Australian telecommunications company iiNet has paid an infringement notice of $102,000 from the Australian Competition and Consumer Commission for alleged misleading advertising.
The advertisements in relation to its Naked DSL Service appeared on the rear of a bus in Sydney and allegedly misled consumers over the monthly price of its service.
This is the first time an infringement notice has been paid by a publicly-listed company over an alleged breach of Australian Consumer Law.
The bus ad appeared between February and March 2013 and displayed the monthly price of iiNet’s internet service as $59.95. This price did not include the costly installation fee and even though the total price was displayed, the ACCC said it was not given enough prominence.
Australian Consumer Law states an advertisement which promotes the monthly price of a service must also prominently display the quantifiable total minimum price for the service.
In this case, the total price was $59.95 per month for 24 months plus a $79.95 connection fee, making the total cost $1,518.75.
Paying an infringement notice is not an admission of guilt and iiNet chief regulatory officer Steve Dalby said in a statement to SmartCompany it is committed to upholding Australian Consumer Law.
“When advised by the regulator that our interpretation of ‘prominence’ was not adequate, we immediately took steps to rectify the advertisement in question.
“Although there are no specific guidelines in the law outlining what is adequate prominence, we have a comprehensive compliance program in place to help us meet this continuing challenge,” he says.
The ACCC has been particularly active in the area of misleading advertising recently and earlier this week the former operator of a rent-a-car company was fined $30,000 for not including compulsory add-ons in its advertised daily vehicle hire costs.
ACCC deputy chair Michael Schaper told SmartCompany misleading advertising, particularly regarding the “full and honest disclosure of prices”, is a priority area for the ACCC.
“There have been several occasions where we have taken action. Over the last two or three years we have looked at telcos and airlines in particular.
“The law is pretty clear about it and for us the issue is about misleading consumers and also a firm being responsible for the final price,” he says.
Schaper says it’s not just consumers the ACCC is concerned with; it also aims to protect the competitive business environment.
“It’s making sure all businesses are competing on a level playing field,” he says.
Hall and Wilcox partner Sally Scott told SmartCompany companies need to consider how their advertisements will be interpreted by consumers.
“iiNet’s ad was on the back of a bus. Although someone might spend some time looking at the ad if they are parked behind the bus in a car, others would only see the ad fleetingly.
“The variety of ways in which an ad is viewed need to be taken into account in determining how prominently to feature the total minimum price,” she says.
Scott says when reviewing an ad, business should assume it will be analysed by the ACCC.
“They should keep in mind that ignorance or carelessness will be no excuse. If an ad is misleading or falls foul of the pricing provisions, then they can still get caught,” she says.
Alistair Little of TressCox Lawyers says while this is the first instance of a publicly-listed company paying an infringement notice, there have been many cases where infringement notices have been rejected and the issue pursued in court.
“If you don’t agree to pay the amount, the ACCC is free to launch proceedings and the maximum penalty for this is $1.1 million per breach.
“In this case, had it gone to court and the ACCC succeeded, it [the money paid] could have been 10 times the cost and then there are also the legal fees. Companies have to weigh up the odds, pay the infringement notice or roll the dice and see what happens,” he says.
Little say the ACCC will be pleased with this result since one of the watchdog’s goals is to educate and this demonstrates to other businesses that sometimes paying the infringement notice is the best option, even for publicly-listed companies.