A Sydney beauty product manufacturer has been ordered to pay $1 million after a court found that it sold “bigger and meaner” eyeshadow palettes without warning consumers.
Key points: The case was brought by two Australian beauty product manufacturers in the US in 2013Mr Justice David Karr awarded $1m to the Australian company which pleaded guilty to misleading consumers about the colours of their eyeshadowsThe company’s products were advertised as having “real” eyes, but were actually made up of colours ranging from light to darkThe products, sold under the names Farmasi and Grace, are used in some countries for treatment of cataracts and other eye conditions.
The US Supreme Court had previously found the products were deceptive because they did not have to disclose the colours they were supposed to contain, and did not tell consumers what colour they would be using in the palette.
Key point: The company had advertised the palettes as having real eyesThe company admitted that the palets sold without telling consumers the colours used in them were made upOf the two Australian manufacturers, Farmasi had admitted that it advertised the colours it used in its palettes under the “real eye” label, while Grace admitted that they were made-up of colours, and said they had been “used by people”.
Both pleaded guilty and received a $1.5 million fine.
Judge David Korsar said it was “an outrage” that a company like Farmasi was allowed to advertise the colours in its palette without disclosing them to consumers.
“There was no warning to consumers that this was an eye treatment product, and consumers had no knowledge that these palettes contained the wrong colours,” he said.
“The defendant’s conduct was dishonest, and was so serious as to constitute a gross misrepresentation of the facts.”
The products contained colours ranging between light and dark.
Mr Justice Karr said that when he handed down the judgement, it appeared as if the Australian products had been designed to look like real eyes, and that consumers were misled into believing that they had real eyes when they were not.
“They had not been designed in a manner which would be easily apparent to consumers, but instead appeared as though they were a product for treatment,” he wrote in his judgement.
“This was done by the defendant knowing that consumers would not be able to differentiate between real eyes and their product of the same brand and colour.”
He said that Farmasi “may be guilty of fraud, but it does not require a higher degree of criminality than what is required to sustain a criminal conviction.”
“The nature of fraud is that, if it is not designed to deceive, it does so and, even more so, if its designed to conceal, the defendant must have a reasonable prospect of conviction for that deception,” he added.
The court also found that Farmas palettes were not advertised in a way that “would have been likely to cause consumers to be misled by the colour scheme of the product”.
“It was not the nature of the fraud that made it a ‘real eye’ product,” Judge Karr wrote.
He added that Farmhas’ deception of consumers had “severely prejudiced the outcome”.
“The deception by the defendants, which involved deception of the public as a whole, was a gross misapplication of the law to a product intended for use only as a cosmetic,” he concluded.
Mr Korsarr said he was satisfied the defendants had made “a substantial error” in advertising the products, and would impose a fine of $1,000 per day.
The company was ordered to repay $1 billion in damages to consumers in Australia.