Nasal Delivery Technology” – as unconscionable in its marketing as it was irritating to the ear – has unexpectedly disgorged The AMI advert can be irritating an enduring and valuable gift for all Australians.

Taken to task for its aggressive sales practices from 2008 to 2010, Advanced Medical Institute Pty Ltd and its directors were comprehensively rolled in a Federal Court ruling that sees compensation payable to patients and injunctions against most concerned.

AMI treated 112,000 patients by phone and 50,000 at its clinics between 2008 and 2010. In 2007/08 its revenue was $49 mil climbing to $55 mil the following year.

The unproven “treatment” it offered for premature ejaculation, erectile dysfunction and ‘bedroom hell’ was all part of a ruthless sales machine that preyed upon vulnerable and unsuspecting targets paying fees upwards of $3,000.

Phone consultations – ostensibly with para-medical staff – were mostly with commission sales agents delivering a rehearsed sales script that inevitably led the prospects to signing up to a treatment plan for 12 or 18 months.

The only medications prescribed to those crying out for treatment for their sexual dysfunction were those of AMI. No consideration was ever given to referrals to specialists for treatment or diagnosis.

Should a prospect waver in their desire for the AMI cure, the sales script mandated they be warned their “penis may shrink” or “you may become impotent”.

Although refunds were said to be available under AMI’s “total satisfaction guarantee” the fine print required all treatment options – including painful injections into the base of the penis – be exhausted, before any refund for the unexpired contract period be considered.

Refunds were then only made subject to a 30 day waiting period and for a sum that was reduced by the cost of medication prescribed and a 15% administration fee.

Justice Anthony North ruled that AMI “unconscionably” manipulated patients’ underlying discomfort with the embarrassing and humiliating features of their disorders.

Singled out for special mention were Dr Jack Vaisman – AMI’s CEO with overall management responsibility – and Dr Brian Lonergan who failed to conduct physical examinations of many patients to whom he recommended its treatments. Dr Vaisman has lodged an appeal and contests the findings made against him.

But it was NRM Corporation – who purchased AMI from external administration in 2011 and continued the same sales model under the same CEO and with AMI as its business name – that has delivered the legacy likely to bear fruit for decades to come.

NRM had moved on from “Nasal Delivery” to saturate air waves and billboards with a slightly less annoying mantra of “Longer Lasting Sex” thru 2011 and 2012.

The ACCC joined it to the proceedings it had started in December 2010 against AMI, but for NRM its case was for breaches of the brand new and as yet, untested, unfair terms provisions of the Australian Consumer Law that had so unobtrusively come into force from the previous July.

In the very first authoritative determination of what constitutes an “unfair term”, Judge North ruled that because the 15% administration fee went beyond what was reasonable to protect AMIs legitimate interests, it was “unfair” within the meaning of ACL sections 24 and 250.

Likewise the contract provision “your contract with us for the period decided in the first consultation with the AMI doctor” – in the context of a 30 day wait period for contract cancellations – was unfair because cancellation might arise from ineffective treatment.

And charging for medication when a contract was cancelled was unnecessary to protect NRM’s legitimate interests – and therefore unfair – by operation of ACL s 23.

The court next had to consider whether the NRM contract was “a standard form contract”.

“The evidence positively established that NRM had a dominant bargaining position obtained by using high-pressure selling techniques”, wrote Justice North in his 264 page judgment that concluded the company had not rebutted the presumption its contract was a standard form contract. “The pressure applied to the patients denied them the power to resist entering into the agreement”.

“The terms were set by the parameters of the business model of NRM and were in the same form irrespective of the individual circumstances of the patient”.

The two ingredients having been established – that the term was unfair and that the contract was “standard form” – the refund provisions with all its restrictions was declared void.

Thus AMI’s ill wind has nevertheless done some good in the guidance its prosecution has set in identifying an unfair term.

Injunctions as to business practices were granted against NRM and Dr Vaisman was effectively excluded from the conduct of its business for the rest of his working life “to protect the public from his actions”.

NRM has also lodged an appeal against the findings and has pointed out its current business model is entirely different to how it was conducted in 2012.

Australian Competition and Consumer Commission v ACN 117 372 915 Pty Limited (in liq) (formerly Advanced Medical Institute Pty Limited) [2015] FCA 368 North J 22 April 2015


Do you have any questions?

If you have a question, seeking more information or would just like to speak to someone, make an enquiry now and we’ll be in touch with you.

Online Now

Welcome to QLD Business + Property Lawyers! I'm here to assist with enquiries and gather details. How can I help today?