Friday, 18 December 2015

Federal Court orders Electrodry franchisor to pay $215,000 in penalties for fake testimonials

The Federal Court in Sydney has ordered the franchisor of the Electrodry Carpet Cleaning business, A Whistle & Co (1979) Pty Ltd, to pay total penalties of $215,000 for its involvement in the publishing of fake testimonials on the internet, following action by the Australian Competition and Consumer Commission.
Electrodry is a franchised business that provides carpet, drapery, grout, upholstery, and mattress cleaning services with over 100 franchisees in Australia excluding Sydney.
The Court found that Electrodry posted, and requested that its franchisees post, customer testimonials about the quality of carpet cleaning services, when those customers were fabricated and the services had not been provided.
The Court declared that Electrodry contravened the Australian Consumer Law (ACL) between February 2012 and June 2012 by posting a number of false reviews or testimonials on the internet and by inducing and attempting to induce its franchisees to post false testimonials or reviews about Electrodry on popular product review websites including Google, True Local, and Yelp.
In his judgment, Justice Yates stated he considered inducing and attempting to induce franchisees to post fake testimonials was serious conduct. He said that all fabricated testimonials, once posted and searchable, were equally capable of misleading or deceiving consumers. Along with other forms of false or misleading advertising, the fabricated testimonials had the potential to mislead a large number of consumers, divert customers from law-abiding competitors, and generate a positive perception of Electrodry that was based on falsehoods.
“Consumer issues in the online arena remain an area of ACCC concern. While online testimonials can be a useful and genuine marketing tool, it is important that online businesses understand that making or inducing false or misleading representations about testimonials breaches the Australian Consumer Law,” ACCC Deputy Chair Dr Michael Schaper said.
“By manipulating or producing false reviews or testimonials, businesses mislead consumers who rely upon them when making purchasing decisions.”
The Court also made other orders including injunctions, corrective advertising and that Electrodry pay a contribution towards the ACCC’s costs.
Electrodry cooperated with the ACCC in resolving these proceedings, by agreeing on facts and joint submissions to be put to the Court as well as consenting to orders relating to injunctions, corrective advertising and costs.
The Court also noted that in deciding the amount of penalty to impose on Electrodry, a substantial discount for co-operation was warranted. Justice Yates made it clear that, but for that cooperation, significantly greater penalties would have been imposed.
Release number: 
MR 269/15
Media enquiries: 
Media team - 1300 138 917

Monday, 1 June 2015

Franchisees leave national carpet cleaning company over chemical stain and health concerns

The following story was written by ANDREW SADAUSKAS and posted on smartcompany on 1st June 2015.
A group of franchisees have allegedly left carpet cleaning company Electrodry over their concerns a chemical used by the company, which has been endorsed by the National Asthma Council Australia’s Sensitive Choice program, could potentially pose a health risk to asthmatics or damage carpets.
SmartCompany understands franchisees were told by Electrodry during a 2010 conference getting the endorsement involved a vigorous nine-month testing process and would mean franchisees would be charged $11 per week for the endorsement.
The revelations come after the Australian Competition and Consumer Commission initiated legal action against the franchisor of the Electrodry Carpet Cleaning business, alleging it posted fake online testimonials in July last year.
One of the former Electrody franchisees told SmartCompany their issues with Electrodry began in July 2012, when a former storeman alerted a group of franchisees that a chemical called Tinopal CBX (an optical brightener) was added to the two main Electrodry cleaning products.
The former franchisee, who chose to remain anonymous, became concerned afterreading articles on the internet, which included suggestions optical brighteners could reduce stain resistance in some carpets, have a tendency to yellow with age, and can cause respiratory issues.
In a sworn statement to the NSW Office of Fair Trading seen by SmartCompany, the former franchisee said the revelations appeared to contradict claims on the company’s website and in its training manual.
“The representations made to us at the time we entered into the franchise that cleaning was in accordance with Australian Standards was false at the time we entered the agreement… The manual received with our agreements state ‘our company’s certified technicians perform a four-step process that meets the Australian Standards for carpet cleaning’,” the franchisee said in the statement.
“The Electrodry websites stated the following... ‘We comply with the Australian Standards for carpet and upholstery cleaning’ and ‘The Electrodry system meets the strict requirements of the Australian Standards through a 4 step carpet cleaning process’ and also ‘Electrodry is one of the few companies who follow the stringent Australian standards for carpet and upholstery cleaning’.
“Based on the manual [and the website] we have always believed the claims to be factual, so in turn, have advised our customers that the service we provide as Electrodry Franchisees are in accordance to the Australian Standards. This was a great selling tool as we were always slightly more expensive than most carpet cleaners.”
The former franchisee said they received legal advice that they could potentially be liable as a result of any litigation from either damaged carpets or allergic reactions.
“We all sought legal advice as this was of great concern to us and what we, as Electrodry franchisees, were doing to our customers carpets and upholstery and that now we were aware we would be liable for any issues resulting in the use of this optical brightener Tinopal,” the franchisee said.
Upon the concerns being raised, the franchisee contacted Electrodry in a letter.
“The optical brightener can also damage carpets especially wool and is expressly advised as not to be used by all carpet manufacturers as it will void the warranty,” the franchisee’s letter said.
“Optical brightener is also regarded as an irritant and is mentioned on a number of asthma web sites as a chemical to be avoided.”
SmartCompany understands a solicitor claiming to act for Electrodry responded by sending franchisees a letter denying Electrodry’s products contain Tinopal CBX.
“The defamatory imputations arising from your statements are clearly actionable by our client, and you will not have any good defence to such an action,” the solicitor said.
“With respect to your constant references to Tinopal, our client denies the claims raised against it in this regard. If your clients believe that the actionable parts of the letter they authored and published (which relate to its claims about chemicals) are true, then they are open to run those defences (which are denied) in any proceeding our client may bring. Your letter fails to address the actionable imputations which relate to issues (other than chemicals), we take that as an admission that your clients do not deny imputations.”
Following the letter, the franchisee had a sample of Electrodry’s products tested at the Intertek West Footscray Laboratory, with the results coming back positive for Tinopal CBX.
The franchisee has since left Electrodry, citing their concerns about Tinopal CBX as one of the key issues.
In a statement, a spokesperson for the National Asthma Council Australia’s Sensitive Choice program told SmartCompany applications are considered by an independent (and voluntary) product advisory panel.
“Panel membership includes: a respiratory physician, a clinical and academic allergist, an industrial chemist, a general practitioner, a pharmacist and an engineer,” the spokesperson says.
“The Sensitive Choice program is a type of product endorsement program, although approved products and services must satisfy our independent Product Advisory Panel they do no harm and may offer relative benefits to people with asthma or allergies.”
According to the spokesperson, one of the aims of the program is to generate sponsorship funds to enable both the Australian and the New Zealand asthma organisations to continue their work in improving asthma care.
It also seeks to educate Australians and New Zealanders about the importance of managing their asthma, encourage businesses to produce products and services that are asthma-friendly, and “provide consumers with a way of identifying products and services that may benefit people with asthma and/or allergies”.
The spokesperson says the panel assesses the likelihood that a product or service may cause harm to people with asthma or allergies, as well as its potential benefits, either absolutely or relative to competing products.
“We do not conduct our own testing, but where provided testing is not considered sufficient, may ask the applicant to obtain specific testing,” the spokesperson says.
SmartCompany asked the spokesperson if they were aware of any of Electrodry’s cleaning products containing any optical brighteners, such as Tinopal CBX.
“Electrodry has advised us that its products do not contain optical brighteners,” the spokesperson says.
While acknowledging franchisees raised concerns the company’s products could contain Tinopal CBX, the spokesperson says “these [concerns] were investigated and addressed”.
“We cannot answer for all products, but in the context of the use of optical brighteners in cleaning chemicals at below 0.05% concentration, this is not considered to be a health risk. We understand the Australian Standard identifies optical brightener due to the impact it may have on carpet, not on health.”
“As a general comment, it is important to consider the percentage of any chemical used, and the way it is used, in a formulation. If one just looks at the warnings associated with the basic ingredients, one would not drink tap water (which contains fluoride – toxic at 100% strength, but beneficial at the tiny percentage used in drinking water).”
In a statement, Electrodry operations manager Grant Burchell told SmartCompany the company does not advertise its systems as meeting the Australian standards.
“We have stated that ‘All products are reviewed by the Sensitive Choice Product Advisory Panel comprising experts in allergy, respiratory medicine, pharmacy, general practice, industrial chemistry and consumer issues. Only products that may be a better choice for people with asthma or allergy are included on the Sensitive Choice register.’ We are not privy to the testing and investigative processes of the Sensitive Choice Product Advisory Panel and accordingly cannot make any further comment,” Burchell says.
When asked whether the company’s cleaning products contain any optical brighteners, such as Tinopal CBX, Buchell says: “Yes, one of our products does contain 0.00013% of Tinopal. i.e. Tinopal accounts for approximately one part per million in the product composition”.
“It is our position that our products are safe and effective. Almost all laundry products and most cleaning products use brighteners,” Buchell says.
“In 25 years of business operation, there has been no evidence that a carpet has been affected in any way the optical brightener used in the cleaning process. Our testing has shown that the Electrodry cleaning system does not damage carpets. We are aware that there has been some recent publications identifying potential health risks associated with optical brighteners. To our knowledge these studies are not conclusive and at this point we are not aware of any data giving guidelines on exposure levels. We also note that Tinopal is an FDA approved product. We are constantly reviewing this matter.”
Burchell acknowledges former franchisees have raised concerns Electrodry products could contain Tinopal CBX, but says “we subsequently reviewed the product composition and undertook a series of internal tests”.
“A former franchisee had previously filed a claim with the ACCC and the matter was dismissed,” he says.
Burchell says the company has a solid relationship with its existing franchisees.

Saturday, 9 May 2015

Satisfaction Guaranteed

A customer who was the subject of a recent post in regards to shoddy workmanship by a competitor has updated me on her quest for monetary compensation.

If you view the story Big Does Not Always Mean Best you will see the result of what was supposed to have been a clean carpet.
The customer was right not to call the company back to rectify the shoddy work, after all if the business is not capable of doing the right thing, the first time, why should the customer be forced to have them back in her house.

Unfortunately, consumer law states that you have to be seen to have attempted to have the problem rectified by the company who did the work in the first instance.
The company in question advertises a satisfaction guarantee and as such, the customer who has had work performed must contact the company within the guarantee period if the work is unsatisfactory.

I know, from experience, that sometimes little things can go wrong, such as browning caused by over wetting, but in this instance it is clear that the whole job was unsatisfactory.
The carpet was simply not cleaned and the pet urine in the carpet was exacerbated by the addition of water causing it to reconstitute with the resultant strong odour.

The customer was told by Consumer Affairs that the job was obviously unsatisfactory as evidenced by the photographic proof provided, but unfortunately, the customer must allow the company to provide a solution.
Be aware that the company in question may also charge to come out for a so called redo of a job.
The fine print states that a call out fee may be charged which is usually a minimum close to $100.
So not only have you had an unsatisfactory job performed, but you then have to call the person back to redo the job and possibly get charged again.

Where is the justice in the system???

Please remember that Big Does Not Always Mean Best.

Thursday, 23 April 2015

Reviews - Believe It Or Not

Business reviews are extremely helpful in assisting potential customers to make a decision about selection.
Reviews can also be instrumental in growing a business both organically and via search algorithms used by search engines such as GOOGLE.
Customers can use the review sites to express their experiences and these can both be positive and negative.
If a business receives a negative review, the business can use this feedback to reflect on why the customer felt the need to write the review.
Customers generally will usually only write a review if they have received exemplary service or have had a less than satisfactory one.
The business should see this as grist for the mill and attempt to placate the customer with an apology or offer some restitution.

Unfortunately, there are some businesses that abuse the review sites.
A business may receive a spate of poor reviews from customers which lowers the rating.
In order to increase the rating, the business either places fake reviews or incentivizes customers by offering rewards such as cash vouchers.
The cash vouchers would generally only be paid out to those reviews which rated the business high.
Using this method the average star rating can quickly be positively increased.
It is very obvious that this sort of manipulation is being carried out by a business by viewing the star rating, the dates posted and the frequency of posts.
For example, a business will receive few posts due to customers posting only when the service is at either end of the experience scale.
A business may receive a number of poor posts over a period of a month giving a star rating of 1 or 2.
In order to negate this, the business offers cash incentives and the sudden increase in posts, sometimes more than 5 in a single day of the maximum 5 stars, pushes the star rating back towards the maximum of 5.

Of course, this is all completely false and tricks customers into selecting a business which is rated highly only because customers have been paid.

Before you select a business based on reviews, follow the guidelines provided by the ACCC to ensure that you are not tricked.

ACCC - Online Product Reviews