The ACCC recently announced that it had completed its investigation into comments pharmaceutical giant, GlaxoSmithKline (GSK), previously made regarding price increases for its Panadol Osteo products. The regulator found that while the company’s representations were ambiguous, they did not establish a breach of the Australian Consumer Law (Cth) (ACL). Below, we discuss why the ACCC investigated GSK’s comments, how its representations were ambiguous and what constitutes a false and misleading representation at law.
In 2015, the Federal Government announced the removal of some medicines from the Pharmaceutical Benefits Scheme (PBS). These products were available over-the-counter at a price less than the cost of the standard co-payment amount. Paracetamol was among these items. In December 2015, GSK sent a letter to pharmaceutical wholesalers informing them that the price of Panadol Osteo products would increase by 50% from 1 January 2016. Certain comments made in that letter were later the subject of the ACCC’s investigation. The company had stated that its product, Panadol Osteo, will no longer be available on the PBS, in line with a Government initiative to remove most over-the-counter medicines from the scheme. The company cited that as a result, it would not be able to sustain the current price of Panadol Osteo and that it would increase from 1 January 2016.
GSK also sent a letter to pharmacists informing them of the price increase in similar terms. Federal Health Minister, Susan Ley, described GSK’s representations to wholesalers and pharmacists as ‘an attempt to mislead consumers and pharmacists’. She noted that the changes to the PBS would not increase the company’s administrative or regulatory costs.
The Minister then asked the Department of Health to notify the ACCC of the matter and the possibility that GSK had made false and misleading representations in contravention of section 29 of the ACL. This section prohibits a person, in trade or commerce, from making a false and misleading representation, including regarding the price of goods and services, in connection with the supply or possible supply of goods or services.
The ACCC’s investigation into the representations GSK made concluded on 10 October 2016. ACCC Chairman Rod Sims noted that although the statements were ambiguous, they were unlikely to establish a breach of the ACL. Although the ACCC would not pursue action against GSK for its comments regarding the increase in the price of Panadol Osteo products, it stressed that it nonetheless had ‘significant concerns’ about the representations. The regulator noted that the comments did not make clear the reasons for the price increase. In particular, the context in which GSK made the comments left open to interpretation the possibility that the decision to delist the product caused or contributed to the price increase.
The ACCC found in the course of its inquiry that while the decision to delist the products did give rise to some modest indirect costs for the company, this was only one of several reasons for the price increase. Another important factor in GSK’s decision to raise the price was the effect that new generic paracetamol 665mg products had on sales of Panadol Osteo. Significantly, the company did not have any direct regulatory costs resulting from the decision to delist Panadol Osteo from the PBS. While the comments were not ultimately false and misleading, Rod Sims pointed out that there ‘can be a fine line between an ambiguous statement and a misleading one’.
The ACCC Chairman reiterated the need for businesses to take care not to link price increases to one factor (such as a change in government policy) in cases where the increase is attributable to numerous factors. That has the potential to mislead consumers. For its part, GSK welcomed the findings of the ACCC’s investigation. While the company maintained that it did not believe that its comments were misleading, it asserted that it would take on board the regulator’s concerns and be ‘careful’ of the language it used in any future statements.
False and Misleading Representations
The controversy that resulted from GSK’s comments is important to all businesses because it provides an insight into how representations can be false and misleading. As noted above, section 29 of the ACL prohibits a person from making false and misleading representations, in trade and commerce, in connection with the supply or possible supply of goods. The provision details how a representation can fall foul of the ACL. For example, as well as representations regarding price, a representation relating to a product’s place of origin (if incorrect) can be false and misleading. A breach of section 29 can result in a pecuniary penalty. Section 151 of the ACL also makes the same act an offence. The term ‘misleading’ is likely to depend on context and a representation can be misleading both subjectively and objectively.
Significantly, a contravention of section 29 does not require intent. A person can make a false and misleading representation even if they do not know that their representation is untrue or believe it to be accurate. The ACL is primarily concerned with whether the representation is, in fact, incorrect. A breach of section 29 also does not require evidence of dishonesty. Representations are false and misleading if they lead or are capable of leading a person into error. When a court is required to determine if a representation is false and misleading, it does so using evidence of the representation in light of all the attendant facts and circumstances.
The emphasis on context explains in part why GSK’s comments were so problematic. The company announced a price rise for Panadol Osteo, without giving reasons for the increase, immediately after referring to the government’s decision to delist the product from the PBS. GSK’s choice of phrasing left open the question whether the delisting of the product caused the price increase.
Ultimately, the ACCC’s recent investigation found that GSK’s representations although ambiguous, fell short of contravening the ACL. This matter highlights how important it is for all businesses irrespective of size to exercise due care when making representations. The onus remains firmly on the business to understand and satisfy its obligations under the ACL. If you have any questions or need assistance complying with your responsibilities, get in touch with our consumer lawyer on 1300 544 755.