Consumer compo, $3m fine for dodgy claims

With a sly grin, a US teledentistry marketed better smiles on the basis Australians could get treatment covered by health insurance.

But SmileDirectClub misled consumers, with few getting a cent in return.

Now, a court has fined the US firm and its local subsidiary a combined $3.5 million and ordered it pay compensation to potentially thousands of customers who signed up for aligner treatment and then had claims denied.

SDC customers use in-home kits or visit the company's retail shops before receiving teeth aligners for about $3000.

Between May 2019 and October 2020, the company's website and other promotional material said the treatment could be covered under two item codes.

The claims were made in the face of repeated approaches by health funds to SDC about the lack of coverage and that claims were being rejected.

Funds used by 98.5 per cent of Australians only pay out if a dentist or orthodontist sees the patient face-to-face.

"But nevertheless (SDC) continued to make the representations," the Federal Court said on Friday.

At least 26,300 people signed up for treatment during the relevant period.

More than 600 customers were individually emailed "good news" that their health fund would covering the SDC treatment when that was false.

The consumer watchdog, the ACCC, began investigating in 2020, leading SDC to pull the advertisements.

It later admitted several breaches of Australian Consumer Law by making false or misleading claims, and began the process of offering refunds to affected customers.

In a joint submission with the ACCC requesting the court issue a $3.5 million fine, SDC admitted the "good news" emails and texts were "particularly apt to mislead" any consumer who was interested in the product but did not want to commit to the purchase unless they could claim reimbursement from their private health insurers.

The court also ordered SmileDirectClub to implement a compliance program and to pay a contribution to the ACCC's legal costs.

"This was concerning conduct, and we began receiving complaints from affected consumers about it shortly after SmileDirectClub entered the Australian market," ACCC commissioner Liza Carver said on Friday.

"Making false or misleading statements is a breach of Australian Consumer Law.

"This outcome is a reminder to all companies, whether established businesses or new entrants, that they must ensure they comply with Australian consumer laws when they sell their products and services to Australian consumers."

SmileDirectClub said it accepted statements on its website and in its advertising erred but denied it intended to mislead Australian customers.

"We thought it unfortunate the ACCC felt the need to file the complaint as we fully cooperated throughout the process," SmileDirectClub international director David Cran said.

"This matter is now fully resolved, and we remain committed to providing Australians with improved access to premium and affordable oral care as we work with private health insurance companies in Australia."