In brief

In Invisalign Australia Pty Ltd v SmileDirectClub LLC [2023] FCA 395, the Full Court of the Federal Court of Australia held that SmileDirectClub had made false, misleading or deceptive representations in promoting its clear aligner. This case highlights some key considerations for brands in relation to comparative advertising.

Facts

Invisalign Australia Pty Ltd (Invisalign) and SmileDirectClub LLC (SDC) are competitors in the market for clear aligner teeth straightening products in Australia. Invisalign alleged that SDC made false, misleading or deceptive representations in contravention of ss 18 and 29 of the Australian Consumer Law (ACL) in relation to certain promotional material with respect to its clear aligners, which are a type of orthodontic appliance available to dentists and orthodontists to induce mechanical movement of teeth (SDC Aligner Treatment).

Invisalign relied on five categories of representations that can be summarised as follows:

• the SDC Aligner Treatment was of comparable efficacy to, and will achieve the same or similar clinical outcomes to, traditional braces or Invisalign aligners (Comparable Treatment Representations);

• the SDC Aligner Treatment was less expensive in all instances, or was “60% less” or “up to 60% less” expensive for equivalent treatments obtained from an orthodontist or dentist such as braces or Invisalign (Price Comparison Representations);

• SDC Aligner Treatment provides a comprehensive solution to orthodontic issues or alternatively all non-severe orthodontic issues at significantly less cost than that of equivalent treatments with braces or Invisalign (Lower Cost Representations);

• the total cost associated with SDC Aligner Treatment is “less than $4 a day” for the duration of treatment (Less than $4 a Day Representation); and

• the total cost associated with the SDC Aligner Treatment is either $2,825 for upfront payment or $3,155 by instalments (Total Cost Representation).

Federal Court (first instance) decision

Justice Anderson found in SDC’s favour, holding that with one exception, none of the alleged representations were conveyed by SDC in the marketing and promotional material relied on by Invisalign. In the case of that one exception, SDC admitted that the alleged representation had been made. However, the primary judge held that the representation did not contravene the ACL. Invisalign’s proceeding was therefore dismissed.

Full Federal Court’s decision

Invisalign appealed the decision to the Full Court of the Federal Court. Justices O’Callaghan, Halley and Button handed down their decision on 11 April 2024.

Comparable Treatment Representations

The primary judge had found that the Comparable Treatment Representations were not conveyed by SDC in the example relied on by Invisalign. However, the Full Court did not agree. The dominant impression created by the promotional material was to convey to a consumer that they would end up with the same smile irrespective of whether they chose braces or SDC Aligner Treatment, that consumers would achieve the same or a similar clinical outcome from SDC Aligner Treatment as they would achieve with Invisalign treatment, and that the SDC Aligner Treatment is of comparable efficacy to Invisalign treatment and traditional braces treatment. The Full Court held that by making the Comparable Treatment Representations, SDC had contravened the ACL.

Price Comparison Representations and Lower Cost Representations

The primary judge had found that the Price Comparison Representations and the Lower Cost Representations were not conveyed by SDC in the examples relied on by Invisalign. Again, the Full Court did not agree and held that the primary judge had failed to consider the dominant message of the advertisements. Their Honours held that the dominant message of the advertisements is that the products are interchangeable or equivalent or have an equivalent effect on consumers’ teeth but that SDC Aligner Treatment costs “60% less”. This message was not qualified by reference to the severity of the problems with the consumers’ teeth. Further, even though this message did not include express claims that SDC costs 60% less than Invisalign, their Honours held that the ordinary reasonable consumer interested in undertaking treatment for teeth straightening would understand that SDC could only be referring to its competitors. The Full Court held that by making the Price Comparison Representations and Lower Cost Representations, SDC had contravened the ACL.

Less than $4 a Day Representation

Invisalign submitted that the advertisement would mislead an ordinary and reasonable consumer into concluding that they would pay less than $4 a day for the time taken to treat their smile and straighten their teeth which was advertised by SDC to take on average 4-6 months. Invisalign calculated this as 365/2 = 182.5 and 182.5 x $4 = $730 which was significantly less than the advertised price.

SDC admitted that it made the representation in its advertising material but that the representation was not referring to the treatment time as contended by Invisalign but rather to the 24 month period over which instalments for SDC Aligner Treatment are paid.

The primary Judge held that the placement of a footnote above the full stop was sufficiently prominent to alert the ordinary and reasonable consumer to the manner in which the representation had been calculated. Their Honours considered the primary judge had made no error.

Total Cost Representation

Invisalign alleged that the Total Cost Representation was misleading as it did not refer to the ongoing costs associated with purchasing retainers at six-monthly intervals after the SDC Aligner Treatment had completed which were required to keep a consumers’ teeth in their new position. SDC admitted that it had conveyed the Total Cost Representation in its marketing material but that the representation was not misleading as the ordinary and reasonable consumer would not consider ongoing retainer costs to be included in the price of the SDC Aligner Treatment. The Full Court agreed with the primary judge that it is clear that the ongoing costs are outside the cost of the SDC Aligner Treatment and therefore that the Total Cost Representation did not contravene the ACL.

SDC’s financial predicament

On 8 December 2023, SDC announced that it was winding down its global operations. Their Honours asked SDC to provide further information and confirm its position. The SDC informed the Full Court that a US court had ordered SDC US to be liquidated with only US$400,000 available to wind down operations. The Full Court therefore considered that the threat of ongoing contraventions is nil and the utility of making the relief that Invisalign sought is questionable. Their Honours made an order for the further hearing of the appeal be listed on a date to be fixed.

Key lessons

Notably, the only representations which were made out by Invisalign were those concerning comparative advertising. This is another important reminder that when engaging in comparative advertising, context is key. It is always prudent to ensure that comparative advertisements have accurate comparisons that compare the like products and/or services fairly.

If you have any questions about your brand’s promotions please contact our brand protection team.