Federal Court Fines Woolworths for Engaging in Misleading Conduct
Tuesday 9 February 2016 @ 9.30 a.m. | Legal Research | Trade & Commerce
In a yet to be released judgment, it has been reported that the Federal Court has ordered supermarket giant Woolworths Limited (Woolworths) to pay total penalties of $3.057 million for breaches of the Australian Consumer Law (ACL) [contained in Sch 2 to Competition and Consumer Act 2010 (Cth)] relating to safety issues with house brand products sold in Woolworths Supermarkets, Big W and Masters stores.
Background to the Case
The Court declared that Woolworths engaged in misleading and deceptive conduct and in some cases had made false or misleading representations about the safety of five of its house brand products:
- a deep fryer;
- drain cleaner;
- safety matches;
- a padded flop chair; and
- a folding stool
over a period of 3 years.
The defects in Woolworths’ products caused several serious injuries, including burns from hot oil when the handle of the deep fryer broke during use and chemical burns including to a young child, caused by a defective cap on the bottles of drain cleaner.
Tom Godfrey, a representative from Consumer Group Choice said that the fine imposed on Woolworths was a "drop in the ocean" for the company, which posted a net full-year profit of $2.15 billion in August 2015.
Mr Godfrey said:
"Even though it won't be the biggest problem for Woolies to pay this fine, it does send them a very clear message that they need to take their product safety obligations very seriously. The judge took a very hardline with them here because the private label brands are very profitable ... they need to take their product safety very seriously, and they haven't done that."
Inaction from Woolworths
Woolworths became aware of serious injuries resulting from defects in these products, but did not remove the products from sale and recall the products. Some of the products were subsequently removed from sale and recalled, but not always before further injuries resulted from their defects.
In other cases, the Court found that express representations on the products or packaging were false or misleading. For example, the padded flop chair was described as capable of bearing the weight of 115kg when under testing it could not reliably support more than 92kg.
Findings of the Court
Justice Edelman also found that Woolworths contravened the ACL by failing to report serious injuries to the ACCC within two days of becoming aware that serious injuries may have been caused by these products. The Court found that Woolworths failed to do so on 8 occasions in relation to products, including a coffee plunger, cling wrap and some food products.
His Honour found that...
“The penalties I have imposed are designed in broad terms to achieve specific and general deterrence by requiring vigilance concerning quality management procedures to ensure the accuracy of representations and effective procedures for the recall or withdrawal of products and the notification of the ACCC. This is particularly so where products can affect consumer safety and the person deals in the sale of large volumes of consumer products”.
Reaction from the ACCC
Commenting on this case in a recent ACCC Media Release, the ACCC Chairman Rod Sims said:
“By failing to recall and remove products from its shelves for some time after it became aware that the products were defective, Woolworths misled Australian consumers and placed their safety at risk. The significant penalties imposed in this case reflect the serious nature of Woolworths’ conduct. ..The Court has ordered Woolworths to implement an upgraded, dedicated product safety compliance program, and its quality assurance processes will be monitored by an external auditor. The ACCC acknowledges that Woolworths moved to implement an improved product safety compliance program, and that it has cooperated with the ACCC investigation and made admissions assisting in the resolution of the proceedings.”
Further action imposed on Woolworths
In addition to penalties and orders relating to an upgraded product safety compliance program, and by consent, Woolworths was also ordered to:
- implement an upgraded dedicated product safety compliance program;
- publish on its websites a link to information detailing the product safety requirements to which Woolworths is subject, how to report an incident, and recalls undertaken in the last year; and
- publish on the Woolworths supermarket smartphone application the details of all products currently recalled by Woolworths and those recalled within the last 12 months.
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Sources:
Woolworths ordered to pay $3 million over safety of deep-fryer, drain cleaner and other products – abc.net.au
Woolworths misled consumers over product safety hazards – Ordered to pay over $3 million in penalties – ACCC MR 7/16
