A day after Mosaic Brands convinced the market that it wasn’t heading off a cliff thanks to the unholy combination of the bushfires and Covid driven lockdowns, it has fallen foul of the competition and consumer watchdog, the ACCC.
The Commission said in a statement on Thursday morning that Mosaic had paid penalties totalling $630,000, and admitted that it breached the Australia Consumer Law in its promotion of pandemic-related ‘Health Essential Products’.
The statement said Mosaic Brands had admitted in the undertaking with the ACCC that its conduct contravened the Australian Consumer Law.
The news saw the shares lose some of their 20% plus gains from Wednesday and end Thursday down 2.2% at 66.5 cents.
Investors were not too worried because the case has been settled and Mosaic has copped a plea and a penalty.
Mosaic Brands is the largest speciality fashion retail group in Australia with well-known fashion brands Noni B, Autograph, BeMe, Crossroads, Katies, Millers, Rivers, Rockmans and W.Lane and operates about 1,210 stores nationally.
The ACCC issued five infringement notices to Mosaic Brands in respect of alleged false or misleading representations relating to hand sanitiser and face masks advertised on Mosaic Brands websites and via direct marketing between March and June last year.
The ACCC said the infringement notices related to advertising by Mosaic Brands which stated that:
- Air Clean hand sanitiser sold on the NoniB website contained 70 per cent alcohol, when a sample tested by the ACCC was found to contain 17 per cent alcohol;
- Miaoyue hand sanitiser sold by Millers contained 75 per cent alcohol, when a sample tested by the ACCC was found to contain 58 per cent alcohol;
- Velcare-branded hand sanitiser products sold on its websites were ‘WHO-approved’, when they were not;
- KN95 Kids Safety Face Masks sold on its websites were ‘CE/FDA certified’, when they were not; and
- KN 95 Adult Face Masks were” non-refundable”, when in fact consumers have a statutory right to a refund under the consumer guarantee remedies.
The Commission said these ‘Health Essentials’ products “were promoted at a time when COVID-19 restrictions were first announced by federal and state governments and there was intense public concern regarding the availability of sanitiser and face masks. Tens of thousands of hand sanitiser and face mask products were sold on Mosaic Brands’ websites. ”
“The products were marketed with phrases such as ‘Be prepared’, ’Stock up now before it’s gone’, ‘Remain Healthy’ and ‘Stay Safe and Clean’, as well as references to the pandemic such as ‘These are uncertain times and as the COVID-19 situation changes, we will be too’ and ‘It’s important we are all doing our part to protect the most vulnerable’.
“After a complaint from CHOICE, independent testing of the hand sanitisers commissioned by the ACCC found that one of the sanitisers tested contained an alcohol content of 17 per cent and another had an alcohol content of 58 per cent, below the percentage advertised on Mosaic Brands’ websites in each case, “ACCC Deputy Chair Delia Rickard said in Thursday’s statement.
“This was also below the minimum 60 per cent alcohol concentration recommended by Australian health authorities.”
Mosaic Brands’ websites, such as NoniB.com.au and Katies.com.au, also advertised Velcare hand sanitiser with the tag-line ‘Protect yourself from viruses and germs during uncertain times with this 10 x Pack of 100ml WHO-approved Hand Sanitizer’. The World Health Organisation does not approve or certify hand sanitiser products, the ACCC pointed out.
“Businesses must never mislead their customers about the certification, quality or properties of their products, but we were particularly concerned about the representations by Mosaic Brands because the statements which Mosaic Brands has admitted were false or misleading related to certain protective health properties at the time of a global pandemic,” Ms Rickard said.
“Our investigation also found that Mosaic Brands’ Kids KN95 mask was not certified by European and US standard authorities as they had advertised.”
The ACCC said Mosaic Brands had signed a court-enforceable undertaking agreeing to refund customers under a redress program, implement a three-year compliance program and properly substantiate its claims with respect to hand sanitisers and face masks, including by independent product testing.
Ouch!
