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Australian law has a strong focus on consumer protection and there are numerous obligations with which businesses must comply when providing goods or services to consumers in Australia. In particular, these include obligations set out in the Australian Consumer Law (ACL), which is contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth). The ACL is the principal legislative framework in Australia that governs consumer protection and fair trading. It contains laws addressing, amongst others, consumer guarantees (for example, goods being of an acceptance quality), misleading or deceptive conduct, unfair contract terms, unsolicited sales practices, lay-by agreements, product safety and manufacturer liability.

 


 

Conduct obligations 

The ACL regulates how companies can engage with consumers (including over the internet). The Australian Competition and Consumer Commission (ACCC) enforces the ACL.

In 2022-23, the ACCC’s compliance and enforcement priorities are:

  • consumer and fair trading issues in relation to environmental claims and sustainability;
  • consumer and fair trading issues relating to manipulative or deceptive advertising and marketing practices in the digital economy;
  • competition and consumer issues arising from the pricing and selling of essential services, with a focus on energy and telecommunications;
  • empowering consumers and improving industry compliance with consumer guarantees, with a focus on high value goods including motor vehicles and caravans;
  • competition and consumer issues relating to digital platforms;
  • competition issues in global and domestic supply chains, particularly where they are disrupted by the COVID-19 pandemic;
  • promoting competition and investigating allegations of anti-competitive conduct in the financial services sector, with a focus on payment services;
  • exclusive arrangements by firms with market power that impact competition;
  • ensuring that small businesses receive the protections of the competition and consumer laws and industry codes of conduct, including in agriculture and franchising;
  • compliance with the button battery safety standards; and
  • consumer product safety issues for young children, with a focus on compliance, enforcement, and education initiatives.

The ACCC’s enduring priorities are:

  • cartel conduct;
  • anti-competitive conduct;
  • product safety;
  • consumers experiencing vulnerability or disadvantage; and
  • conduct impacting Indigenous Australians.

Businesses need to be particularly careful to ensure that they comply with consumer guarantees and that they do not make misleading representations to consumers in Australia about their products and services or what remedies might be available to them under the ACL.

The ACL also prohibits "unconscionable conduct” in connection with the supply of goods or services. When considering whether conduct may be unconscionable, consideration is given to factors such as the relative bargaining strengths of the business and the customer and whether the business exerted undue influence or pressure or used unfair tactics.

The ACL provides that unfair contract terms in standard form contracts between a business and consumers, being terms that cause significant imbalance in the parties’ rights and obligations under the contract, that are not reasonably necessary to protect the legitimate interests of the advantaged party and that would cause detriment (financial or otherwise) if they were applied or relied on, are void. The unfair contract terms regime also extends to certain business-to-business contracts where at least one of the parties is a small business with less than 20 employees (excluding casual employees who are not employed by the business on a regular and systematic basis) and the upfront price payable under the contract is no more than A$300,000 or A$1 million if the contract has a duration of more than 12 months. However, this test will change on 9 November 2023 under the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) (More Competition, Better Prices Act), which was enacted on 9 November 2022, so that the unfair contract terms regime will apply where at least one of the parties is a small business with fewer than 100 employees (excluding casual employees who are not employed by the business on a regular and systematic basis and only counting part-time employees as an appropriate fraction of a full-time equivalent) or a turnover of less than A$10,000,000 in the last income year that ended at or before the time when the contract was made. The More Competition, Better Prices Act will also amend, amongst other things, the unfair contract terms regime from 9 November 2023 by introducing a prohibition on unfair contract terms.  

In addition to the ACL, the Fair Trading Act 1987 (NSW) requires up front disclosure by suppliers of contract terms that may substantially prejudice the interests of a consumer, including terms that exclude supplier liability. Non-compliance attracts penalties.

The ACL also requires that prices for certain goods or services be stated as a single price. The single price must include all quantifiable components, including any taxes or charges. There are some limited exceptions to this. For example, restaurants applying surcharges for food and beverages on specified days. Bait advertising (advertising special prices for goods or services that are either not available or available in limited non-disclosed quantities) and two-price comparison advertising (such as ‘was/now’, ‘strike through’ or ‘% off’ pricing), if it misleads consumers about savings that will be made (for example, if the ‘was’ price was only advertised for a very limited time or no sales were made at that price), are also prohibited.

Practices such as unsolicited supplies (including door-to-door selling and telephone sales) and lay-by transactions are also regulated. There has been increased enforcement activity in these areas in recent times.

The ACL also prohibits false representations, referral selling, undue harassment at a place of residence or business, supplying unsafe goods, sending unsolicited credit cards and requiring payment for the supply of unsolicited goods or services.

Defective goods

The ACL provides remedies for consumers where the supplied goods are not of acceptable quality or are defective and cause injury.

Consumer guarantees

Statutory consumer guarantees are imposed in relation to goods or services supplied to a consumer in the course of trade or commerce. They include a guarantee that goods are of an acceptable quality and a guarantee that they are fit for purpose. Consumers are defined as persons (which can include entities) who have paid no more than A$100,000 for the goods or services, or where the goods or services are of a kind ordinarily acquired for domestic, household or personal use or consumption (irrespective of price), provided the goods are not for re-supply or used up or transformed in trade or commerce. With some very limited exceptions, consumer guarantees cannot be excluded by contract. The ACCC actively enforces these provisions.

Liability for injury or loss

Suppliers (not just manufacturers) can be directly liable for loss or damage that a consumer suffers from goods that do not comply with consumer guarantees.

The ACL places mandatory reporting obligations on suppliers who become aware that a consumer good or product-related service they supply has caused or may have caused death or serious injury or illness.

The ACL also enables people who are injured or whose property is damaged as a result of goods being unsafe to seek compensation from the manufacturer without the need to show any negligence by the manufacturer or a contractual relationship with the manufacturer. Goods will be deemed to have a defect if their safety is not such as persons generally are entitled to expect. The ACL sets out a number of matters to be considered when assessing whether goods are safe, including the way in which the goods are marketed and the instructions or warnings that accompany the goods. Manufacturers have a number of statutory defences available to them, including that the defect did not exist when the goods were supplied or that the defect occurred because of compliance with a mandatory standard.

In addition to statutory protections, consumers in Australia may also rely on the common law and seek damages under principles of tort (negligence) or contract if they have suffered loss or damage from a defective product. Liability under the common law tort of negligence is fault-based, meaning that the claimant must show some wrongdoing on the part of the manufacturer or supplier. The claimant must establish that the manufacturer or supplier owed a duty of care to the claimant, that the manufacturer or supplier breached that duty (by failing to perform according to the requisite standard of care) and that the breach caused the loss or injury. Remedies may also be available for consumers who are able to establish a breach by a supplier of a contractual relationship.

Enforcement: penalties and powers

The consumer protections of the ACL are enforced by the ACCC. The ACCC can issue substantiation notices (requiring a business to provide information or produce documents) and infringement notices (imposing a financial penalty).

Where court proceedings are commenced, civil penalties for breach of the ACL by body corporates can be up to the greater of:

  • A$10 million;
  • where the benefit obtained can be calculated, three times the value of the benefit; or
  • where the benefit obtained cannot be calculated, 10% of the annual turnover of the body corporate in the preceding 12 months.

For all other persons, the penalty can be up to A$500,000 for each contravention.

However, the More Competition, Better Prices Act increases these civil penalties. For body corporates, the maximum civil penalty will be the greater of:

  • A$50 million;
  • where the benefit obtained can be calculated, three times the value of the benefit; or
  • where the benefit obtained cannot be calculated, 30% of the adjusted turnover of the body corporate during the breach turnover period.

Maximum penalties for individuals will increase to A$2.5 million.

Nevertheless, even without these proposed increases, civil penalties for contraventions of the consumer law have been increasing rapidly in recent years. For example, in 2019, the Federal Court ordered Volkswagen to pay then record penalties of A$125 million for contraventions of the consumer law relating to the emissions of its diesel engines. Notably, the Court imposed a higher penalty than that jointly proposed by the parties. In 2021, that record was broken when the Federal Court ordered AIPE to pay a penalty of A$153 million. In both cases, due to when the conduct in question occurred, the penalties were calculated based on the maximum penalties that applied prior to September 2018.

The ACCC can also seek court orders requiring businesses to publish corrective advertising or implement compliance programs or can disqualify individuals from management positions.

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Last updated 01/01/2023

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Peter Holloway

Partner, Melbourne

Peter Holloway
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Aoife Xuereb

Partner, Melbourne

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