Federal court finds small businesses were misled into purchasing safety products

The Federal Court has declared that Safety Compliance Pty Ltd (Safety Compliance) contravened the Australian Consumer Law (ACL)  and the Trade Practices Act 1974 (Cth) (now called the Competition and Consumer Act 2010) (the Act) by making false or misleading representations and engaging in misleading or deceptive conduct directed towards small businesses in connection with the supply of safety wall charts and first-aid kits, in proceedings brought by the Australian Competition and Consumer Commission (ACCC).

The ACCC has reported that the Court found that Safety Compliance made false or misleading representations to small business consumers that workplace health and safety laws required businesses to maintain safety wall charts and first-aid kits of the same nature as those sold by Safety Compliance.

The Court also found that Safety Compliance falsely represented that it was affiliated with, or actually was, a state or territory workplace health and safety agency.

The Court found that three individual respondents associated with Safety Compliance, Dean King, Shane Black and Fiona Schimmel, were knowingly concerned in:

• falsely representing to small business consumers that workplace health and safety laws required businesses to maintain safety wall charts of the same nature as those sold by Safety Compliance, and
• falsely representing that Safety Compliance was affiliated with, or actually was, a state or territory workplace health and safety agency.

The Court also found that Safety Compliance had contacted a number of individual franchisees of a franchise group and had represented to the franchisees that the franchisor had agreed to purchase products from Safety Compliance, when in fact it had not agreed to make such a purchase.

“This is an important outcome, as small businesses operators generally take their health and safety obligations very seriously but can often be time poor and susceptible to telemarketers promoting products relating to workplace health and safety,” ACCC Deputy Chair Dr Michael Schaper said.

“In these circumstances, it is important that small businesses can rely on the accuracy of claims made by telemarketers and others about their compliance products,” Dr Schaper said.

The ACCC had also alleged that Safety Compliance had coerced small businesses into purchasing its products, by representing that there was a legal requirement to have the products and by issuing debt recovery letters which threatened legal action and steps to damage the credit rating of businesses who did not pay for the products received. Although the Court said that this conduct was deliberately intimidating, it found that this conduct did not amount to coercion.

A further hearing will be held at a later date to determine the relief to be ordered by the Court. The ACCC is seeking pecuniary penalties, injunctions, costs and, in respect of the individuals involved in the contravening conduct, disqualification orders banning them from managing corporations in the future.

Dean King, Shane Black and Fiona Schimmel contested the proceedings. Safety Compliance went into liquidation on 21 September 2012 and the liquidator did not participate in the proceedings.