Businesses obligations when trading online – Competition and Consumer Act 2010

The advent of the internet and electronic commerce has opened up numerous channels for businesses to sell to customers.  It could also be said that social media has created new ways of engaged with consumers.  In some respect the courts have struggled to keep up with the application of the law to the development of the technology.

Evolution of the law governing sales of goods or services online

The application of what was once widely known as “trade practices and competition law” has been superseded by the Competition and Consumer Act 2010 (Cth) (CCA).   The CCA provides various avenues against businesses engaged in poor trade practices.  That said, there may also be a number of other avenues open to those aggrieved by a businesses conduct online.

Misleading and deceptive conduct – s18 Part 2-1 – The shot gun!

The catch all in any commercial litigation the misleading and deceptive conduct provisions which were previously contained in section 52 of the Trade Practices Act 1974 (Cth) (TPA) are now contained in section 18 of Schedule 2 of the CCA as follows:

A person, must not, in trade or commerce, engage in conduct in conduct that is misleading or deceptive or is likely to mislead or deceive.[1]

The provisions which relate to the supply, order or delivery of goods are discussed below.

Interpretation of the statutory provisions

A useful analysis of the elements to establish whether conduct is likely to be misleading and deceptive is contained in Australian Competition and Consumer Commission (ACCC) v Dukemaster [2] where Gordon J restated the following principles:

    • There must be “conduct” in the circumstances, must lead, or be capable of leading a person into error;[3]
    • The error or misconception must be caused by the conduct of the corporation;[4]
    • To mislead and deceive there must be a real and not remote chance that it will mislead;[5]
    • The conduct as must be considered in context and not in isolation[6];
    • The test is an objective one which a Court must determine for itself[7];

Misleading and deceptive online conduct

In Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd[8](Specsavers) an application was made for interlocutory relief based on allegations of misleading and deceptive conduct pursuant to section 18 and also section 48’s single price provisions.   In another case on the single price provisions the ACCC sought and obtained interlocutory relief (Injunction) against Abel Rent a Car to restrain the company from advertising its prices with the extras at $29.[9]

Single price representation – s48(1) Division 4 – Pricing

In Specsavers, it was held that that the representation ‘Focus Dailies Lenses Only $18.99’[10] contravened the single price provisions of section 48(1) as 6.95% was added to every order for insurance and handling.[11] It was further held that the disclaimer ‘see website for details’ did not cause the conduct to fall within an exception to the single price provisions of section 48(3) of the CCA.[12]

Is there enough for an injunction?

In Specsavers, Jacobson J at 21 stated that there was ‘sufficient likelihood of success to establish a prima facie case’ citing the thresholds to be met in Australian Broadcasting Corporation v O’Neill.[13]

The relevant principles that apply where an application for an interlocutory injunction is made were stated in the joint judgement of Gleenson CJ and Creenan J citing Beecham Group Ltd v Bristol Laboratories Pty Ltd.[14]  Firstly

whether the plaintiff had made out a prima facie case in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief’[15]; and

‘whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.[16]

Unconscionable conduct sections 20 and 21

Section 21(1) provides that:

“a person must not in trade or commerce in connection with:

    • the possible supply of goods or services (other than a listed public company); or
    • the acquisition of goods or services from a person other than a listed public company, engage in conduct that is in all the circumstances, unconscionable.[17]

Whilst it would seem that unconscionable conduct occurs only in relation to consumer transactions, it applies equally to contracts between two corporations[18] other than listed public companies.

That said, there is a paucity of case law relating to unconscionable conduct and electronic commerce.

Unfair contract terms – section 23 – Part 2-3

Part 2-3 of Schedule 2 of the CCA regulates unfair contract terms[19] in consumer contracts.  Section 23 provides:

“A term of a consumer contract is void if:

(a) the term is unfair; and

(b) the contract is a standard form contract.

(2) The contract continues to bind the parties if it is capable of operating without the unfair term.

(3) A consumer contract is a contract for:

(a) a supply of goods or services; or

(b) a sale or grant of an interest in land;

To an individual whose acquisition of goods, services or interest is wholly or predominantly for personal, domestic or household use of consumption.[20]

What is an unfair contract term?

The CCA defines an unfair contact term as one that:

    • would cause significant imbalance in the parties’ rights and obligations;
    • is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term;
    • it would cause detriment (whether financial or otherwise) to a party if it were to be relied on.[21]

Examples of unfair contract terms

Section 25 provides a list of thirteen examples of consumer contracts that may be unfair.  Generally these provisions are “one sided” in nature.  For example:

    • a term that provides that for one party to avoid the contract but not the other;[22]
    • one party to terminate the contract, but not the other;[23]
    • a penalty for breach or termination by only one party;[24]
    • one party only to vary the terms of the contract;[25]
    • a term that allows one party to unilaterally change the goods or services to be supplied;[26]
    • one party to be able to assign the contract to the detriment of the other without the other party’s consent;[27] and
    • a term which limits a party’s right to sue the other.[28]

Remedies against unfair contract terms

Chapter 5 contains the enforcement and remedy options which are available if a party has breached the CCA.

Pecuniary penalties

In the case of the unfair contracts regime contained in Part 2-3 of the CCA, section 224 curiously does not provide for the award of a pecuniary penalty.

Declaratory and injunctive relief

The Court may on application from a party to a standard form consumer contract (or the ACCC) make a declaration that the term in the contract is unfair.[29]

The Court may grant injunctive relief for the contravention of a provision of chapter 2, 3 or 4 of the Act[30] for on the application by the regulator or any other person.[31]

Damages

Damages are available where a person suffers a loss because of the conduct of another person.[32]

Compensation orders

On the application by an injured person, a Court may make a compensation order against a person that has engaged in a contravention of chapters 2, 3 or 4 of the CCA.[33]  The orders which can be made are quite broad as provided in section 243.

Adverse publicity orders

The ACCC may make an application for an adverse publicity order in relation to a person that has committed an offence as provided in chapter 4 of the CCA.[34]

Links to legislation

Competition and Consumer Act 2010 (Cth) – Schedule 2.

Competition and Consumer Act 2010 (Cth).

Competition and Consumer Regulations 2010 (Cth).

Related articles

The Competition and Consumer Act 2010 (Cth) and consumer transactions

– By Dundas Lawyers

Social Media Rant costs upwards of $350k

– by – Dundas Lawyers

Further information

If your business needs advice on compliance with its legal obligations when conducting business online,  contact us for an obligation free and confidential discussion.

Malcolm Burrows Lawyer Brisbane

Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
Telephone: (07) 3221 0013
Fax: (07) 3221 0031
e: mburrows@dundaslawyers.com.au

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.


[1] Competition and Consumer Act 2010 (Cth), Schedule 2, s18.

[2] Australian Competition and Consumer Commission (ACCC) v Dukemaster Pty Ltd [2009] FCA 682 at 10.

[3] (Hannaford (t/as Torrens Valley Orchards) v Australian Farmlink Pty Ltd [2008] FCA 1591 at [252] citing Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200.

[4] Gordon J in Dukemaster citing Global Sportsman Pty Ltd 2 FCR 82, 91.

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8] Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd [2012] FCA 102 (17 February 2012).

[9] Australian Competition and Consumer Commission  v  Abel Rent-a-Car  Pty Ltd [1999] FCA 314.

[10] Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd [2012] FCA 102 (17 February 2012) at 27

[11] Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd [2012] FCA 102 (17 February 2012) at 36.

[12] Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd [2012] FCA 102 (17 February 2012) at 40.

[13] Australian Broadcasting Corporation v O’Neill [2006] HCA 46.

[14] Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1.

[15] Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd [2012] FCA 102 (17 February 2012) at 65.

[16] Australian Broadcasting Corporation v O’Neill [2006] HCA 46 at 65.

[17] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 20.

[18] POS Media Online Limited v Queensland Investment Corporation [2001] FCA 809 (29 June 2001).

[19] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 23.

[20] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 23.

[21] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 24.

[22] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 25(1)(a).

[23] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 25(1)(b).

[24] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 25(1)(c).

[25] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 25(1)(d).

[26] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 25(1)(g).

[27] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 25(1)(j).

[28] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 25(1)(k).

[29] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 250(1).

[30] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 232(1)(a).

[31] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 232(2).

[32] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 236.

[33] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 237.

[34] Competition and Consumer Act 2010 (Cth) – Schedule 2, section 247 (2).

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