managing the medusa- trade practices compliance the... · managing the medusa-trade practices...

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(Monday 12th May 2008

Managing the Medusa-Trade Practices Compliance

21st Annual MEA National Conference 2008

Matt Crouch – Executive Lawyer

Monday 12th May 2008

Why comply with the Trade Practices Act (TPA)?

• UNLIMITED CIVIL LIABILITY;

• PENALTIES UP TO $10 MILLION

THAT’S WHY !

And, as the saying goes “ignorance of the law

won’t save you.”

Monday 12th May 2008

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Introduction to the TPA

• Since 1974

• Commonwealth Act – applies to all states and territories

• Applies to corporations in trade and commerce

• But all states and territories have Fair Trading Actsthat replicate most of the important provisions with application to individuals or partnerships in trade or commerce

•(Monday 12th May 2008

What does the TPA cover?

• Answer – just about everything

• The most all-embracing statute affecting business in Australia

• Applies to just about every activity in your business


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What does the TPA cover of prime relevance to participants in the meetings and events sector?

• Restrictive trade practices

• Consumer protection – misleading conduct

• Consumer protection – product liability for defective or unsafe goods and services, implied warranties etc


Restrictive Trade Practices (Part IV)

• Business practices and arrangements between businesses that reduce competition (and thus hurt consumers)

• Some prohibitions apply “per se”; some require competition to be (or be likely to be) substantially reduced as a consequence (the “competition test”)

• Penalties up to $10 million (corporation) and $500K (manager involved) for breach

• Aggrieved parties (eg competitors) can also sue for damages


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Price Fixing – sec 45A

• Contract arrangement or understanding between competitors that has the effect of fixing, controlling or maintaining price

• Known as “cartels”• Mainly applies to competitors fixing their selling

prices but theoretically may apply to buying groups• Contract, arrangement or understanding –

very wide• Fixing etc “price” – anything to do with the amount

payable• Per se illegal – the most serious offence and top of

ACCC’s “hit list”• Penalties imposed to date are highest for this • Compliance tip – don’t even discuss

prices with your competitors


Resale Price Maintenance – sec 48

• A sells to B on condition that if B sells to C the price must be $X

Eg. A supplier sells goods to an event manager on condition that, when the event manager resupplies them to the client or delegates, the event manager’s price is no less than $50 per item

• Vertical price fixing - “price” is anything to do with the total monies payable

• You can recommend reselling price so long as there is no compulsion and the required form of words is used

• Per se illegal - serious offence

• Compliance tip – don’t specify the price at which your customer can resell the goods you supply. Care needed when using recommended prices. •(Monday 12th May 2008

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Exclusive Dealing• Any agreement between buyer and seller by which

either buyer or seller is restricted in dealing with others

Eg. A supplier of beverage enters into an agreement to supply beverage on condition that the venue does not purchase its needs from a competitor of the supplier

• Mostly subject to competition test, but third line forcing is per se illegal

• A sells goods to B on condition that B must also acquire other goods or services from C

Eg. “I will supply you with my conference management services if you agree to buy all your supplies for the event from my supplier list”

• Compliance tip – This is very common and care needed to ensure that a different contractual model is used, or that there is no compulsion. •(Monday 12th May 2008

Consumer Protection – Misleading and Deceptive Conduct

• Sec 52:

A corporation must not in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive

• The most litigated and all-pervasive provision of Australian legal history

• Applies to almost every activity you can think of:

– Negotiations with customers and suppliers –what you say to them and what your conduct implies

– Product labelling and packaging;

– Advertising and promotional activity –we’ll focus on this


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Consumer Protection – Misleading and Deceptive Conduct

• NB – you cannot contract out of liability for breach of sec 52

• Unlimited civil liability; competitors, customers and ACCC can initiate proceedings.


Advertising and Promotion –General Principles

• Actual client quote: “Anything goes in advertising doesn’t it – I mean people will understand that it’s just advertising…”

• Not true !! – ensure your advertising and promotional material (including your website) is not misleading or deceptive or likely to be misleading or deceptive. If you don’t it’s just a matter of time…


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Advertising – General PrinciplesThe Knucklehead Rule

• Target audience – would the advertisement, considered as a whole be misleading to the members of the target audience

• Consider the target audience and then dumb it down and consider the “knuckleheads”

• Usual test in law is the “reasonable person” – for sec 52 issues, the reasonable person is replaced by an unsophisticated , superficial, gullible and poorly educated person; ie:


Advertising – General Principles

• Consider the whole of the advertisement in context

• Balance of the advert is important – over-emphasis of one element (the selling point) may disguise or hide an important side issue: eg

$100

Plus GST

THIS MONTH’S SPECIAL PRICE


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• Be careful not to fall into the trap of relying on literal or half truths

• Material can be literally or technically accurate but when placed in context it is inaccurate

“LADIES AND GENTLEMEN –

BEHOLD THE MANEATING FISH”


Then once you have paid and gone inside …


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• Silence – what you don’t say is as important as what you do say…

• Ask yourself “does my target audience expect me to spell something out? Would they think it was misleading if I did not spell it out?

• Example: PCO gets paid a fee by a venue for arranging conferences at its venue but the PCO does not tell the client, who is expecting the PCO to make venue decisions purely on merit…

Secret commissions - the classic example of misleading and deceptive conduct by silence



WHAT YOU CAN DO – THE “MERE PUFF”

“It is not misleading to engage in puffery. Puffery involves making exaggerated statements of opinion (not fact) to attract attention […to you or your products.]…

Whether a statement is puffery will depend on the circumstances. A claim is less likely to be puffery if its accuracy can be assessed”

ACCC Guide on Travel and Tourism 1999


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• Compliance Tip – A puff is a claim that the audience will understand is not intended to be capable of verification.

Ask yourself “would my target audience believe that I intended the claim to be accurate, serious or capable of being proved? If the answer is yes, it isn’t a puff and you must make sure it is accurate.


Examples:

BEDROCK HOTEL

Paradise on earth

OR•(Monday 12th May 2008

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We’ve got the biggest conference

room in town

BEDROCK HOTEL•(Monday 12th May 2008

Advertising Principles –Specific Traps

PRICING – WHOLE PRICE

• The whole price must be clearly expressed

• “Free” is misleading if the cost of the item is recovered in other elements of the price eg:

“Stay one night and get 2nd night free” is misleading if the price for the first night was doubled!


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• Compliance tip - Be especially careful with “all inclusive prices. Don’t assume that customers will know what isn’t included.

Ask “would my target audience expect me to spell out that:– Meals– Drinks– Transfers– Activities– Tips or gratuities (especially North Americans)

are not included in the price? Then spell it out anyway!



PRICING – WHOLE PRICE – GST

• All businesses should advertise prices inclusive of GST

• Not a Tax Act requirement, but a Trade Practices Act requirement – sec 51C

• The wrong way:– “Price is $100” - the law assumes this includes

GST. If you try to add GST, you are in breach– “Price is $100 plus GST” – this is likely to be in

breach, especially if dealing with consumers• The right way:

– “Price is $110 including GST”– “Price is $100 plus $10 GST = $110


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FINE PRINT AND *CONDITIONS APPLY”

• If print is too fine to be easily seen or read – it may be misleading and is unlikely to apply

• Very common in advertising, especially in meetings and events and in travel and especially with trade and promotional competitions

• Overall impression is what counts

• Relative size of the fine print or conditions is important – shouldn’t be hidden or disguised



• Conditions must be capable of being read before the decision to buy – eg. referring to conditions that must be tracked down on a website may not work if:

– the product or promotion being advertised is the kind of product that elicits impulse buying or short term decision-making

– not everyone has access to the internet– you get the conditions after buying the product– the conditions contradict the main impression or

message


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**conditions apply



COMPARATIVE ADVERTISING

• A direct claim that your product is better than the competitor’s

• High risk advertising – a direct challenge to your competitor

• Likely to attract intense scrutiny and be held to a higher standard of accuracy

• Comparison must be scrupulously fair and accurate


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• Compare apples with apples. Misleading to compare your top of the range product with the competitor’s mid range product

• Compliance tip – avoid comparative advertising; it just isn’t worth the potential hassle



SPONSORSHIP AND AFFILIATION

• Direct or implied assertion that a person (often a celebrity) endorses you/your product

• Outright lie is obviously a problem

• Implied sponsorship or endorsement is a trap also, eg

– Ballroom dancers – the Henderson’s case

– Applies even to fictitious characters - Crocodile Dundee – Grosby shoes case; Duff beer case

– Muppets and Sesame Street cases


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• Need for care with testimonials too

• Compliance tip - get consent of the celebrity or individual before using name or photo in advertising (helps with Privacy Act compliance too)



FUTURE PREDICTIONS

• Must be made on reasonable grounds in the circumstances

• Sec 51A of the Trade Practices Act was introduced to make it easier to claim misleading and deceptive conduct in relation to predictions

• May also constitute a contractual promise:

“If you appoint my company as your event manager, I will guarantee you’ll get 1000 delegates attending”

• What determines “reasonable grounds”? – your experience, the circumstances, market conditions and other matters of which you should be aware, comparable recent events…


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• Compliance tip - be very careful when making predictions. Keep a record of why the prediction was based on reasonable grounds.

Better to avoid predictions, especially about delegate numbers, likely profit from an event, weather etc.



GREEN” MEETINGS AND EVENTS

• THE hot claim for meetings and events is to advertise

“Our event is green”

• Generally an all-encompassing claim of this type will be misleading as virtually no event is carbon-neutral or negative in its overall environmental impact

• Saab case - “the new green Saab” – measures may have been taken to reduce emissions but overall, driving a car leaves a carbon footprint


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Examples:

“OUR GREEN CONFERENCE - WE’RE SAVING THE RAIN-FOREST ALL CONFERENCE SATCHELS AND PAPERS ARE MADE FROM RE-CYCLED PAPER”

IN FACT ….. •(Monday 12th May 2008

OLD GROWTH HARDWOOD IS NOT USED IN THE SATCHELS OR

CONFERENCE PAPERS AT ALL, SO NO RAIN-FOREST TREES

WERE SAVED

AND ….•(Monday 12th May 2008

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Big Compliance Tip

• Commence and maintain your own TRADE PRACTICES COMPLIANCE PROGRAMME

• Not just a document:

– Staff training for awareness

– Culture of compliance and leadership on the issue from management

– Accountability


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Meetings & Events Australia

Thank you !

21st MEA National Conference

Monday 12 May 2008


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