A company that sold fake Aboriginal art has been fined $2.3m for “false and misleading conduct”, the largest penalty of its kind awarded by the federal court.

Birubi Art breached consumer law by selling thousands of Indonesian-made items as Aboriginal art, but is unlikely to ever have to pay the fine because the company is in liquidation.

In October, the federal court found that Birubi Art had “made false or misleading representations that products it sold were made in Australia and hand-painted by Australian Aboriginal persons, in breach of the Australian consumer law”.

The Australian Competition and Consumer Commission (ACCC) sought a high penalty to act as a deterrent, and to signify the “serious cultural harm” done by fake Aboriginal art.

These harms were “grave and far-reaching” and involved “not just direct economic loss but a weakening of the value of the authentic products” and an “erosion of consumer confidence in the entire sector”.

Outside the court, the CEO of the Indigenous Art Code, Gabrielle Sullivan, said the judgment was “promising and it will hopefully act as a deterrent for others” but “it is important to acknowledge that the law has not changed”.

The Indigenous Art code is set up to promote and preserve ethical trading in Indigenous art.

“The existing consumer law has been used to highlight misleading and deceptive conduct,” Sullivan said.

“While the ACCC acknowledges the cultural harm caused, it must be made clear that Birubi, in liquidation, were not on trial for abuses of Indigenous cultural and intellectual property and stealing, and cultural theft.”

Birubi Art went into voluntary liquidation in 2017 but not before selling its assets to another company, Gifts Mate, “established and controlled by Birubi’s former director Mr [Ben] Wooster,” federal court judge Melissa Parry noted in her decision.

“What’s not clear is how the law deals with the fact that Gifts Mate Australia continue to sell works which are strikingly similar to the products Birubi has previously sold,” Sullivan said.

The Indigenous Art Code and other organisations are now calling for tougher laws to protect against misrepresentation and fake art.

“There is no law in Australia that says you can’t make fake art or you can’t misappropriate Aboriginal and Torres Strait Islander culture. All the law says is that if you are doing that you need to be up front about it,” Sullivan said.

Between July 2015 and November 2017, the ACCC said, Birubi sold more than 18,000 boomerangs, bullroarers, didgeridoos and message stones to retail outlets around Australia, featuring designs “associated with Australian Aboriginal art” and labelled with words such as “Aboriginal Art”, “genuine” and “Australia”.

Up to 80% of Aboriginal souvenir products sold are fake or have not been made under a fair and transparent licensing agreement, the Australian copyright agency, the Indigenous Art Code and Arts Law said, in a joint statement following today’s judgment.

“Fake art deprives Indigenous artists of economic opportunity and demeans Indigenous cultural heritage.

“These concerns cannot be overcome through the existing consumer protection laws on false and misleading representations.

“A new law enforced by the ACCC to prevent the sale of fake art is needed.”