Unacceptable recalls badly hurt customers
Woolworths is facing a potential $4 million penalty for selling faulty products and failing to promptly alert authorities and issue recalls after it became aware of injuries caused by them. At a Federal Court hearing yesterday, the Australian Competition and Consumer Commission (ACCC) said the supermarket chain should be slapped with a penalty that would ensure deterrence and be recognised as adequate.
The ACCC launched legal action in September 2014, alleging Woolworths made false or misleading representations about the safety of some products sold under a number of its in-house brands. At the top of the list was an electrical appliance, the Abode 3-litre stainless steel deep fryer (pictured below for sale on Gumtree), which had loose handles. Other generic recalls included the Select 1-litre drain cleaner with a faulty child-proof lid and self-igniting Homebrand Safety Matches, by continuing to sell them after injury reports.
The Home Collection padded flop chair was also recalled, as was a folding step stool sold by Woolworths’ Masters Home Improvement business.
The ACCC’s barrister Ruth Higgins told the court “The public is entitled to expect that a high-margin, profitable house-brand product would be accurately labelled … and promptly recalled if the supplier has reason to believe there has been a failure… and consumers may be at risk.”
The drain cleaner’s faulty lid led to an 11-month child “burning a hole” in his leg and a Woolworths employee suffering burns to his eyes. A whopping 124,000 people over seven months were exposed to the drain cleaner, which Woolworths admitted was the “most serious of the misleading conduct contraventions”.
Parties to the case have come to an agreement over most aspects except the penalty.
In pushing for the hefty penalty, Dr Higgins said Woolworths had repeatedly failed to notify the ACCC about injuries as it was required to by law, that its actions resulted in actual harm, and it displayed patterns of neglect.
These actions took place against a backdrop of senior management being made aware of the “dramatic increase” in home-brand related product recalls, quality-related complaints, and consequences of product failures, including serious burns.
The ACCC put Woolworths on notice over the issues in September 2012.
Dr Higgins also referred to the lack of compensation for two people who suffered burns because of the drain cleaner. She also said it was agreed that profit margins on home-brand products were very high, sales were significant, and home-brand was an important part of Woolworths’ business.
Woolworths’ barrister Matthew Darke SC, attempted to lower the potential penalty, outlining a string of “mitigating factors”.
“The fact the products have been recalled may be evidence that Woolworths had inadvertently, unknowingly, in a small number of cases, offered for sale products that were not safe,” he said.
He said Woolworths accepted and was sorry for the breaches that led to consumers being exposed to the risk of injury and invited affected consumers to claim compensation.
“Even those who sought and received compensation have been invited to raise any concerns about their compensation and have been notified that Woolworths will provide them with further compensation if appropriate,” he said.
He said the injured Woolworths employee has received full legal entitlements. He said the mother of the child who suffered burns was invited to make a claim for compensation.
“But for a year and a half there was no substantial compensation for the extreme injuries,” Justice Edelman said.
“Only because no claim has been made,” Darke responded.
He said the period of exposure to the faulty products was relatively confined.
Where the conduct occurred for longer periods, the products were low-selling, such as in an example of chairs that were mislabelled about the weight they could hold and led to head injuries.
He also said the misleading conduct only affected a small percentage of Woolworths’ products.
“It was a conduct that affected a very,very, very small proportion,” he said.
Darke argued against ACCC’s claim that Woolworths was put on notice, saying the commission had “cherry-picked” a section of a letter primarily concerning a DVD player.
He also rejected the ACCC’s claim that senior management was involved in the contravening conduct.
Supermarket rival Coles was fined $2.5 million for falsely advertising bread products as “freshly baked” and “baked today” last year. The ACCC had pushed for penalties of up to $5 million.