Crime DOES Pay !

The Australian Competition and Consumer Commission is a government body tasked with keeping a strict eye on the business world.   It carefully examines proposed mergers to ensure that these will not result in the creation of monopolies that will corner the market and hike prices, and that the claims made for products are not grossly exaggerated.   Its purpose is very much protection for the public.

Unfortunately, once an illegality is identified the penalty for that offence passes out of the hands of the Commission and the case wends its way through the court system, and in many instances the outcome falls short of the expectations of both the Commission and the public.  A recent case falls into that category.

A leading paint manufacturer claimed that two of its products had the capability of cooling homes in the summer heat.   Prospective buyers were promised that their roof paint would drop temperatures inside a house by up to ten degrees and that wall paint would reduce the heat of external walls by as much as fifteen degrees.

These products were promoted and on sale between 2009 and 2012 and each carried a price premium for the claimed benefits.   The sales of roof paint over that period reached 144,00 litres with an extra $ 4.95 added per litre and the wall paint achieved sales of 48,000 litres, with a surcharge of $ 2.20 per litre.   The premiums delivered an additional profit of $ 805,600 to that company's bottom lime.

Surprisingly, when the matter went to court the company admitted that it had no reasonable grounds for making those claims.  There were no added ingredients and the customers were paying an extra premium above that of the standard product - for absolutely no additional benefit.

To illustrate the thinking disparity between the Commission and the Courts, the penalty imposed on the paint company was a mere $ 400,000, plus the ACCC's legal expenses of  $ 150,000- for a total of $ 550,000.    Considering that the paint company garnered an exstra profit of $ 805,600 from its deception, it still came out in front by $ 295,600.

Who said crime doesn't pay  ?    This was clearly a scam to extract a premium price from the public for a promised benefit that did not exist.   More to the point, the entire system of justice rests on the thinking that crime is punished by the imposition of a penalty.   It is hardly a penalty when the nature of the punishment results in the culprit retaining a benefit from the crime.

Certainly the threat to wrongdoers would be enhanced if the ACCC could mandate that the penalty to be imposed was directly related to the benefit delivered by the crime - and a good rule of thumb would be to impose a doubling of the illicit profit gained by way of the fine.

It is not unusual for manufacturers to claim exotic benefits from their products and the law requires that they must be able to substantiate such claims.  A fine doubling the profits gained by such deceptions would go a long way towards ensuring honesty.

It is claimed that " naming and shaming " is in itself a penalty for bogus claims, but many court actions result in a small reference on an inside page of a newspaper - that few notice and even fewer remember.

One of the tenets of justice - is making the penalty fit the crime !