E-cigarette companies to pay penalties

Published: 
8 May 2017

The Federal Court has ordered three online e-cigarette retailers The Joystick Company Pty Ltd (Joystick), Social-Lites Pty Ltd (Social-Lites) and Elusion Australia Limited (in liquidation) (Elusion) to pay penalties for breaching the Australian Consumer Law (ACL).

The ACCC understands that this is the first time any regulator globally has successfully taken action for false and misleading claims about the presence of carcinogens in e-cigarettes.  

In separate proceedings against each of these companies, the Federal Court found that each of Joystick, Social-Lites and Elusion contravened the ACL by making representations that their products did not contain harmful carcinogens and toxins, when this was not the case.

The Court also found that the directors of Joystick and Elusion, and the CEO of Social-Lites, were knowingly concerned in the contravening conduct of their respective companies.

Following admissions made by each of the companies and individuals and joint submissions on penalties, the Federal Court ordered that:

  • Joystick pay a pecuniary penalty of $50,000, and its director a penalty of $10,000;
  • Social-Lites pay a pecuniary penalty of $50,000, and its CEO a penalty of $10,000, and;
  • Elusion pay a pecuniary penalty of $40,000, and its director a penalty of $15,000.

“Consumers were led to believe by this conduct that when using these e-cigarette products, they would not be exposed to the harmful chemicals found in ordinary cigarettes,” ACCC Acting Chair Delia Rickard said.

“In fact, they were exposed to the same chemicals, including a known carcinogen that has no safe level of exposure.”

“Businesses must ensure that they provide accurate information to customers, and have a reasonable basis for making any representations. This is particularly important for products that may cause harm to the health of consumers,” Ms Rickard said..

The ACCC has written to over 30 Australian e-cigarette suppliers reminding them of their ACL obligations, in particular to ensure information provided to consumers is accurate.  

The ACCC took action against Joystick and its director after the company failed to pay infringement notices issued by the ACCC in respect of its conduct. This reflects the ACCC’s policy to consider litigation against businesses that do not pay infringement notices.

Background

Independent testing commissioned by the ACCC identified the presence of carcinogens and toxic chemicals, such as formaldehyde, acetaldehyde and acrolein in the products of Joystick, Social-Lites and Elusion, as well as acetone in Social-Lites’ products.

Formaldehyde is classified by the World Health Organisation International Agency for Cancer Research (IARC) as a Group 1A carcinogen, meaning there is sufficient evidence to show it is carcinogenic to humans.

Acetaldehyde is classified as a Group 2B carcinogen by the IARC. That classification is applied to a chemical agent that has been evaluated as being possibly carcinogenic to humans.

Acrolein is classified by the World Health Organisation as a toxic chemical.  It is also listed as a dangerous poison in Schedule 7 of the Poisons Standard of the Therapeutic Goods Act 1989 (Cth).

Acetone, a chemical used in nail polish remover, is recognised by the Commonwealth Government's Quit agency as a toxic chemical found in tobacco smoke.

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News reference number: 
MR 61/17
Australian Competition and Consumer Commission