Most Read Contributor in Australia, September 2016
In two recent ACCC actions, health insurance company NIB and
energy retailer AGL South Australia have been dealt penalties
following communications that the ACCC felt were misleading in
In May 2015, NIB paid a penalty of $10,200 due a promotion it
ran during December 2012 – November 2014 which promoted the
waiver of a waiting period for extras on its combined Hospital and
Extras health insurance product. The promotion represented that
customer would "usually" or "normally" be
required to wait 2 months to access the Extras. The truth was NIB
had waived this 2 month waiting period for all customers for 23
months from December 2012.
This was a case of a "promotion" that represented a
call to action – namely that customers must purchase the
product by a specified or soon impending date – but in fact
that end date kept rolling over for about 2 years. The lessons are
similar to those represented in the ACCC's guidelines regarding
"was" / "is" pricing. The "was" price
(or higher price) needs to be one that the provider has sold the
goods or services at within a reasonable period prior to the
publication of the promotion. Otherwise, similar to the NIB
infringements , the "was" price, or in this case the
benefit of the waiver of waiting periods on certain extras, becomes
part of the provider's standard offer and cannot be advertised
or represented as a promotional offer.
In a decision of the Federal Court handed down on 29 April 2015,
AGL South Australia was ordered to pay penalties of $700,000 and to
offer affected customers refunds of approximately $780,000 for
making false and misleading representations regarding the level of
discount these customers would receive under its plans. AGL SA was
also ordered to pay $300,000 towards the ACCC's costs, publish
corrective advertising and maintain a compliance program for a
further three years.
It was perhaps fortunate for AGL that the ACCC and AGL had
agreed on the on the penalties before the court endorsed them, as
the court said 'the serious nature of AGL's contraventions,
its previous record of contraventions, and the fact that AGL has
not disclosed all material bearing upon the full extent of its
culpability may well have warranted the imposition of a higher
penalty that that upon which the parties have agreed'.
The ACCC alleged that the consumers who took up the offer of a
discounted electricity plan between January 2012 and July 2012
would have believed they were being charged at the "discount
off" rates that generally applied to other residential
consumers. In mid-July 2012, these customers were sent letters
saying AGL would be increasing the rates under its energy plans.
This price increase was not uniform but this was not clear from the
letter. The letter relevantly stated that these customers would
continue to receive their discount. Yet, due to the increase in
rates, the same discount amounted to higher prices than customers
who were supplied under AGL SA's standard retail contract or
those who had subsequently commenced an energy plan with the
The court expressed surprise at the content of the affidavit
filed by AGL Energy Limited's General Counsel which, amongst
other things describes the review processes that were adopted by
AGL for a letter of this nature. The court said '[i]t seems
surprising that the false and misleading nature of the statements
in the 2012 Rate Increase Letter was not recognised during the
process of review described by [the General Counsel]. The fact that
it was not appears to raise some concerns about the level of rigor
involved in some aspects of the review.'
This is a timely lesson for providers to take into account the
average consumer when conducting campaigns and consumer
communications such as price increase notifications. The message is
that the average consumer should not be expected to know there is a
difference between a provider's standard retail rates and
'other' rates charged by the provider. When consumers
assess the value of the discount or benefit offered it will always
be the headline price or figure that is most powerful.
In bringing these two actions, the ACCC may well have had in
mind that health insurance and electricity, like
telecommunications, are commonly purchased services that are
already difficult for consumers to compare. The lesson? Don't
make it more difficult for them.
This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
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