The recent case of ACCC v Metricon Homes Qld Pty Ltd reminds business owners that they must avoid false or misleading representations in advertising and promotional material. This article looks at:
The Federal Court recently ordered Metricon Homes Qld Pty Ltd (Metricon Qld) to pay $800,000 in penalties for making a number of false or misleading representations in advertising and promotional material.
The ACCC had sought penalties and declarations against Metricon Qld for promotions conducted between January 2009 and August 2011, including:
The parties agreed on a set of penalties, declarations and Court undertakings. The Court, in approving these, commented that the substantial penalties were justified by Metricon Qld's conduct which was egregious and intended to induce customers to make a substantial financial commitment to purchase homes from it.
You can read the full case here.
'Resort Style Living'
Metricon Qld had produced a brochure labelled 'Resort Style Living', which was published in newspapers and distributed in Metricon Qld's display centres.
The brochures indicated that houses shown were available at or from a particular price. In fact the photographs depicted some substantial features and fittings that were not included in the advertised 'from' price and were not actually supplied by Metricon Qld at all.
For example, the ACCC was particularly concerned that houses were shown with swimming pools and Balinese huts adjacent to them, when these were neither included in the package nor supplied by Metricon Qld. Metricon Qld did not point out either of these facts in the brochures.
'Build Time Guarantee'
Metricon Qld had also advertised a 'Build Time Guarantee'. The brochures represented that, if the houses Metricon Qld supplied were not completed within a certain 'build time' (which ranged between 14 and 24 weeks), then it would compensate purchasers for rental costs up to $300 per week.
However Metricon Qld gave the guarantee subject to significant carve outs. As a result, most houses which Metricon Qld offered for sale over the relevant period were excluded from the guarantee.
Despite this, the brochures only had a fine print statement that conditions applied and that those conditions could be found on Metricon Qld's website. As a result, the Court's view was that readers of the brochures were misled into believing that the guarantee applied to all houses offered for sale by Metricon Qld.
Finally, Metricon Qld published brochures containing 'was/now' pricing in the form of price lists for each house design with a 'list price', a 'pay only price' and a statement of the saving consumers would make at the 'pay only price'.
In fact, Metricon Qld had either never offered the houses for sale at the list price, or had not offered them at the list price at any relevant time prior to the promotion.
An 'Upgrades Package' brochure similarly misled customers about the value of the features available with the houses and the savings available under the promotion.
In approving the penalty regime, Justice Collier of the Federal Court found that Metricon Qld had:
Whilst acknowledging that $800,000 was a substantial penalty, Justice Collier noted that the penalty was considerably less than the total combined maximum penalty which could have been imposed in the circumstances.
In approving the declarations and penalties agreed by the parties, the Justice Collier also accepted a number of undertakings to the Court from Metricon Qld, including:
The Federal Court's decision reinforces some key advertising and promotion messages for small business owners including:
For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Advertising, Brands and Marketing team.
You can read other articles concerning companies, here.
 Australian Competition and Consumer Commission v Metricon Homes Qld Pty Ltd  FCA 797
Julian Smith is a partner in the Maddocks Commercial team.
Julian advises extensively in the following areas:
Julian advises clients ranging from public companies servicing the wholesale financial services market to high net worth individuals and their advisers.
Julian has been with Maddocks since undertaking articles in 2001.
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