International paint manufacturer Dulux has been hit with a $400,000 fine at the conclusion of a four-year long case in which the Australian Competition and Consumer Commission (ACCC) took the company to court over misleading claims about its brand of cooling paint.
The ACCC began the case against Dulux in 2012 over claims that the company’s InfraCOOL paint would lower the interior temperature of a house by ten degrees and significantly reduce the energy consumption costs of a household.
The ACCC’s case was against advertisements that Dulux placed in multiple locations online, in print media, through press releases, promotional videos, and in-store advertisements.
On Tuesday the Federal Court found that Dulux was had engaged in conduct that was misleading or deceptive, and fined the company $400,000, also ordering the company to pay the ACCC’s costs to the sum of $150,000.
Dulux will also be required to issue a notice in The Australian and on its website notifying consumers on the court’s decision.
Dulux admitted to the court that it did not have reasonable grounds in which to make the claims regarding its InfraCOOL paint brand, and that while some tests were conducted in the formulation of the product, the company stated it did not “conduct or obtain any studies or tests in which InfraCOOL Paint was applied to the roof of any house and the temperature of the interior living space of that house was measured”.
“There is no evidence that applying InfraCOOL Paint to the roof of a normal Australian house would ever reduce the interior temperature of the living space by 10C,” Dulux admitted in the judgment.
However, Federal Court Justice Siopis made clear in the judgment that “the origins of the contravening conduct are not to be found in a cynical attempt by the management of Dulux deliberately to make false or misleading or deceptive claims”.
“Rather, in my view, as I have found, the seriousness of the conduct is to be measured by reference to the lack of experience and expertise of [Dulux marketing manager] Mr Schultz, Mr Volker and members of the Dulux technical staff,” Siopis states.
The ACCC’s case also involved another brand of Dulux’s cooling paint, Heat Reflect, on which the company also admitted it did not conduct studies where the paint was applied to the walls of a house and the inside temperature of the house was measured.
In a statement from the ACCC, chairman Rod Sims criticised Dulux for not having reasonable ground for the claims.
“Dulux promised a real consumer benefit at a premium price, apparently supported by scientific evidence, when in fact Dulux had no reliable evidence of what benefit could be delivered in real world conditions because it had not tested for any reduction in the room temperature of houses painted with these products,” Sims said.
“Businesses have a responsibility to ensure that accurate information is given to consumers about the performance characteristics and benefits of their products, and that these claims are backed by adequate scientific or technical evidence.”
In 2015, Reader’s Digest ranked Dulux the second most trusted Australian brand.
In a statement provided to SmartCompany, Dulux said it was “disappointing that it has taken this amount of time and money to reach an outcome that we largely conceded soon after the ACCC commenced its action in 2012”.
“While the court found that Dulux’s conduct falls into the ‘lower to middling range of seriousness’, it is a matter that Dulux takes extremely seriously.”
“We never set out to deliberately deceive and as soon as we learned of the breach, we withdrew the relevant advertising, took immediate steps to correct it and cooperated with the ACCC’s investigation.”
Commercial lawyer and advertising expert Narissa Corrigan told SmartCompany that Dulux had made “one of the craziest claims I’ve ever seen”.
“It’s a clear lesson for other businesses: if you’re going to make claims, you’ve got to have the evidence behind the claims,” she says.
“And these are some very bold claims to make.”
Provisions exist under Australian Consumer Law that state companies can’t engage in misleading or deceptive conduct and that companies cant make false representations about products,
Corrigan says that Dulux would have been fine to make the claims if their testing had been successful, but as it was unsuccessful the company had “no reasonable basis” to make the claims.
“They made these claims without properly verifying the truth of it, and that’s where they tripped up,” Corrigan says.
“It’s fine to say stuff like that if you have done the testing, but in this case, they did the testing and found that the claims weren’t true.”
Dulux could have avoided the hefty fine by noting any exceptions to their cooling claims on the product, but Corrigan notes that the exceptions would have to be made clear.
“Any exceptions to the claims should have been noted, and not in a tiny disclaimer font. It would need to be really clear, and any qualifications should have been stated,” she says.
Corrigan also believes that the $400,000 fine could have been a lot more, but acknowledges it is “on the larger scale” of what the ACCC has fined in the past.
“I think they could have gotten fined more. With such a blatant breach of consumer law, I’m surprised it wasn’t higher.”
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