A Reminder of the Effect of Enforceable Undertakings: The Matter of Lily’s Florist
By Alicia Hill, Principal, and Darsh Chauhan, Law Clerk
Summary
On 20 December 2022 the Australian Competition & Consumer Commission (ACCC) issued a media release stating that United Florists Pty Ltd (trading as Lily’s Florist) had agreed to provide it with enforceable undertakings arising from concerns that it was making false or misleading representations that Lily’s Florist was a local business. The undertakings required Lily’s Florist to cease making the misrepresentations and to establish and implement a compliance program which was designed to prevent and deter further breaches by Lily’s Florist of the Australian Consumer Law.
Background
Lily’s Florist is a retailer of flowers which conducts its business entirely online. It operates by advertising through some 1,500 webpages which are each marketed toward particular Australian suburbs. When a customer ordered flowers from Lily’s Florist, it would engage a delivery company named Petals Network Pty Ltd to relay the product to the consumer. Third-party independent florists rather than Lily’s Florist itself were responsible for filling the orders.
Misrepresentations
Several of Lily’s Florist’s webpages which advertised its business purported to describe it as a ‘local business’. Its webpages displayed the names, descriptions, maps, and phone numbers relating to specific suburbs. However, there was in fact no relationship of locality between the third-party florists it engaged and the address of the customer. The effect of these misrepresentations were, as Liza Carver (ACCC Commissioner) said, to ‘unfairly diver[t] business away from legitimate local businesses’.
The ACCC alleged that Lily’s Florist was in breach of the following provisions of the Australian Consumer Law:
- section 18: prohibition against misleading or deceptive conduct in the course of trade or commerce;
- section 29(1)(k): prohibition against making false or misleading representations concerning the place of origin of goods; and
- section 33: prohibition against misleading the public as to the nature or characteristics of goods.
Undertakings
Section 87B of the Competition and Consumer Act 2010 (Cth) empowers the ACCC (in its regulatory capacity) to accept written undertakings from businesses which are considered in breach of the Australian Consumer Law.
The undertakings relating to Lily’s Florist’s contraventions of the Australian Consumer Law commenced on 19 December 2022 and applied to United Florists Pty Ltd (the company whose trading name was Lily’s Florist). They provided that:
- the directors of United Florists be required to undergo at least annual practical training administered by a qualified legal practitioner focusing on the provisions of the Australian Consumer Law it was alleged to have breached;
- United Florists develop a system by which to record, store, and respond to complaints it received relating to competition and consumer law; and
- United Florists provide the ACCC with a document certifying that its directors had undergone training as required, and a document outlining its complaints handling system, each in a timely manner, and each at United Florists’ own expense.
In addition to the enforceable undertakings, it was also recommended that United Florists comply with any further suggestions made by the ACCC relating to the allegations of its contravening conduct.
By providing the undertakings, United Florists admitted it had contravened the Australian Consumer Law.
If Lily’s Florist, or any business which has provided the ACCC with enforceable undertakings, breaches the terms of the relevant undertakings, the ACCC may apply to a court, which in turn may exercise broad powers in order to enforce those undertakings. Those powers include the ability of the court to make contravening parties pay a monetary amount to the Commonwealth equivalent to the profit made from the breach or to compensate any party who has suffered loss as a result of the breach.
Takeaways
The laws governing misleading or deceptive conduct and court-enforceable undertakings apply to any business. The lesson to be learnt from the events surrounding Lily’s Florist is that the ACCC expresses demonstrable concern and regularly and closely monitors businesses it considers to be in breach of the Australian Consumer Law. A different, unrelated business has since removed several similar misrepresentations from its website that it too was a local business.
Because the ACCC’s investigation and the subsequent media release and undertakings it issued are all publicly available, it is also important to beware the potential for reputational damage to be occasioned against any business which is the subject of any like inquiry by the ACCC.
Franchises should therefore take particular care when advertising their goods or services online that the representations they make are not likely to mislead consumers into patronising their business. This requires particular attention to the language employed in the course of advertising to the public at large.
If you have any questions regarding this article or any matters raised by it, please feel free to get in contact with Alicia Hill of the MST Dispute Resolution and Litigation team on (03) 8540 0200, or by email at alicia.hill@mst.com.au.
