The purpose of this letter is to remind AFA Members of the Federal Court of Australia decision following action taken by the Australian Competition and Consumer Commission (ACCC) against Woolworths Limited (Woolworths) relating to the supply of unsafe products to Australian consumers.

The ACCC wrote to industry about this case as an important reminder that businesses found not to meet their Australian Consumer Law obligations can face significant sanctions and penalties.

The AFA encourage you to review the products you supply and your consumer product safety compliance processes to prevent the supply of unsafe goods to Australian consumers, and avoid serious risks to your business.

Background

The ACCC enforces the Competition and Consumer Act 2010 (CCA), which incorporates the Australian Consumer Law (ACL). The ACL prohibits suppliers from engaging in misleading and deceptive conduct or making false and misleading representations, including representations about the safety of goods.

The ACL also imposes obligations relating to consumer products, including a requirement for suppliers to report incidents of serious illness or injury associated with consumer goods they supplied.

CASE STUDY : ACCC action against Woolworths

On 5 February 2016, the Federal Court of Australia found by consent that Woolworths had engaged in misleading or deceptive conduct and in some cases had made false or misleading representations about the safety of five of its house-brand products—including a padded flop chair and a folding stool.

The Court also found that Woolworths had, on eight separate occasions, failed to notify the ACCC in relation to incidents of serious illness or injury associated with goods it supplied. Woolworths admitted liability and was ordered to:

* pay a penalty of $3 million for engaging in misleading or deceptive conduct and making false or misleading representations,

* pay a penalty of $57,000 for failing to comply with the requirement to notify the ACCC about serious illnesses or injuries,

* upgrade its product safety compliance program, and

* commission independent audits of its quality management system for a period of three years.

The defects in the Woolworths house-brand products caused several serious consumer injuries, including a fractured vertebra.

In some instances, Woolworths had become aware of serious injuries caused by product defects, but did not immediately remove the products from sale and recall them.

These products were subsequently removed from sale and recalled, but not always before further serious injuries had resulted from the known defects. In these instances the Court found that Woolworths had misled consumers as to the suitability of the products.

In other instances, the Court found that express representations printed on the products or packaging were false or misleading. For example, the padded flop chair was described as capable of bearing the weight of 115kg, when under testing it could not reliably support more than 92kg.

Woolworths also admitted to failing to notify the ACCC in accordance with the mandatory reporting requirements relating to serious injuries caused by house-brand products it had supplied, incurring a total penalty of $57,000.

This case is relevant to all businesses supplying products to consumers

As you supply goods or services to consumers, the following key points of the Court’s findings are relevant to you:

* By offering goods for sale after becoming aware of injuries arising from defects in those products, businesses are at risk of making false or misleading representations about the safety of those products and being exposed to significant pecuniary penalties.

* Where a potential defect or safety hazard is identified, businesses must act quickly to investigate and remove the product from sale and recall it if necessary.

* It is important for a business to have an effective quality assurance and control program that is consistently and methodically applied to ensure products are sourced responsibly and safely.

* Suppliers can confirm that house-brand goods have been manufactured in accordance with product specifications and in compliance with safety standards by applying basic quality control measures, such as ensuring that pre-shipment inspections are performed and the resulting reports are diligently scrutinised.

Product Safety Issues

It is important that businesses throughout the supply chain have effective quality assurance programs that:

* ensure that potentially hazardous product defects are discovered prior to those products being made available to consumers, and that appropriate action is taken to rectify any problems,

* educate officers and employees about their obligations under the CCA, and

* regularly review quality management processes and procedures to ensure that they remain