SmileDirectClub admits misleading customers in case brought by ACCC

Teeth-aligner company SmileDirectClub has conceded it wasn’t straight with Australian customers, court documents reveal.

The self-described pioneer of “teledentistry” has conceded it misled Australians by claiming some of the hefty cost of clear teeth aligners could be covered by private health insurance.

The admissions by Nasdaq-listed SmileDirectClub, which is worth $US2.1 billion ($2.9bn), are in response to court claims made by the Australian Competition and Consumer Commission.

The ACCC commenced legal action in July seeking penalties including compensation for up to 26,300 people who paid about $3000 each for online-only orthodontic services from May 2019 to October 2020.

An after and before comparison from SmileDirectClub's website. Picture: SmileDirectClub

According to a document filed for SmileDirectClub (SDC) in the Federal Court, the company admitted that emails it sent to 648 customers were “likely to mislead or deceive in that they were likely to induce the ordinary and reasonable consumer to assume their insurance policy did cover SDC aligner and aligner treatment”.

About 120 of these also received a text message that SDC accepted was misleading.

As well, SDC admitted to making a misleading representation on its website and in emails from January to October 2020 about the potential for part reimbursement via health cover.

“By that period, SDC did not have reasonable grounds for making the representation,” the company said in its defence document.

“By this time, SDC had come to understand that the major private health insurers in Australia had taken the view that SDC aligners and aligner treatment were not claimable under orthodontia on the basis they were ‘teledentistry’.”

Actor Rob Mills has promoted SmileDirectClub. Picture: Instagram

The company, which has promoted its products using Australian actor Rob Mills and US singer Shawn Mendes, said it then made a decision to stop making claims about possible insurance coverage.

However, the removal of some statements from its website didn’t happen until July this year, because of “administrative oversights which occurred due to significantly reduced staff and remaining staff capacity following the onset of the COVID-19 pandemic.”

SDC admitted the ACCC was entitled to court declarations that the company broke Australian Consumer Law in making the representations about insurance coverage and potential reimbursement.

However, the company “otherwise denies the ACCC is entitled to the relief sought”, including compensation for customers and financial penalties.

“SDC denies that consumers have suffered the harm alleged by the ACCC,” the company said.

Of the customers who received the misleading emails and texts, 188 went on to obtain aligners.

SDC said it had been “made aware of 10 customers from that cohort who subsequently had their insurance claim refused, and has made partial or full refunds to all of those customers.”

As for the partial reimbursement representation during 2020, people who saw it “may not have had private health insurance at all, let alone insurance which included ‘extras’ coverage for orthodontia. SDC denies that the representation was likely to have had a material bearing on consumers’ ultimate decision to proceed with SDC aligners”.

Other alleged breaches of consumer law were denied.

The case is due to return to court in Melbourne on December 16.

On Friday, SmileDirect said in a statement to The Daily Telegraph that it continues to want teledentistry to be covered by private health insurance in Australia.

The company said it had arrangements in the US, Canada and EU for its treatment to be covered.

“We are focused on partnering with the private health insurance companies so that Australian customers can maximise their health benefits through access to teledentistry,” SmileDirect said.

The court case wasn’t about “safety or efficacy”, it added.