The recent Federal Court decisions in ACCC v Halkalia Pty Ltd [2012] FCA 534 and ACCC v Halkalia Pty Ltd (No 2) [2012] FCA 535 demonstrate that the ACCC will use all its powers to take prompt actions against persons that breach the Australian Consumer Law, including obtaining orders against individuals.
Basic Facts
Mr Lauren Hann and Ms Vicki Lowe were directors of three companies that engaged in various misleading and deceptive conduct within the meaning of the Trade Practices Act 1974 (Cth) (now Competition and Consumer Act 2010 (Cth)) between 2007 and 2010.
During that period, the companies sold distributorships of certain "Heartlink" branded household cleaning products claiming potential earnings of $900-$1600 for 3-4 days of work per week while actual earnings were much lower than claimed. The Federal Court found that the companies had no reasonable grounds for making such a claim.
The Federal Court also found that Mr Hann was knowingly concerned in and a party to, or aided and abetted, counselled or procured, the companies' breaches of the law and that he also made false or misleading representations concerning the profitability of the distributorships.
Penalties Imposed
Severe penalties were imposed. As a result Mr Hann is:
- restrained for 15 years from carrying on businesses or supplying goods or services in connection with which:
-
- people are invited to invest money or perform work;
- any claim is made that moneys or profits earned by the sale of goods are donated to charity; or
- goods or services concerned are or include household cleaning products;
- disqualified for 15 years from managing a corporation; and
- ordered to pay a civil penalty of $450,000.
Similar injunctions are imposed on the three companies that were found to have engaged in misleading and deceptive conduct and one of the three companies was also ordered to pay a civil penalty of $450,000.
Ms Lowe is, by consent orders, restrained for 7 years from making representations that a particular business activity would or might generate a particular level of earnings or that a reasonable basis existed for potential purchasers to harbour a particular expectation as to projected earnings, unless there were reasonable grounds for the making of such representation.
Implications for Directors and Business Owners
Business owners should be aware as a result of the Halkalia decisions that in addition to the court's power to ban company directors from managing corporations under the Corporations Act 2001 (Cth) which is normally sought by the ASIC, the ACCC also has the power to seek the same order under the Competition and Consumer Act 2010 (Cth). The ACCC has shown that it will pursue such an order where circumstances warrant and not just the usual civil penalty sanctions.
It should be noted that after enforcement action commenced in 2010 the penalty was imposed in 2012, a far shorter timeframe than many similar ASIC actions have taken
If you require more information, please contact us.
Holding Redlich has expertise in advising businesses and companies in relation to the Competition and Consumer Act 2010 (Cth) and would be pleased to assist with any concerns that you may have.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
