Abstract
In 1971, the Australian government formulated trade practices legislations that were later received with prejudices by the business community. Later, the Australian Trade Practices Act (1974) was legislated, which would grant protection for anti-competitive activities from legal actions. In 2005, the Australian Productivity Commission stated that the consumer protection Acts needed to be changed. The commission further stated that the national mechanism had led to regulatory inefficiencies that had many disadvantages to both the consumer and businesses. In 2008, the commission reviewed the consumer policy. Two years later, Australian Consumer Law (ACL) was formulated. The laws that govern the advertisement of goods and services are contained in the ACL. The ACL replaced some of the commonwealth legislation that governed the state. The ACL covers all businesses including those that were not covered with the Commonwealth laws. The name of the Trade Practices Act was changed to the Competition and Consumer Act 2010. The ACL was a result of the 2008 Productivity Commission report, Commonwealth, State, and Territory laws. The Commission has estimated that the reforms introduced by the ACL could be of benefit to the Australian state.
Introduction
Being a Commonwealth law, the Australian Competition and Consumer Commission (ACCC), is a sovereign power of the Australian government. In addition, it is the body oversees the ACL. It was created in 1995 with the sole purpose of overseeing the Trade Practices Act 1974 (TPA) (Cth). It acts as the watchdog that safeguards consumer rights, business rights, as well as prevents illegal anti-competitive deeds. It also promotes fair competition and fair trade in the state (Samuel, 2011b). The ACCC also ensures that the Commonwealth laws are adhered. Other consumer regulators include the state, the Australian Secularities and Investment Commission (ASIC), among other consumer protection agencies. Before taking any legal action against a trader under the TPA, the ACCC has to put into consideration several factors. This paper will highlight some of these factors, with reference to previous cases that have been handled in Australian federal courts.
Factors considered by the ACCC
Mergers
A merger takes place when two firms of almost equal size join their stocks in a bid to a make profit. The ACCC puts into consideration that it is difficult to identify the firm that is losing or gaining competition from the merging firms. Thus, ACL has put across rules and regulations that should be followed before attempting to enforce the law against a merger business that believes it has been a victim of unfair competition. The ACCC released the new merger guidelines in 2008 to replace the 1999 guidelines (Samuel, 2008). The 1999 guidelines were complex. On the contrary, the 2008 version is simplified, and the traders can easily understand them without problems. These guidelines provide the trader with a useful overview of policies that govern the ACL. In addition to this, the new guidelines are voluntary and propose various notification principles. First, the mergers help in identifying competition issues that are in need for the ACCC attention. It also allows a larger number of firms to air their concerns to ACCC as soon as issues arise without causing delays.
The nature of business
Before taking any legal action against a trader, The ACCC has to establish the nature of trade or business. According to the ACL, trade or commerce within the country or between Australia and other countries includes any business activities regardless of their nature. The ACL does not condone any activity or practice that takes place outside the trade or business community.
The 1990 case on Concrete Constructions (NSW) Pty Ltd v Nelson is a good example of how the ACL tackles a case that is out of their command. Nelson accused the construction’s supervisor of incorrectly explaining to him on how to remove a grate. As a result, Nelson was injured making him fall down to the bottom of air conditioning shaft. The court decided that the conduct was not in trade or commerce. In addition, schools and other learning institutions are not considered as businesses. Thus, the ACL laws do not apply to them. For example, the Durant v Greiner (1990) case claims that the premier of New South Wales had made statements about the state of the school future (Noonan, 2006a). These comments were thought to be misleading. The court decided that the TPA act had not been contravened because the statements were out of trade or commerce realms.
‘The unconscious’ conduct
The written law prohibits people in trade from engaging in unconscionable conduct or practice. The states courts define the situations in which unconscious conduct has been committed. The ACCC advises consumers to explore other corrective measures before filing a case against a business that may have behaved unconsciously. The ACL does not define ‘unconscious’ conduct, but has given the circumstances under which conduct is considered unconscious, section 21 of the ACL. For example, when a trader supplies goods and services to a person or a company that is not publicly listed, it is termed as an unconscious conduct. The same case applies when one receives goods and services from a company that may be involved in unconscious conduct. For instance, in 2004, the government court found Lux to have engaged in unconscious behavior during the door-door sale of their vacuum cleaner. A company agent sold a vacuum cleaner to a vulnerable woman. The court stated that the sales representative should have understood that the woman was illiterate and could not understand the business issues fully. In addition, he should have allowed the woman to consult other people about the product. Thus, the court found Lux Ltd guilty through the actions of their sales representative.
Vulnerable consumers
Before commencing on any legal actions in a case that involves a vulnerable person, the ACCC provides advice to the consumer. The business people are allowed to deal with all kinds of consumers, however, the consumer should purchase the product willingly without being coerced or manipulated. The businesses are expected to be careful not to create a negative perception about their products and companies to the consumers or entire public. They should not take advantage of vulnerable consumers. In this scenario, vulnerable consumers are those with little income, young, illiterate, physically or intellectually disabled, homeless or with persistent illness. In other words, it is believed that vulnerable consumers are those consumers who are risk of making poor decisions in relation to buying of goods and services. This is because they are normally compelled by the situation at hand, be it poverty or sickness to make such decisions.
Bait advertising
This is another of the factors that the ACL puts into account before enforcing any action against the trader. The ACL has to examine the advertisements used to lure consumers to buy products in the market. Some businesses involve themselves engages in tempt advertising. These adverts are highly forbidden by the ACL. For instance, in 2005 the ACCC investigated Repco, a company that was involved in a big sell of its products. It was alleged that Repco had distributed many catalogues to consumers, who turned in large numbers to get the goods. They also advertised the products at a relatively cheaper price than the previous sale (Samuel and Enright, 2005b).
Misleading or deceptive conduct
Such a conduct by a business is highly forbidden by the ACL. A trader should not engage in deceptive or misleading behavior. Any person who suffers loss of enterprise due to involvement in deceptive conduct can file a case against the person or business involved. Alternatively, a formal complaint can be filed with the ACCC, which will take action on behalf of the consumer (Cornwall, 1990).
The Australian Competition and Consumer Commission v Telstra Corporation
Limited in 2007 is an example of case with misleading information handled by the ACCC. Telstra made various claims in its advertising of its Next G mobile network. The ACCC alleged that in making such a claim Telstra had engaged in misleading or deceptive conduct (Samuel, 2011a).
Wrongly accepting payment
A trader should not receive any payments from the buyers when he does not intend to supply the products. The ACL has severe judgments to businesses that have a habit of promising customers what they cannot achieve. The Dawson v World Travel Headquarters Pty Ltd (1981) is an example of a case that shows how ACL approaches such atrocity. World Travel Headquarters Pty Ltd (WTH) agreed to do the booking for a 2-day tour to Singapore. Issues arose when the tour changed to be an overnight stay. The World Travel Headquarters Pty Ltd was found guilty of breaking the promise after accepting payment without intention to supply ( Noonan, 2006b).
Pyramid schemes
This is a product distribution scheme whereby the traders make a profit or a commission for the sale of each product they sell. These schemes are dependent on one’s ability to introduce other partners. These pyramid schemes are very problematic as the participants at the top level make profits while those at the bottom fail to make profits (Samuel and Enright, 2005a). In addition, the commission for sale is always low, and buyers for products are sometimes few.
The ACL prohibits business from engaging in such schemes. In addition, there is the consideration to be checked when the pyramid scheme involves one line products or many types of products. “Several scheme leaders such as Teddi Jutsen, Tina Aroha, Brownlee, and David Graeme Scanlon obtained a restraining order from the federal courts for promoting pyramids schemes” (Samuel and Enright, 2005a).
A Lay-by agreement
A ‘lay-by’ is an agreement between a buyer and seller, whereby the customer pays for the goods in installments. Under the ACCC, a lay-by agreement is breached when a buyer pays for the goods in two or three installments, and does not receive the goods until the full amount is paid. During such agreements, the treaty should be provided in written form, signed by both the buyer and seller and each should keep the copy of the agreement. The consumer has the right to terminate the lay-by agreement at any time before the delivery of goods. In this case, the supplier has to refund the payment, less any charges that were agreed. As such, the ACCC looks at whether the lay-by agreement was breached before proceeding with any charges against the trader.
Evidence of transactions
The ACL states that customers are entitled to get evidence of transactions. For a transaction more than $75, the buyer should be issued with a formal receipt. In addition, the consumer can request for a receipt for goods bought at a price less than $75. The receipt should also include the tax transaction on it. Thus, before the ACCC takes any legal action, they have to check for any evidence of the transactions, in this case, the receipt or vouchers.
Product safety standards
The ACL’s safety standards focus on the contents, processing, design, and packaging of the goods and services. A business is prohibited from supplying goods or services that are not compliant with any relevant product safety standard: ACL ss. 106, 107. Therefore, before the ACCC commences on any action against the trader, they have to look at whether the safety standards were compiled.
False representation about goods and services
ACL carefully studies the messages made by businesses when advertising and selling its products. Business firms should desist from conveying misleading representation of their products. For example, in August 2010, the Federal Court in Perth made claims that card sellers, Prepaid Services Pty Ltd and Boost Tel Pty had engaged in deceptive conduct, which resulted into misrepresentation (Samuel, 2010, p.1). These firms told the consumers that the cards would have unlimited calls, which was not the case. The court declared Boost’s conduct to be false and misleading. Therefore, injunctions were ordered to prevent the recurrence of such conducts in the future. Boost Company was forced to pay the ACCC costs (Samuel, 2010, p.1).
Conditional referral selling
This is a situation whereby buyers or consumers are lured into buying goods and services by promise of the commission or other benefits for giving out information to the seller. This information could help the trader to sell his goods faster. ACL prohibits promising commissions that depend on future sales (Samuel, 2010, p.1). As such, ACCC provides a stringent punishment for the suppliers who commit such offences. Therefore, in case of a lawsuit against the trader, the ACCC looks at whether the trader had engaged in any commission-based business.
Inertia selling
This is the practice of sending illegal goods to households and pressuring the people to pay for the products. Inertia selling is completely prohibited by the ACL. If a trader sends an unsolicited product to a customer, the customer is not obliged to pay for it. The customer is also not liable for the loss of or damage to the product unless the loss or damage results from willful and unlawful act, according to ACL ss. 41(1), 42 (Samuel, 2010, p.1). The consumer can inform the business about the unsolicited products, and tell them how they can collect their product.
Consumer guarantees and warranties
In Australia, whenever a consumer enters into a transaction, he or she gains certain rights. These rights are called consumer guarantees. This means that a buyer can return goods that are spoiled or damaged to the seller to get certain remedies. The remedies include repair, replacement, and even refund. This ensures that the interests of consumers are promoted. Before engaging a trader in a lawsuit, the ACCC has to see if traders have followed the consumer guarantees.
For example, the guarantee that consumer shall possess the goods without any disturbances and the guarantee that the goods are of good quality and fit for the purposes that are meant for among other guarantees. On the other hand, Warranty is different as it is a voluntary promise offered by the trader to the buyer. In Australia, consumer guarantees are given for goods bought on 1st or after January 2011.
Conclusion
From the above discussion, it is clear that before any legal action is taken against a trader, several factors have to be considered as mentioned. In addition to this, there are certain penalties that the ACL imposes upon traders who breach the laws. These penalties are severe, and help the traders to maintain discipline when handling their customers. The ACL laws Act is a consumer policy that applies to all business in Australia. The ACL benefits all kinds of businesses, whether small, medium, and big as well as all consumers in the state. The ACL laws are in a way that they are not biased against the business or the consumers. According to Fels, (2011), the ACL helps in eliminating the outlawed cartels, monopoly, and anti-competitive conducts. Thus, ACL helps in the improvement of Australian economy due to the promotion of fair trade.
References list
Cornwall J.J. (1990). Breach of conduct and misleading conduct. Web.
Enright, L. and Samuel, G. (2004). Federal Court finds Lux acted unconscionably in door-to-door vacuum sale to vulnerable consumer. Web.
Fels A. (2011). How the ACCC benefits small business. Web.
Noonan M. (2006a). Commercial transaction. Web.
Noonan M. (2006b). Commercial transaction. Web.
Samuel G. (2004). Federal Court finds Lux acted unconscionably in door-to-door vacuum sale to vulnerable consumer. Web.
Samuel G. and Enright, L. (2005a). Pyramid schemes. Web.
Samuel G. and Enright, L. (2005b). Repco sizzling sells out. Web.
Samuel G. (2008). Australian Competition and Consumer Commission (ACCC), For Consumers. Web.
Samuel G. (2008). Merger guidelines – ACCC. Web.
Samuel G. (2010). Federal Court declares phone card advertising false and misleading. Web.
Samuel G. (2011a). ACCC calls for comment on Telstra’s structural separation. Web.
Samuel G. (2011b). Legislation. Web.