E-cigarette Retailers Fined over Misleading Advertising

Tuesday 9 May 2017 @ 9.23 a.m. | Legal Research | Trade & Commerce

The Federal Court has ordered three online e-cigarette retailers - The Joystick Company Pty Ltd (Joystick), Social-Lites Pty Ltd (Social-Lites) and Elusion Australia Limited (in liq) (Elusion) - to pay penalties for breaching the Australian Consumer Law (ACL) [contained in Sch 2 to the Competition and Consumer Act 2010 (Cth)].

Background to the Action

Independent testing commissioned by the ACCC identified the presence of carcinogens and toxic chemicals, such as formaldehyde, acetaldehyde and acrolein in the products of Joystick, Social-Lites and Elusion, as well as acetone in Social-Lites’ products.

Formaldehyde is classified by the World Health Organisation International Agency for Cancer Research (IARC) as a Group 1A carcinogen, meaning there is sufficient evidence to show it is carcinogenic to humans.

Acetaldehyde is classified as a Group 2B carcinogen by the IARC. That classification is applied to a chemical agent that has been evaluated as being possibly carcinogenic to humans. Acrolein is classified by the WHO as a toxic chemical. It is also listed as a dangerous poison in Sch 7 of the Poisons Standard of the Therapeutic Goods Act 1989 (Cth).

Acetone, a chemical used in nail polish remover, is recognised by the Commonwealth Government's Quit agency as a toxic chemical found in tobacco smoke.

Findings by the Court

The Court also found that the directors of Joystick and Elusion, and the CEO of Social-Lites, were knowingly concerned in the contravening conduct of their respective companies.

Following admissions made by each of the companies and individuals and joint submissions on penalties, the Federal Court ordered that:

  • Joystick pay a pecuniary penalty of $50,000, and its director a penalty of $10,000;
  • Social-Lites pay a pecuniary penalty of $50,000, and its CEO a penalty of $10,000, and;
  • Elusion pay a pecuniary penalty of $40,000, and its director a penalty of $15,000.

Reaction from the ACCC

Commenting about the current action in a recent ACCC Media Release, the ACCC Acting Chair Delia Rickard said:

“Consumers were led to believe by this conduct that when using these e-cigarette products, they would not be exposed to the harmful chemicals found in ordinary cigarettes. In fact, they were exposed to the same chemicals, including a known carcinogen that has no safe level of exposure. Businesses must ensure that they provide accurate information to customers, and have a reasonable basis for making any representations. This is particularly important for products that may cause harm to the health of consumers.”

Corrective action by two manufacturers

Social-Lites and Elusion have both published a corrective advertisement on their websites. Social-Lites website states:

"In fact, when our e-cigarette products are used, the vapour produced for inhalation does contain carcinogens and toxic substances — including Acetaldehyde, Acetone, Acrolein and Formaldehyde. Those chemicals are carcinogens and toxic substances which are also found in tobacco cigarette smoke. Following Federal Court proceedings taken by the Australian Competition and Consumer Commission, the Court has found that the representations which we made on our website and on YouTube were false, misleading or deceptive in contravention of the Australian Consumer Law."

Joystick appears to no longer operate an Australian website.

The ACCC has written to over 30 Australian e-cigarette suppliers reminding them of their ACL obligations, in particular to ensure information provided to consumers is accurate.  Action was taken against Joystick and its director after the company failed to pay infringement notices issued by the ACCC in respect of its conduct.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.

Sources:

E-cigarette companies to pay penalties - ACCC Release MR 61/17

Three vaping retailers slapped with $175,000 in court fines over misleading advertising – abc.net.au

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