1. A USTRALIA B ELGIUM C HINA F RANCE G ERMANY H ONG K ONG SAR I NDONESIA ( A SSOCIATED O FFICE) I TALY J APAN P APUA N EW G UINEA S INGAPORE S PAIN S WEDEN U NITED A RAB E MIRATES U NITED K INGDOM U NITED S TATES OF A MERICA Australian Consumer Law February 2013 Bill Reid, Partner 224202192_1

2. 2 A gallop through the 'new' Australian Consumer Law – from the perspective of a business operator. What must be done/complied with in: –general business dealings, –selling to consumers, –pricing goods and services, –selling outside business premises, and –dealing with unsafe goods. Overview

3. 3 s18 – Misleading or deceptive conduct Section 18 ACL in the same form as the old s52 TPA. – Representation "with respect to a future matter" will be misleading unless there are "reasonable grounds for making the representation" – s4. Hot spots include: – "was/is now" advertising: Zamels; "Was $275, Now $149" advertising - $250,000 pecuniary penalty, Jan 2013. – country of origin representations: King Island Meatworks (not on King Island), pecuniary penalty of $50,000, Feb 2013 (see also s254 and following); – comparative advertising: Spectacles cases (Specsavers and Luxottica, 2010) are two instances of misleading comparative advertising – "heavy responsibility" to get it right. – "green" representations: Pepe's Ducks: "open range" and "grown nature's way": pecuniary penalty of $400,000 and corrective advertising, Dec 2012. General business dealings

4. 4 s18 – Misleading or deceptive conduct (continued) Intermediaries: recent Google case (High Court, 6 Feb 2013) determined that whether a publisher or other intermediary will contravene s18 depends on whether "the corporation has adopted or endorsed that representation". Remedies include: – ACCC may accept an undertaking (s218), – substantiation notices (s219), – public warning notices (s223), – injunctions (s232), – damages (s236), – compensation orders, including orders (other than damages) for "non-party consumers" (s237 etc, see esp s243 for list of non-party orders), – "non-punitive" orders (eg community service) (s246), and – disqualification orders (s248). No fines or pecuniary penalties can be imposed for s18 contravention (but see further below). General business dealings (cont)

5. 5 s29 – False or misleading conduct Section 29 in similar form to old s53 TPA: sets out false and misleading conduct to which criminal fines (see s151), pecuniary penalties etc apply. – New prohibition re misleading representation re paying for a warranty/guarantee that is equivalent to a statutory guarantee in the ACL. Remedies/penalties include those for s18, plus: – criminal fines (s151 – up to $1.1m for corporations), – pecuniary penalties (s224 – up to $1.1m for corporations), – infringement notices (s134 CCA etc – $102k for corporations), and – adverse publicity orders (s247). General business dealings (cont)

6. 6 s30 to s38 – Other false/misleading practices These include false/misleading conduct re: – the sale of land, – employment, – offering rebates, gifts, prizes etc, – nature of goods or services, – bait advertising, – accepting payment for goods/services, and – business activities. All similar to the old provisions in the TPA. Remedies/penalties are as per s29 above. General business dealings (cont)

7. 7 ss20, 21, 22 – Unconscionable conduct Provisions are similar to old s51AA (unconscionable per the "unwritten law") and s51AB (unconscionable conduct re goods/services). New s21 applies to all business dealings, other than those with a publicly listed corporation (previously consumer dealings only). Remedies same as for s18, plus: – pecuniary penalties (s224 – up to $1.1m for corporations), – infringement notices (s134 CCA etc – up to $102k for corporations), and – adverse publicity orders (s247). Set out in s21 is a statement of Parliamentary "intentions": – not limited to unwritten law approach, – applies to a system/pattern of behaviour whether or not anyone disadvantaged, and – where conduct concerns a contract, the court may consider its terms and how they are carried out. General business dealings (cont)

8. 8 S23 – Unfair contract terms S23: a term of a "consumer contract" is void if: – it is "unfair", and – the contract is in a "standard form", although contract will continue to bind parties if it can operate without the unfair term. Effective from 1 July 2010. – Consumer contract is for supply of goods/services or an interest in land, acquired for "personal, domestic or household use or consumption". – Reversed onus re what is a standard form – relevant factors include: » relative bargaining power of the parties, » whether prepared by one party/ opportunity to negotiate terms, » whether contract takes into account specific characteristics of party/transaction. Selling to consumers

9. 9 S23 – Unfair contract terms (con't) S24: term is unfair where: – the term would "cause a significant imbalance" in rights/obligations, AND – the term is "not reasonably necessary … to protect legitimate interests" of a party (evidentiary onus reversed), AND – the term would "cause detriment" if applied or relied upon. Transparency of terms is relevant. S25 sets out examples of "kinds of terms that may be unfair". Most concern unilateral rights to amend, terminate, renew the contract or exercise rights. Remedies – Court may declare a term of a consumer contract as "unfair" per s250. – Injunctions (s232) and compensation orders per s237 and s239 (non-party consumers) may then be made. Selling to consumers (cont)

10. 10 Part 3-2, Div 1 – Consumer guarantees New consumer guarantees – but in similar terms to the consumer warranties previously provided for in the TPA. Guarantees as to: – title to goods – s51, – undisturbed possession – s52, – undisclosed securities – s53, – acceptable quality (fit for purpose, free from defects, safe, durable) – s54, – fitness of goods/services for any disclosed purpose – ss55 and 61, – supply in accordance with description, sample, demonstration – ss56 and 57, – availability of spare parts and repair facilities – s58, – compliance with any express warranties made or offered – s59, – services supplied with due care and skill – s60, and – services supplied in reasonable time – s62. Selling to consumers (cont)

11. 11 Part 3-2, Div 1 – Consumer guarantees (cont) Any contract term which excludes, modifies or restricts these guarantees is void (s64) - except permissible limitation of liability to replacement or supply again, where not supplied for personal, domestic or household use or consumption (provided it is fair and reasonable) – s64A. The main change from the old TPA is the introduction of statutory remedies if guarantees are not complied with. See sections 259 to 270. Where there is a "major failure" (see s260), the consumer may reject the goods/terminate the services and obtain a refund – ss259 and 267. Recipient of a gift is in the same position as purchasing consumer – s266. Selling to consumers (cont)

12. 12 S102 – Voluntary warranty against defects If a supplier gives a "warranty against defects" (WAD), it must comply with s102 and regulation 90. These require that any document that "evidences" a WAD must: – be "transparent", – state what must be done by supplier/consumer to honour/claim the warranty, – prominently state supplier's name, address, phone, email etc, – state the period in which to claim on warranty, – set out the procedure to claim, – state who will bear the expense of claiming and how they will be paid, – state that the WAD rights are in addition to other rights/remedies under the law, and – include the text in blue on the following slide. These requirements mean that a "swing tag", for example, must say … Selling to consumers (cont)

13. 13 Selling to consumers (cont)

14. 14 S102 – Voluntary warranty against defects (cont) It is an offence to give a consumer a document that evidences a WAD that does not comply with the prescribed form under s102, reg 90 – see s192 (fine of $50,000 for corporations). S59 requires that any voluntary, "express warranty" offered to consumers by either: – a manufacturer, or – a supplier, will be the subject of a consumer guarantee that the supplier will comply with the WAD. Voluntary WAD's must be carefully reviewed and monitored for compliance! Selling to consumers (cont)

15. 15 Ss47 and 48 – pricing of goods/services If multiple prices are "displayed" for goods, the lowest of those prices must apply – s47 and s165 (criminal offence - $5,000 fine for corporations). A supplier of goods/services for personal, domestic or household use/consumption, must not represent "part of the consideration", unless the "single price" (ie total price including taxes etc) is also displayed prominently - s48 and s166 (criminal offence - $1.1m fine for corporations). Air Asia Berhad – penalty of $200,000, for not including all taxes, duties and fees in prices on its website – contravened s48, Dec 2012. ACCC recently issued proceedings against Abel Rent a Car: alleging "administration fees" and "vehicle registration recovery fees" were not included in quoted prices – but under s18 and s29 only. Pricing goods/services

16. 16 Unsolicited consumer agreements (door to door sales) Part 3-2, Div 2 sets out detailed rules on "unsolicited consumer agreements" and how they may be negotiated and agreed. In short, any unsolicited dealing re goods/services, between a "dealer" and a consumer, any part of which occurs by phone or not at the trade premises of the supplier, must comply with the rules. Prominent requirements are: – regulated visiting hours, requirement to leave premises, disclosure/notice requirements, and form of agreement, – 10 day cooling off period, and prohibition on supplying goods or accepting payment in that period, – consumer cannot waive rights. Sanctions for failing to comply with these requirements include criminal offences (see Part 4-2, Div 2 - $50,000 fine, per contravention) for corporations). Selling outside business premises

17. 17 Unsolicited goods and services Asserting a right to payment for unsolicited goods/services, or for unauthorised placement of an entry or advertisement in a publication is a criminal offence (ss40 and 43, ss162 and 163 – up to $1.1m for corporations). Unsolicited – goods/services sent/supplied without any request being made by the consumer – s2. Consumer may retain any unsolicited goods unless collected inside 3 months/1 month (if consumer gives notice). Any goods supplied under an unsolicited consumer agreement inside the 10 day cooling off period are unsolicited goods for these purposes (s86) Selling outside business premises (cont)

18. 18 Ss122 and 128 – Product recalls Compulsory: the Minister may issue a recall notice for consumer goods if: – those consumer goods are being supplied, – it appears the goods will/may cause injury to any person, or the goods do not comply with a safety standard, and – suppliers have not taken satisfactory action to prevent the goods from causing injury. Failure to comply with a compulsory recall notice is a criminal offence – s199 (fine $1.1m for corporations). Voluntary: a person may voluntarily issue a recall notice in the same circumstances as above (or if a ban on the goods is in force). – Must give notice to the Minister within 2 days. Unsafe consumer goods

19. 19 Part 3-3 – Safety standards etc Minister may declare safety standards for goods/services as per Standards Australia standards – s105 It is an offence to supply goods/services that do not comply with safety standards – ss106, 107 and ss194, 195 (fines $1.1m for corporations). The Minister may impose interim and permanent bans on goods/services. These must be complied with per ss118, 119 and s197, 198 (fines $1.1m for corporations). Unsafe consumer goods (cont)

20. 20 Various… Pyramid selling: Mr Stott disqualified as a company director for involvement in a pyramid scheme, by Crimeguard – 18 Feb. Lay-by agreements – must be in writing and rules as to termination etc – ss96 to 99. Right to an itemised bill – s101 Rules as to Manufacturer's liability for goods with safety defects – Part 3-5. Referral selling – offering rebates for prospective customer referrals – s49 and s167 ($1.1m penalty for corporations) No physical force or undue harassment and coercion re supply or payment for goods/services – s50 and s168 ($1.1m penalty for corporations). Other prohibitions …

21. A USTRALIA B ELGIUM C HINA F RANCE G ERMANY H ONG K ONG SAR I NDONESIA ( A SSOCIATED O FFICE) I TALY J APAN P APUA N EW G UINEA S INGAPORE S PAIN S WEDEN U NITED A RAB E MIRATES U NITED K INGDOM U NITED S TATES OF A MERICA This presentation material is intended to provide a summary of the subject matter covered for training purposes only. It does not purport to be comprehensive or to render legal advice. No reader should act on the basis of any matter contained in this presentation without first obtaining specific professional advice. 222386349