Penalties for misleading customers about contributions to charitable causes – it isn’t always the thought that counts
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Businesses need to be cautious when representing to customers that proceeds of their revenue or profits will be used to support charitable causes, particularly where conduct cannot be easily checked or monitored.
If such promises fall short, significant penalties can be imposed by the Australian Consumer and Competition Commission (ACCC) for breaching the Australian Consumer Law (ACL) relating to misleading and deceptive conduct.
In a recent Federal Court decision, eyewear retailer Oscar Wylee was penalised $3.5 million for making false and misleading representations about its charitable donations and affiliations (ACCC v Oscar Wylee Pty Ltd [2020] FCA 1340).
For a period of four years between 2014 and 2018, Oscar Wylee made various statements in its promotional material that for each pair of glasses a consumer purchased, it donated another pair of glasses to someone in need.
The marketing claims included statements such as “For every pair purchased, a pair is donated to someone in need” and “One for one. All the time. Forever. We donate a pair of glasses to those in need for every pair purchased.” These statements were false and in fact only one glasses frame was donated for every 100 pairs of glasses sold.
In the same period, Oscar Wylee also falsely promoted that it was building sustainable eye care programs in Cambodia in close affiliation with its international charity partner – Rose Charities. In fact, there was no such affiliation, and Oscar Wylee was found to have made a single donation of $2,000 and provided 100 glasses frames to the charity.
Federal Court Justice Anna Katzmann held that the company’s conduct was part of a deliberate marketing campaign which falsely induced socially conscious consumers to purchase its products. She described the contravening conduct as a “betrayal of that promise” and stated:
“By misrepresenting the facts, Oscar Wylee improperly exploited the good nature of consumers to its advantage by contriving to enhance the value of its brand by falsely associating it with altruistic pursuits.”
The ACCC submitted that Oscar Wylee had:
- engaged in misleading or deceptive conduct, in contravention of section 18 of the ACL;
- engaged in conduct that was liable to mislead the public as to the quantity of goods being donated, namely one pair for the customer and one pair to be donated, in contravention of section 33 of the ACL; and
- made false or misleading representations that it had an affiliation with Rose Charities, in contravention of section 29(1)(h) of the ACL.
Oscar Wylee admitted the contraventions. The Court ordered that Oscar Wylee pay pecuniary penalties under section 224(1) of the ACL, totalling $3.5 million.
Oscar Wylee was also ordered to publish information online explaining its breaches of the ACL and pay a contribution to the ACCC’s costs. Finally, Oscar Wylee was ordered to undertake an annual review of its compliance program for three years, with each review to be carried out by a suitably qualified and independent professional.
This decision highlights the importance of ensuring that all marketing relating to charitable partnerships or charitable giving can be substantiated to avoid any claim of misleading or deceptive conduct.
If your organisation exists as a social enterprise or advertises that it dedicates a percentage of its profits to charities, it’s vital that these arrangements be transparent – both with the charity and with the public – and should be underpinned by clear contractual arrangements that accord with the ACL.
As expectations of prudent governance of charities and other not-for-profits (NFPs) in Australia grows, we also recommend that NFPs review their own partnership arrangements with businesses, to ensure that the use of the NFP’s brand and/or goodwill with the public is underpinned by a strong contractual agreement that ensures quantifiable outcomes and delivers real value to the NFP organisation.
If you’d like to discuss how your business or NFP may be impacted by the lessons of this case, please contact our Trade Team or Not for Profit team.
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Penalties for misleading customers about contributions to charitable causes – it isn’t always the thought that counts
Businesses need to be cautious when representing to customers that proceeds of their revenue or profits will be used to support charitable causes, particularly where conduct cannot be easily checked or monitored.
If such promises fall short, significant penalties can be imposed by the Australian Consumer and Competition Commission (ACCC) for breaching the Australian Consumer Law (ACL) relating to misleading and deceptive conduct.
In a recent Federal Court decision, eyewear retailer Oscar Wylee was penalised $3.5 million for making false and misleading representations about its charitable donations and affiliations (ACCC v Oscar Wylee Pty Ltd [2020] FCA 1340).
For a period of four years between 2014 and 2018, Oscar Wylee made various statements in its promotional material that for each pair of glasses a consumer purchased, it donated another pair of glasses to someone in need.
The marketing claims included statements such as “For every pair purchased, a pair is donated to someone in need” and “One for one. All the time. Forever. We donate a pair of glasses to those in need for every pair purchased.” These statements were false and in fact only one glasses frame was donated for every 100 pairs of glasses sold.
In the same period, Oscar Wylee also falsely promoted that it was building sustainable eye care programs in Cambodia in close affiliation with its international charity partner – Rose Charities. In fact, there was no such affiliation, and Oscar Wylee was found to have made a single donation of $2,000 and provided 100 glasses frames to the charity.
Federal Court Justice Anna Katzmann held that the company’s conduct was part of a deliberate marketing campaign which falsely induced socially conscious consumers to purchase its products. She described the contravening conduct as a “betrayal of that promise” and stated:
“By misrepresenting the facts, Oscar Wylee improperly exploited the good nature of consumers to its advantage by contriving to enhance the value of its brand by falsely associating it with altruistic pursuits.”
The ACCC submitted that Oscar Wylee had:
- engaged in misleading or deceptive conduct, in contravention of section 18 of the ACL;
- engaged in conduct that was liable to mislead the public as to the quantity of goods being donated, namely one pair for the customer and one pair to be donated, in contravention of section 33 of the ACL; and
- made false or misleading representations that it had an affiliation with Rose Charities, in contravention of section 29(1)(h) of the ACL.
Oscar Wylee admitted the contraventions. The Court ordered that Oscar Wylee pay pecuniary penalties under section 224(1) of the ACL, totalling $3.5 million.
Oscar Wylee was also ordered to publish information online explaining its breaches of the ACL and pay a contribution to the ACCC’s costs. Finally, Oscar Wylee was ordered to undertake an annual review of its compliance program for three years, with each review to be carried out by a suitably qualified and independent professional.
This decision highlights the importance of ensuring that all marketing relating to charitable partnerships or charitable giving can be substantiated to avoid any claim of misleading or deceptive conduct.
If your organisation exists as a social enterprise or advertises that it dedicates a percentage of its profits to charities, it’s vital that these arrangements be transparent – both with the charity and with the public – and should be underpinned by clear contractual arrangements that accord with the ACL.
As expectations of prudent governance of charities and other not-for-profits (NFPs) in Australia grows, we also recommend that NFPs review their own partnership arrangements with businesses, to ensure that the use of the NFP’s brand and/or goodwill with the public is underpinned by a strong contractual agreement that ensures quantifiable outcomes and delivers real value to the NFP organisation.
If you’d like to discuss how your business or NFP may be impacted by the lessons of this case, please contact our Trade Team or Not for Profit team.