Mackay Chapman December 2024 ACCC Update
In this month’s ACCC update:
- ACCC takes action against Magnamail for false prize promotions;
- ACCC clears Sigma-Chemist Warehouse merger with conditions;
- Getty Images to refund $78,000 after misleading subscription cancellation charges;
- ACCC seeks feedback on proposed Australia Post price increases for 2025;
- Airline competition drops, airfares rise after Rex’s exit from major city routes; and
- Koala Living fined for misleading consumers on faulty product rights.
ACCC Takes Action Against Magnamail for False Prize Promotions
The ACCC has initiated legal proceedings in the Federal Court against Magnamail and its parent company, Direct Group, for allegedly misleading consumers through false statements in their promotional material.
Between May 2022 and July 2023, Magnamail sent out promotional materials (including letters, catalogues, scratch cards, and envelopes) claiming that consumers were eligible for, had won, or qualified for major prizes worth up to $25,000.
The prizes listed included cash, Apple iPads, and jewellery. However, the ACCC alleges that these prizes had already been pre-drawn, and only a small number of consumers had a right to claim them.
The misleading promotions, which were sent to hundreds of thousands of consumers, are said to have targeted vulnerable individuals, including elderly consumers, some of whom were led to believe they had won large sums of money, only to discover later that the claims were false.
The promotional materials included statements such as "YOU HAVE DEFINITELY WON a prize valued up to $20,000" and "CONGRATULATIONS, YOU HAVE QUALIFIED FOR A PRIZE valued up to $10,000 cash."
Additionally, the scratch cards included in the promotions are alleged to have been identical for every consumer, making it impossible for consumers to increase their chances of winning.
Scratching the card did not affect the outcome, which misled consumers into believing they had won a major prize.
The ACCC is seeking penalties, injunctions, and other orders from the court, and has called attention to the importance of businesses running promotional campaigns to avoid misleading or deceptive conduct.
Magnamail, a direct mail order business, operates in both Australia and New Zealand and is part of Direct Group, which also owns brands like Reader’s Digest and TVSN. The ACCC claims that Direct Group was knowingly involved in Magnamail’s conduct.
For more details, including a copy of the initiating court document, visit the ACCC v Magnamail Concise Statement.
ACCC Clears Sigma-Chemist Warehouse Merger with Conditions
The ACCC has approved the merger between Sigma Healthcare and Chemist Warehouse, after accepting a court-enforceable undertaking from Sigma.
The ACCC's investigation concluded that, with the undertaking in place, the merger is unlikely to substantially lessen competition within the pharmacy sector.
Other wholesalers such as API, EBOS, and CH2 will continue to provide strong competition to the merged entity. Additionally, other retail pharmacy competitors, including supermarkets and non-pharmacy retailers, will maintain competitive pressure.
Consumers will still have access to different types of pharmacies, from smaller stores offering personalized services to the large, discount-oriented Chemist Warehouse stores. The ACCC determined that pharmacies, including those under long-term agreements with Sigma, would still be able to switch wholesalers or banner groups, thanks to the enforceable undertaking that will prevent Sigma from enforcing exit restrictions on contracts.
Chairwoman Gina Cass-Gottlieb, emphasized that while there were concerns raised by some market participants, detailed analysis of Chemist Warehouse and Sigma’s internal documents, along with the undertaking, led to the conclusion that the merger would not substantially harm competition.
For more information, visit the ACCC media release.
Getty Images to Refund $78,000 After Misleading Subscription Cancellation Charges
Getty Images is refunding around $78,000 to over 200 customers after the ACCC flagged misleading cancellation charges for iStock subscriptions.
Between November 2023 and February 2024, customers who cancelled their subscriptions after the one-month free trial were hit with fees that were far higher than they expected. The iStock terms only mentioned an “administrative charge,” but in reality, customers were charged up to 50% of the remaining annual subscription cost.
The ACCC took action after a surge in consumer complaints, particularly from people who felt misled by the fine print. On top of the hefty cancellation fees, iStock also made it unclear on its website that the monthly subscription price was part of a larger annual cost, leaving customers confused about the total price and cancellation terms.
Getty has since agreed to refund the overcharged customers and update its website for better transparency.
The company will automatically process refunds based on customer data, but if any transactions fail, affected customers will be contacted directly.
Consumers are also being warned to be cautious of scammers pretending to offer refunds and to verify any communication from Getty Images through official channels.
While the ACCC is satisfied with Getty’s response, it’s a reminder for businesses to be upfront with their pricing and cancellation policies from the get-go. If you're one of the affected customers, check your inbox for a refund notification or reach out to Getty Images’ customer service.
ACCC Seeks Feedback on Proposed Australia Post Price Increases for 2025
The ACCC is seeking public feedback on Australia Post’s proposal to increase basic postage rates by 20 cents from mid-2025.
The proposed hikes would impact ordinary small letters, which would rise from $1.50 to $1.70, and ordinary large letters, which could jump as much as 60 cents depending on weight.
Additionally, the cost of priority labels would go up by 30 cents, while priority small letters would see a 50-cent increase. However, concession stamps and seasonal greeting card stamps are not set for any price changes.
The ACCC is conducting this consultation to assess whether the price increases align with the legal requirements under the Competition and Consumer Act, focusing on Australia Post’s ability to recover efficient costs while ensuring fair competition.
Importantly, the ACCC does not approve price increases, but it does have a role in assessing the proposed changes. Following the consultation, a preliminary view will be released in early 2025, which will help guide the next steps.
Australia Post has indicated it may submit further price increases in 2026 and 2027 as part of a long-term price path, but these are not part of this consultation.
The public consultation process is open until 22 December 2024, and businesses, consumers, and other stakeholders are encouraged to share their views.
Airline Competition Drops, Airfares Rise After Rex’s Exit from Major City Routes
Domestic airline passengers are feeling the pinch, after Rex suspended its services between metropolitan cities in July 2024. Since then, airfare prices on major city routes have surged by 13.3% through September 2024, marking a significant jump following Rex's departure from 11 of the 23 metropolitan services.
The ACCC's latest Domestic Airline Competition report highlights that the average number of seats on routes between major cities has dropped by 6% since Rex pulled out. This, combined with stable passenger numbers, has resulted in fuller flights.
Before Rex's exit, nearly half of all domestic passengers flew on routes with three or more competing airline groups. Now, no major route is served by more than two, with Qantas Group and Virgin Australia accounting for 98% of passengers.
The lack of competition is likely to have lasting effects on the domestic aviation market. With fewer options available, there’s less incentive for airlines to keep prices competitive or improve service reliability.
As a result, airfares for some of the popular routes previously serviced by Rex have seen sharp increases. For instance, the cost of a ‘best discount economy’ ticket from Adelaide to Melbourne has spiked by 95% to $296, while flights from Melbourne to the Gold Coast are up 70% to $432.
Even Canberra to Melbourne flights have increased by 54%, reaching $298. Despite a significant drop in jet fuel prices, domestic airfare prices have stayed largely the same in real terms over the past year.
With fewer airline groups competing, consumers are left with less choice and potential higher prices, which could be felt for years to come.
Koala Living Fined for Misleading Consumers on Faulty Product Rights
Furniture retailer Koala Living, trading as Koala & Tree Pty Ltd, has been hit with penalties totalling $56,340 after the ACCC issued three infringement notices for making false or misleading statements about consumers’ rights to remedies for faulty products.
The ACCC found that Koala Living misled customers by incorrectly stating that the right to seek remedies for faulty goods was limited to 72 hours or the length of a manufacturer’s warranty and that the company could choose the type of remedy for faulty products.
In addition, Koala Living falsely told customers that delivery charges were non-refundable.
However, under Australian Consumer Law, consumers are entitled to compensation for any foreseeable loss or damage caused by a business failing to comply with consumer guarantees, including reimbursement of delivery charges.
In a court-enforceable undertaking with the ACCC, Koala Living admitted that its actions likely breached the law and agreed to compensate affected consumers. Customers who were misinformed about their rights and who hadn’t already received a full refund, repair, or replacement will receive compensation of 20% of their purchase price, in addition to any remedies they may still be entitled to under consumer guarantees.
Koala Living has also agreed to review its policies and procedures, including staff training on consumer law, and correct its misleading statements. The company has removed the incorrect information from its website and will publish corrective notices across its website and social media channels.
Businesses are reminded that misleading consumers about their legal rights is a serious breach of the law, and the ACCC is committed to taking action to ensure businesses comply with their obligations.
The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such. It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only. You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.
