Australian Competition and Consumer Commission flexes its muscles

Australian Competition and Consumer Commission flexes its muscles

Australian Competition and Consumer Commission flexes its muscles

ACCC v Marksun Australia Pty Ltd [2011] FCA 695 (June 23 2011)

The Australian Competition and Consumer Commission (ACCC) has extensive enforcement powers in relation to deceptive and misleading conduct under the Consumer Law and its predecessor, the Trade Practices Act. It exercises these powers selectively in that where the conduct relates primarily to a dispute between competitors, for example in a passing off situation, the ACCC is usually content to leave it to the aggrieved party to invoke the provisions of the act in civil proceedings and to devote its resources to matters of higher priority as outlined in its enforcement policy. Matters which influence the ACCC in its decision include:

  • the level of consumer interest;
  • significant consumer detriment; and
  • blatant disregard for the law.

This case note by DCC consultant Des Ryan first appeared on WTR Daily (part of World Trademark Review) in July 2011 and is republished here with permission. For further information, please go to www.worldtrademarkreview.com

These three elements were present in ACCC v Marksun Australia Pty Ltd [2011] FCA 695. Marksun is an Australian company whose sole director and shareholder is Lianping Shen. It operates as an online retailer of UGG boots through websites at 11 different domain names, including ‘australiauggboots.com.au’, ‘australianuggbootstore.com.au’, ‘ugg-boots-australian.com.au’ and ‘ugg-bootsmelbourne.com.au’.

The websites at the domain names each displayed words (eg, ‘100% authentic Australian-made’) or images (eg, the Australian flag, kangaroos, wombats and the Sydney Opera House) stating or implying that the boots were made in Australia. In addition, two of the websites displayed the ‘Australian Made’ logo, a certification mark which is licensed and administered by the Australian Made campaign for use only in association with Australian-made goods. The goods offered at the various websites were made in China, not Australia, and use of the ‘Australian Made’ logo by Marksun had not been authorised.

In response to complaints, the ACCC contacted Marksun by email in May 2010. Marksun undertook to discontinue the offending conduct but did not do so and did not respond to a further demand from the ACCC in June 2010. Following a further complaint in January 2011, the ACCC commenced proceedings using the Federal Court’s fast track, seeking declarations, injunctions, pecuniary penalties, corrective advertising and costs. Service on Marksun was by email.

Marksun did not appear and the ACCC sought judgment in default. The court was satisfied that Marksun had notice of the proceedings and of the dates set for appearance, directions and hearing. In assessing the application for pecuniary penalties, the court had regard to, among other things, the flagrancy of the breaches, the effect on the reputation of the ‘Australian Made’ logo and the need for deterrence. The court found that Marksun’s conduct was “deliberate and dishonest” and stated that:

“In this case, the respondent has deliberately structured its marketing to benefit from the perception of an iconic Australian product being ‘made in Australia’, when it is actually made in China.

In circumstances where the respondent’s websites are accessible by large numbers of consumers from around the world, it is relevant that both Australian and non-Australian consumers place a premium on goods made in Australia and are likely to be swayed by a representation that the iconic Australian product advertised, is genuinely Australian…

The use of logo conduct, without authorisation, may have caused damage to the reputation of the Australian Made logo. As a result, consumers may become wary of whether other products which have the Australian Made logo have been similarly misused. Consumers may begin to question the value of the Australian Made logo and the concept of ‘Australian made’ if false representations are easily made on the Internet.”

The court made the declarations and orders and granted the injunctions sought, namely;

  • a declaration that Marksun had engaged in conduct that was misleading or deceptive;
  • an injunction restraining Marksun from publishing on any website any words, images or audio that state or otherwise convey the overall impression that the products are made in Australia or are approved for the use of an ‘Australian Made’ logo when they are not;
  • an order that Marksun publish on each of its websites a correcting advertisement in the form and content specified by the court;
  • orders that Marksun pay penalties of A$330,000 in respect of the misleading and deceptive conduct and A$100.000 in respect of the misuse of the ‘Australian Made’ logo; and
  • an order for costs in the amount of A$50,000.