1. Competition & Consumer Act 2010 & the Australian Consumer Law
BEC Workshop
XX August 2013
Presented by Michael Jerabek Education & Engagement Manager (NSW & ACT)

2. Consumer guarantees & voluntary (express) warranties
What will I cover today?
Consumer guarantees & voluntary (express) warranties
Misleading & deceptive conduct/false & misleading representations
Unfair contract terms law
Unconscionable conduct
Product Safety
Scams
Restrictive trade practices
Enforcement of ACL
I have brought along some overview publications on these as well as other provisions of the ACL, so you can refer to them later, and if you need further information you can contact the ACCC or your local office of fair trading.

3. Selling and advertising…
‘If you say something dishonest outright, you’re breaking the law, but simply keeping quiet about something is ok.’
‘A business owner can be liable for comments made on their business’ social media by 3rd parties if those comments are misleading.’
‘A statement may be true in fact yet be considered misleading in law.’
True or False?

4. Faulty goods and/or returns…
A customer tries to return a good purchased from you that is faulty due to a manufacturing defect but you refer her to the manufacturer instead as that is where the source of the problem lies
Signs in store or online:
‘Be warned - No refunds given under any circumstances’
‘No refunds given for change of mind’
‘Refund given on demand for goods in original condition’
What are the implications, if any, of the above?

5. Small business self assessment checklist
You have 15 minutes to complete the checklist
Write down any questions that may come up for you
Feel free to discuss with your neighbour/s when finished

6. Australian Competition & Consumer Commission
National law enforcement agency responsible for administering the Competition and Consumer Act 2010, which aims to:
promote competition and fair trading; and
protect consumers
NSW Fair Trading/Consumer Trader Tenancy Tribunal

7. Consumer guarantees Consumer guarantees apply to:
goods or services of any type up to $40,000 in value (and...)
goods purchased online, over the phone or in person
new & second hand goods
leased, hired & purchased goods
Consumer guarantees do NOT apply to:
auctions (if selling on behalf of another)
one-off sales (e.g. private sales such as car or garage sale)
buying to on-sell (e.g. car repairer purchasing parts to be used in repairs)
If consumers simply change their minds
If consumers misuse the goods
If consumer has not specified what the goods are to be used for and this is not obvious from the circumstances

8. Nine consumer guarantees applying to goods:
Acceptable quality: fit for purpose, acceptable appearance & finish, free from defects, safe & durable (exception)
Reasonably fit for any purpose specified by customer or supplier
Suppliers and manufacturers guarantee that their description is accurate
Suppliers guarantee goods match sample, demonstration model and description
Voluntary (express) warranties to be satisfied
Suppliers guarantee clear title unless customer informed otherwise
Suppliers guarantees undisturbed possession for the customer (some exceptions)
Goods to be free of hidden securities or charges (some exceptions)
Reasonable availability of spare parts & repair facilities for reasonable length of time guaranteed by manufacturer or importer (exception)
If any of these guarantees are not met, the consumer
has a right to a remedy.

9. Three consumer guarantees applying to services
A supplier must meet the consumer guarantees of providing services:
with due care and skill
which are fit for any specified purpose
within a reasonable time (when no time is set)
If any of these guarantees are not met, the consumer
has a right to a remedy.

10. Consumer guarantees – important concepts
Major failure
Minor failure
Consequential loss
Rejection period
Trader’s v manufacturer’s/importer’s responsibility
Consumer guarantees v voluntary warranties
Major problems cannot be fixed or are too difficult to fix.
There is a major failure to comply with a consumer guarantee when:
A reasonable person would not have purchased the product if he/she had known about the problem. Eg. Most people would not buy a car or a boat if they knew it had a serious structural problem that lead to ongoing safety concerns.
The product is significantly different from the description, sample or demonstration model you were shown. Eg. Wrong colour or model
The product is substantially unfit for the purpose and cannot easily be made fit within a reasonable time. Eg. Truck/ute tray capacity is not the volume promised.
The product is substantially unfit for a purpose that you told the supplier about & cannot be made fit within a reasonable time. Eg. Bought car to tow boat but the car not powerful enough for the weight of the boat specified.
The product is not of acceptable quality because it is unsafe. Eg. Vehicle’s brakes don’t work.
A minor failure to comply is one that can normally be fixed or resolved in a reasonable amount of time. If the seller refuses to fix the problem or takes too long, the customer may be able to get the item fixed by someone else and recover the costs from the seller.
Consequential loss.
If costs are incurred or losses suffered as a result of the failure of goods, the customer can also claim for compensation from the seller or manufacturer. Eg. A faulty tap caused flooding and carpet damage. The consumer may claim for compensation to replace the carpet.
It’s important to note that while manufacturers or importers of goods are also legally responsible for some consumer guarantees customers may choose to contact the seller for a remedy and sellers CANNOT tell the consumer to deal with the manufacturer/importer.
Introduce Point of sale signs
Note: it is illegal for businesses to display “No Refunds” signs as these suggest that the business will not provide a refund under any circumstances. Under the consumer guarantees businesses are required to provide a refund if there is a major failure of a consumer guarantee.

11. Misleading & Deceptive Conduct
It is unlawful for a business to make statements in trade or commerce that:
are misleading or deceptive, or
are likely to mislead or deceive
Failing to disclose relevant information, promises, opinions and predictions can be misleading/deceptive
Advertisements, promotions, quotations, statements and any representations made by a person are included
‘Small print’ and disclaimers no excuse
Overall impression considered

12. Some examples…
Silence can be misleading…
(Hardy v Your Tabs Pty. Ltd.)
Disclaimers and small print can be misleading…
(ACCC v Target Australia Pty Ltd [2011] FCA 13260)
Predictions & opinions can be misleading if unreasonable…
(Journal reference: (2009) 17 TPLJ 25)

13. False & Misleading Representations
It is unlawful for a business to make false or misleading representations about goods or services when supplying, offering to supply or promoting them
An offence punishable by a fine of up to $220,000 for an individual and $1.1 million for a body corporate
Representations can be made:
Verbally or in writing
In person, online, over the phone or through correspondence
In packaging/promotional material
Through words, pictures or symbols or combination thereof

14. A business must not make false or misleading representations about:
standard, quality, value or grade of goods & services
place of origin of a product
buyer’s need for the goods or services and whether the goods are new (also their history & use)
sponsorship, approval, performance, benefits and uses of goods and services
price of goods and services
any guarantee, warranty or condition
Also:
Whether a representation is misleading may depend on the characteristics of a specific group
A representation can be misleading even if it s true or partly true

15. Unconscionable conduct
Under the ACL unconscionable conduct covers business to business transactions as well as business to consumer transactions
UC can be described as behaviour which is irreconcilable with what is right or reasonable and is seen as harsh and/or oppressive
Usually involves a stronger party exploiting its bargaining advantage to impose terms or conditions that are unreasonable or against good conscience towards a smaller or weaker party
The ACL includes provisions about unconscionable conduct.
The ACL recognises that there may be circumstances where the manner in which a contract was executed was unconscionable, such as a disparity in bargaining power.
Under the ACL the amendments unify sections 21(consumer UC) and 22 (UC in business transactions) of the ACL. Sections 21 and 22 of the ACL contain almost identical terms, and the meaning of unconscionable conduct under each provision was intended to be the same. The unification will avoid the risk that courts will accord different meanings to the two sets of provisions.
Examples of unconscionable conduct by a business may include:
not properly explaining the conditions of a contract to a person they know does not speak English or has a learning disability
not allowing sufficient time to read an agreement, ask questions or get advice
using a friend or relative of the customer to influence the customer’s decision
inducing a person to sign a blank or one-sided contract
taking advantage of a low-income consumer by making false statements about the real cost of a loan
failing to disclose key contractual terms
using high pressure tactics such as refusing to take ‘no’ for an answer.
“Unconscionable conduct is not a static concept; it has developed in recent years, and continues to be refined as it is interpreted by the courts.” quote from former Commissioner John Martin.
Unconscionable conduct e.g. Allphones April 2010
Fifty-five current and former Allphones franchisees have received payments totalling $3 million from Allphones and its executives for their involvement in unconscionable conduct.
Unconscionable conduct is described as behaviour which is irreconcilable with what is right or reasonable.
The conduct began in 2004 when Allphones commenced a national expansion plan at the direction of its board and newly appointed CEO, Matthew Donnellan. At that time, Allphones structured its franchise system so that the company had control over both the stock and income of franchisees.
As it grew, Allphones represented to potential franchisees that their franchise system was like 'a true partnership' where they shared the profit, assuring franchisees that Allphones would use its bargaining power to their benefit. 
Even while making these representations however, Allphones negotiated commissions and bonuses with suppliers which it did not disclose to franchisees. Allphones also altered documents from carriers, disguising charges.  The court has ordered by consent that in both instances withholding this income was unconscionable.
"This is a blatant case of promising and even contracting to do one thing but doing something completely different – to the detriment of franchisees," acting ACCC chairman Peter Kell said today. 
In 2006, Allphones identified a group of franchisees referring to them in its management reports as 'dickhead franchisees'. To try to ensure franchisees did what they were told, Allphones implemented a business plan targeting franchisees who did not meet performance criteria unilaterally adopted by Allphones, or who were identified as not being 'loyal' to Allphones, to pressure them to sell, transfer or otherwise terminate their franchise. These tactics included:
By consent, Justice Foster of the Federal Court declared these tactics were unconscionable and that Mr Donnellan, Tony Baker and Ian Harkin were knowingly concerned in the unconscionable conduct.
On a number of occasions where franchisees tried to rely on the Franchising Code of Conduct, and discuss their concerns, or implement dispute resolution procedures, Allphones blocked them.
"Bullying franchisees by withholding stock and income is egregious conduct that will not be tolerated," Mr Kell said. "This is some of the worst conduct encountered by the ACCC in dealing with franchisees. It was both systemic and prolonged.  I can only imagine how a franchisee caught on the wrong side of such policies, with their livelihood on the line, must have felt."
Justice Foster of the Federal Court declared that since 2004 Allphones engaged in misleading and deceptive conduct, contravened the Franchising Code of Conduct and engaged in unconscionable conduct in its dealings with franchisees. 
By consent, he ordered that:
the franchisees be paid $3 million in damages for money that had been withheld
the executives Matthew Donnellan, Tony Baker and Ian Harkin had been knowingly concerned in unconscionable conduct
a number of injunctions be imposed to prevent similar conduct in the future, and
the company, Mr Donnellan and Mr Baker pay the ACCC's costs.
The $3 million will be divided amongst the franchisees represented by the ACCC according to the timeframe they were a franchisee and duration and performance of their business. The amount paid reflects underpayment of rebates and commissions and implementation of charges by Allphones.

16. Some examples of possible unconscionable conduct
Failing to disclose important contractual terms
Not allowing sufficient time for consumer to read agreement, seek advice, ask questions & decide
Refusing to deal with legitimate complaints
Not explaining terms of contract to consumers from NESB
Using friends/relatives to influence decision-making
Refusing to accept ‘No’ for an answer

17. Unfair contract terms
ACL enables a court to find a contract term unfair & declare it to be VOID (treated as if it never existed)
Applies to standard form contracts including written and oral – over the phone or face to face.
Applies to contracts entered into on or after 1 July 2010, and terms of contracts altered on or after 1 July 2010
Contract remains binding to the extent that it can operate without the unfair term
A standard form contract is like a contract template – it is a contract between two parties that does not allow for negotiation.
Many small businesses use standard form contracts to set out terms and conditions when they supply goods or services to their customers. These may be drafted by a lawyer for use by the business, or provided by an industry association as part of its services to members. They can save a business time and money as the business is not required to establish a new contract for each customer.
Businesses that use standard form contracts with their customers include gyms, insurance companies, telecommunications companies, regular services such as house cleaners and gardeners, etc.
The ACL provides a national law that makes unfair contract terms between business and consumers illegal. Under this law, a court can find a term of standard form contract is unfair and declare it to be void.
That is, the unfair contract term is treated as if the unfair term never existed, and the contract itself remains binding on the parties to the extent that it can operate without the fair term.
This law applies to contracts in all forms, including written, oral – over the phone or face to face, and online.
If a business seeks to apply or rely on a term that a court has declared unfair, it is breaking the law. In such cases the court can make a variety of orders to stop actions or payments or to provide remedies or compensation to the consumer.
What is unfair?
A term in a standard form consumer contract is unfair if:
it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and
the term is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and
it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
When deciding whether a term is unfair, the court must also consider the contract as a whole, and how transparent the term is within the contract.

18. Unfair contract term test
Does the term create a significant imbalance between rights and obligations of the two parties?
Is the term reasonably necessary to protect legitimate interests of the business?
Would the term cause a detriment (financial or non-financial) if the business tried to enforce it?
How transparent is the term?

19. Product Safety
Imposing mandatory safety standards
Product testing
Issuing public safety warning notices
Issuing compulsory recall notices
Banning unsafe products
Mandatory reporting

20. Scamwatch website how scams work, latest scams, report scams,
register for alerts,
scambuster app,
educational videos etc.
The issue of grant re-sellers…

21. Restrictive Trade Practices
Cartel conduct (s.44)
Anti-competitive agreements (s.45)
Misuse of market power (s.46)
Exclusive dealing (s.47)
Resale price maintenance (s.48)
Prohibition of acquisitions (s.50)

22. Compliance & enforcement outcomes
Education, advice & persuasion
Voluntary industry self-regulation
Administrative resolution
Infringement notices (up to $220,000 for individuals
and $1.1 million for corporations)
Section 87B enforceable undertakings
Court proceedings (declarations, injunctions, public notices, findings of fact, financial redress for injured parties, non-punitive orders, significant pecuniary penalties, convictions, prison sentences)
The ACCC has new powers including:
The power to issue substantiation notices requiring businesses to substantiate claims they make about their products or services
The power to issue public warning notices where it has reasonable grounds for believing that a contravention of certain provisions of the ACL has occurred and that consumers have suffered
The power to issue infringement notices where it has reasonable grounds for believing that a contravention of certain provisions of the ACL has occurred – see amounts on slide
ACL also introduces civil pecuniary penalties (that is, fines ordered by a court) of up to $1.1 million for corporations and $220,000 for individuals who breach the unconscionable conduct and certain provisions of the ACL. There are no pecuniary penalties for breaches of the Consumer Guarantees
The courts can now also, on application by the ACCC, make an order disqualifying a person from managing corporations for a given period if the court is satisfied that the person has contravened or attempted to contravene the law & that the disqualification is justified.

23. New ACCC resource available
Free online education program for small businesses on Australia’s competition and consumer laws

24. Purpose & content of program
Access this free online education program, funded by the ACCC, to learn more about your rights & obligations under the Competition and Consumer Act 2010
There are 10 modules, covering the following topics:
Misleading conduct & advertising
Consumer contracts
Pricing & unfair selling practices
Unconscionable conduct
Consumer rights & guarantees
Exclusive dealing
Selling safe products
Cartels
Scams
Misuse of market power

25. Visit the ACCC website www.accc.gov.au
Further information
Visit the ACCC website
Call the ACCC Infocentre –
Visit the ACL website
Subscribe to the ACCC Small Business Information Network for regular fair trading updates
I have provided you each with a brochure booklet “Consumer guarantees – a guide for businesses and legal practitioners’.
For further information ….refer to slide.
Hand out Subscriber Information Network forms and encourage attendees to fill them in and you collect them before the end of the session.

26. Open forum
Any questions arising from the checklist or the presentation?