Posting False Reviews – Modern Day Racketeering

Commissioner for Consumer Affairs (SA) v Star Plus Group Pty Ltd (in liq) [2023] FCA 778

The respondent is fined for posting misleading and deceptive conduct for posting some 126 false reviews:

MCELWAINE J:

1    The Commissioner for Consumer Affairs for South Australia (Commissioner) applies for declaratory and injunctive relief together with the imposition of pecuniary penalties for conduct by the first respondent Star Plus Group Pty Ltd (in liq) (Star Plus) and the second respondent SPG (SA) Pty Ltd (SPG) in contravention of ss 18(1), 29(1)(b), 29(1)(e) and 29(1)(f) of the Australian Consumer Law (ACL), which is schedule 2 to the Competition and Consumer Act 2010 (Cth). The conduct concerns fake consumer testimonials and reviews of Star Plus and SPG’s business posted on various websites between June 2017 and May 2020. Star Plus and SPG engaged in the business of providing contract electrical, plumbing and gas fitting services to commercial and residential customers in Adelaide under the business name “Star Plus Group”. The reviews commented favourably on the services purportedly provided, were in the form of consumer recommendations and caused Star Plus Group to be highly rated by comparator websites.

2    In all, 126 false testimonials were posted to “www.yellowpages.com.au” (Yellow Pages website) and 22 to “www.productreview.com.au” (Product Review website) which then founded false representations that were posted to the Star Plus Group website to the effect that the business had a 4.8 out of 5 star customer rating. The compelling inference is that the fake ratings were posted by one or more of the directors of Star Plus and SPG, or by persons acting at their direction. Star Plus was incorporated on 10 July 2013 and had several directors over time including Mr Jashavantkumar Patel (Mr Patel) from 18 January 2016 to 14 June 2020 and his son, Mr Tejaskumar Patel from 17 February 2015 to 23 March 2018. SPG was incorporated on 22 August 2018 and Mr Patel is the sole director. It should be emphasised that the Commissioner does not seek relief against any of the directors as persons knowingly concerned in the contravening conduct.

3    Star Plus was wound up with effect from 7 April 2021. On 14 December 2022, the Commissioner was granted leave under s 500(2) of the Corporations Act 2001 (Cth) to commence this proceeding. The liquidator filed a submitting notice on 5 April 2023. The Commissioner only seeks declaratory relief against it, despite the utility that pecuniary penalties may serve when imposed upon an insolvent corporation: see the discussion by Katzmann J in Fair Work Ombudsman v Foot & Thai Massage Pty Ltd (in liq) [2019] FCA 1601 at [15], [31]-[37] and [39]-[40].

…..

PENALTY AMOUNT

57    Having carefully considered and weighed these factors and mindful of the totality principle as “a final check” on what is an appropriate penalty, I have concluded as follows:

(1)    $15,000 for each of the five fake reviews (being items 17,18,19,21 and 22 in annexure 2 to the concise statement) posted to the Product Review website between 13 November 2019 and 15 May 2020;

(2)    $20,000 for the fake review and invoice (being item 20 on annexure 2 to the SOAF) submitted posted to the Product Review website;

(3)    $30,000 for the false publication on 20 November 2019 that the business had a “4.8 Yellow Pages Rating” on the Star Plus Group website.

58    The total pecuniary penalty to be paid to the State of South Australia is $125,000. In setting these amounts, I consider that $15,000 per review is the starting point for the deliberate dishonest conduct of SPG that was calculated to mislead as an appropriate specific deterrent to it and an appropriate general deterrent to other business that may consider engaging in the same or similar conduct. I regard, for the same reasons, the second and third categories as involving more serious misconduct and I do not impose separate penalties for the same course of conduct, fake invoice and fake review, at (2).

A link to the case can be found here.