-enforceable undertaking, Riff Raff agreed to:

• remove the representations from its website and social media;
• provide corrective notices to all customers who purchased the associated comforter toys with the relevant safety risks; and
• establish a consumer law compliance program for employees.

In too deep: the ACCC penalises yoghurt manufacturer for misleading 'ocean plastic' claims 

On 24 November 2023, yoghurt manufacturer MOO Premium Foods Pty Ltd (MOO), provided a court-enforceable undertaking to the ACCC to address concerns that the environmental claims on its yoghurt packaging, website, and social media, likely breached the Australian Consumer Law.

The ACCC had concerns about MOO's claims that its yoghurt tubs were made from '100% ocean plastic'. An ACCC investigation revealed that the plastic resin used in packaging was actually collected from coastal areas up to 50 kilometres away from the ocean in Malaysia.

In the court-enforceable undertaking provided to the ACCC, MOO:

• admitted that the '100% ocean plastic' claims likely contravened the Australian Consumer Law prohibition on false or misleading representations;
• pledged to remove the 'ocean plastic' representation from its packaging and all digital platforms;
• committed to publishing corrective notices online;
• agreed to conduct internal audits of the plastic resin used in their packaging and implement an Australian Consumer Law compliance program.

The action highlights the ACCC's 2023-2024 enforcement focus on addressing consumer concerns about environmental and sustainability claims.

The ACCC's Seventh Digital Platform Services Inquiry interim report takes a byte at examining the impact of digital ecosystems 

On 27 November 2023, the ACCC published its seventh Digital Platform Services Inquiry interim report.

The Report focuses on the impact of the growing ecosystems of the world's five largest tech companies. These companies, through organic growth and strategic acquisitions, have extended beyond their core offerings, creating a vast web of interconnected products and services. They dominate digital markets spanning from smart home devices, cloud storage and computing to financial technology and gaming.

The ACCC found that the expansion of these companies' ecosystems may raise concerns where the purpose or effect of the expansion is to protect its existing market power, deprive or limit customer choice, or limit or deter innovation by competitors.

The report explains two broad categories of conduct that may pose a greater risk of competition harm:

1. leveraging strategies: the ACCC found that Digital Platforms engaged in various leveraging strategies when expanding their ecosystems, such as self-preferencing, bundling and tying of products or services, pre-installation, and default settings, and limiting interoperability. While these leveraging strategies can impact competition, the ACCC acknowledged that these practices are common commercial practices that can lead to consumer benefits; and
2. exclusionary data practices: the ACCC also found that as Digital Platforms expand their ecosystem, they increase their opportunities to collect and combine large sums of non-public user data. The ACCC considered that this increased the risk of Digital Platforms using exclusionary data practices to protect or enhance its existing market power, or to leverage its market power from one market to another.

Specific consumer harms noted include:

1. consumer lock in: the complex nature of the products and services within an ecosystem and the use of certain leveraging strategies (such as limiting interoperability with third-party services) can often make switching products difficult for consumers; and
2. data collection and use practices: ecosystems can exacerbate both excessive data collection by tech companies and the use of that data to foreclose rivals.

The ACCC made no new recommendations in its report but reiterated the recommendations from its 5th interim report, including:

1. an unfair trading practices prohibition: The ACCC continues to push for economy-wide consumer measures, including a prohibition against unfair trading practices and strengthening unfair contract terms legislation; and
2. codes of conduct for Digital Platforms: The ACCC seeks a new power to implement mandatory codes of conduct tailored to 'designated' digital platform services (ie, service-specific codes), which would provide the ACCC with flexibility to target specific conduct used by Digital Platforms' across their respective ecosystems that lead to the competition and consumer harms outlined above.

For more on the ACCC's Digital Platform Services Inquiry, see our previous article on the 5^th interim report.

Federal Government decodes change: agrees to major reforms in regulating digital platforms 

On 8 December 2023, the Government released its official response to recommendations made by the ACCC in its 5th interim report for the Digital Platform Services Inquiry (Regulatory Reform Report). The Government has agreed in-principle to all four ACCC recommendations. Key points to note include:

If you would like a refresh on the ACCC's key findings and recommendations from the Regulatory Reform Report, you can access our summary here.

Express Online under examination: in court for allegedly misleading students 

The ACCC has commenced legal proceedings in the Federal Court against Express Online Trading (Express) over allegedly engaging in misleading conduct about aspects of its online training courses.

The ACCC alleges that Express made misleading statements on its website and online ads regarding when course payment and completion would occur.

First, Express's publication of multiple statements including – 'Only pay after you pass' and 'Best of all with us you don’t have to pay until you pass!' – falsely represented to potential students that they would be required to pay for their online training course only after passing. Instead, students were prompted to pay for the course before being able to schedule the final assessment tasks needed to obtain their certificate.

Second, the ACCC also alleges that Express misled participants by suggesting that they could complete the courses in one day. However, participants had to complete lengthy questionnaires that would take between three to six hours in addition to further assessment tasks that were often unavailable to be scheduled for the same day.

The ACCC is seeking penalties, consumer redress, declarations, injunctions, costs, and other orders.