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2105AFEINTRODUCTION TO BUSINESS LAWLecture 8Module 2 – Con.docxvickeryr87
2105AFE
INTRODUCTION TO BUSINESS LAW
Lecture 8
Module 2 – Consumer Protection
Covers: Australian Consumer Law
1
1
Objectives
On completion of this lecture, you should be able to understand, recognise and discuss a general overview of the Australian Consumer Law (ACL):
Key sections in regard to definitions and those sections that apply to:
parties involved
new statutory consumer guarantees
manufacturers liability
specific false representation provisions
country of origin claims
misleading and deceptive conduct
unconscionable conduct
unfair contract terms
regulators (and ministers) new prohibition, investigation and enforcement powers
Note that the ACL also provides for:
unsolicited supplies and selling practices
lay-by agreements
linked credit contracts
other prohibited business conduct
2
2
Part 1: overview of acl
3
Introduction and Purpose of the ACL
The Competition and Consumer Act 2010 (Cth) (CCA) was introduced on 1 January 2011. It provided new national uniform laws offering consumer protection.
Act of the Australian Federal (Commonwealth) Parliament applying to all jurisdictions (Federal, State & Territory level).
Replaced provisions across 20 State and Territory (Fair Trading related) Acts, plus amended and renamed the Trade Practices Act 1974 (Cth) (TPA) as the CCA.
Australian courts and tribunals (including those of the states and territories) can enforce the ACL, including the Australian Competition Tribunal (ACT) or QCAT.
The consumer protection provisions of the former Trade Practices Act 1974 (Cth) (TPA) were generally directed towards conduct engaged in by corporations, but the ACL has a much broader application to conduct engaged in by persons.
Much of the case law discussed in this chapter was decided under the corresponding provisions of the former TPA.
Specifically, the Australian Consumer Law (ACL) covers consumer protection and its provisions are located in (Volume 3) Schedule 2 of the CCA
Protecting consumers from the unfair practices of businesses.
In effect it is a response to the recognised need for new systems and procedures to protect consumers under one national law, rather than many different but similar laws across the Nation.
4
Who regulates the CCA?
5
We are discussing legislation so what do you think are the main issues you need to consider in answering any consumer law question?
5
Australian Competition and Consumer Commission (ACCC)
The ACCC promotes competition and fair trade in the market place to benefit consumers, businesses and the community. It also regulates national infrastructure services. Its primary responsibility is to ensure that individuals and businesses comply with the Commonwealth competition, fair trading and consumer protection laws.
www.accc.gov.au
For consumers
(can often include a business)
The ACCC is provides information about consumer rights & how to make a complaint and prosecutes companies engaging in the misconduct. http://www.acc.
In this presentation delivered at the Law Society of Upper Canada’s Six Minute Business Lawyer Conference on June 6, 2013, Bill Hearn addresses recent developments and trends in Canadian consumer protection law.
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2. Consumer Protection Law
2
The Competition and Consumer Act 2010
(CCA) is a new national uniform law that
provides for consumer protection. It was
introduced in January 2011.
The Australian Consumer Law ('ACL') is
Schedule 2 of the Competition and
Consumer Act 2010
The purpose of the Competition and Consumer Act
2010 is to protect consumers from unfair business
practices.
The Competition and Consumer Act (CCA) is an act
of the Parliament of Australia and so it applies at
both State and Federal level.
https://www.youtube.com/watch?v=ze_nqcHylgk
3. The Competition and Consumer Act 2010
The CCA provides for:
• A national product safety regime
• An investigation and enforcement regime
• An unfair contract terms regime
• A regime for other unfair practices
• Prohibitions against specific types of unfair
practices
• False or misleading representations
• New statutory consumer guarantees
3
4. The Competition and Consumer Act 2010 (cont.)
• Multiple pricing
• Lay-by agreements
• Country of origin claims
• Linked credit contracts
• Unsolicited supplies and selling practices
Check out The
Website: http://www.abc.net.au/tv/thecheckou
t/clips/?play=checkout_01_03_returninggoods.
mp4
4
5. The Competition and Consumer Act 2010
• The Competition and Consumer Act 2010 is
designed to protect you as a consumer in your
dealings with business.
• S2 CCA - The object of the Act is to enhance the
welfare of Australians through the promotion of
competition and fair trading and provision for
consumer protection.
5
6. Types of businesses affected by CCA reforms
will include those who offer:
• Banking or financial services, loans, and credit card contracts;
• Software licences;
• Mobile phone and telecommunications contracts;
• Domestic building contracts;
• Many online sales (ebay, iTunes etc);
• Gym memberships;
• Utilities;
• Pay-TV subscriptions;
• Travel services; and
• Motor vehicles and/or services.
6
7. Who does the legislation apply to?
In Australia, the Competition and Consumer Act 2010
(Cth) generally applies to the activities of corporations
and to individuals in certain circumstances.
Accordingly, the Act applies to:
(1)The activities of corporations;
(2)Commonwealth departments and statutory corporations;
(3)Individuals (including sole traders, partnerships, and other
unincorporated bodies) who:
• engage in interstate or overseas trade and commerce;
• use telephones or the mail;
• advertise on radio or television;
• trade with Commonwealth instrumentalities.
7
8. Who is the “Consumer” under the
Competition and Consumer Act
2010?
Definition: Consumer – Section 3 ACL
“Consumer”, in relation to an industry, means a
person to whom goods or services are or may
be supplied by participants in the industry
8
9. ACCC
• The Australian Competition and Consumer Commission
(ACCC)
The ACCC promotes competition and fair trade in the
market place to benefit consumers, businesses and the
community. It also regulates national infrastructure
services. Its primary responsibility is to ensure that
individuals and businesses comply with the Commonwealth
competition, fair trading and consumer protection laws.
For consumers
The ACCC is a resource that provides information about
your consumer rights or how to make a complaint?
9
10. ACCC
For businesses
The ACCC provides small business with
support in regard to required standards of
goods an services, franchising, mergers,
authorisations, obligations, professions and
industry codes of conduct
10
11. ACL Consumer Protection Provisions
(1) Misleading and deceptive conduct: ss18-19
(2) Unconscionable conduct: ss20-22
(3) Unfair Terms: s24-25
(4) False Representation: s29
(5) Resale Price Maintenance: ss48
(6)Conditions and warranties- goods and services: ss54-56
(7) Liability of credit providers: s274
(8)Actions against manufacturers and importers for
defective goods: ss138-150
(9) Product safety and product standards: ss106,122,12311
12. Misleading or Deceptive Conduct – s18 ACL
(CCA)
Definition: Misleading or deceptive:
• To lead into error
• Believe in something which is false
• To lead astray
Misleading- “to lead astray in action or conduct;
to lead into error, to cause to err”.
Deceptive – to deceive-
“to cause to believe what is false;
12
13. Misleading or Deceptive Conduct – s18
• Section 18 ACL (CCA): A person must not, in
trade or commerce*, engage in conduct that is
misleading or deceptive or is likely to mislead
or deceive
* trade or commerce: the conduct must have a
trading or commercial character
Case Example: eBay International AG v
Creative Festival Entertainment Pty Ltd (2006)
13
14. What is Conduct?
Puffs, opinions, literal truth, Silence, failure to
disclose, or the giving of incomplete information can be
misleading conduct.
Example:
Henjo Investments Pty Ltd. v Collins Marrickville Pty Ltd. (1988)
Facts:
Henjo agreed to sell a restaurant to Collins. The restaurant contained
seating for 128 people. The terms of the licence for the restaurant
limited seating capacity to 84 persons.
Held:
The court held that the Henjo Pty Ltd had a duty to disclose the
details of the licence; it knew that the physical appearance of the
restaurant gave a false impression and it should have corrected this.
14
15. Misleading or Deceptive Conduct – s18
Whether conduct is misleading or deceptive or is likely to mislead or deceive
depends upon 4 factors - Taco Company of Australia Inc v Taco Bell Pty Ltd (1982):
•Identify the relevant section (or sections) of the public (which may be the public
at large) targeted by the conduct of the defendant.
•Determine the effect of the defendant’s conduct on the relevant section or
sections of the public, ‘including the astute and the gullible, the intelligent and
the not-so-intelligent, the well-educated as well as the poorly educated, men and
women of various ages pursuing a variety of vocations’.
•Decide whether the conduct was capable of being misleading or deceptive or
likely to mislead or deceive the relevant section or sections of the public.
•**Note: **Only a small percentage of the relevant section of the public needs to
be affected.
•Decide whether the conduct of the defendant caused the misconception.
15
16. Misleading or Deceptive Conduct – s18
Conduct that causes confusion only will not necessarily
amount to misleading and deceptive conduct.
McWilliam’s Wines Pty Ltd v McDonald’s Pty Ltd (1980)
• Facts: McDonalds extensively advertised a hamburger under the name
“Big Mac”. McWilliam’s a well-known wine company, started to
advertise its wines using the words “Big Mac” prominently displayed in
the advertisements. McDonalds sought an injunction under s52
alleging that McWilliams use of words “Big Mac” was conduct that was
misleading or deceptive.
• Held: Not a breach of s18. Use of words “Big Mac” may cause
confusion as to whether there was a business connection between
McWilliam’s and McDonald’s but such a person was not misled by the
advertisement into believing that there was such a connection.
Conduct which merely tends to cause confusion will not ordinarily be
sufficient to constitute misleading or deceptive conduct under s18
16
17. Misleading or deceptive conduct s19 ACL
(CCA) – ‘information providers’
• ACL exempts certain ‘information providers’ (including the
news media), from the general prohibition of misleading
or deceptive conduct: s19.
• However, the exemption does not extend to:
• statements made in an advertising context, s19(2)
• misleading statements made under a contract,
arrangement or understanding with a person supplying
goods or services of the type which was the subject of
the publication: s19(3); Australian Competition and
Consumer Commission v Channel Seven Brisbane Pty Ltd
18. UNCONSCIONABLE CONDUCT - s20-22 ACL
(CCA)
Section 20 of the CCA states that a corporation or a company
shall not, in trade or commerce, engage in conduct that is
unconscionable or unfair.
The ACL (CCA) deals with various types of unconscionable conduct:
S20 ACL (CCA) - General unconscionability within the meaning of the
unwritten law
s21 ACL (CCA) - More specific - Unconscionability in the supply of goods
and services to another person or the acquisition of goods and services
from a person
s22 ACL (CCA) – Matters the court may have regard to for determining
breach of s21
18
19. What is an “Unconscionable Conduct”?
• Unconscionable conduct occurs when the stronger party in
a transaction acts unfairly, usually by taking advantage of
the other party’s disability or disabilities.
• This is aimed at redressing the imbalance in bargaining
power between sellers and buyers. So it incorporates
greater protections for buyers.
19
20. Case Example:
Commercial Bank of Australia Ltd v Amadio (1983)
Facts:
Two elderly parents of Italian origin (aged 76 and 71) Limited English.
Persuaded by their son Vince and local bank branch (Vince a major
customer thereof) to guarantee and mortgage their home to the bank
as security for son’s company bank loan.
Parents believed liability limited to $50,000 for six months as son and
bank did not disclose true position. In reality the liability was $240,000.
Held: The mortgage and guarantee were set aside as unconscionable on
basis would not have signed if they had known the state of the
company’s account and its insolvency.
20
21. The elements for establishing unconscionable conduct:
Commercial Bank of Australia Ltd v Amadio
1. The weaker party was in a position of ‘special
disadvantage’ - special disadvantage – includes poverty,
sickness, age, sex, drunkenness, illiteracy, lack of
education, emotional dependence.
2. The ‘special disadvantage’ prohibited the weaker party from
protecting him/herself
3. The stronger party knew of the ‘special disadvantage’ and
took advantage of the weaker party’s special disadvantage.
4. The act of the defendant was unconscionable (unfair ,unjust)
21
22. **Vote Break**Unconscionable conduct
• Section 21(1) ACL (CCA): A person must not, in trade or
commerce, in connection with the supply or possible supply
of goods or services to another person, engage in conduct
that is, in all the circumstances, unconscionable
• S22(1 &2) List of factors for determining breach of s21 – not
exhaustive
• Bargaining strengths of supplier and consumer
• Whether consumer required to comply with unnecessary
conditions
• Whether consumer was able to understand any documents
relating to the supply of goods & services
22
23. Unconscionable conduct
• S22(1 &2) List of factors for determining breach of s21
– not exhaustive - Continued
• Whether undue influence or pressure exerted or
unfair tactics used against the consumer
• The amount for which the consumer could have
acquired identical or equivalent goods & services from
a person other than the supplier
• Supplier’s conduct consistent with its conduct towards
other business consumers in similar transactions
• Compliance with industry codes (if any)
• Non-disclosure of any conduct that may affect the
business consumer or add to its risks
23
24. Case Example: ACCC v Lux Pty Ltd (2004)
Facts:
The ACCC alleged that Lux Pty Ltd engaged in unconscionable
conduct in relation to the door-to-door sale of a $945 Lux vacuum
cleaner to a clearly vulnerable woman while she was home alone
at her house in Port Pirie, South Australia. The vacuum cleaner
salesman was overbearing, stood too close, spoke strongly, and
wrongly made out that the consumer’s existing vacuum cleaner
was going to “blow up”.
Held:
The conduct was unconscionable because of the relative bargaining
strengths of the parties; the consumer’s limited capacity to understand
the contract and the salesman’s pressure.
24
25. Prohibition of unfair contract terms
S 23 ACL (CCA) Unfair terms of consumer contracts
•(1) A term of a consumer contract is void if:
•(a) the term is unfair; and
•(b) the contract is a standard form contract.
“Consumer contract” – S 23(2):
•(a) a supply of goods or services; or
•(b) a sale or grant of an interest in land;
•to an individual whose acquisition of the goods, services or
interest is wholly or predominantly for personal, domestic or
household use or consumption.
•Consumer contracts are not for re-supply or for transforming
them in trade or commerce in manufacture etc.
26. Prohibition of unfair contract terms
S 24(1) ACL (CCA) “unfair” - A term of a consumer contract is unfair if:
•(a) it would cause a significant imbalance in the parties’ rights and
obligations arising under the contract; and
•(b) it is not reasonably necessary in order to protect the legitimate
interests of the party who would be advantaged by the term; and
•(c) it would cause detriment (whether financial or otherwise) to a
party if it were to be applied or relied on.
S24 (2&3) - Possible Defences for Person relying on Unfair Terms:
•(a) the extent to which the term is transparent;
– expressed in reasonably plain language; and
– legible; and
– presented clearly; and
– readily available to any party affected by the term.
•(b) the contract as a whole.
26
27. Examples of Unfair Terms S25(1) ACL (CCA)
S25(1) lists examples of unfair terms in contracts – the
following are some examples from s25(1)
•A term that allows one party to avoid or limit
performance of the contract, but not the other party;
•A term that allows one party to terminate the contract,
but not the other party;
•A term that penalises one party for a breach or
termination of the contract, but not the other party;
•A term that permits one party to change the
characteristics of the goods or services to be supplied, or
the interest in land to be sold or granted, under the
contract, but not the other party;
27
28. False or Misleading Representations – S29 ACL (CCA)
S29(1) ACL (CCA) A person must not, in trade or commerce, in connection
With the supply or possible supply of goods or services or in connection
with the promotion by any means of the supply or use of goods or services.
Examples:
• (a) & (b) that goods or services are of a particular standard, quality,
value or grade
• (c) that goods are new
• (g) that goods or services have sponsorship, approval, performance
characteristics, accessories, uses or benefits
• (i) with respect to the price of goods or services
• (j) concerning the availability of facilities for the repair of goods or of
spare parts for goods
• (k) concerning the place of origin of goods
• (l) concerning the need for any goods or services
• (m) concerning the existence, exclusion or effect of any condition,
warranty, guarantee, right or remedy 28
29. False or Misleading Representations
Some Examples:
•A statements or representations about “price” in relation
to range of goods and services may give a misleading
impression of the price.
Ascot Four Pty Ltd v ACCC (2009)
Facts: A jeweller breached (s75AZ(1)(g) TPA) – now
s29(1)(i) CCA by displaying price tags on jewellery that
showed the ‘original’ price and then the reduced price, like
this: “Was $50!! Now $39!!!”. The jewellery however had never
been offered for sale at the higher price or even close to it.
•Price reduction must be real and genuinely less than the
normal price, and should actually benefit the purchaser.
29
30. False or Misleading Representations
Case Example:
Hartnell v Sharp Corp (1975)
Sharp advertised that their microwaves were of a specific
quality and that they were tested and endorsed by the
Standards Authority of Australia. The statement was
completely false.
HELD: The Full Court of the Australian Industrial Court held that
Sharp had falsely represented that the goods were of a
particular standard or quality when they were not and so was
a breach of the TPA - now s29(a) and (b) ACL (CCA)
30
31. False and Misleading Representations -
s29
• Furniture and Bedding Concepts Ltd (“FBC”) owns
and operates Sleep City and Everyday Living Stores.
In its 2008 Spring catalogue, FBC advertised bedding
and furniture in the form of “Now $X, save $Y”. The
save amounts were based on FBC’s internally set
recommended retail prices, not the prices which the
products were offered, or sold, for a reasonable time
immediately before the sale.
31
32. Resale Price Maintenance s48 ACL (CCA)
• S48CCA - A corporation or other person shall
not engage in the practice of resale price
maintenance.
• Resale price maintenance refers to a prohibition on
manufacturers, importers and wholesalers not to
force (coerce) retailers to sell, lease or hire goods or
services for a specific price.
• The purpose of s48CCA is to protect consumers
against unfair pricing and to enhance free market
competition
32
33. Manufacturers’ liability for defective goods
The basic premise of manufacturers liability for
defective goods is that:
• Goods must be of acceptable quality s54(1) ACL (CCA)
• Goods must be fit for the disclosed purpose s55(1) ACL
(CCA)
• Goods must correspond with the purpose s56(1) ACL
(CCA)
Note: The premise for manufacturer’s liability does not
include goods presented at auction
33
34. Manufacturers’ liability for defective goods
• Liability for non-compliance with the statutory
guarantees of fitness for disclosed purpose -
s55(1) and acceptable quality – s54(1) does
not depend on proof of negligence but on the
existence of a contractual relationship
between the parties. See Pt 3-2, ss51-56.
• Certain guarantees as to quality also apply in
contracts for the supply of services to a
consumer: ss60-61.
35. National product safety regime - ss106,122,123
Under the provisions of the CCA the Minister is now empowered to:
• Issue public warning notices about consumer goods or
services
• require mandatory recalls of consumer goods
• impose interim or permanent bans on the supply of consumer
goods or services
• make mandatory safety and information standards
• Require all supply chain participants to report goods or
product related services that have caused or may have caused
serious injury, illness or death, within 48 hours
• Apply threshold test for safety bans and recalls based on the
concept of reasonably foreseeable of use and misuse of goods
• Conduct market surveillance powers
35
36. Other prohibited business conduct
• ACL also prohibits certain other kinds of
business conduct in relation to the supply of
goods and services:
•Misleading conduct : employment
•Offering rebates, gifts, prizes, or
other free items with the intention of
not providing them as offered
•Misleading conduct re nature of or
manufacturing process of goods
•Misleading conduct re services
•Bait advertising
•Accepting payment without being
able to supply as ordered
•Sending unsolicited credit /debit
cards
•Assertion of right to payment for
unsolicited goods or services
•Recipient not liable to pay for
unsolicited goods or services
•Assertion of right to payment for
unauthorised entries or ads
•Pyramid selling
•Pricing
•Referral selling
•Harassment and coercion
37. Guarantee relating to the supply of goods by
description – Bait Advertising – S56 ACL (CCA)
• Section 56 ACL (CCA) – bait advertising – false
advertisements intended to induce potential
customers to go to a store, but there is no
intention to supply the advertised goods at
the advertised prices
• Example: False advertisements about the
price of goods that are either priced more
expensively or are not there at the store
when customers arrive
37
38. Country of Origin Claims
Goods labelled ‘Made in Australia’:
ss255-257 ACL (CCA) Goods can only be labelled ‘made in
Australia’ if:
• More than 50% of the cost of their production was incurred in
Australia; and
• They have been substantially transformed in Australia.
Example:
An offence would be committed under this provision if a
product manufactured in a foreign country, but it was still
labelled "Made in Australia".
38
40. Remedies
Criminal Penalties -
Criminal penalties are available under the ACL (CCA) for
certain contraventions however preference is given to
compensating victims
Damages / Compensation: ss236, 237
Damages are a pecuniary compensation or indemnity, which
may be recovered in the courts by any person who has
suffered loss, detriment or injury, whether to his person,
property, or rights, through the unlawful act or omission or
negligence of another. Gates v City Mutual Life Assurance
Society Ltd
Damages may be compensatory or punitive according to
whether they are awarded as the measure of actual loss
suffered or as punishment for outrageous conduct.
Note: $$ may be reduced if Court finds that the plaintiff is partly responsible for their
loss
40
41. Remedies
s224 Civil Pecuniary Penalty:
• Does not apply to misleading or deceptive conduct
s151 Fines:
• Only applies to a breach of s29 in relation to false or
misleading representation about goods and services
s218 Court enforceable undertakings:
• If undertaking breached, Court can make any
appropriate orders
41
42. Remedies
s243 Other Orders:
Includes, but is not limited to:
• Declaration that a contract is void
• Refusal to enforce some of the contract terms
• Variation of a contract
• Refund money or return property
• Repair of or provide parts for goods
42
43. Unfair practices: other enforcement provisions
• In addition to the criminal penalties and pecuniary
penalties, the ACL provides the courts and the ACCC
with the following enforcement measures
• Examples s246 and s247 – corrective advertising
undertakings
substantiation
notice
public warning
notice
non-punitive
orders
adverse publicity
order
order disqualifying
a person from
managing
corporations