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After a positive start to the week with news of a turnaround in its financial fortunes, leading Australian specialty fashion retailer Mosaic Brands (ASX: MOZ) has been dealt a blow by the consumer watchdog.
Days after announcing a return to profitability this financial year, Mosaic has been hit with a $630,000 penalty after admitting it had breached consumer law when promoting a range of 'health essentials' products, including hand sanitiser, aimed at a COVID-19 market.
Mosaic Brands - owner of the Noni B, Autograph, Crossroads, Katies, Millers, Rivers, Rockmans and W.Lane chains - was issued with five infringement notices relating to advertisements for hand sanitisers and face masks posted between March and June last year.
The company is understood to have sold tens of thousands of its health essentials products online at the time.
The products included Air Clean hand sanitiser, sold on the Noni B website. The advertisement claimed it contained 70 per cent alcohol, but tests by the ACCC found the level to be just 17 per cent.
ACCC deputy chair Delia Rickard says this was below the minimum 60 per cent alcohol concentration recommended by Australian health authorities.
The Miaoyue hand sanitiser sold by Millers was just shy of this level at 58 per cent, although it was marketed as containing 75 per cent alcohol.
The company's Velcare-branded hand sanitiser products - advertised on its Noni B and Katies websites - were promoted as being World Health Organisation-approved, although this was found not to be the case. The ACCC says WHO does not approve hand sanitisers.
Similarly, KN95 Kids Safety Face Masks sold on Mosaic's websites were said to be "CE/FDA certified", when they weren't. The face masks were also labelled as "non-refundable", despite the statutory right of customers to a refund under the consumer guarantee.
The ACCC says the breaches occurred at the height of COVID-19 restrictions last year during a period of intense public anxiety over COVID-19 and the availability of protective facemasks and hand sanitisers.
The watchdog's action was prompted by a complaint from CHOICE which led to the independent testing of the hand sanitisers commissioned by the ACCC.
"Businesses must never mislead their customers about the certification, quality or properties of their products, but we were particularly concerned about the representations by Mosaic Brands because the statements which Mosaic Brands has admitted were false or misleading related to certain protective health properties at the time of a global pandemic," says Rickard.
"Our investigation also found that the Mosaic Brands' Kids KN95 mask was not certified by European and US standard authorities as they had advertised."
Mosaic Brands has agreed to refund customers and implement a three-year compliance program.
Tighter regulations covering hand sanitisers were introduced at the end of last year, and from May 24 this year all hand sanitisers must identify on their label the alcohol content as a percentage by volume.
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