Lux pays price for unconscionable breach of Australian Consumer Law
A recent decision of the Federal Court (ACCC v Lux Distributors Pty Ltd (No 2)  FCA 903) illustrates the need for any business engaging in direct selling or marketing techniques (such as telemarketing or door-to-door sales) to ensure that potential customers are treated fairly and reasonably to avoid breaching the Australian Consumer Law (ACL) and the serious consequences which follow from such a breach.
Here, Special Counsel Brett Bolton and Law Clerk Amy Detheridge discuss the Federal Court’s decision further.
Lux Distributors Pty Ltd (Lux) implemented a sales strategy to target elderly women in their 80s or 90s, who were widowed and living alone. As part of its strategy, Lux created a scripted telemarketing conversation, offering a free maintenance check for householders’ vacuum cleaners. A sales representative of Lux would then attend the residence to test the householder’s current vacuum cleaner for maintenance and efficiency. Notwithstanding the vacuum cleaner was working effectively, the Lux representative would demonstrate the inefficiency of the old vacuum cleaner as compared to the expensive new Lux vacuum cleaner, or tell the householder that their vacuum cleaner was defective. This led to the elderly ladies in this case purchasing new Lux vacuum cleaners for around $2,000.00 to $3,000.00.
In addition to the purchasers receiving a refund from Lux, it was ordered to pay a penalty under the ACL and TPA and is subjected to restraining and mandatory orders.
In making these orders, the Court had regard to the overarching objective of deterrence, namely to highlight the fact that contraventions of the ACL should not be seen as part of “the cost of doing business”.
The Court found that:
The orders against Lux included:
The ACCC will supervise Lux’s compliance with the Program.
In addition Lux has also suffered negative publicity from the legal proceedings, which has resulted in a significant decline in its sales.
This decision serves as a reminder of the severity of the consequences of a breach of the ACL, especially where the court concludes that the breach was deliberate or that the business had recklessly disregarded its obligations under the law.
For more information or discussion, please contact HopgoodGanim Lawyers' Competition team.