Lorna Jane has been fined $A5 million ($NZ5.28m) and labelled "predatory and exploitative" by the Federal Court after the popular activewear brand falsely claimed its clothes could eliminate Covid-19 and stop it spreading.
During the deadly virus outbreak, the company claimed its anti-virus activewear had been sprayed with a substance called "LJ Shield", which protected people against pathogens.
Advertisements on the brand's website, stores and Instagram used the tag "Cure for the Spread of Covid-19? Lorna Jane Thinks So".
The Australian Competition and Consumer Commission (ACCC) launched court action against Lorna Jane for allegedly making false and misleading claims.
In a decision delivered in the Federal Court on Friday, Justice Darryl Rangiah said Lorna Jane sought to "exploit the fear and concern" surrounding the deadly outbreak.
"The advertising campaign was conducted in July 2020, at a time of considerable uncertainty, fear and concern amongst the public about the consequences and spread of Covid-19," he said.
"Lorna Jane sought to exploit that fear and concern of the public through the use of misleading deceptive and untrue representations about the properties of LJ Shield activewear.
"Lorna Jane sought to profit from the fear with concerns of the public in a way that involves unlawful conduct in contravention of the relevant provisions of the Australian Consumer Law.
"The behaviour of Lorna Jane can only be described as exploitative, predatory and potentially dangerous."
Justice Rangiah said the court must impose a substantial penalty to reflect the conduct's seriousness and demonstrate "exploitative conduct of this kind will not pay".
He found the company had not been shown to have actually profited from its conduct and said the $5 million fine agreed by both parties on the eve of the hearing was appropriate.
He also ordered Lorna Jane to pay the ACCC's costs of $370,000 and to put a "corrective notice" on its website, social media, customer emails and in stores about the LJ Shield false claims.
ACCC commissioner Sarah Court previously said the company gave the impression the Covid-19 claims were based on scientific or technological evidence.
"We are particularly concerned about this because consumers often trust well-known brands and assume that their marketing claims are backed up by solid evidence."
In July last year, Lorna Jane copped an almost $40,000 fine from the Therapeutic Goods Administration for failing to seek correct approval for the ads.
Action against company director Lorna Jane Clarkson for being "knowingly concerned" in the conduct did not proceed.
The company has apologised to customers, blaming suppliers for the error.
"A trusted supplier sold us a product that did not perform as promised," CEO Bill Clarkson said in a statement.
"They led us to believe the technology behind LJ Shield was being sold elsewhere in Australia, the USA, China, and Taiwan and that it was both anti-bacterial and anti-viral.
"We believed we were passing on a benefit to our customers."
Lorna Jane has 108 stores in Australia, plus several overseas, including in the USA and New Zealand.
