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Hundreds of thousands of Australians were allegedly misled by promotions offered by direct mail order catalogue Magnamail, some of whom were elderly or vulnerable, according to Australia's consumer watchdog.
The Australian Competition and Consumer Commission (ACCC) has mounted a case in the Federal Court against Magnamail for allegedly making false or misleading statements in relation to "pre-draw" promotions in its mail order catalogues, and its parent company Direct Group for allegedly being knowingly involved in this conduct.
ACCC chair Gina Cass-Gottlieb said the company allegedly enticed consumers to buy products by representing that they were, at that time, eligible for a major prize, even though they were not.
"We are very concerned that Magnamail allegedly misled many consumers, some of whom were elderly or vulnerable, and may have enticed them to buy products by representing that they were, at that time, eligible for a major prize, even though they were not," Ms Gina Cass-Gottlieb said.
"We allege some consumers paid for products they might not otherwise have ordered, and some became distressed after being led to believe that they were eligible to claim up to $25,000 and then discovering this was false."
Gina Cass-Gottlieb alleges the company misled the vulnerable and elderly. (ABC News: John Gunn)
Magnamail is owned by Direct Group, which claims on its website it is "one of Australia's leading direct to consumer retailers".
It states that through online, print, television and digital publishing, it provides products and services to "the growing, high spending senior demographic (45+ age group) which is often neglected and not effectively reached by traditional retail and e-commerce players".
The ACCC alleges that hundreds of thousands of consumers were sent Magnamail's "attention-grabbing promotional materials", which included letters, envelopes, catalogues, and scratch cards.
Ms Cass-Gottlieb said the ACCC mounted legal action after being contacted by many consumers who received this promotional material and complained about their experience.
'Vulnerable, elderly experienced distress and embarrassment', ACCC alleges
Between May 9, 2022, and July 7, 2023, in connection with 12 promotions, Magnamail allegedly made misleading statements that if consumers ordered products from its mail order catalogues, they had a right to claim, were eligible for, or had qualified for, a prize which could be valued at up to $10,000, $20,000 or $25,000, or another major prize such as Apple iPads or jewellery.
But the ACCC said the prizes had already been drawn and at that time no-one except the small number of pre-drawn winners had a right to claim, were eligible for, or had qualified for, a major prize.
The ACCC's statement of claim alleges that "some consumers, including vulnerable and/or elderly consumers, experienced confusion, distress and embarrassment, because they had been led to believe by the (company's) representations, that they had a right to claim, were eligible for, or had qualified for a prize if they placed an order, being a prize that could be a Major Cash Prize or other Major Prize when they were not".
"This was compounded by the fact that some such consumers had expended their own money as a result of that erroneous belief."
Statements made in the promotions to consumers who had not been pre-drawn to win a major prize included:
YOU HAVE DEFINITELY WON a prize valued up to $20,000…
**Congratulations** YOU HAVE WON! This is the Final & Only Notice you will receive by mail before we must award $20,000 cash to the winner.
$25,000 CASH ON HOLD
CONGRATULATIONS [title and surname], this means: YOU HAVE QUALIFIED FOR A PRIZE valued up to $10,000 cash!
The statements in the promotions also included words suggesting consumers had been hand-picked for participation in the promotion, were particularly lucky and had greater odds of winning, or needed to act urgently to not miss out.
The ACCC says Magnamail selects consumers to be sent promotional material from its database of previous customers and customer databases held by other Direct Group brands.
The Group also owns many other brands or publications including Reader's Digest, Over Sixty, Infashion, House of Pets, and TVSN (Television Shopping Network), a shopping network channel that broadcasts on free-to-air TV and subscription services such as Foxtel.
Scratch card promotions with 'lucky number' under focus
With respect to scratch card promotions, the ACCC alleges the scratch cards issued to every consumer — including the "lucky number" contained on the cards — were identical.
That, the ACCC says, means that scratching to reveal the "lucky number" did not actually increase the likelihood that the consumer had won a major prize.
The ACCC alleges the scratch cards issued to every consumer - including the "lucky number" contained on the cards - were identical. (Supplied )
"We allege Magnamail already had the results of the pre-draw when it decided to send the promotional materials to hundreds of thousands of consumers who were not, at that time, eligible to claim a major prize," Ms Cass-Gottlieb said.
The ACCC also alleges Magnamail's parent company Direct Group, one of the largest mail order and direct-to-consumer retailers in Australia, was knowingly involved in Magnamail's alleged conduct.
"Businesses running game or draw style promotions are on notice that they must not make statements that mislead consumers about whether consumers are eligible for particular prizes," Ms Cass-Gottlieb said.
The ACCC is seeking declarations, penalties, costs, injunctions, and other orders.
The company has been contacted for comment.