Give False Advertising the Flush

Tim Hammond & Andrew Leigh, "Bump Up Fines to Flush Out a Menace", Daily Telegraph, 5 January 2017

There’s an old plumber’s saying that the only things which should go down the toilet are the three Ps: pee, paper and poo. But according to Sydney Water, more than 500 tonnes of so-called ‘flushable’ wipes are removed from the city’s sewerage system each year. Perhaps the only way to stop it is to start focusing on a fourth ‘P’: penalties.

Although a quarter of households admit to dunny-dropping their wet wipes, it turns out that these ‘flushable’ products aren’t really so flushable. And according to the Water Services Association of Australia, removing them costs water utilities more than $15 million a year. Given that ‘flushable’ wipes have been on sale for at least five years, the total cost to the public purse is nearing $100 million.

It gets worse once we include what households are paying to plumbers. Sydney Water reckons that four out of five pipe blockages are now caused by wet wipes. It says that it has been ‘inundated’ with complaints from households that have paid between $300 and $16,000 to solve the problem. It ain’t cheap to swipe the wipe from the pipe.

One veteran plumber, Ken Johnston, reported removing a 12-metre block of wipes from a single Sydney home (unsurprisingly, the homeowner chose to remain anonymous).

In light of these allegedly misleading claims, the Australian Competition and Consumer Commission (ACCC) has commenced proceedings against two of the leading companies that sell these products: Kimberly-Clark, who make Kleenex Cottonelle Flushable Cleansing Cloths (they also won Choice magazine’s not-so-coveted ‘Shonky Award’ in 2015) and Pental Limited, who make White King Power Clean Flushable Toilet Wipes.

The argument is simple: these wet wipes appear to be about as flushable as a bathmat. But despite these enormous costs to households and tax payers, even if the ACCC wins the case, the manufacturers will be the ones flushed with success.

That’s because the current penalty for misleading and deceptive conduct is just $1.1 million per offence. If the ACCC is successful in its proceedings in regards to four products from Kimberly-Clark and two products from Pental Limited, the total penalties received will be $6.6 million. This is less than half the annual cost to Australian water utilities, a fraction of the plumbing costs to Australian households and a pittance of the total cost over the years in which these products have been sold.

Compare these wee penalties with the companies’ total turnover. Kimberly-Clark has sales of $18.6 billion globally. For Pental the figure is $111 million. A penalty of $6.6 million is a drop in the cistern for such firms. So it’s no wonder ACCC Chairman Rod Sims warns that these lax penalties are often viewed as ‘simply a cost of doing business’.

More and more Australians have been kicking up a stink about misleading and deceptive conduct. Complaints to the ACCC of such conduct are up 32 per cent over the last three years. In 2015 Australians lost a record $230 million because of scams. Despite this, the penalties for breaching the Australian Consumer Law are one-ninth the penalty for breaching the competition provisions of the Australian Competition and Consumer Act.

This makes no sense. Protecting consumers from misleading and deceptive conduct is just as important as defeating anti-competitive conduct. When companies can get away with lying, they stop competing. Why bother competing if you and your competitors can make false claims and rake in millions of dollars in sales before people discover the 500-tonne truth?

Letting companies get away with misleading and deceiving consumers is about as funny as not flushing a number two on a summer day. A lack of competition can lead to less innovation, higher prices and more dangerous products.

Labor went to the last election with policy to address this problem. We proposed that the penalty for breaching the Australian Consumer Law be increased to the same level as that for anti-competitive conduct: $10 million. We also proposed to use some of the revenues from these increased penalties to double the ACCC’s litigation budget, giving it more firepower to go after companies that flout the law, and to give it a market studies function so it can explore, in detail, the competition and consumer protection challenges in particular markets.

These are logical reforms. But, much like Sydney’s pipes, there is a 500-tonne blockage preventing them from moving through the system. Let’s hope the Government dislodges itself and joins Labor in cleaning up our competition laws.

Tim Hammond is the Shadow Minister for Consumer Affairs. Andrew Leigh is the Shadow Assistant Treasurer and the Shadow Minister for Competition and Productivity.


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