Criminal Cases

US – April 2017 – Mix of criminal and non-criminal enforcement actions – “The Securities and Exchange Commission today announced enforcement actions against 27 individuals and entities behind various alleged stock promotion schemes that left investors with the impression they were reading independent, unbiased analyses on investing websites while writers were being secretly compensated for touting company stocks.  The SEC filed fraud charges against three public companies and seven stock promotion or communications firms as well as two company CEOs, six individuals at the firms, and nine writers.  Of those charged, 17 have agreed to settlements that include disgorgement or penalties ranging from approximately $2,200 to nearly $3 million based on frequency and severity of their actions.  The SEC’s litigation continues against 10 others.   The SEC also instituted separate charges against another company for its involvement in circulating promotional materials that did not comply with prospectus requirements under the federal securities laws.  The company settled the case.  The SEC today released an investor alert warning that articles on an investment research website that appear to be an unbiased source of information or provide commentary on multiple stocks may be part of an undisclosed paid stock promotion.  Investors should never make an investment based solely on information published on an investment research website.  When making an investment decision, thoroughly research the company using multiple sources.”

NZ – Sep 2016 – Vodafone – “Vodafone New Zealand Limited has today been fined $165,000 in the Auckland District Court after pleading guilty to making false price representations in breach of the Fair Trading Act.”  This is Vodafone’s fourth sentencing under the Fair Trading Act in the past five years (in New Zealand).

Aus – Sep 2016 – “The Department of Health and Human Services has successfully prosecuted the operators of an illegal tanning salon run firstly from a business premises and then from a private home in Bundoora. This is the first prosecution since the Victorian ban on commercial tanning commenced in 2015.  In the Heidelberg Magistrates Court today Clare Zahra and Tropical Sun Industries Pty Ltd pleaded guilty to multiple charges of conducting a commercial tanning practice.”

Aus – Jul 2016 – Canberra eatery ‘London Burgers and Beer’ was found to have insanitary and unclean premises, resulting in six convictions for proprietor Hostile Takeovers Pty Ltd. The court of first instance found:

[T]he state of the premises in the current matter are truly awful… I doubt that any health conscious patron who actually saw the state the kitchen was in would be prepared to eat anything prepared in it.

The appellate court noted:

Those observations were warranted.

The offender successfully appealed its sentence on the ground of manifest excess; though it isn’t put in these terms, the presiding judge was swayed by cross-jurisdictional parity arguments.  I question the appropriateness that approach in our Federal system (the offences were Territory, not Commonwealth, offences).

Infringement Notices

Aus – June 2017 – “Energy retailer Lumo Energy Australia Pty Ltd (Lumo) has paid a penalty of $10,800 after being issued with an infringement notice by the ACCC.  The ACCC issued the infringement notice because it had reasonable grounds to believe that Lumo had contravened the Australian Consumer Law by making a false or misleading representation about energy discounts.  Lumo made a representation on its website in February 2017 that consumers, including those outside of Victoria, could save 33 per cent off their total electricity bill and 17 per cent off their total gas bill if they switched to Lumo.  In fact, these discounts were only available to residents of Victoria. Maximum discounts for electricity were substantially less in other states. In addition, Lumo does not offer gas outside Victoria.”

Aus – Mar 2017 – “Hoyt Food Manufacturing Industries Pty Limited (Hoyt’s Food) has paid a penalty of $10,800 following the issue of an infringement notice by the Australian Competition and Consumer Commission. Hoyt’s Food is a distributor of oregano and supplies to major retailers across Australia.The ACCC issued the infringement notice because it had reasonable grounds to believe that Hoyt’s Food had made false or misleading representations in contravention of the Australian Consumer Law, after it tested the composition of a sample from a batch of the 25g net variety of “Hoyt’s Oregano Leaves rubbed” (batch number 28615).”

Aus – Feb 2017 – “Energy retailer Lumo Energy Australia Pty Ltd (Lumo) has paid a penalty of $10,800 following the issue of an infringement notice by the Australian Competition and Consumer Commission.  Lumo call centre staff made representations to a number of consumers in February 2016 that the Australian Energy Regulator (AER) was responsible for increases to Lumo’s retail gas tariffs when the rise was due to a commercial pricing decision made by Lumo.”

South Korea – Dec 2016 – The Korea Times reports that “The Fair Trade Commission (FTC) has ordered Audi Volkswagen Korea (AVK) to pay a 37.3 billion won ($32 million) fine for running false advertisements on its emissions-rigged diesel engine vehicles.  The antitrust agency said Wednesday that the 37.3 billion won is the largest fine it has ever imposed on corporations for posting false advertizing.”  I can’t see any mention of the action on the Fair Trade Commission’s english-language website, so can’t verify the story, or clarify the nature of the “fine” imposed.  The Korea Times says that the country’s environment agency has also penalised VW, and that prosecutors are investigating possible criminal charges against individuals involved.

Aus – Oct 2016 – “Findex Group Limited and Financial Index Australia Pty Ltd (FIA) have each paid a $10,800 penalty following the issuing by ASIC of infringement notices for potentially misleading claims on the Findex website”.

USA – Sep 2016 – Wells Fargo – “Today the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo Bank, N.A. $100 million for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts. Spurred by sales targets and compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges. According to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers. Wells Fargo will pay full restitution to all victims and a $100 million fine to the CFPB’s Civil Penalty Fund. The bank will also pay an additional $35 million penalty to the Office of the Comptroller of the Currency, and another $50 million to the City and County of Los Angeles.” The “consent order” is available here.  This scandal prompted a US Senate Banking Committee examination; see news releases here and here; webcast of the CEO’s examination here; Senator Elizabeth Warren’s questions here.  The CFPB considered the conduct was an “unfair, deceptive or abusive act or practice”, within the definition given at 1036(a)(1)(B) of the Consumer Financial Protection Act of 2010. The Office of the Comptroller considered it “unsafe or unsound sales practice” and the City and County of Los Angeles considered it “unlawful, unfair, and fraudulent sales and related business acts and practices in violation of California Business & Professions Code sections 17200, et seq., resulting in harm to California consumers”.  Query whether there will be additional enforcement action by other regulators for fraud, employment or other offences.

Aus – Sep 2016 – “LT Management Pty Limited (LT Management) has paid a $10,800 infringement notice penalty after making potentially misleading statements about the cost of setting up a self-managed superannuation fund (SMSF) using the services of RS Capital Partners Pty Limited (RS Capital), trading as My SMSF Property.”

Aus – Sep 2016 – “The supplier of Bosisto’s tea tree oil, Felton Grimwade & Bosisto’s Pty Ltd (Bosisto’s), has paid a penalty of $10,800 following the issue of an infringement notice by the Australian Competition and Consumer Commission. The ACCC issued the infringement notice because it had reasonable grounds to believe that Bosisto’s had made a false or misleading representation in breach of the Australian Consumer Law (ACL) by labelling its tea tree oil as 100% pure, when that was not the case.”

Aus – Aug 2016 – ASIC issued a $10,800 infringement notice to R S Capital Partners Pty Ltd for “making potentially misleading representations about the cost of setting up a self-managed superannuation fund (SMSF) using RS Capital’s services.”

Deferred Prosecution Agreement

USA – Dec 2016 – “The world’s largest dietary supplement retailer, GNC Holdings Inc. (GNC), has entered into a wide-ranging agreement with the Department of Justice to reform its practices related to potentially unlawful dietary ingredients and dietary supplements, and has further promised to embark on a series of voluntary initiatives designed to improve the quality and purity of dietary supplements, the Department of Justice announced today.  The non-prosecution agreement resolves GNC’s liability for selling certain dietary supplements produced by a firm currently under indictment.  As part of the agreement, GNC has agreed to pay $2.25 million to the U.S. government and cooperate in dietary supplement investigations conducted by the government.”

Civil Cases

Aus – April 2017 – civil pecuniary penalty litigation – “The Federal Court has today fined Cairns-based lender, Channic Pty Ltd (Channic), broker Cash Brokers Pty Ltd (Cash Brokers) and the sole director of both companies, Mr Colin William Hulbert, a total of $776000 for breaching consumer credit laws. The Court also ordered the payment of costs of $420000.  Channic and Cash Brokers both operated from Supercheap, a used car dealership in Cairns which was also owned by Mr Hulbert. ASIC brought civil penalty proceedings after the Indigenous Consumer Assistance Network reported that Channic and Cash Brokers were dealing unjustly with vulnerable Indigenous consumers from the remote community of Yarrabah.” Australian Securities and Investments Commission v Channic Pty Ltd (No 5) [2017] FCA 363

US – Mar 2017 – consent agreement – “The Consumer Financial Protection Bureau (CFPB) today took action against Experian and its subsidiaries for deceiving consumers about the use of credit scores it sold to consumers. Experian claimed the credit scores it marketed and provided to consumers were used by lenders to make credit decisions. In fact, lenders did not use Experian’s scores to make those decisions. The CFPB ordered Experian to truthfully represent how its credit scores are used. Experian must also pay a civil penalty of $3 million. ”

NZ – Mar 2017 – out of court settlement – “The [Commerce] Commission has reached a $19 million settlement with ANZ Bank New Zealand Limited (ANZ) in relation to the marketing, promotion and sale of interest rate swaps to rural customers between 2005 and 2009.”

Aus – Mar 2017 – “The Federal Court has ordered Jetstar Airways Pty Ltd (Jetstar) to pay a $545,000 penalty and Virgin Australia Airlines Pty Ltd (Virgin) to pay a $200,000 penalty for breaches of the Australian Consumer Law. In November 2015, Jetstar was found to have made false or misleading representations about specific advertised airfares on its website in 2013 and its mobile site in 2014. Virgin was found to have made false or misleading representations about specific advertised airfares on its mobile site in 2014.”  ACCC v Jetstar Airways Pty Limited (No 2) [2017] FCA 205

USA – Feb 2017 – “Attorney General Eric T. Schneiderman today announced a lawsuit against Charter Communications Inc. (“Charter”) and its subsidiary Spectrum Management Holdings, LLC, (f/k/a Time Warner Cable, Inc.,) (together, “Spectrum-TWC”) for allegedly conducting a deliberate scheme to defraud and mislead New Yorkers by promising internet service that they knew they could not deliver.”

USA – Jan 2017 – “The Consumer Financial Protection Bureau (CFPB) today took separate actions against CitiFinancial Servicing and CitiMortgage, Inc. for giving the runaround to struggling homeowners seeking options to save their homes. The mortgage servicers kept borrowers in the dark about options to avoid foreclosure or burdened them with excessive paperwork demands in applying for foreclosure relief. The CFPB is requiring CitiMortgage to pay an estimated $17 million to compensate wronged consumers, and pay a civil penalty of $3 million; and requiring CitiFinancial Services to refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million.”

USA – Jan 2017 – “the Consumer Financial Protection Bureau (CFPB) is suing TCF National Bank for tricking consumers into costly overdraft services. Banks cannot charge overdraft fees on one-time debit purchases and ATM withdrawals without a consumer’s consent. The Bureau alleges that TCF designed its application process to obscure the fees and make overdraft seem mandatory for new customers to open an account. The CFPB also believes that TCF adopted a loose definition of consent for existing customers in order to opt them into the service and pushed back on any customer who questioned the process. Today’s lawsuit seeks redress for consumers, an injunction to prevent future violations, and a civil money penalty.” Director Richard Cordray’s comments here.

USA – Jan 2017 – “The Consumer Financial Protection Bureau (CFPB) today took action against Equifax, Inc., TransUnion, and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. The companies also lured consumers into costly recurring payments for credit-related products with false promises. The CFPB ordered TransUnion and Equifax to truthfully represent the value of the credit scores they provide and the cost of obtaining those credit scores and other services. Between them, TransUnion and Equifax must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB.

Aus – Dec 2016 – ACCC proceedings against US company Valve for misrepresentations regarding consumer rights to refunds: ACCC v Valve Corporation (No 7) [2016] FCA 1553

Aus – Dec 2016 – ACCC proceedings against Woolworths for unconscionable conduct dismissed by Federal Court: ACCC v Woolworths Limited [2016] FCA 1472

US – Nov 2016 – “The Consumer Financial Protection Bureau (CFPB) today filed a complaint in federal district court against Access Funding, LLC for an illegal scheme in which victims of lead-paint poisoning and others were deceived into signing away future settlement payments in exchange for a significantly lower lump-sum payout. The CFPB alleges that Access Funding steered victims to receive “independent advice” from a sham advisor, an attorney who was actually paid directly by the company and indicated to consumers that the transactions required little scrutiny. In its suit, the CFPB seeks to put an end to the company’s unlawful practices, obtain relief for the harmed consumers, and impose penalties. Many of these struggling consumers were victimized first by toxic lead, and second by a company that saw them as little more than income streams to be courted and harvested,” said CFPB Director Richard Cordray. “The Consumer Bureau is fighting to help vulnerable consumers who were swindled out of their settlements, and to prevent future abuses.” ”

Aus – Nov 2016 – DuluxGroup (Australia) Pty Ltd was found to have engaged in misleading and deceptive conduct – “The Court found that Dulux represented that Acratex InfraCOOL Paint can reduce the interior temperature of a house by up to 10 degrees when in fact that was not the case and Dulux did not have reasonable grounds for making that representation.” $400,000 pecuniary penalty, corrective notice, declarations.  ACCC v DuluxGroup (Australia) Pty Limited (No 2) [2016] FCA 1286

Aus – Sep 2016 – price exploitation and misleading and deceptive conduct – Supreme Court of Victoria – two insurance companies – ordered to pay costs of $20,000, and to notify affected customers and provide refunds, conduct an audit of affected person and provide refunds, and provide the Director of Consumer Affairs Victoria with evidence that the above steps have been completed.  Director of Consumer Affairs Victoria v Mecon Insurance Pty Ltd [2016] VSC 42.

Aus – Sep 2016 – failure to comply with the requirements of the Retirement Villages Act 1986 to provide the necessary documents when requested by a consumer – Supreme Court of Victoria – “A retirement village operator and two related parties have agreed to pay $1,500 in costs and implement a number of measures for recording information, following contraventions of Victorian retirement village laws. ”

Aus – Sep 2016 – Unconscionable conduct and other contraventions of National Consumer Credit Protection Act 2009 (Cth) – ASIC v Channic Pty Ltd (No 4) [2016] FCA 1174 – sale of used cars and entry into loan contracts to vulnerable indigenous consumers.

Aus – Aug 2016 – Product Safety – Civil Pecuniary Penalty case – ACCC v Ozsale Pty Ltd – sale of defective and unsafe children’s pyjamas – Federal Court of Australia – $500,000 penalty.

Administrative Actions

Consent Order (USA)

USA – Mar 2017 – “The U.S. District Court for the Western District of Virginia entered a consent decree of condemnation and permanent injunction against Valley Milk Products LLC, Michael W. Curtis, Robert D. Schroeder, and Jennifer J. Funkhouser (defendants), the Department of Justice announced today. The consent decree also orders the condemnation of certain seized milk powder products and prevents the further distribution of adulterated milk powder products.”

USA – Feb 2017 – “The Consumer Financial Protection Bureau today took action against Mastercard and UniRush for breakdowns that left tens of thousands of economically vulnerable RushCard users unable to access their own money to pay for basic necessities. In October 2015, a rash of preventable failures by Mastercard and UniRush meant that many customers could not use their RushCard to get their paychecks and other direct deposits, take out cash, make purchases, pay bills, or get accurate balance information. UniRush then failed to provide customer service to many consumers who reached out for help during the service breakdown. The CFPB has ordered Mastercard and UniRush to pay an estimated $10 million in restitution to tens of thousands of harmed customers. The CFPB also fined Mastercard and UniRush $3 million.” Consent order here – no admissions, save what was required to establish the agency’s jurisdiction.

Licence Cancellation

UK – Jul 2016 – “The Financial Conduct Authority (FCA) has today published a Decision Notice issued to Andrew Barry Hart, director of Wage Payment and Payday Loans Limited (WPPL), and a Decision Notice issued to WPPL. The FCA has decided to prohibit Mr Hart from performing any role in regulated financial services and has decided to cancel WPPL’s interim permission.”

Licence Suspension

Aus – Sep 2016 – VCAT application – “Melbourne estate agency director Frank Valentic has had his licence suspended for six months for contraventions of professional conduct regulations relating to the sale of a four-unit development in Malvern.”

Enforceable Undertakings

Aus – Feb 2017 – “Inhouse Finance Group (Sydney) Pty Ltd (Inhouse Finance Group) will refund more than $400,000 to 177 consumers following an ASIC surveillance which found that the car financier charged consumers an interest rate higher than the maximum allowable under the National Credit Act.”

Aus – Nov 2016 – “The Australian Competition and Consumer Commission has accepted court enforceable undertakings from both Philip Morris Ltd (Philip Morris) and Zen Sensation Pty Ltd (Zen) not to supply cigarettes that do not meet the mandatory Reduced Fire Risk safety standard.”

Aus – Nov 2016 – ACCC accepted enforceable undertakings from two companies who sold products labelled ‘oregano’ when in fact, the products contained a substantial amount of olive leaves.

Aus – Aug 2016 – “Online food retailer EasyMeals by Flavour Makers Pty Ltd (EasyMeals) has provided a court enforceable undertaking to the Australian Competition and Consumer Commission in relation to its conduct in the marketing and supply of its pre-packaged meals.”

Public Warnings

Aus – Mar 2017 – “The Australian Competition and Consumer Commission has issued a Public Warning Notice about the alleged conduct of online retailer Lux International Sales ApS (a company based in Denmark that trades under the name LuxStyle). The ACCC received 127 complaints about LuxStyle since January 2017.”

Administrative Undertaking

Aus – Sep 2016 – “The Australian Competition and Consumer Commission has accepted an administrative undertaking on behalf of Chemmart in relation to representations regarding the effectiveness of a myDNA genetic test in identifying an individual’s response to certain drugs.”

Warning Letters

NZ – Sep 2016 – “The Commerce Commission has issued a warning letter to Wellington Electricity Lines Limited (WELL) after it failed to comply with minimum standards for network reliability in 2013 and 2014.”

Investigation But No Action

Aus – Oct 2016 – The ACCC investigated GSK’s comments made to wholesale consumers, to see if they were misleading and deceptive.  Despite “significant concerns”, it determined it did not have a case under the ACL to take enforcement action.