Reckitt Benckiser, the manufacturer of Nurofen, has been fined $6 million by the Full Federal Court for misleading consumers. The penalty serves as a warning against toxic workplace cultures where potentially unlawful behaviour is unchecked.
The Federal Court initially fined Reckitt Benckiser $1.7 million in April 2016 for making misleading representations about its Nurofen Specific Pain products. The company claimed that each product was designed to target different areas of pain on the body. Despite being around twice as expensive as the standard Nurofen products, the so-called specific target products were no different from the standard products, which also contained the same amount of active ingredient.
The ACCC appealed the lenience of the original penalty, and in December 2016 the Full Federal Court agreed, stating that it was manifestly inadequate given the need for deterrence and the substantial consumer loss suffered. The increased penalty of $6 million is the highest corporate penalty awarded for misleading conduct under Australian consumer law.
The court’s judgement stated: ‘A marketing strategy designed around the creation and promotion of a fiction of difference and choice when none existed was inherently risky in terms of consumer protection laws.’
Concerns were raised by the court that the marketing strategy created the risk of double dosing. The court also noted that the marketing strategy could give the company an unfair advantage over companies abiding by consumer law, and that deceiving consumers into purchasing more expensive products with no additional benefit could lead to potential gains in the tens of millions of dollars.
Justices Jagot, Yates and Bromwich stated in their joint decision: ‘The objective of any penalty in this case must be to ensure that Reckitt Benckiser and other “would-be wrongdoers” think twice and decide not to act against the strong public interest’.
While the ACCC welcomed the increased penalty, its position is that consumer law penalties should be increased in line with competition law penalties, which are effectively nine times higher.
‘The ACCC will continue to advocate for higher penalties for breaches of Australia’s consumer laws to ensure that they act as an effective deterrent and are not simply viewed as a cost of doing business,’ said ACCC chairman Mr Sims.
Bottom line for organisations
- Sound workplace culture is critical. Those in executive and managerial positions need to lead by example.
- Those in less senior positions need to be aware of current consumer law so that they can identify and report any potentially unlawful behaviour.
- A negative workplace culture may prevent employees from reporting unlawful practices, and a workplace where unlawful practices are allowed to flourish is likely to develop a toxic culture.
- It is important to ensure your employees are up to date with their legal responsibilities.
Learning Seat offers a range of training courses in consumer law and misleading and deceptive conduct, and can develop bespoke online training solutions to support organisations’ unique learning needs.