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Lecture 7 Consumer Protection Lecturer: Dr Leela Cejnar
• On Blackboard now ¾ Contract law, problem question ¾ See Guidelines to Students (attached to the assignment) • DUE WEEK 9: MONDAY 23 SEPTEMBER 2013 ¾ See Course Outline (paragraph 4.4) for details about where and how to submit Assignment 2 ¾ Must be submitted ONLINE on Blackboard (via Turnitin), due by 5pm Monday 23 September
© 2013 The University of New South Wales Sydney 2052 Australia The original material prepared for this guide is copyright. Apart from fair dealing for the purposes of private study, research, criticism or review, as permitted under the Copyright Act, no part may be reproduced by any process without written permission. Enquiries should be addressed to the Head of School, Taxation and Business Law, UNSW, Sydney
• ONLINE SUBMISSION ONLY • Check your plagiarism score and re-submit on Turnitin as many times as you wish UNTIL the deadline of 5pm on 23 September • Word limit is 2000 words – please observe the word limit
This week Consumer Protection
• Consumer Law - the statutory provisions:
¾ Unconscionable conduct ¾ Misleading or deceptive conduct ¾ False representations
• • • •
Defences Remedies No refunds Implied guarantees for sellers and manufacturers
Tutorial materials Consumer Protection: Week 8
• See Blackboard • Download from Blackboard and bring materials to class: ¾ ACCC module on False or Misleading Advertising Practices ¾ ACCC Quiz Questions ¾ Group work ¾ ACCC observation and feedback
On completion of this week in you should be able to: 9 Explain what is ‘unconscionable conduct’ within the meaning of the ACL 9 Explain what is meant by ‘misleading or deceptive conduct’ in s 18, ACL and identify different types of conduct that might be misleading or deceptive 9 Identify the different types of false representations set out in s 29, ACL 9 Identify defences available for breaches of the consumer protection provisions 9 Suggest possible remedies for breaches of the consumer protection provisions 9 Explain what the law says about ‘no refund’ signs 9 Identify the non-excludable implied guarantees applicable to consumer contracts
domestic or household purposes: s3(1)(b) See Latimer at ¶7-012 11 12 . the CCA was known as the Trade Practices Act 1974 (Cth) Australian Consumer Law (ACL) • Consumer law and ‘unfair practices’ dealt with by the Australian Consumer Law • Australia Consumer Law (ACL) is Schedule 2 of the Competition and Consumer Act 2010 (Cth) • In this course we will focus on the following types of conduct: ¾ ss 20-22: unconscionable conduct ¾ s 18: misleading or deceptive conduct ¾ s 29: false representations 9 The Regulator • Australian Competition and Consumer Commission (ACCC) • Regulator responsible for administering the CCA • Primary responsibility: to ensure individuals and businesses comply with Commonwealth consumer protection.au Australian Consumer Law (ACL) Who is a “consumer”? A person (or business) will be defined as a consumer if they acquire goods or services for: • Up to $40K: s3(1)(a) • More than $40K and the products or services are normally used for personal.Sale of Goods/Product Liability Please note – in this unit we are NOT DEALING with: • Sale of Goods • Product Liability Therefore the following paragraphs in Latimer are NOT RELEVANT: ¶7-011 to ¶7-215 What is consumer protection • Aim of consumer protection laws ¾ Prevent businesses from harming consumers ¾ Promoting fair competition between businesses by preventing businesses from gaining an unfair advantage in the market at the expense of customers and competitors 7 Competition and Consumer Act 2010 (Cth) • The Competition and Consumer Act (‘CCA’) is a federal/Commonwealth statute that: ¾ Regulates ‘RESTRICTIVE TRADE’ practices to produce greater competition and efficiency in the market for the benefit of consumers.gov. services and land against ‘UNFAIR PRACTICES’ • Prior to 1 January 2011.accc. was the Trade Practices Commission (TPC) • Also see http://www. and ¾ Protects the interests of consumers of goods. fair trading and competition/trade practices laws • Until 1995.
engage in conduct that is unconscionable…. of the plaintiff’s disability and not taken advantage of it AND • Actions of defendant were unconscionable Unconscionable conduct • Section 20 (ACL): defines unconscionability in general terms ¾ “A person must not. in trade or commerce.” ¾ Applies the common law principles from Commercial Bank of Australia Ltd v Amadio to business disputes • Section 21: prohibits statutory unconscionability in connection with the supply or acquisition of goods or services • Section 22: statutory checklist (see next slide) 18 . non-English speaking) and the other party takes advantage of this for gain 15 16 Unconscionable conduct Amadio’s case: The plaintiff has to establish: • They were in a position of ‘special disadvantage’ • That substantially affected their ability to protect themselves • The defendant knew.e. because of: ¾ age ¾ sickness ¾ illiteracy ¾ financial needs ¾ lack of explanation when required ¾ language (i. or ought to have known.Australian Consumer Law (ACL) Who is NOT a “consumer”? A person who purchases products or for resupply or for use in the manufacture or repair of other items Australian Consumer Law (ACL) Note: The ACL implies non-excludable consumer guarantees for the supply of goods and services to “consumers”: to be discussed later Unconscionable conduct • The unconscionability provisions provide consumers (and small business) with protection from unconscionable (unfair) conduct Unconscionable conduct • Where one party to a transaction is at a disadvantage.
in trade or commerce.Unconscionable conduct • Section 22 ¾ Relative bargaining positions of the parties ¾ Did the consumer have to comply with conditions that were not reasonably necessary? ¾ Did the consumer understand the documentation? ¾ Was there any undue influence. engage in conduct that is misleading or deceptive or is likely to mislead or deceive’ • Section 18 was formerly s 52 of the Trade Practices Act 1974 (Cth) See Latimer at ¶5-756) 19 20 Misleading or deceptive conduct • Section 18 (formerly. misrepresentation and unconscionable conduct in relation to financial services are caught by the Australian Securities and Investments Commission Act 2001 and looked after by the Australian Securities and Investments Commission (ASIC) See Latimer at ¶7-240 21 22 Misleading or deceptive conduct prohibited • • Section 18 is made up of the following elements: ¾ Conduct by a person ¾ In the activity of supplying goods or services in trade or commerce. and ¾ Who has engaged in misleading or deceptive conduct or conduct that is likely to mislead or deceive • What is misleading or deceptive? Conduct is misleading if it will: ¾ lead a consumer astray in action or conduct or ¾ lead a consumer into making an error Conduct is deceptive if it leads people to believe what is false. see Latimer at ¶7-250 The test = question of fact to be determined in context of evidence/facts of each case 24 • 23 . if it misleads as to a matter of fact: Weitmann v Katies Ltd. s 52): most sued on piece of legislation in Australia • Not restricted in its usage to consumers and can be equally enforced by competitors or suppliers against other competitors or suppliers Misleading or deceptive conduct and the Financial Services Industry • Misleading or deceptive conduct. pressure or unfair tactics? ¾ Could the consumer have obtained the same goods or services elsewhere Misleading or deceptive conduct • Section 18 (ACL): ¾ ‘A person shall not.
' Case: Taco Company of Australia Inc v Taco Bell Pty Ltd See Latimer at ¶7-250 What is misleading or deceptive? Whether conduct is misleading or deceptive is determined by the court using an objective test of: ‘…whether a reasonable person would be misled or deceived. ¾ who is likely to read the statement or be influenced by it ¾ into error Case: Taco Company of Australia Inc v Taco Bell Pty Ltd See Latimer at ¶7-250 Relevant section of the public • Who is likely to be misled or deceived by the conduct in question? • Need to identify the class of persons who are prospective purchasers and who are likely to be affected by the conduct • Ask: ¾ At whom was the conduct directed? ¾ Would those persons have been likely to be led into error by the conduct? Case: Taco Company of Australia Inc v Taco Bell Pty Ltd See Latimer at ¶7-250 25 26 Relevant section of the public • Once relevant section of public identified. the well-educated as well as the poorly educated.. men and women of various ages pursuing a variety of vocations….’ 27 28 Standard for assessing conduct The standard should be set by reference to that section of the public who is exposed or potentially exposed to the relevant conduct 'Likely to mislead or deceive' • Not necessary to prove that anyone was actually misled • Need real possibility or 'not remote chance' that someone might be misled 29 30 . the intelligent and the not so intelligent.the astute and the gullible. consider all who come within it • '.What is misleading or deceptive? • Courts have formulated the test that a statement is misleading if: ¾ it would lead one ordinary member of the public.
• McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd • Parkdale Custom Built Furniture Pty Ltd v Puxu See Latimer at ¶7-250 34 How to avoid acting in breach of s 18 • Comparisons must be ACCURATE • Compare like with like Misleading/deceptive conduct • Roadmap of s 18 • See Latimer at ¶7-251 35 36 . will not be taken to infringe s 18 31 'Silence' • Silence may be misleading or deceptive: • No general duty of disclosure BUT conduct may be misleading or deceptive if failure to communicate a relevant fact may cause the true representation of another fact to be misleading • ASK: is there a REASONABLE EXPECTATION OF DISCLOSURE? See Latimer at ¶7-250 32 'Silence' • Traditional secretiveness of a bargaining process is NOT a licence to deceive ¾ Poseidon Ltd v Adelaide Petroleum NL See Latimer at ¶7-250 Misleading/deceptive conduct What is misleading or deceptive? • Mere confusion or causing uncertainty will not amount to conduct that is misleading or deceptive.Misleading/deceptive conduct What is ‘conduct’? • Conduct has a broad meaning and includes: ¾ Statements of Opinion ¾ Broken promises and false predictions ¾ Statements that are literally true but which create a false impression ¾ Pre-contractual statements ¾ Silence BUT: 'puffery' or self-evident exaggeration that are promotional statements in advertising and that cannot be taken literally (eg 'the juiciest oranges in Qld).
grade. degree of quality.False Representations False Representations: s 29 (ACL) ¾ Breach of section 29 will result in either: . right or remedy • S 29(1)(n): no false representations concerning a requirement to pay for a contractual right 39 Other unfair practices Bait advertising – s 35. uses or benefits of goods or services • s 29(1)(h): no false representations regarding sponsorship. ¾ The section prohibits the making of false representations in connection with the promotion and supply of goods and services in 14 subsections…. ACL: ¾ A business must not make false or misleading representations about business opportunities ¾ See Latimer at ¶7-450 40 Other unfair practices Referral selling – s 49. model. guarantee. approval or affiliation 38 False Representations • s 29(1)(i): no false representations about the price of goods or services • s 29(1)(j): no false representations about repair facilities or spare parts • s 29(1)(k): no false representations about place of origin • s 29(1)(l): no false representations about the need for any goods or services • s 29(1)(m): no false representations about the existence. composition. style.prosecution by the ACCC for a criminal offence OR . ACL: ¾ Knowing you will not or cannot supply the promised goods/services ¾ See Latimer at ¶7-440 No misleading representations about certain business activities – s 37. ACL: ¾ A trading scheme in which a 'promoter' offers to sell to a 'participant' both the right to sell a particular product or service and the right to introduce others into the scheme in the same way ¾ Both the promoter and participants trying to recruit others in the scheme are caught under this section ¾ See Latimer at ¶7-470 41 42 . ACL: ¾ A person is prohibited from advertising of goods or services at a special price where it does not intend to offer those goods or services for a reasonable period and in a reasonable amount ¾ See Latimer at ¶7-420 No wrongly accepting payment – s 36. exclusion or effect of any condition. history or previous use of goods • s 29(1)(b) no false representations regarding services • s 29(1)(c): no false representations that goods are new • s 29(1)(d): no false representations that goods or services have been ordered • s 29(1)(e)/(f): no false representations regarding testimonials relating to goods or services • s 29(1)(g): no false representations about performance characteristics. accessories. warranty. See Latimer at ¶7-290 to ¶7-375 37 False Representations • s 29(1)(a): No false representation about the standard. ACL: ¾ A person shall not induce a consumer to acquire goods or services by representing that the consumer will benefit after the contract is made by providing names of prospective customers ¾ See Latimer at ¶7-480 No harassment and coercion – s 50. ACL: ¾ No use of pressure tactics or physical force/undue harassment or coercion ¾ See Latimer at ¶7-485 Other unfair practices Pyramid Selling – s 44 to 46. value.the injured party being provided with civil remedies (eg damages).
or 'We do not refund’ ¾ Signs like these are likely to create the impression that consumers have no right to a refund at all See Latimer at ¶7-370 • • • • • • • See Latimer at ¶7-520 47 48 . Table 1 at ¶7-510 • Remedies for breach of s 18 include: ¾ injunction ¾ damages but the misleading or deceptive conduct must have caused the loss or damage suffered 46 Enforcement and Remedies • Penalties (except for s18): ¾ $1 100 000 per offence in case of a corporation ¾ $220 000 per offence in case of a natural person Undertakings Substantiation notices Public warning notices Infringement notices Injunctions Damages Other orders: ¾ Varying or refusing to enforce a contract ¾ Refund money or return property ¾ Specific performance ¾ Community service ¾ Corrective advertising ¾ Compliance programs 'No refund' signs • No need to display signs about refunds • BUT if sign is displayed. 'Exchange or repair only'. cannot claim ‘No refunds’. need to be sure that it does not mislead consumers about their rights under the ACL ¾ For example.Other unfair practices Unsolicited Credit Cards – s 39. see especially Table 1 at ¶7-510 Misleading/deceptive conduct: Remedies • Breach of s 18 is not an offence resulting in a criminal penalty: see Latimer. ‘No refunds after 7 days’. information/advertisement received in the ordinary course of business and publisher had no reason to suspect that publication would breach the ACL See Latimer at ¶7-530 43 44 Enforcement and Remedies The ACL provides that certain breaches of the law are sufficiently serious such that they may be treated as criminal offences. ACL: ¾ Prohibits the sending of unsolicited credit or debit cards to a person unless they were requested ¾ See Latimer at ¶7-460 Unsolicited goods or services – ss 43. ACL: ¾ Prohibits a business pushing a right to payment for unsolicited goods or services ¾ See Latimer at ¶7-460 Defences • Defences for breach include: ¾ reasonable mistake of fact ¾ breach caused by a third party or due to some cause beyond the control of the defendant ¾ defendant took reasonable precautions and exercised due diligence to avoid contravention ¾ publisher’s defence: reliance on information supplied by another person. to which criminal sanctions apply See Latimer at ¶7-510 to ¶7-540.
'No refund' signs • Consumers are legally entitled to a refund if the implied guarantees have not been met • See www. ACL See Latimer at ¶7-035 to ¶7-100 50 Next lecture • Competition Law • See Latimer at ch 7 51 . ACL ¾ Goods match the sample (or the demonstration model): s 57.accc. ACL ¾ Goods are fit for purpose: s 55. ACL ¾ Goods match their description: s 56.gov. ACL ¾ Goods are of acceptable quality: s 54. ACL ¾ Freedom from undisclosed securities: s 53. ACL ¾ Undisturbed possession: s 52. ACL ¾ Repairs and spare parts will be available: s 58.au: brochure on Warranty and Refund Obligations • Consumer Guarantees when goods are supplied The ACL implies into consumer contracts certain non-excludable conditions and warranties (by retailers/suppliers and manufacturers to consumers): ¾ Regarding title and right to dispose of the goods: s 51.