A recent Federal Court decision1 should serve as a
warning of the need to ensure promotional materials comply with the
Australian Consumer Law ("ACL").
The ACCC commenced proceedings against Metricon Homes Qld Pty
Ltd alleging false and misleading representations and misleading
and deceptive conduct in relation to advertising brochures and
other materials. The Trade Practices Act 1974 (Cth) was
applied to the conduct of Metricon Homes prior to 1 January 2011
and the ACL under the Competition and Consumer Act 2010
(Cth) following 1 January 2011.
Metricon Homes was ordered to pay $800,000 in respect of
contraventions of the TPA and ACL, and an additional $50,000
towards the costs incurred by the ACCC.
What did Metricon Homes do wrong?
There were a number of problems with the advertising materials
distributed by Metricon Homes:
many of the features and fittings depicted in the photographs
of the house designs displayed in a brochure were not included in
the represented price, and some items shown in the photographs were
not supplied by Metricon Homes at all, e.g. swimming pools and Bali
huts. Metricon Homes did not make it clear that these features were
not part of the package on offer;
all advertising brochures it published included representations
that Metricon Homes would guarantee build times for the houses it
offered and that it would compensate purchasers for rental costs if
the build time was not met. The build time guarantee did not,
however, apply to the majority of houses on offer and the terms and
conditions stating this were not properly communicated in the
materials. In reality, very few customers would have been able to
take advantage of the build time guarantee;
they advertised price discounts, but the houses represented in
the brochures had either never previously been offered for supply
by Metricon Homes at all, or had not been offered for supply at the
"list" price immediately before the start of the
promotion. This conduct was intended to make customers believe they
were making substantial savings, when in fact that was not the
'Upgrades Package' brochures which advertised
additional features and fittings available when purchasing a
specific house design misled customers about the value of the
features and the savings available if an 'Upgrades Package'
was purchased. Metricon Homes had on only very few occasions
entered into transactions for the supply of the particular feature
or fitting at the standard price, and had, therefore, misled
customers in relation to the value of the features and savings
As stated by ACCC Chairman, Rod Sims:
Home building companies should take the penalties ordered in
this case as a serious warning.
Photographs and glossy brochures that promote products
should be of what the consumer will be supplied at the advertised
price, not an upgraded package that would ultimately cost the
consumer much more.
If companies run promotions or advertise savings then those
savings must be real, not a lure to attract customers to their
products over competitors who might be doing the right thing.'
Of course, this decision does not just apply to home building
companies. It is a reminder that when preparing promotional
material all businesses must:
carefully contemplate what representations are actually being
made when preparing advertisements and promotions, and consider
whether any representation is misleading or deceptive or is likely
to mislead or deceive. Remember, what is key is not your intended
representation, but what the understanding of a typical member of
your target audience would be;
implement and monitor competition and consumer compliance
policies and programs to prevent conduct that would be considered
to contravene the ACL; and
vet promotional materials for ACL compliance prior to their
Failure to prepare compliant materials can give rise to claims
under the ACL and significant financial penalties.
1Australian Competition and Consumer
Commission v Metricon Homes Qld Pty Ltd  FCA 797. 2ACCC Media Release issued 31 July 2012, 'Metricon
Homes Qld to pay $800,000 penalty for misleading
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.
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