Corporate gift company Red Balloon has been fined $43,200 by the Australian Competition and Consumer Commission (ACCC) for allegedly overcharging four customers for “excessive payment surcharges” on credit card purchases.
The company, founded by Shark Tank investor Naomi Simson, was found to have fallen foul of the nation’s excessive surcharges ban which has applied to large businesses since September 2016, and recently came into effect for SMEs in September 2017.
However, speaking to SmartCompany, Simson said she wasn’t aware her business came under the definition of a “large business” as defined by the excessive surcharges law, saying to her Red Balloon “still feels like a startup”.
“I’ve always thought of [Red Balloon] as small, and there’s a number of different definitions of small business depending on what government authority you’re speaking to,” she says.
Simson was not directly involved with Red Balloon at the time of the issues, being on board only as founder and director. Both the chief executive and chief financial officer who were at the helm have since left the business.
In a statement, ACCC deputy chair Michael Schaper said the company was charging customers “more than allowed under the law prohibiting excessive payment surcharges on card transactions”.
“This provides that businesses can only pass on to customers what it costs to accept the payment, including fees such as merchant service fees, and terminal rental and maintenance fees.”
Four customers were charged a 1.5% surcharge instead of the accepted 1.2% surcharge, says Simson, reinforcing the incident was an honest mistake, rather than the company “trying to get an extra 20c from each customer”.
“As soon as we found out it was fixed, and we were very cooperative with the ACCC,” she says.
“That doesn’t negate that the chief financial officer at the time has a responsibility to read the legislation and make sure you’re compliant with it.”
“It’s a very expensive lesson.”
With only four customers being affected by the excessive surcharges, Simson suggests the company’s penalties may reflect some “tall poppy syndrome”, but nevertheless accepts that she and her company has to take responsibility.
However, she does view the legislation as further “red tape” for SMEs, especially ones on the cusp of being considered a large business.
“You’ve got to make sure you’re proactive around legislation – don’t just wait for the next newsletter to come around and tell you about it,” she says.
“We’ve definitely tried to stay on the front foot, but the time you spend understanding compliance is more time taken from trying to get customers.”
“Red tape issues for SMEs are material. This gives me a chance to talk more about responsibility, and advise businesses to get really good advisors around you to make sure nothing like this slips by.”