The Australian Competition and Consumer Commission (ACCC) has recently issued a warning to gyms using ‘No Contracts’ inducements in their advertising. The move comes in response to a number of gyms using the phrase ‘No Contracts’ to boost memberships, when in fact conditions specified indicate that a contract is being entered into. The ACCC has made it clear that using these statements in this way is misleading and may constitute a breach of the Australian Consumer Law (ACL).
The consumer watchdog has previously taken action against offending gyms, and is monitoring the fitness industry to identify and eliminate this behaviour. Several gyms have already dropped the phrase from their advertising in response.
According to the ACCC, examples of situations where the use of ‘No Contracts’ will be considered misleading include:
- conditions that prevent a consumer from cancelling at any time;
- non-refundable advance payments for a membership period;
- written notice from the gym is required to effect a termination;
- payments required for termination to take effect; and
- payments continue to be applied where consumer fails to provide notice of termination.
Fines for misleading and deceptive conduct under the ACL run up to $1.1 million per breach. This is a huge sum for any business to come up with, but particularly so for smaller operators. While the exact penalties imposed are discretionary, and may be significantly less, they still have the potential to cripple a business. With these kinds of penalties, it is clear that the ACCC takes misleading and deceptive conduct very seriously.
Although the ACCC is focussing on gyms this time, it is always on the hunt for cases of misleading advertising. This is a prime opportunity for businesses in all industries to double check their promotional material to ensure that they aren’t next in line.