LG OZ Faces Million Dollar Payouts After $13K Profit

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EXCLUSIVE: LG Australia, who has a history of making false consumer claims may be a victim of their own Korean Corporation, who in an effort to supply stock in Australia have been accused of ” lying” about the performance of LG products a former senior executive of LG Australia, has said.The issue is now under investigation by the Australian Competition and Consumer Commission.

In an exclusive interview with ChannelNews, a former executive of LG Australia said that local management would have relied on information that their overseas factory supplied when launching a new refrigerator that Choice Magazine tests, recently revealed was using 876 kilowatt of power a year, compared to the advertised 738kWh.

We can also reveal that LG Australia failed to test any of the appliances independently when they landed in Australia with the company now having to defend their brand in the Australian market.

LG Australia has already agreed to compensate affected consumers $331 to cover the increase in their power bills. However they are refusing to replace the affected refrigerators.

This financial penalty which could arise from the issue will impact the Australian operations of LG who last year only managed profits of $13,553, on revenues of $968 Million.

In the 2007/2008 financial year, LG Australia had profits of $17,228 on revenues of $1.12 Billion.

A senior executive at LG Australia told ChannelNews today that the LG Corporation “will most likely pick up the bill associated with the compensation payouts”.

The same factory is believed to be responsible for the incorporation into Australia refrigerators of a secret device that emulated energy saving.

This was only discovered after it revealed that two fridges sold by LG Australia including the L197NFS model and the P197WFS – were found to contain an illegal device that activates an energy-saving mode when it detects room conditions similar to those in a test laboratory.

The circumvent device was discovered last month by Choice testers.

 

The device detects test conditions and activates the mode, creating the impression of lower running costs and energy usage. The devices have been banned in Australia since 2007.

LG Electronics has agreed to compensate potentially thousands of consumers.

Yesterday, Choice chief executive Nick Stace said the fridge was an extreme example of a company making false or misleading environmental claims, known as ”greenwashing”.

”This fridge is both a potential danger to your food, your wallet and the environment,” Mr Stace told the Choice National Consumer Congress.

Today, LG is refusing to comment, however the former senior executive said “LG Australia could well be a victim in all of this. They would have ranged the offending product after being supplied information by their own factory; overseas executives could have lied, about the performance of the refrigerator in an effort to get volume into Australia.”

This is not the first time that LG Australia has found itself surrounded by controversy. In December several consumers contacted ChannelNews to say that the new LG “Borderless” TV was in fact not borderless.

A senior JB HI manager said at the time “Yes we are having issues with the positioning of the LG borderless TV. Consumers are not stupid they can see that there is a border around the broadcast image.” At the time they said that the TV was not selling well.

In 2008 the Sydney Morning Herald reported that LG had to repay $3 million after the Australian Competition and Consumer Commission ruled it had inflated the energy efficiency rating of five models of air-conditioner.

It is believed that the LG Corporation picked up the tab for this payout.

 

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