NRM Corporation Pty Ltd v ACCC [2016] FCAFC 98: NRM’s Appeal Dismissed by Federal Court
Tuesday 26 July 2016 @ 9.34 a.m. | Legal Research | Trade & Commerce
In the case of NRM Corporation Pty Ltd v ACCC [2016] FCAFC 98 (21 July 2016), the Full Court of the Federal Court of Australia has dismissed an appeal by NRM Corporation Pty Ltd and NRM Trading Pty Ltd (together, NRM), and NRM director Jacov Vaisman, against the decision of Justice North that NRM had engaged in unconscionable conduct through its Advanced Medical Institute business promoting and supplying medical services and medications for men suffering from sexual dysfunction.
In dismissing NRM’s appeal, the Full Court rejected NRM’s arguments that the Trial Judge had made errors of fact and law in finding that NRM had engaged in unconscionable conduct targeting vulnerable consumers by its advertising and sales techniques. The Full Court noted that this vulnerability related to the particularly sensitive and personal nature of the services supplied by NRM and the sales techniques employed by the salespeople, and was well supported by the evidence.
It is alleged that NRM contravened ss 51AB, 51AC of the (then) Trade Practices Act 1974 (Cth) as well as Sch 2, ss 21, 24, 25 and 250 of the Competition and Consumer Act 2010 (Cth).
Background to the Case
The ACCC instituted proceedings against the companies formerly known as Advanced Medical Institute Pty Ltd and AMI Australia Holdings Pty Ltd (together, the AMI companies) and Mr Jacov Vaisman in December 2010. At that time the ACCC was concerned that the AMI companies had engaged in conduct that took advantage of vulnerable consumers suffering from sexual dysfunction.
When the AMI business was subsequently sold to NRM, the ACCC remained concerned that the conduct was continuing and, as a result, NRM was joined to the proceedings. On 22 April 2015, the Federal Court found that the AMI companies and NRM, by operating the AMI business, engaged in unconscionable conduct and used unfair contract terms to promote or supply male sexual dysfunction products.
In his judgment at the time, North J. stated:
“It is immoral to seek to harness the fears and anxieties of men suffering from ED [erectile dysfunction] or PE [premature ejaculation] for the purpose of selling medical treatments. To target the patient’s vulnerability in this way is to use an unfair tactic and that is a possible marker of unconscionable conduct.”
His Honour also stated:
“The technique of frightening men by telling them of the dire adverse consequences of not agreeing to treatment and assuring them that the treatment was effective was part of the business system of AMI and NRM. It was formulated by management and imparted in an organised fashion through scripts and training sessions.”
The Court also declared that Mr Vaisman, who was a director and CEO of the AMI companies, then subsequently NRM, aided and abetted and was knowingly concerned in the unconscionable conduct by the AMI companies and NRM. Mr Vaisman was restrained for a period of seven years from having a role in connection with training, supervising or counselling or terminating employees, agents or contractors of NRM.
The Current Court Action
In the current action, the Full Court upheld the order made by North J. permanently restraining NRM from making statements and representations to any patient or prospective patient as to the efficacy of NRM treatments unless they are made by a medical practitioner in a face-to-face or video consultation.
The Full Court considered [at para 20]:
“There remains a continuing need, and there remains a factual foundation, for an order restraining the Appellants from advertising in a manner which has the potential to exploit the vulnerable”.
The Full Court also dismissed Mr Vaisman’s appeal against orders restraining him from having a role in connection with training, supervising or counselling or terminating employees, agents or contractors of NRM for a period of seven years.
Reaction from the ACCC
The ACCC Chairman Rod Sims said of this matter:
“The ACCC brought these proceedings because NRM sought to exploit consumers’ vulnerability for its own commercial gain, by targeting vulnerable consumers with unconscionable advertising and sales techniques....Consumer issues in the health and medical sector are a priority for the ACCC. We will not hesitate to take appropriate enforcement action where businesses in this sector are exploiting the vulnerability of consumers.”
This appeal judgment follows an earlier finding by Moshinsky J. that NRM was guilty of contempt for failing to comply with the previous orders made by North J.
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Sources:
NRM Corporation Pty Ltd v ACCC [2016] FCAFC 98 (21 July 2016)
Full Court upholds unconscionable conduct finding against AMI – ACCC Release MR 134/16
