ACCC 2022 In Review | Healthcare
Overall, 2022 was a relatively quiet year for the ACCC in the healthcare sector after several years of activity during the height of the pandemic. While healthcare has not been included in the ACCC’s enforcement priorities since 2017, the enforcement actions taken by the ACCC in the sector throughout 2022 reflect themes about which the ACCC has been very clear over many years. In particular, unsolicited sales of complex and expensive products remain under close scrutiny by the ACCC.
Key enforcement activity
Health Insurance Comparison Choosewell Pty Ltd, trading as compareclub.com.au
Penalty for failing to inform consumers of cooling-off periods in unsolicited sales calls
From October 2014 until December 2021, Health Insurance Comparison Choosewell Pty Ltd (HICC), which operates the compareclub.com.au online comparison service, initiated unsolicited phone calls with consumers through third-party lead generators. HICC did not provide any written or verbal information after the telephone call, about the consumers’ rights to terminate and how they can exercise this right. HICC has admitted to failing to inform consumers of their cooling-off period rights for unsolicited sales of private health insurance. The cooling-off period is a legislated period during which consumers can cancel their contracts without penalty, a right that was not adequately disclosed to consumers in breach of the ACL.
HICC has provided a three-year court-enforceable undertaking in which HICC commits to not entering into unsolicited sales contracts without giving consumers verbal and written information about their termination rights and notifying the relevant health insurance provider that the contract resulted from an unsolicited sales contract. HICC has also paid a penalty of $13,320 and agreed to implement a compliance program.
Clews Holdings Pty Ltd, trading as Revitalife
Unsolicited sales practices for vulnerable consumers
In July 2022, the ACCC accepted a court-enforceable undertaking from medical device company Clews Holdings Pty Ltd, trading as Revitalife (Revitalife), following concerns about customer sales practices used between July 2019 and January 2022. Revitalife admitted to likely breaches of the ACL, as a result of unsolicited sales calls offering a ‘sleep assessment’ and subsequent home visits by Revitalife representatives, intending to sell adjustable beds and recliner lift chairs. In agreeing to the undertaking, Revitalife:
- Admitted it had not adequately disclosed the true purpose of the unsolicited visits and that its sales personnel did not explain to consumers they were obliged to leave the premises immediately if asked to do so (as they are required to do under the ACL).
- Acknowledged it had misrepresented to some consumers that its sales recommendations were based on the results of the purported ‘sleep assessment’.
- Acknowledged likely breaches of the ACL, as a result of misrepresentations to some consumers about their rights to refunds and returns during the cooling-off periods that apply to unsolicited consumer agreements under the ACL.
Revitalife has ceased in-home sales and paid refunds to consumers totalling $57,646. In addition, the undertaking requires an external compliance review of relevant training materials, a compliance program and updated complaints handling system.
Since Revitalife’s target market is predominantly elderly Australians, the action taken by the ACCC aligns with the enduring enforcement priority of preventing conduct that impacts vulnerable or disadvantaged consumers. In the July 2022 media release, then ACCC Deputy Chair, Ms Delia Rickard commented that,
“Consumer protections regarding unsolicited sales practices are very important, particularly for consumers experiencing vulnerability, and we believe Revitalife did not consistently adhere to these protections…”
$3.5million for misleading claims about health insurance reimbursement for teeth aligners
As we have previously reported (see page 18 of our ACCC 2021 Year in Review), in July 2021, the ACCC commenced proceedings in the Federal Court against SmileDirectClub Aus Pty Ltd and its US parent company, SmileDirectClub LLC (collectively SmileDirectClub) for alleged false, misleading or deceptive representations made concerning private health insurance reimbursements for plastic teeth aligners and associated treatments. The relevant conduct between May 2019 and October 2020, saw SmileDirectClub make representations via email, text messages, flyers and its website that Australian consumers may be eligible for reimbursement from their health fund for the SmileDirectClub aligner and treatment, even though this was not the case for most Australian private health insurance companies (98.5% of the market). During this period, at least 26,300 consumers ordered the aligners for between $2,499 and $3,155.
In November 2022, SmileDirectClub was ordered by the Federal Court to pay $3.5 million for contravention of the ACL and to compensate affected customers for loss and damage suffered. The Court ordered that SmileDirectClub issue a notice to each consumer who purchased the teeth aligners in the relevant period, compensate the affected consumers, implement an ACL compliance program for three years and pay a contribution to the ACCC’s costs. ACCC Commissioner, Ms Liza Carver commented that,
“This outcome is a reminder to all companies, whether established businesses or new entrants, that they must ensure they comply with Australian consumer laws when they sell their products and services to Australian consumers.”
Juno Pharmaceuticals Pty Ltd, Natco Pharma Ltd, Celgene Corporation and Celgene Pty Ltd
Authorisation for the proposed settlement agreement refused
As we have reported in December 2022, the ACCC received an application from Juno Pharmaceuticals Pty Ltd (Juno), Natco Pharma Ltd (Natco), Celgene Corporation and Celgene Pty Ltd (together, Celgene) (altogether, the Applicants) for authorisation of the operative provisions of a settlement agreement relating to a patent dispute before the Federal Court of Australia. The dispute centred around the patents for the drugs Revlimid (lenalidomide) and Pomalyst (pomalidomide), used in some cancer treatments. The proposed settlement would have allowed Juno and Natco to supply generic versions of lenalidomide and pomalidomide before the relevant Celgene patents expire.
If granted, the ACCC authorisation would have provided the parties with protection from legal action for arrangements that risk breaching competition law. The ACCC can only grant authorisation where it is satisfied that proposed conduct is likely to result in a benefit to the public and the benefit would outweigh foreseeable damage. This is the first time the ACCC has been asked to authorise aspects of a patent dispute settlement and followed the repeal of the former section 51(3) of the Competition and Consumer Act in 2019. That section was a broad exemption for intellectual property rights to the prohibition against substantially lessening competition and engaging in cartel conduct.
While the Applicants submitted that the proposed conduct had clear and substantial public benefits, the ACCC viewed the competitive implications of the settlement and licence agreement to be unclear. The ACCC also noted that the extent of the proposed agreement would result in cost savings under the Pharmaceutical Benefits Scheme was uncertain. On 23 March 2022, the ACCC issued a draft determination proposing to deny authorisation. The Applicants subsequently withdrew the application for authorisation in July 2022, shortly before a final determination was due. The litigation has since been discontinued and it appears the parties have reached an alternative settlement arrangement.
In considering the application, ACCC Commissioner, Mr Stephen Ridgeway said:
“The opportunity for other generic manufacturers to enter the market is a key driver of competition. The ACCC is concerned the agreement seeks to establish Juno/Natco as the first generic supplier on Celgene’s terms and this could result in public detriment by distorting competition between generic manufacturers.”
Whether or not the healthcare sector explicitly features on the ACCC’s annual compliance and enforcement priorities, protecting vulnerable and disadvantaged consumers (such as the elderly, individuals with a disability or those with significant healthcare needs) from exploitation will continue to be a priority for the ACCC.
Healthcare products and services are often complex and expensive and the risk of misleading, unfair and unconscionable conduct in the healthcare sector remains high. Inflationary pressures, supply chain constraints and labour shortages have significant potential to disrupt the availability and access to healthcare products and services. Trading conditions of that kind provide ample opportunity, even incentives, for sharp commercial practices. Given all these aspects, we would not be surprised to see ongoing ACCC enforcement activity in the sector.
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