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GRC Professional : GRC Summer 2013
14 GRC Professional • Summer 2013 LESSONS LEARNED deceptive or likely to mislead or deceive in contravention; falsely representing that the goods were of a particular standard, quality, value, grade, composition or style; falsely representing that the goods had performance characteristics or benefits, and engaging in conduct that was liable to mislead the public as to the characteristics of the goods. • A month later, in September 2008 the ACCC was yet again on the tail of Cotton On Kids over children's dressing gowns being offered for sale without any fire hazard labelling, as required by Australian and New Zealand Standards. At that point the company told the ACCC that it would be introducing a trade practices compliance program that would take effect from October 2008 – more than a year after its undertaking to do so following the sunglasses episode. • But in early 2011, when Cotton On Kids "Nicki Short Sleeve White/Petal Spot Nightdress'' and the '"Girls Short Sleeve Burst Pyjamas Pea Green'' children's pyjamas and nightdresses were recalled because of their high flammability (after being on the market for several months), an effective compliance and safety monitoring regime had still not been put in place. Justice Tracey said the company should have been exercising particular vigilance to ensure that its products complied with the appropriate standards and other relevant statutory requirements, ensured they were appropriately labelled, and had put in place necessary processes to ensure management complied with their statutor y obligations. "Responsibility for ensuring compliance with relevant safety standards and the Act rested on senior managers of the respondents [Cotton On]," he said. "They manifestly failed to perform this importa nt a spect of their duties. The potential consequences were most serious. This is a factor which weighs in favour of a significant penalty." Rapid growth Cotton On Clothing is a privately held compa ny that has expanded rapidly and is touted as one of Australia's few retail success stories in a climate of diminishing margins. Since founders Nigel and Tania Austin (he now runs the business since their marital split in 2008)opened a single store in Geelong in 1991, it has expanded to sell six brands of men's, women's and children's clothing and footwear (Cotton on Kids being one of them) at 924 stores in Australia, New Zealand, Hong Kong, Malaysia, Singapore, United Arab Emirates, Germany, the Philippines, South Africa and the US. It employs nearly 6000 staff across the group. The company has earned praise for its environmental awareness and its charitable Cotton On Foundation, but has also received u nfavourable publicity besides the clothing and apparel safety and standards breaches. In 2009, the company earned the wrath of consumers online for selling baby clothing with words on it such as "they shake me". It was in the press again in 2010 for underpaying its workers. The Fair Work Ombudsman's office ordered it to back-pay 3000 workers at an average $84per employee,in relation to trainingsessions. It also had to apologise to them online. In January 2012, its sale of a mobile phone cover, bearing the image of a naked woman with the word "dirty", and a mug labelled "porn is my saviour" raised the hackles of 1000 people who mounted a petition to have the products removed from shelves. Despite this growing list of misdemeanours Nigel Austin has remained reclusive, preferring his spokesperson to comment to media. Judge Tracey said penalties for deterrence were important to dissuade others from thinking that "detection [of contraventions] will lead merely Justice Tracey did not let Cotton On's past safety breaches or failure to comply with standards or take remedial action go unnoticed either.
GRC Spring 2012
GRC Autumn 2013