this is the prescribed textbook for your course

•2-1Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd

PPTs to accompany Barron, Fundamentals of Business Law 7Rev

This is the prescribed textbook for your course.

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CONSUMER PROTECTION LEGISLATION

CHAPTER 13

•13-2



Learning objectives

At the end of this chapter you should understand:

• the main principles of consumer protection legislation• how the Australian Consumer Law (ACL) was enacted• the significant role the ACL plays in providing protection

to consumers• the provisions of the ACL that deal with:

– unfair trade practices– misleading or deceptive conduct– unconscionable conduct– product safety and product information– consumer guarantees– manufacturers’ and importers’ liability



Learning objectives (cont.)

• the civil remedies, criminal penalties and defences available to aggrieved consumers

• the criminal penalties imposed for a breach of the Australian Consumer Law the defences that can be claimed

• the functions of the Australian Competition and Consumer Commission

• the functions of small claims tribunals and agencies.



Introduction

• Legislation to protect consumers in Australia has recently been significantly reformed.

• This reform has taken place with the cooperation of the federal government together with all state and territory governments.

• This has resulted for the first time in a national approach and application to the regulation of traders (no matter what their structure) and the protection of consumers across Australia.



Consequences of national reform• 1 January 2011, the Trade Practices Act 1974

(Cwlth) became the Competition and Consumer Act 2010 (Cwlth), (CCA).

• 1 January 2011, the Australian Consumer Law, (ACL), Schedule 2 of the CCA, became fully operative.

• The ACL has overcome the constitutional difficulties confronted by the TPA, replaced all state and territory fair trading legislation and applies to all consumer transactions across Australia.

• The ACL is jointly administered and enforced by the ACCC and state and territory authorities.



Who is a consumer under the ACL?ACL section 3 provides that:

• A person is regarded as a consumer of goods and services:

– If the goods or services are priced at $40 000 or less.

– If goods or services of any price are of a kind ordinarily acquired for personal, domestic or household use or consumption.

– For commercial road vehicles

– And that goods must not be acquired for resupply or manufacturing.



ACL Chapter 3 Part 2.1 Unfair practices—Section 18• Section 18: Prohibition on misleading and

deceptive conduct

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

• Concept of conduct very broad, may include advertising, contractual negotiations, even silence

• Commonly used not only by consumers but by business against business



Section 18—misleading and deceptive conduct• Remedies:

– Civil action for damages

– Injunction to stop misleading or deceptive conduct

– Community services orders

– Corrective advertising orders

– Adverse publicity orders

– Substantiation orders

– Undertakings



Chapter 2 Part 2.2 Unfair practices—unconscionable conductPart 2.2 prohibits unconscionable conduct where a stronger party takes advantage of another party’s weakness or ignorance.•Section 20: general duty on persons in trade and commerce to trade fairly—specifically embraces common law principles of unconscionability already established by the courts.•Section 21: deals with unconscionable conduct by a person in trade and commerce in connection with the supply of goods and services to consumers.•Remedies: orders directed towards the contract itself

contract void contract varied refusing to enforce contract directing refund of money/return of property ordering repair or provision of parts for goods



Meaning of unconscionable conduct• Where one party to a transaction is at a

disadvantage because of:– age

– sickness

– sex

– illiteracy

– poverty

– lack of explanation when required

– language (i.e. non-English speaking)

and the other party takes advantage of this for gain.



Basis of unconscionable conduct

• With regard to consumers

– Relative strengths of the bargaining positions of the parties

– Whether the consumer is being asked to comply with conditions that are not reasonably necessary to protect the legitimate interests of the trader

– Whether any documentation given to the consumer was intelligible to the consumer

– Whether there was any undue influence or pressure exerted

– The type of deal the trader’s competitors could have offered the consumer



Unconscionable conduct and small business• Section 22: recognises that small businesses can also be

treated unconscionably by large businesses simply because of the difference in size and prohibits such conduct.

• Matters to be considered in addressing this issue between businesses include:– relative strengths of bargaining positions of parties– comprehension of documents– any undue influence applied– consistency with conduct in similar transactions with other

like customers– requirements of any industry codes– willingness of supplier to negotiate the terms.



Unfair contract terms ACL Chapter 2 Part 2.3• Sections 23–28 apply to standard form

consumer contracts, which are contracts that are prepared by one party and not subject to negotiation.

• The court may consider a term unfair and consequently void if:– the term/s cause significant imbalance in the parties’

rights and obligations– the term/s is not reasonably necessary to protect the

interests of either party; and/or– would cause loss (financial or otherwise) to a party if it

were relied upon.



Section 29 (1) prohibits a person in trade or commerce from making false or misleading representations with respect to:

(a)&(b): standard, quality, value, grade, composition style, mode or history of goods or services

(c): newness of goods

(d): agreement to acquire the goods

(e)&(f): testimonials relating to goods and services

(g): the sponsorship, approval, performance, accessories, uses or benefits of goods or services

Unfair conduct specifically prohibited under Section 29 (1)



Unfair conduct specifically prohibited under s29 (1) (cont.)

(h): sponsorship, approval or affiliation of a corporation

(i): price of goods or services

(j): availability of repair, facilities or spare parts

(k): origin of goods

(l): buyer’s need for goods or services

(m): existence, exclusion or effect of any condition, warranty guarantee, right or remedy (e.g. no refund signs)



Unfair conduct specifically prohibited under ACLA person in trade or commerce must not make false or misleading representations with respect to:

• Section 30: all types of dealings with land

• Section 31: persons seeking employment as to:

availability

nature

terms or conditions, etc.



Unfair conduct specifically prohibited under ACLFalse or misleading statements with respect

to:• Section 32: offering gifts and prizes

• Sections 33&34: conduct that may mislead the public

• Section 35: bait advertising

• Section 49: referral selling

• Section 36: accepting payment without intending to supply goods or services

• Section 48: single price must be disclosed

• Section 59: misleading statements about the profits of home-run businesses



Unfair conduct specifically prohibited under ACL• Section 50: harassment and coercion in relation

to the supply of goods and services

• Sections 44-46: pyramid selling

• Section 30: sending unsolicited debit or credit cards

• Section 40: payment for unsolicited goods or services.



Product safety and product information • The ACL creates a national product safety system.

• The ACL ensures that businesses comply with safety standards relating to goods used for personal, domestic or household purposes and to services that involve the installation, repair or delivery of those goods.

• The Commonwealth has sole responsibility for making safety standards and permanent safety bans which will apply nationally.

• The Commonwealth, states and territories all have the power to make interim safety bans.

• Safety bans, safety standards and mandatory recalls will be enforced by state, territory and Commonwealth regulators.



Product safety and product information (cont)• Safety bans and recalls can be ordered for goods or services

of a kind that under normal or foreseeable use (or misuse) will or may cause injury to any person.

• The Minister for Consumer Affairs can issue public warning notices stating that particular goods are under investigation or warning of possible risks in using the goods.

• Suppliers are required to report products that have been associated with death or serious injury.

• Suppliers of goods that are banned or do not comply with mandatory product standards, or are under a product recall order, can be prosecuted for an offence.

• Fines of up to $1.1 million for corporations and $220 000 for individuals may be imposed.



Consumer guarantees under the ACL• Mandatory statutory guarantees must be

met by a person supplying goods and services in the course of ‘trade and commerce’.

• Applies where buyer is a ‘consumer’ as defined under s. 3 of the ACL.

• Consumer guarantees cannot be excluded by the parties.



Consumer guarantees (cont.)

• Section 51: the seller has the right to sell the goods—guarantee as to title.

• Section 52: the buyer shall have and enjoy undisturbed possession of the goods.

• Section 53: the goods shall be free from undisclosed securities.

• Section 54: the goods shall be of acceptable quality.



Consumer guarantees s. 54—acceptable qualityTo be of acceptable quality goods must be:• fit for all the purposes for which goods of that kind

are commonly supplied; and• acceptable in appearance and finish; and• free from defects; and• safe; and• durable as a reasonable consumer fully acquainted

with the state and condition of the goods, (including any hidden defects of the goods) would regard as acceptable having regard to:



Consumer guarantees s. 54—acceptable quality (cont.)

– the nature of the goods– the price of the goods (if relevant)– any statements made about the goods by the supplier or

manufacturer of the goods and– any other relevant circumstances to the supply of the

goods.• Breach of the guarantee of acceptable quality will not occur

where:– issues that would otherwise mean the goods are not of

acceptable quality are drawn to the attention of the consumer prior to supply; or

– the consumer examines the goods prior to purchase and that examination ought reasonably have revealed the goods were not of acceptable quality.



Consumer guarantees s.55—fitness for purpose• Section 55: goods must be reasonably fit for any disclosed

purpose and for any purpose for which the supplier represents they are reasonably fit.

• Four conditions for guarantee to apply:

– Has the buyer made known either expressly or impliedly the purpose for which the goods are required?

– Has the buyer relied on the seller’s skill and judgement?

– Are the goods of a description that is in the course of the seller’s business to supply?

– Has the buyer ordered goods under patent/trade/brand name therefore not in reliance on seller’s skill or judgement?



Consumer guarantees (cont.)

• Section 56: where goods are sold by description the goods will correspond with their description.

• Section 57: sale by sample—if goods are supplied to a consumer by reference to a sample or demonstration model the goods must:

– correspond with the sample or demonstration model in quality, state or condition; and

– the consumer will have a reasonable opportunity to compare the goods with the sample: and

– the goods are free from any defect that would not be apparent on reasonable examination of the sample and would cause the goods not to be of acceptable quality.



Consumer guarantees—services

• Section 60: guarantee as to due care and skill in relation to the supply of services

• Section 61: guarantee as to fitness for purpose for which the services are being acquired by the consumer and any product resulting form the services

• Section 62: guarantee as to reasonable time for supply of services to consumer



Remedies for breach of consumer guarantees• A consumer has the right to take action against the

supplier of goods or services if the supplier fails to comply with a consumer guarantee.

• Remedy will vary depending on whether the breach is a major or minor failure to comply with a guarantee.

• If the failure is minor, the supplier may be required to remedy the failure within a reasonable time or pay for it to be remedied elsewhere.

• If the failure is major remedies include rejection of the goods by the consumer, compensation and damages for foreseeable loss.



Manufacturer’s and importer’s liability—ACL Part 5.4 Div 2• ACL allows consumers to sue the manufacturer if the

goods are defective and the goods have been supplied through sale, exchange, lease or hire.

• The effect of the ACL is to make manufacturers concurrently liable with the immediate supplier of defective goods (goods in breach of the consumer guarantees) to the consumer in certain situations.

• The ACL provides that a manufacturer must indemnify any supplier who may be required to pay damages to a consumer as a result of a liability of a manufacturer under a consumer guarantee.



Manufacturer’s liability (cont.)

• Section 58: consumer guarantee that provides a manufacturer must ensure there is a reasonable availability of repair facilities and spare parts.

• Section 59: consumer guarantee that provides a manufacturer is liable to compensate a consumer or a person who acquires goods from a consumer for any loss or damage they suffer as result of the manufacturer's failure to comply with an express warranty made about the goods.

• Section 138: strict liability is imposed on manufacturers and importers of defective goods that cause personal injury or property damage.



Defences to manufacturer’s liability• The defect in the goods did not exist at the

time the goods left the manufacturer, but occurred elsewhere in the distribution chain.

• The goods had the defect only because they complied with a mandatory standard.

• The product is someone else’s component.• The defect could not have been discovered

at the time of supply because of the state of existing scientific and technical knowledge.



Enforcement and remedies for breach of the ACLCivil remedies

• Section 224: civil pecuniary penalties—maximum of $220 000 for an individual and $1.1 million for a corporation.

• Section 232: injunctions—may be sought by a regulator or an affected person.

• Section 236: damages

• Section 243: compensation orders, may include;– an order for specific performance of a contract

– rescission of a contract

– variation of a contract

– refund of money

– return of property.



Enforcement and remedies for breach of the ACL (cont.)

• Section 239: orders for non-party consumers—if a breach of the ACL has occurred, a regulator may apply to the court for an order providing redress to a person not named in the proceedings but who may have suffered some injury.

Non-punitive orders—Section 246

• Community service orders

• Order to ensure conduct does not occur for a period of time

• Disclosure order

• Order requiring a person to publish an advertisement in terms specified in the order (e.g. corrective advertising)



Enforcement and remedies for breach of the ACL (cont.)

Disqualification order—Section 248• Regulator may apply to the court for an order

banning a person from managing a corporation.

Criminal penalties (except s.18):• Offence must be proven beyond reasonable

doubt and criminal proceedings must be brought within three years of the offence.

• Maximum fines which can be imposed are $220 000 in the case of a natural person and $1.1 million in the case of a corporation.



ACL Sections 207–209: defences to breaches• Breach was due to a reasonable mistake

of fact, including reliance on information given by another person.

• Breach was caused by the fault of another person that the accused took reasonable care to avoid.

• Publication of advertisement where the publisher did not know and had no reason to suspect the advertisements were in breach of the ACL.



Australian Competition and Consumer Commission (ACCC)• Administers ACL• Investigates and prosecutes breaches of

the ACL• Hears disputes arising under the ACL• Conducts research and provides

consumers and traders with information on their respective rights

• Has powers to obtain evidence, including documentary evidence

• Has powers to establish and administer standards relevant to product safety.



Consumer complaint

ACCC dispute

Settle before Court action

court action



Settlement before court

• Pay restitution to consumers who have been affected by illegal conduct.

• Promise ACCC that steps will be taken to ensure CCA and ACL are complied with and future breaches avoided.



Court action

• Depends on the following considerations:

– Educative or deterrent effect

– Blatant disregard of law

– Significant public detriment

– Need to test the limits of the CCA or ACL



Australian Competition Tribunal

This is the appeal body from the ACCC.



Small claims tribunal

• Has authority to hear consumer claims

• Operates through hearings

• Limits imposed on its operation

• Generally no right of appeal and no costs orders (except SA)

• Claims made by filing prescribed form



Consumer protection agencies

• Educate the community about their rights as consumers

• Handle complaints made by consumers against providers of goods and services

• Provide information to consumers

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