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Heavy penalties for Consumer Law breach: ACCC v We Buy Houses

20 May 2019

#Competition & Consumer Law

Published by:

Madison Tonkes

Heavy penalties for Consumer Law breach: ACCC v We Buy Houses

We Buy Houses Pty Ltd (WBH) has found itself in hot water in the Federal Court by making representations to consumers in breach of the Australian Consumer Law (ACL, the Act).

The Federal Court imposed record penalties of $12 million against WBH and $6 million against its sole director and shareholder Rick Otton for false or misleading representations through real estate investment strategies.

WBH claimed that by attending their free seminars, paid “boot camps” or mentoring programs, people could learn how to:

  • buy a house for $1
  • buy a house without requiring a deposit, bank loan or real estate experience
  • create a property portfolio without investing their own personal funds, or having a bank loan or real estate experience
  • start making profits immediately and create or generate wealth.

WBH also published testimonials from consumers who had allegedly successfully implemented the strategies.

The court dismissed WBH’s argument that the claim “buy a house for $1” constituted mere puffery and was therefore not in breach of the Act. Rather, the court found that an ordinary person would understand from the phrase “buy a house for $1” that by attending the WBH seminars that it would be possible to learn a strategy that corresponded in some realistic sense that would enable them to purchase a “house for $1”.

The Federal Court also noted the repetition of phrases throughout marketing materials indicated significant dishonesty on Mr Otton’s part and this dishonesty must also be attributed to WBH.

Additionally, the ACCC was successful in establishing that WBH did not have reasonable grounds for making the representations and there was a significant risk that consumers who saw these claims would believe them and rely upon them.

In an effort to deter this type of behaviour, this case marks a record increase in penalties for misleading and deceptive conduct under the ACL.

This important decision ushers in a new era of tough penalties, meaning compliance with consumer law obligations is now more critical than ever.

Authors: Dan Pearce & Madison Tonkes 

Dan Pearce, Partner
T: +61 3 9321 9840

Angela Flannery, Partner
T: +61 2 8083 0448

Trent Taylor, Partner
T: +61 7 3135 0668

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future. 

Published by:

Madison Tonkes

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