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  • The consumer watchdog takes US-based teledentistry giant SmileDirectClub to court for misleading Australian customers about insurance reimbursement
  • The ACCC says SmileDirectClub told consumers they could be eligible for reimbursements even though most health funds did not cover the treatment
  • As such, Australian consumers could not make an informed decision about the true cost of the dental alignment treatment
  • The ACCC says it will seek declarations, penalties, consumer redress and other orders from SmileDirectClub for its alleged misleading conduct
  • SmileDirectClub is publicly listed on the Nasdaq stock exchange, and shares in the company last closed 1.41 per cent lower at US$7.71 (A$10.28) per share

The consumer watchdog is taking US-based teledentistry giant SmileDirectClub to court for misleading Australian customers about insurance reimbursements.

The Australian Competition and Consumer Commission (ACCC) said this morning it had launched Federal Court proceedings against SmileDirectClub and its Australian subsidiary over “false and misleading statements about private health insurance reimbursement” for its teeth aligner product.

SmileDirectClub’s dental aligners are designed to correct mild-to-moderate teeth misalignment and the company sells the product directly to consumers without the need to attend in-person dental appointments.

The treatment often takes several months and costs upwards of $3000, according to the ACCC.

However, the ACCC alleged that between May 2019 and October 2020 SmileDirectClub misled Australian consumers about the true cost of the product by claiming that SmileDirectClub aligners were potentially eligible for insurance reimbursement — even though most private health funds did not cover the treatment.

Accordingly, ACCC Chair Rod Sims said Australian consumers could not make a fully informed decision about the total cost of SmileDirectClub aligners.

“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,” Mr Sims said.

The ACCC said at least 26,300 consumers ordered aligners from SmileDirectClub during the 18-month period.

SmileDirectClub allegedly told customers to check if their aligner treatment was covered by their health fund using the item numbers 825 and 811. According to the ACCC, however, these item numbers cover only treatments from face-to-face consultations with dentists registered with the health fund.

As such, consumers who checked their eligibility using these item numbers could have been told that their health insurance covered them for such treatments while being unaware that SmileDirectClub’s teledentistry service was not considered an eligible treatment.

What’s more, the ACCC also alleged that several customers who filled out an insurance inquiry form — which was provided by SmileDirectClub — were told directly by the company that they were eligible for reimbursements.

SmileDirectClub reportedly sent emails to these customers claiming the company had contacted the relevant health insurers and confirmed the customer was eligible for reimbursement for the aligner treatment, but only after they had paid SmileDirectClub in full.

An example of a “Good News” email from SmileDirectClub. Source: ACCC

Mr Sims said these emails were “particularly concerning” given that affected customers found out they were not actually eligible for health insurance reimbursement only after they had already paid for the SmileDirectClub treatment.

“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 ACCC said it would seek declarations, penalties, consumer redress and other orders from SmileDirectClub for its alleged misleading conduct.

SmileDirectClub is publicly listed on the Nasdaq stock exchange. Shares in the company last closed 1.41 per cent lower at US$7.71 (A$10.28) per share.

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