No relief in sight as ACCC targets “targeted” pain relievers

Key takeaways

In a new case with strong echoes of Nurofen’s bruising $6 million encounter with the Australian Competition and Consumer Commission (ACCC) in December 2016 over its “pain specific” range, the ACCC has commenced proceedings against the manufacturers of Voltaren Osteo Gel.

This case is important because:

• it highlights the ACCC’s intention to protect vulnerable consumers and challenge well-known companies over the representations they make to those consumers;
• the ACCC is likely to seek the highest penalty; and
• if the proposed legislative reforms to increase maximum financial penalties under the Australian Consumer Law (ACL) are enacted, there will be increased financial pain for any company that makes false representations.

Background to proceedings

Late last year, the ACCC brought Federal Court proceedings against GlaxoSmithKline Australia (GSK) and Novartis Consumer Health Australasia (Novartis), the current and former manufacturers of Voltaren Osteo Gel, for false or misleading representations under the ACL.

The ACCC has alleged that for more than six years GSK and Novartis misled osteoarthritis pain sufferers into paying up to 33 per cent more for the Osteo Gel by claiming it was “more effective” and offered “targeted relief”, despite the Osteo Gel actually containing identical ingredients to the cheaper Emulgel.

From the ACCC’s media releases, it appears that the ACCC approached GSK in around late 2016 or early 2017 with its concerns. The ACCC seems to have taken issue with the packaging for the Osteo Gel including representations that the product was specifically formulated to treat osteoarthritis pain in a way superior to the ‘original’ Emulgel.

GSK appears to have responded by updating the packaging for Osteo Gel in March 2017 with a different design that featured the words “Same effective formula as Voltaren Emulgel” under the product name. However, the Commission remained unsatisfied, maintaining the view that the amended packaging was still misleading.

The ACCC is now seeking declarations, injunctions, penalties, a publication order, the imposition of a compliance program and costs. 

ACCC’s pursuing higher penalties

If it is successful in establishing false or misleading representations, it seems likely the ACCC will argue for an even higher penalty against GSK and Novartis than the $6 million penalty it secured against Reckitt Benckiser in the Nurofen ‘pain specific range’ case,¹ particularly given the apparent similarity between the cases and the need to send a strong message of deterrence.

ACCC Chairman Rod Sims, who expressed his concern that vulnerable consumers of pain relief medication were still being misled a year after the Nurofen case, has conceded that the deterrence message of the Nurofen case was not as effective as anticipated.

Moreover, the ACCC’s ability to send a strong deterrence message in consumer law cases is likely to be further enhanced in the near future, with significant changes proposed for the ACL penalty regime.

Since 2011 the maximum penalty per breach of the ACL has been $1.1 million for companies and $220,000 for individuals. These are well below the maximum penalties available for the competition provisions of the Competition and Consumer Act 2010 (Cth) (the Act), which are:

• For companies – the greater of:
  • $10 million;
  • three times the value of the benefit the company received from the breach; or
  • 10% of annual turnover in the preceding 12 months if the benefit cannot be determined.
• For individuals - $500,000.

The ACL review completed in March 2017 by the Consumer Affairs Australia and New Zealand (CAANZ) recommended that the maximum financial penalties available under the ACL be increased in line with the penalty regime outlined above, and the Australian Ministers of Consumer Affairs identified this recommendation as a priority in August 2017.²

Legislation to this effect was subsequently introduced to the Parliament on 15 February 2018 via the Treasury Laws Amendment (2018 Measures No. 3) Bill 2018 (the Bill). Assuming there are no major delays in the progress of the Bill, the ACL may have significantly higher maximum civil pecuniary penalties and penalties for criminal offences before the end of 2018.

For completeness, earlier this year the government also released exposure draft legislation seeking to amend other ACL provisions following the recommendations made by CAANZ.  You can read our analysis of that exposure draft legislation here.

---

¹ The Court at first instance imposed a penalty of $1.7 million (Australian Competition and Consumer Commission (ACCC) v Reckitt Benckiser (Australia) Pty Ltd (No 7) [2016] FCA 424). Unsurprisingly, the ACCC appealed submitting the penalty was “manifestly inadequate”.

² Legislative and Governance Forum on Consumer Affairs, Melbourne, Victoria, 31 August 2017 –  https://cdn.tspace.gov.au/uploads/sites/86/2017/08/CAF_Communique_August_2017.pdf

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).