Metricon misleads and misses the mark

Articles Written by Kevin Lynch (Partner), Kate Fitzgerald, Paul Svilans

The Australian Competition and Consumer Commission (ACCC) took issue with representations made by home builder Metricon Homes Qld Pty Ltd (Metricon) in advertisements to consumers. While the case doesn't reflect new law, it is a reminder to home builders and developers not to push the envelope, even in a difficult market.

In summary the ACCC was concerned with conduct extending over the period January 2009 to September 2011 including:
  • Brochures that contained features and fittings that were not included in the advertised price (swimming pools and Bali huts);
  • A build-time guarantee promotion that had significant carve outs in fine print;
  • Promoting sale prices where the standard list prices had never been offered;
  • Promoting an upgrade package with promotional prices that represented no discount to the standard prices.

The ACCC and Metricon reached agreement as to the relevant facts as well as penalties and fines to be imposed and the Federal Court declared that Metricon had breached sections 52, 53(a)(e) and (g) of the Trade Practices Act, and for conduct after 1 January 2011, sections 18, 29(1)(a);(i) and (m) of the Australian Consumer Law.  The Court also ordered Metricon pay $800,000 in penalties, ACCC costs of $50,000 and accepted a detailed undertaking that Metricon would not engage in similar conduct for 3 years.

No evidence of actual loss or damage was provided but the Court described the conduct as "egregious" as it extended over a lengthy period of time. The average house price sold was approximately $300,000 representing "a very substantial commitment to the consumers involved"  Metricon admitted it intended to induce at least some customers to purchase a home from them.

The Court considered the penalties appropriate after noting the total income and assets of the company.  Of particular relevance was the participation and sign off of the relevant campaigns by senior management and the fact that the contraventions occurred despite compliance policies and programs being in place.

In noting the penalties could have been higher the Court considered Metricon's cooperation with the regulator and that the company had not previously been in breach of the relevant legislation.

The case is relevant to any advertiser and serves as a reminder that:

  • advertisements must be accurate
  • features and extras must be included at the advertised price or clear disclaimers must be provided
  • fine print does not fix an advertisement that is otherwise inaccurate
  • discounted or sale prices must have been previously listed at the higher price for a period of time
  • upgrades or other benefits must not have been previously included
  • a compliance program should be complied with to provide protection.
Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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