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False advertising of health products = large fines for Mosaic Group and Pete Evans

Whether it was hand sanitiser bottles, face masks or therapeutic goods, there was a ready market for health products after COVID-19 restrictions came into force in March 2020.

In this article, we look at two situations where health products were falsely advertised:

  1. The prosecution by the Australian Competition & Consumer Commission (ACCC) of Mosaic Brands for infringements of the Australian Consumer Law (ACL) for making false representations as to the composition of hand sanitiser sold in bottles and as to approvals and endorsements of face masks (the ‘Health Essentials Products’); and
     
  2. The prosecution by the Therapeutic Goods Administration (TGA) of Peter Evans Chef Pty Ltd for breaches of the Therapeutic Goods Act 1989 (Cth) for advertising unregistered medical devices and medicines (the ‘Therapeutic Goods’).

The Mosaic Brands Health Essentials Products Advertising

From March until June 2020, Mosaic Brands advertised hand sanitiser and face masks through its 1,333 retail stores, on its websites and via direct marketing under its fashion brands: Noni B, Autograph, BeMe, Crossroads, Katies, Millers, Rivers, Rockmans and W. Lane.

Five infringement notices were issued by the ACCC for these representations:

  • Air Clean hand sanitiser sold by Mosaic Brands contained 70% alcohol - when this was not the case;
     
  • Miaoyue hand sanitiser sold by Mosaic Brands contained 75% alcohol - when this was not the case;
     
  • Velcare hand sanitiser sold by Mosaic Brands was approved by the World Health Organisation - when this was not the case;
     
  • KN95 Kids Safety Face Mask sold by Mosaic Brands was ‘FDA/CE Certified’ - when this was not the case; and
     
  • Health Essentials Products were advertised on its websites as non-refundable - when in fact consumers have a statutory right to a refund.

According to the ACCC, “Tens of thousands of hand sanitiser and face mask products were sold on Mosaic Brands’ websites”.

The ‘Conduct of Concern’ was:

  • As to the Air Clean and Miaoyue hand sanitiser products, they contained far less alcohol than was stated – for Air Clean it was 17%, for Miaoyue it was 58%, in breach of ss 18 & 29(1)(a) of the ACL (particular standard, quality, composition);
     
  • As to the Velcare hand sanitizer, it was not approved by the World Health Organisation as stated (the WHO does not endorse products), in breach of ss 18 & 29(1)(g) of the ACL (sponsorship and approval);
     
  • As to the KN95 Kids Safety Face Mask it was not ‘FDA/CE Certified’ (US Food and Drug Administration / European conformity mark), in breach of ss 18 & 29(1)(g) of the ACL (sponsorship and approval); and
     
  • hat Health Essentials Products advertised on its websites were non-refundable, in breach of ss 18 & 29(1)(m) of the ACL (statutory right to a refund under the consumer guarantee remedies).

According to the ACCC: “The products were marketed with phrases such as ‘Be prepared’, ‘Stock up now before it’s gone’, ‘Remain Healthy’ and ‘Stay Safe and Clean’. As well as references to the pandemic such as ‘These are uncertain times and as the COVID-19 situation changes, we will be too’ and ‘It’s important we are all doing our part to protect the most vulnerable.’”

The penalties and undertakings were:

  • The penalties payable under the five (5) infringement notices totalled $630,000;
     
  • An undertaking that for three (3) years Mosaic will not make a representation about the composition, attributes, qualities, characteristics, approvals or endorsements of a Health Essentials Product without being tested in an appropriate testing facility, with annual reviews;
     
  • An undertaking that for three (3) years, Mosaic will not communicate to a customer that they are not entitled to a refund (when they are entitled), and to establish a refund scheme in which each customer who purchased Health Essentials Products is identified, is contacted and is given an application for a refund and a notice is placed on the brand websites; and
     
  • An undertaking to implement an ACL Compliance Program Level 4, with the appointment of a Compliance Officer and a Compliance Advisor to carry out a risk assessment and to report, and issue a compliance program which contains: a complaints handling system, whistleblower protection, staff training, adherence to product safety standards, reports to senior management, an annual compliance review and compliance reports, the program to continue indefinitely.

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