Topic 9: Dealing with Consumers- General Protections
Commercial Law
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Overview of this topic:
Australian Consumer Legislation Protecting consumers; and
Dealing with consumers.
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Learning Outcomes:
Why do consumers deserve additional legal protection?
When marketing and selling to consumers, what kinds of conduct are prohibited?
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Reading materials
Chapter 11 (pages 343-361) of Nickolas James’s Business Law (Wiley, 5th ed, 2020)
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Australian Consumer Legislation: Protecting consumers
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AUSTRALIAN CONSUMER LEGISLATION: Protecting consumers
The Australian Competition and Consumer Act 2010 (Cth), is Federal legislation (Statute law), which means it is law whose provisions apply uniformly (in the same way), throughout Australia.
The ACL is a Schedule of that Act.
The Act deals with many aspects of the way business is conducted in Australia – competition, fair trading and consumer protection being just some of those aspects.
The part of that Act being dealt with here is that which deals with the protection of consumers and is contained in the ACL.
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AUSTRALIAN CONSUMER LEGISLATION: Why protect consumers?
Consumers are seen to be entitled to additional protection under Australian law because when dealing with a business they are usually at a disadvantage.
The traditional rules of contract law offer little assistance to a consumer who is disadvantaged because of this inequality of bargaining power: the general rule is caveat emptor.
Consumer protection legislation [ACL], seeks to address the fundamental imbalance in bargaining power between business and consumers.
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AUSTRALIAN CONSUMER LEGISLATION: Why protect consumers?
Examples of consumer protection:
Implying additional terms into certain contracts to protect the consumer,
Prohibiting certain types of conduct by businesses,
Closely regulating certain types of transactions with consumers, such as those involving the handling of consumers’ personal information.
Applying significant criminal and civil consequences for businesses that are found to have contravened consumer protection laws, as well as the possibility of unwelcome media attention.
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AUSTRALIAN CONSUMER LEGISLATION: Why protect consumers?
In consumer transactions, unfair practises are widespread. The existing law is still founded on the principle known as caveat emptor – meaning ‘let the buyer beware’. The principle may have been appropriate for transactions conducted in village markets. It has ceased to be appropriate as a general rule. Now the marketing of goods and services is conducted on an organised basis and by trained business executives. The untrained consumer is no match for the businessman, who attempts to persuade the consumer to buy goods or services on terms and conditions suitable to the vendor. The consumer needs protection by the law and this Bill will provide such protection.
Senator the Hon L K Murphy QC, Senate Parliamentary Debates, 30 July 1974
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Dealing with consumers
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AUSTRALIAN CONSUMER LEGISLATION: Consumer protection regulation
The Australian Consumer Law (ACL) is a Schedule to the Competition and Consumer Act 2010 (Cth).
The ACL protects consumers by prohibiting:
[a] Misleading or deceptive conduct generally,
[b] Unconscionable conduct,
[c] Unfair terms, and
[d] Various specific forms of prohibited conduct.
The ACL is administered and enforced by the Australian Competition and Consumer Commission (ACCC) and by the various State and Territory consumer protection agencies.
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AUSTRALIAN CONSUMER LEGISLATION: Meaning of ‘consumer’
Section 3 A person is defined as a consumer if: the goods or services acquired are:
[i] $40,000 and under and
the goods or services have not been acquired for the purpose of re- supply or
they are not being used up or transformed in a process of production or manufacture.
[ii] Above $40,000
The goods or services are of a kind normally used for household use and
They have not been acquired for re-supply, or
They are not being used up or transformed in a process of production or manufacture.
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AUSTRALIAN CONSUMER LEGISLATION Meaning of ‘consumer’
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AUSTRALIAN CONSUMER LEGISLATION: Misleading or deceptive conduct
Section 18: ‘A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’.
In establishing a breach of the section, the intention of the business is irrelevant.
Liability cannot be avoided by use of a disclaimer.
The range of remedies [discussed later] provided by the ACL for breach of this section is much wider than that available at common law for misrepresentation or breach of contract.
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AUSTRALIAN CONSUMER LEGISLATION: Misleading or deceptive conduct
The section can be relied upon not only by consumers but also by interested members of the public and by other businesses, including competitors:
Eveready Australia Pty Ltd v Gillette
Australia Pty Ltd [1999] FCA 1824
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AUSTRALIAN CONSUMER LEGISLATION: Misleading or deceptive conduct
An action for contravention of s 18 ACL may be brought in conjunction with, or as an alternative to, an action for:
Negligence,
Passing off,
Defamation,
Breach of contract, or
Misrepresentation.
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AUSTRALIAN CONSUMER LEGISLATION Misleading or deceptive conduct
Section 18 Requirements:
Meaning of ‘person’: The reference to ‘person’ means this term includes individuals and corporations.
Meaning of ‘trade or commerce’: Conduct that takes place in a non-commercial context (not in trade and commerce), will not be in breach of section 18.
Concrete Constructions (nsw) Pty Ltd v Nelson [1990] HCA 17
Durant v Greiner 21 NSWLR 199
Plimer v Roberts (1997) FCA 1361
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AUSTRALIAN CONSUMER LEGISLATION Misleading or deceptive conduct
Meaning of ‘conduct’
A business will ‘engage in conduct’ if it makes a statement or a claim or a promise, performs an action, or refuses to do any of these things.
In certain circumstances, even silence can be conduct: Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd [1988] FCA 42
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AUSTRALIAN CONSUMER LEGISLATION Misleading or deceptive conduct
Meaning of ‘misleading or deceptive’
‘Mislead’ is usually interpreted as simply meaning ‘to lead astray’ or ‘to lead into error’, and
‘Deceive’ is interpreted as ‘to cause to believe what is false’.
In deciding whether conduct is misleading or deceptive the court will use an objective test: Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
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AUSTRALIAN CONSUMER LEGISLATION: Misleading or deceptive conduct
Meaning of ‘likely to mislead or deceive’.
To determine whether this requirement has been breached, 2 tests are applied: (transparencies 19-20):
The target audience must be identified and
The question must be asked as to whether the most naïve or gullible among them is likely to be mislead or deceived.
If the answer is ‘yes’, s 18 has been breached.
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AUSTRALIAN CONSUMER LEGISLATION Misleading or deceptive conduct
Taco Company of Australia Inc v Taco Bell Pty Ltd:
First, it is necessary to identify the relevant section (or sections) of the public (which may be the public at large) by reference to whom the question of whether the conduct is, or is likely to be, misleading or deceptive falls to be tested.
Second, once the relevant section of the public is established, the matter is to be considered by reference to all who come within it, 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 variety of vocations.
[Note: Highlighting added for emphasis]
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AUSTRALIAN CONSUMER LEGISLATION Misleading or deceptive conduct
FRANKI J, ANNAND & THOMPSON PTY LTD V TPC [1979] FCA 62
Broadly speaking, it is fair to say that the question is to be tested by the effect on a person, not particularly intelligent or well-informed, but perhaps of somewhat less than average intelligence and background knowledge, although the test is not the effect on a person who is, for example, quite unusually stupid.
[Highlights added for emphasis].
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AUSTRALIAN CONSUMER LEGISLATION Misleading or deceptive conduct
A statement that is literally true can still be misleading or deceptive:Henderson v Pioneer Homes Pty Ltd (No 2) 1980 29 ALR 597
A statement that is not literally true is not necessarily misleading or deceptive.
Example: An advertisement which claims a soft drink will make you fly is obviously untrue. No one would believe it. It would be interpreted as a mere ‘puff’.
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AUSTRALIAN CONSUMER LEGISLATION: Unconscionable conduct
A person will engage in unconscionable conduct if it unfairly takes advantage of another person’s special weakness or disability.
There are two types of unconscionable conduct prohibited by the ACL:
Unconscionable conduct generally: s 20 and
Unconscionable conduct when supplying or acquiring goods or services to, or from, a person other than a listed public company: ACL s 21.
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AUSTRALIAN CONSUMER LEGISLATION: Unfair terms
A term of a contract will be unfair in contravention of ACL s 23 and therefore void if:
The contract is a consumer contract;
The contract is a standard form contract; and
The term is unfair.
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AUSTRALIAN CONSUMER LEGISLATION Unfair terms
A term of a consumer contract is ‘unfair’ if :
It causes a significant imbalance in the parties’ rights and obligations arising under the contract;
It is not reasonably necessary to protect the legitimate interests of the business; and
It would cause detriment to the consumer.
Director of Consumer Affairs Victoria v AAPT Limited 2006 VCAT 1493
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Takeaways from today?