The ACCC has instituted Federal Court proceedings against SmileDirectClub Aus Pty Ltd and its US parent company, SmileDirectClub LLC (together SmileDirectClub) over alleged false and misleading statements about private health insurance reimbursement for its clear teeth aligners and associated treatment.
It is alleged that, between May 2019 and October 2020, SmileDirectClub represented to thousands of Australian consumers that they may be eligible for a reimbursement for SmileDirectClub aligners and associated treatment from their health fund, even though most Australian private health funds did not cover the SmileDirectClub aligner treatment.
This information was allegedly conveyed via email, text messages, flyers, and on its website.
"We allege that consumers could not make a fully informed decision about the total cost of the aligner treatment, because SmileDirectClub's statements left them with the understanding that part of it would be covered by their private health insurer," ACCC Chair Rod Sims said.
"It is a breach of Australian Consumer Law for companies to make false or misleading statements about the benefits or rights associated with products and services."
The alleged conduct includes that SmileDirectClub told consumers they should check to see if the aligner treatment was covered by their health fund using item numbers 825 and 811. However, the ACCC alleges these item numbers cover only treatments provided following face-to-face consultations with dentists registered with the health fund. Consumers who did check using these items may have been advised that their health insurance covered them for the aligner treatment, when this was not the case.
It is also alleged that a number of consumers who filled in an insurance inquiry form provided by SmileDirectClub were sent emails which represented that SmileDirectClub had contacted their health insurer and that the "good news" was they were entitled to reimbursement for the aligner treatment, which could be claimed after they had paid SmileDirectClub in full.
"We allege SmileDirectClub's statements that it had contacted the health fund of individual consumers, or that consumers could get reimbursement for treatment under item numbers 825 and 811, were false and misleading because most Australian health insurers did not cover those treatments unless they had been provided by a dentist or orthodontist in a face-to-face consultation," Mr Sims said.
The SmileDirectClub treatment takes several months and generally costs around $3000. Crucially, consumers were not given the documents needed to claim a reimbursement from their health insurer until after full payment was made to SmileDirectClub.
At least 26,300 consumers ordered aligners from SmileDirectClub during the period in which the representations are alleged to have been made.
"We consider that the alleged misleading representations about eligibility for a health fund reimbursement for these aligners and treatment are particularly concerning, because affected consumers did not discover that they would not receive any health insurance reimbursement until after the SmileDirectClub treatment had been paid for in full," Mr Sims said.
The ACCC seeks declarations, penalties, consumer redress and other orders.
Background
SmileDirectClub LLC is a private company, based in Nashville, Tennessee which sells dental aligners direct to consumers. It is the parent company of the Australian subsidiary SmileDirectClub Aus Pty Ltd which started trading in Australia in May 2019, operating seven SmileShops in NSW, QLD, SA, VIC and WA.
SmileDirectClub's aligner treatment is intended to correct mild to moderate misalignment of teeth. At SmileDirectClub, consumers do not attend in-person dental appointments. Instead, they can send in a photograph and dental impression (using a SmileDirectClub kit) or go to a SmileShop where 3D imaging and photographs are taken by sales representatives.
A SmileDirectClub company in Costa Rica uses a computer program to plan the treatment, which is approved remotely by an affiliated dentist, and the aligners are sent in the mail.
SmileDirectClub allegedly told consumers to use two item codes to check whether they could obtain reimbursement from their health insurance company. Item codes are used to identify items covered by private health insurance companies. Code 825 relates to a series of custom-made plastic aligners used to move teeth gradually. Item code 811 refers to plastic retainers that are used to maintain the corrected alignment of teeth. Most health insurers in Australia will not pay for treatment under these codes if the treatment has not been provided by a dentist or orthodontist in a face-to-face consultation.
Example of 'Good News' email
The attached document below contains the ACCC's initiating court document in relation to this matter. We will not be uploading further documents in the event this initial document is subsequently amended.
Concise statement
ACCC v SmileDirectClub_Concise Statement ( PDF 843.47 KB )
