False, Misleading Or Deceptive Conduct: The ACCC Widens The Net To Include Directors And Others

The Australian Competition and Consumer Commission [ACCC] has announced that it is moving from a focus of compliance review to an enforcement-focus approach in relation to breaches of the Australian Consumer Law [ACL].  The ACL is a schedule to the Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974).  In the Winter DW Report (Article ‘Unfair Contract Terms’), examples are given of recent actions by the ACCC and some of the very substantial penalties that have been applied.

Action against Taxsmart

In a press release on 26 June 2013, the ACCC advised that it had instituted proceedings against a number of companies, Taxsmart Group Pty Ltd, Taxsmart Franchising Pty Ltd and Resultssmart Pty Ltd, in relation to conduct which the ACCC asserts is false, misleading or deceptive.

The allegations relate to job advertisements published by the companies for graduate accountant positions to attain a tax agent licence, and subsequently to operate a Taxsmart franchise.

The ACCC alleges that advertising contains false, misleading or deceptive representations that:

  • the graduate program would satisfy the legal requirements for registration as a tax agent;
  • graduates would be employed for a period of 12 months;
  • graduates would receive one on one mentoring and supervision from a registered tax agent;
  • Taxsmart had established offices in the cities in which employment positions were advertised; and
  • at least 50 per cent of its clients in its relevant offices were business clients.

The ACCC press release does not specify in detail the way these representations are said to be false, misleading or deceptive, but goes on to say:

These graduate accountants were people with tertiary accounting qualifications keen to obtain the experience needed to become registered as tax agents.  We allege they were induced to pay significant sums up‑front, on the unfulfilled promise they would receive this experience to obtain registration and operate a Taxsmart franchise” (ACCC Deputy Chair, Dr Michael Schaper).

Orders Sought by the ACCC

The ACCC is seeking declarations, injunctions, compensation orders and non‑party redress orders, pecuniary penalties, a disqualification order in relation to a director, orders for corrective letters to be sent, findings of fact and costs.

Director and Business Development Manager

The action taken by the ACCC is not only against the companies, but also the sole director Mr Scott Andrews, and the Business Development Manager of the companies Ms Janine Andrews.  The ACCC alleges that the director and Business Manager “aided, abetted, counselled or procured and were directly or indirectly knowingly concerned in Taxsmarts’ contraventions of the Australian Consumer Law”.

It is not clear from the ACCC press release what orders the ACCC is seeking against the director and Business Manager, other than an order for disqualification of Mr Andrews from managing a corporation (under Section 248 of the ACL).  However, the intentions of the ACCC as advised in previous press releases, and illustrated by the number of actions that it has commenced, are clearly to pursue not only companies that may be involved in breaches of the ACL but also directors or other officers of companies who may be responsible for the breaches.

Actions against Individuals

The remedy provisions of the ACL provide the ACCC with the power to seek a raft of different remedies against individuals (including company directors, officers and employees) rather than just against corporations.  For example, the ACCC has the power to apply for, or seek, pecuniary penalties and/or an injunction, against individuals, in relation to provisions of the ACL, who have:

  • attempted to contravene a provision;
  • aided, abetted, counselled or procured a person to contravene a provision; or
  • induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene a provision; or
  • been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
  • conspired with others to contravene a provision.

Significantly, pecuniary penalties of up to $220,000.00 (for each act or omission) can be sought against company directors or individual employees for making false or misleading representations in certain circumstances or engaging in unconscionable conduct.

The ACCC also has the power to seek disqualification orders, compensation orders, redress orders and other non-punitive orders (such as requiring a person to undertake a community awareness or education program) against individuals who were involved in the contravention of certain provisions of the ACL.

The ACL defines a person “involved” as being a person who has:

  • aided, abetted, counselled or procured the contravention; or
  • induced the contravention, whether by threats or promises or otherwise; or
  • been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention or
  • has conspired with others to effect the contravention.

The ability to pursue individuals involved in a contravention of the ACL is not limited to the ACCC.  For example, section 236 allows a person who suffers loss or damage to bring an action for damages to recover the amount of that loss or damage from any person involved in the contravention of certain provisions of the ACL (including, for example, the provisions relating to misleading and deceptive conduct, unconscionable conduct, unfair contract terms and consumer guarantees).

The warnings of the ACCC to businesses, as mentioned in the DW Report, to carefully review contracts, terms and conditions of trade and advertising should be heeded.

For more information, please contact:
Sandy Donaldson

Sandy Donaldson
Director
p.  +61 8 8124 1954
e.  Email me

Sarah Annicchiarico

Sarah Annicchiarico
Senior Associate
p.  +61 8 8124 1942
e.  Email me

This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this article, or what it means for you, your business or your clients' businesses, please feel free to contact us.

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