The Australian distributor for kitchen appliance giant Thermomix has been fined $4.6 million over its failure to report numerous cases of serious burns caused by its top-end blender.
The action was brought by the Australian Competition and Consumer Commission after complaints flooded in about injuries caused by the TM31 model, which is sold for more than $2,000.
The ACCC alleged Thermomix in Australia failed to comply with mandatory reporting requirements for injuries arising from the use of the appliances, made false representations, and engaged in misleading conduct regarding the safety of the TM31 model, and made false and misleading statements about its 2014 recall.
Under consumer law a company, on learning that one of its products has killed or injured someone, must report it to a government agency within 48 hours of the incident.
Documents submitted to the Federal Court showed Thermomix in Australia admitted it knew nine women and one child had been burned by the appliance before issuing a public safety recall.
Thermomix in Australia was initially alerted to problems in July 2014, but did not notify customers about a recall until September 2014 in a Facebook post. It sent emails to the more than 100,000 affected TM31 customers notifying them of the safety issue two days later.
Court documents show the distributor sold another $16 million worth of TM31 appliances in the time between first becoming aware of the problem and issuing the recall.
Bianca Mazur from Thermomix said the company was deeply apologetic to the affected customers.
"It was a very challenging and complex issue we were faced with and going through it, what we can see now … is that we simply didn't do the best that we could have," she said.
The company is offering a replacement Thermomix to the 9,000 customers who bought the faulty model after the distributor became aware it was dangerous.
But Ms Mazur said that offer did not extend to consumers who purchased it in the years before the fault was uncovered.
When the product was recalled in 2014, customers who had purchased the faulty model were sent a new seal for the lid which rectified the fault.
Ms Mazur said the company was in negotiations to compensate two of its injured customers but would not comment any further on the issue.
Thermomix took no action for two months: ACCC
Thermomix in Australia faced a number of charges under Australian consumer law, including telling customers its products "were absolutely safe", were never subject to safety recall action, and telling a number of affected customers they were not entitled to refunds.
Each breach carries a maximum penalty of $1.1 million.
The ACCC and Thermomix in Australia made a joint submission on the penalties to be levied:
- Implied safety representations: $2.5 million
- Recall representations: $1 million
- No refund representation: $1 million
- Failure to make mandatory reports: $108,500
- Total; $4,608,500
Thermomix was also ordered to pay the ACCC's legal costs of $230,000.
Justice Bernard Murphy found Thermomix in Australia became aware of the safety issue as early as July 7, 2014, and despite seeking advice from its German manufacturer took no action until September.
"Although they [Thermomix In Australia] continued to make inquiries of, and seek guidance from, Vorwerk [the manufacturer] and tested TM31 appliances, they made the deliberate decision not to inform the relevant consumers of the safety issue," Justice Murphy said.
Tougher penalties needed: CHOICE
ACCC Commissioner Sarah Court said the penalties should serve as a reminder to all businesses that consumers have rights in relation to faulty products which businesses cannot restrict, alter, or remove.
"By failing to act swiftly and alert consumers about the potential safety hazard with the TM31 appliance, Thermomix [in Australia] misled a number of consumers and placed their safety at risk," Ms Court said.
"When a consumer is entitled to a refund or replacement under the Australian consumer law, businesses cannot place conditions on that right to a refund or replacement and customers certainly shouldn't have to sign non-disclosure agreements."
The penalty was also welcomed by consumer advocacy group CHOICE, which first blew the whistle on the injuries being inflicted.
"Our report presented 87 Thermomix cases, with 18 people requiring treatment from a doctor or nurse," CHOICE head of campaigns Sarah Agar said.
"It also presented allegations the company attempted to blame victims and downplay the danger its product presented," Ms Agar said.
"This case shows that if you sell a product that puts people in hospital, you cannot keep that secret and expect to get away with it."
However, Ms Agar said Australian consumer law still needed to be strengthened and higher penalties imposed in the future.
"This case also highlights the fact that our product safety laws need reform, to help prevent this kind of conduct from happening again in the future," she said.
"Sellers should have an obligation to make sure the products they sell are safe before they hit the shelves. This is why we are calling for the introduction of a General Safety Provision, similar to laws in other jurisdictions."