The Australian Consumer Law (ACL) in Schedule 2 of the Competition and Consumer Act 2010 (Cth) provides consumers with numerous rights. This article provides a brief overview for company directors of the ACL’s key provisions in respect of those rights.
When a Company is a Consumer
When we think consumer, we think about people buying goods at the local shopping centre. However, companies can also be consumers under the ACL if the goods your startup is purchasing are valued up to $100,000. For example, computers, office equipment or furniture.
Companies may also be a consumer if purchasing goods over $100,000 and that are ‘of a kind ordinarily acquired for personal, domestic or household use or consumption’. Companies are also a consumer for the purposes of the ACL when purchasing a commercial vehicle or trailer used primarily to transport goods on public roads.
Misleading or Deceptive Conduct
The Australian Consumer Law (ACL) in Schedule 2 of the Competition and Consumer Act 2010 (Cth) provides consumer rights.
Section 18 of the ACL provides:
a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
A case involving TPG helps to illustrate misleading and deceptive conduct. Several years ago, TPG Internet advertised unlimited ADSL 2+ internet plans for $29.95 per month. However, to claim the offer, consumers were required to bundle their phone plan, which made the total price $59.95, an additional cost described in the ‘fine print’.
The High Court found that TPG engaged in misleading or deceptive conduct because, among other things, the advertisement could “lead consumers into error”.
Therefore, business owners must make offers in advertisements explicit and avoid burying material terms in the fine print.
Other examples of misleading and deceptive conduct:
- “Made in Australia” on a package containing a product made in Malaysia.
- An advertisement that states “Organic Skin Care” for a product containing animal fats.
- A software advertisement offering $49 per month does not disclose that the cost increases to $99 monthly after the first month.
Unfair Contract Terms
Section 23 of the ACL contains the unfair contract terms provisions, which prohibit standard form contracts from being weighted too heavily in favour of the seller of goods or services.
There is no hard and fast rule determining what constitutes an unfair contract term. Some examples include where a contract:
1. provides unilateral rights to amend the contract
2. automatically renews
3. that requires the customer to provide an unlimited indemnity.
In a recent case, JJ Richards & Sons (JJRS) – a waste company, had contracts with small businesses that contained clauses that purported to give JJRS the right to increase prices, suspend services and keep charging for those services. The services contracts also provided JJRS unlimited indemnity from the clients. The federal court agreed with the ACCC, who brought the action against JJRS, that the contract terms were weighted too heavily against the consumer.
Consumer Warranties & Conditions
The ACL also contains several compulsory warranties meaning any goods you sell are of a quality relative to the price (merchantable quality). In addition, goods that businesses sell must meet the description, sample, advertisement or description.
There is also a requirement that products are free from defects. The warranties also require that service providers’ work be to a satisfactory standard. Consumers who purchase a defective product have a right to can choose between a refund, repair or replacement.
