FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v ACN 117 372 915 Pty Limited (in liq) (formerly Advanced Medical Institute Pty Limited)

[2015] FCA 368

SUMMARY

NORTH J

22 APRIL 2015

MELBOURNE

SUMMARY

1.    In accordance with the practice of the Federal Court in some cases of public interest, importance or complexity, the following summary has been prepared to accompany the orders made today. This summary is intended to assist in understanding the outcome of this proceeding and is not a complete statement of the conclusions reached by the Court. The only authoritative statement of the Court's reasons is that contained in the published reasons for judgment which will be available on the internet at Court’s homepage together with this summary.

2.    The Australian Competition and Consumer Commission (the ACCC) brought this case against companies trading as Advanced Medical Institute (AMI), its Chief Executive Officer, director and shareholder, Dr Jacov Vaisman and two doctors engaged by AMI.

3.    AMI offered treatments for premature ejaculation (PE) and erectile dysfunction (ED) using nasal spray and later oral strips. It advertised that the treatment would result in longer lasting sex.

4.    The ACCC alleged that AMI engaged in unconscionable conduct contrary to the Trade Practices Act and the Australian Consumer Law. It also alleged that a refund term in one version of its contract was unfair and void under the ACL.

5.    In the 2008 financial year patients paid nearly $49 million to AMI for the treatment programs and in the 2009 financial year they paid nearly $55 million. In the 2010 financial year AMI reported a revenue of almost $40 million.

6.    Men were treated usually over the phone. They spoke first to a salesperson, then to a doctor and then to a salesperson again.

7.    The Court had a unique insight into the way AMI operated because the evidence included a selection of recordings of phone calls from the estimated 3 million recordings seized by the ACCC under a search warrant.

8.    The main findings made by the Court include the following:

•    AMI designed a selling strategy which targeted the anxiety and distress of men seeking treatment for ED and PE.

•    Salespeople used high pressure selling techniques by telling men that their penis would shrink and they would suffer psychological impotence if they did not agree to the treatment.

•    AMI charged patients from about $2500 - $4500 for the programs.

•    Salespeople reassured patients that they could get a refund if the treatment did not work. But the salespeople did not say that patients had to try all treatment options including self-injection in the base of the penis in order to qualify for a refund.

•    Salespeople were paid on commission but were trained to conceal the fact from patients.

•    The nasal spray and oral strip medications were not the medications accepted in the medical profession as the first line treatment for PE and ED. The evidence from medical experts and the scientific literature demonstrated that there is no proper scientific evidence that these medications are effective to treat PE or ED.

•    Men were told that the treatment was for 12 to 18 months. The medical and scientific evidence before the Court does not support the need for treatment of that period with these medications. However, longer periods of treatment cost more and hence suited the commercial interest of AMI.

•    Doctors who worked for AMI were, in practice, required to prescribe the AMI medications even though there was no proper scientific basis that they were effective.

•    Doctors failed to tell patients, adequately or at all, of the side effects of the medications. This encouraged them to agree to treatment.

•    The business of AMI depended on the prescribing of medications. Only a doctor could do that. Evidence of the consultations showed that doctors were concerned only to obtain enough information so they could prescribe the medication. They did not diagnose the cause of the problem as would be usual in a conventional consultation with a doctor. That is particularly important in cases of ED which are often associated with cardiovascular disease, diabetes, or other underlying conditions.

•    The doctors failed to provide patients with proper care and act in their best interests. They failed to meet the standards of proper practice established by the medical profession. In the service of AMI, the doctors elevated the commercial interests of AMI above the medical interests of the patients. That made the conduct unconscionable.   In view of this finding, the judgment of the Court, will be forwarded to the medical disciplinary bodies for their attention.

•    A clear picture emerged that the business of AMI was concerned to make money from vulnerable men with PE or ED. It targeted their vulnerability to sell highly priced treatments which had no proper scientific basis. AMI required doctors to compromise their professional standards to advance the commercial interest of AMI, and

•    Dr Vaisman made all the critical decisions relating to the business of AMI and is responsible for the unconscionable conduct found against AMI.

9.    The Court will therefore make orders against AMI including:

1.    Declarations that the conduct was unconscionable.

2.    Orders for compensation to be paid some of the 14 patients treated in 2011 whose cases were examined by the Court.

3.    An order for corrective advertising.

4.    Injunctions which require that:

A.    Consultations with doctors be conducted face to face or by video link.

B.    AMI provide the terms of any contract to patients in writing, by email, or in person before the agreement is made.

C.    AMI tell patients that its doctors do not provide general medical advice but only consider whether to prescribe medication.

D.    Patients have a 5 day cooling off period.

E.    After the cooling-off period, patients have the right to cancel the contract on 14 days’ notice.

F.    Patients be offered contracts of no more than 2 months duration.

G.    AMI may not accept payment in advance for treatment of more than 2 months.

10.    And against Dr Vaisman the Court will order, in effect, that he be excluded for seven years from continuing his main role in the business of AMI which involved the unconscionable conduct.