LAWS1100 Business Law

Teaching Week 9

Comp & Consumer Law (I)

 Consumer Law

1. The Competition & Consumer Act –

Australian Consumer Law (Schedule to Act)
2. Misleading and Deceptive Conduct
3. False Representations
4. Implied Consumer Guarantees
5. Unconscionable Conduct
6. Unfair Terms
 Why Protect Consumers?
• Consumers are entitled to additional protection under
Australian law because when dealing with a business they
are usually at a disadvantage.
• Consumer Law addresses the fundamental imbalance in
bargaining power between business and consumers.
• The traditional rules of contract law offer little assistance to
a consumer who is disadvantaged because of the inequality
of bargaining power: the general rule being caveat emptor
(let the buyer beware).
• Consumer protection legislation seeks to overcome many of
the difficulties with the common law of misrepresentation
and provides better remedies for ‘consumers’ whose
contracts are induced by false statements or by misleading
or deceptive conduct.
 Why Consumer Law?
In a nutshell:
1. Often an aggrieved party cannot hit all the
tests that are required under contract law;
2. Proving a breach of consumer law is often
easier than proving a breach of contract;
3. Typically, there is also a broader range of
remedies available under consumer law, than
is available under contract law.
 Rationale
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
 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, misleading or
deceptive conduct generally, unconscionable conduct, unfair
terms and 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.
• S3 of the ACL states that a person is a consumer if they have
acquired goods or services:
– of a kind ordinarily acquired for personal, domestic or
household use or consumption; and
– that have not been acquired for the purpose of re-supply or
for use in a manufacturing process.
 S18 – Misleading or Deceptive Conduct
NOTE: s18 (ACL) is the old s52 of the Trade Practices Act (TPA).

Section 18 (1) of the ACL states: ‘a person must not, in trade or

commerce, engage in conduct that is misleading or deceptive or is
likely to mislead or deceive’.

• Under s18, intention or fault is irrelevant (plaintiff need not show

intention) and liability cannot be avoided by use of a disclaimer.
See: ACCC v Telstra (2007).
• The range of remedies provided by the ACL for breach of s18 is
much wider than that available at common law for
misrepresentation or breach of contract – including injunctions (s
232), damages (s 236) and compensatory orders under ACL Ch5.
 S18 – Who can bring a claim?
• Section 18 is not limited to consumer transactions or the
supply or possible supply of goods or services.
• The words in s18 do not restrict who can bring an action.
• s18 can be relied upon not only by consumers but also by
members of the public, lobby and public interest groups,
other businesses and competitors.
• In fact, competitors are the most
frequent people to bring a s18 claim.
Ask yourself, why?
See: Gillette v Energiser (2002)
 S18 – Requirements
Requirement 1: ‘A person must not’
• Can be either a person, an incorporated body or an
unincorporated business entity.
Requirement 2: ‘in Trade or Commerce’
• This means: within Australia or between Australia and
places outside Australia – includes any business or
professional activity.
• This definition comes directly from the Act. What section?
• ‘Trade’ and ‘Commerce’ are ordinary terms which describe
all the mutual communing, the negotiations verbal and by
correspondence, the bargain, the transport, and the
delivery which comprised commercial arrangements.
See: Re Ku-Ring-Gai Co-operative Building Society (1978).
 S18 – Requirements
Requirement 3: ‘Engage in Conduct’

• Section 2(2) of the CCA defines ‘engaging in conduct’ as

‘doing or refusing to do an act’.
• A person will ‘engage in conduct’ if they make a
statement, claim or promise, perform an action, or
refuse to do any of these things.
• It includes both actions (doing things) or non-actions
(refusing to do things) if the definition of the TPA applies.
• Important: in certain circumstances, even silence can be
conduct. See: Henjo Investments v Collins (1988)
 S18 – Requirements
Requirement 4: ‘Misleading or Deceptive’

Weitman v Katies (1977) defined the terms as follows:

– ‘mislead’: to lead astray in action or conduct; to lead into error;
to cause to err.
– ‘deceive’: to cause to believe what is false; to mislead as to a
matter of fact; to lead into error; to impose upon, delude, take
in.

• The conduct will be caught under s18 not only if it has actually
misled or deceived others, but even if it has not actually misled or
deceived anyone yet, it still has the potential or likelihood to do so.
• In other words, you do not need proof that someone was actually
misled or deceived.
 S18 – Requirements
Requirement 4: ‘Misleading or Deceptive’

The two tests come from: Taco v Taco Bell (1982). They are then assisted by
the test in Annand & Thompson v TPC (1979).

Taco v Taco Bell (1982)

• Restaurant in Sydney owned by Taco Bell Pty Ltd (TB).
• TB had been operating for quite some time.
• Taco Company of Australia Inc (TCA) sought to open a restaurant with the same
name as part of the US “Taco Bell” franchise.
• TCA commenced an action against TB for breach of s52 (TPA).
• TB cross-claimed, also alleging a breach of s52 .

Held: The Court recognised that actually TCA’s conduct was M&D as:
1. The Sydney owner had been established first and had a strong reputation; and
2. The same names would mislead customers.
 Taco v Taco Bell – 2 Tests
• First, it is necessary to identify the relevant section (or
sections) of the public by reference to whom the
question of whether the conduct is, or is likely to be,
misleading or deceptive falls to be tested. ASK: who is
the relevant target group/audience whom the
defendant’s conduct targeted or directed at?
• 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 a variety of vocations.
 Annand & Thompson v TPC – Test
In relation to the second test in Taco Bell:

• 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 to
be determined by the effect
on a person who is,
eg. quite unusually stupid.
 Annand & Thompson v TPC – Test
• Only a small % of the target audience needs to be misled
or deceived or be capable of being misled or deceived.

See: ACCC v Powerballwin.com (2010)

• Here, a small % was misled and deceived.
• However, still deemed to be M&D conduct.

NOTE:
Do not judge misleading or deceptive
conduct, based on your own understanding or that of a
reasonable person. Remember, it is one of the few tests
that does NOT apply the reasonable person.
 S18 – Cases & Principles
• Conduct that creates confusion amongst customers may not
satisfy the tests. See: McDonald’s v McWilliam’s Wines (1980).

Burgers vs Wine

See also: ACCC v Coles Supermarkets Australia [2014]

Depending upon the circumstances, an exaggeration may be
misleading and deceptive.
See: Given v Pryor (1980) – an advertisement for a land estate
saying that it is “a wonderful place to live”, even though it was
not actually possible to build a residential home on the land.
 S18 – Cases & Principles
• A statement that is literally true can still be misleading or
deceptive – overall impression created by the advertisement
was a misleading one, even though it contained all the correct
information. See: Henderson v Pioneer Homes (1980)

• A statement that is not literally true is not necessarily

misleading or deceptive – Eg.) ‘sales puff’.
 S4 ACL – Misleading Representations
with respect to Future Matters
Section 18 may apply to future promises (s4 ACL) – if:

1. A person makes a representation with respect to any

future matter (including the doing of, or the refusing to
do, any act); and
2. The person does not have reasonable grounds for
making the representation;
3. The representation is taken, for the purposes of this
Schedule, to be misleading.
See: ACCC v Powerballwin.com (2010)
 Modern Day Example – s18
Nurofen Controversy

• Australians paid a premium for their "misleading" targeted pain

relief pills.
• The specific pain range claimed to target back pain, migraines,
tension headaches etc, despite containing nearly identical
ingredients to regular Nurofen.
• http://www.abc.net.au/news/2017-08-03/nurofen-offers-3.5-mi
llion-compensation-to-customers/8770910
 S29 – False Representations
S29 ACL – A person must not, in trade or commerce, in
connection with the supply or possible supply of goods
or services or in connection with the promotion by any
means of the supply or use of goods or services… make
certain false and misleading representations.

• NOTE: Does not mention the same elements of

“fraudulent”, “negligent” or “innocent”
misrepresentation, that are found in contract law.

• Can be used by Competitors (in conjunction with s18).

 S29 – False Representations
Includes making false and misleading representations:

a) That its goods are of a particular standard, quality,

value, grade, composition, style or model or have had a
particular history or particular previous use.
See: ACCC V Cadbury (2004);
b) That its services are of a particular standard, quality,
value or grade;
c) That its goods are new;
g) That the goods or services have a sponsorship, approval,
performance characteristics, accessories, uses or
benefits. See: Hartnell v Sharp (1975);
i) With respect to the price of its goods or services;
k) Concerning the place of origin of its goods.
 Section 18 and Section 29

• While s29 uses the expression “false or misleading”

rather than “misleading or deceptive” (as in s18),
there is no meaningful difference between these
expressions.

See: ACCC v Coles Supermarkets Australia Pty Ltd

[2014 FCA 634] at [40] per Allsop CJ.
 Section 18 and s29 – Case Example
See: Optus Mobile Pty Ltd v Telstra Corp Limited [2018] FCA

• Telstra conducted an advertising campaign across Australia.

• The campaign centred around the use of the word ‘unlimited’.
• Optus contended that by using the word ‘unlimited’ (without any
qualification in the advertisements) Telstra breached ss18 and 29 of
the ACL.
• Telstra contended that their advertising only says ‘unlimited’ and in
the context of the surrounding words and imagery in the
advertisements, the word conveys “nothing definitive, doing no
more than to cause a viewer to wonder about its meaning”.
• Held: 1.) by publishing various ‘unlimited’ advertisements, Telstra
has engaged in conduct contrary to s18; and 2.) Telstra has made a
false representation that services are of a particular quality in
contravention of s29(1)(b) and (g).
 ACL Implied Consumer Guarantees
The ACL implies into contracts for the sale of goods to consumers
guarantees that:
• The seller has title: s 51;
• The consumer will have undisturbed possession: s 52;
• There are no undisclosed securities: s 53;
• The goods are of acceptable quality: s 54;
• The goods are fit for any disclosed purpose: s 55;
• The goods correspond with their description: s 56;
• The goods correspond with any sample or demonstration model
in quality, state or condition: s 57;
• The manufacturer will ensure that repair facilities and spare
parts are reasonably available: s 58; and
• The manufacturer will comply with any express warranties given
in relation to the goods: s 59.
 ACL – s54 (Acceptable Quality)
ACL s54 – In every contract for the supply of goods to a consumer
in trade or commerce (other than by auction), there is a guarantee
that the goods will be of acceptable quality (s2):
– 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.
See: Licciardo v Plush Think Sofas Pty Ltd [2015] VCAT 2044
See: Mitchell v Oz Design Furniture Pty Ltd [2016] VCAT 108
 ACL – s55 (Fit for Purpose)
ACL s55 (1)– If a person supplies, in trade or commerce, goods to a
consumer… there is a guarantee that the goods are reasonably fit for
any disclosed purpose, and for any purpose for which the supplier
represents that they are reasonably fit.
(2) A disclosed purpose is a particular purpose (whether or not that
purpose is a purpose for which the goods are commonly supplied)
for which the goods are being acquired by the consumer and: the
consumer makes known, expressly or by implication, to:
(a) the supplier, or a person by whom any prior negotiations or
arrangements in relation to the acquisition of the goods were
conducted or made (Eg. agent); or (b) to the manufacturer.
(3) This section does not apply if the circumstances show that the
consumer did not rely on, or that it was unreasonable for the
consumer to rely on, the skill or judgment of the supplier,
manufacturer etc.
 Interesting Case Law
See: ACCC v C.I. & Co Pty Ltd [2010] FCA 1511
Facts:
• Court penalised wholesaler when they misled the public by
labelling and selling cartons of eggs labelled 'free range' when
a substantial proportion of the eggs were not free range.
• North J: “the conduct involved a high level of dishonesty. The
conduct was also extremely difficult to detect because, once
the eggs were placed in the cartons, it was impossible to
determine whether they were free range or not… the 2nd Res
must have known that it was dishonest to a high degree.
• “The conduct amounts to a cruel deception of consumers who
seek out free range eggs as a matter of principle.”
• Held: The wholesaler infringed (under old Act): s52 (M&D), s53
(false rep), s55 (fit for purpose).
 Interesting Case Law
See: ACCC v C.I. & Co Pty Ltd [2010] FCA 1511

Decision and Gravity of Penalties:

• Justice North noted that the maximum penalty for each

contravention is $220,000 and stated: “it is unlikely that other
operators in the industry could be in any doubt about the
court’s view of the gravity of the deception visited upon
unsuspecting and often well motivated consumers... the
quantum of the penalty should signal to the suppliers of eggs
that to mislabel free range eggs will be viewed as a very serious
contravention of the Act, attracting severe penalties, even for a
short period of trading.”
 Statutory Implied Terms –
States and Territories
• Sale of goods legislation in the States and Territories
also implies statutory terms that protect the buyer in
contracts for the sale of goods. See: Chapter 8 (book).

• Queensland has the Sale of Goods Act 1896 (Qld) –

and there is similarity in the terms implied by this
legislation into contracts for the sale of goods to
terms implied into consumer contracts by the ACL.
 Unconscionable Conduct – ACL
There are main three sections prohibiting
unconscionable conduct:

• Section 20: unconscionable conduct in general.

• Section 21: unconscionable conduct in connection
with goods or services.
• Section 22: matters that are considered under s21.

Note: Section 20 does not apply where the conduct of

the person falls specifically within ss21 and 22.
 Section 20 – ACL
Unconscionable conduct within the meaning of the
unwritten law.

• s20: A person must not, in trade or commerce,

engage in conduct that is unconscionable within the
meaning of the unwritten law from time to time.
• This section applies to ‘unconscionable conduct’ of a
corporation that is recognized now and in the future
as part of the common law and equitable principles
developed by of the Courts such as Cth v Amadio and
any future developments.
 Section 21 – ACL
• Considers unconscionable conduct in connection with
goods or services.
• Section 21: A person must not, in trade or commerce,
in connection with: (a) the supply or possible supply
of goods or services to a person; or (b) the acquisition
or possible acquisition of goods or services from a
person… engage in conduct that is, in all the
circumstances, unconscionable.
• S21 protection generally limited to consumers and
small business – not listed public companies
 Section 21 – ACL
• S21(4): It is the intention of the Parliament that:
(c) In considering whether conduct to which a
contract relates is unconscionable, a Court’s
consideration of the contract may include
consideration of:
(i) The terms of the contract; and
(ii) The manner in which and the extent to which
the contract is carried out;
and is not limited to consideration of the
circumstances relating to formation of the contract.
 Section 22 – ACL
• Section 22: Looks at a range of matters that a Court
may consider to determine whether a person has
contravened section 21.

• Section 22 (1) and (2) takes into account both

procedural and substantive unconscionability, to
determine a breach of s21, including:
- Relative strengths of the bargaining positions;
- Imbalance in the terms (favours stronger party);
- Whether the consumer was able to understand
any related document;
- Whether a party has a contractual right to vary
unilaterally a term or condition of a contract.
 Examples of Procedural Unconscionability

1. Inequality of bargaining power between parties due

to factors like age, infirmity of mind or illiteracy;
2. Harsh or oppressive behaviour (undue influence or
pressure); unfair tactics used by the stronger party.

• Section 22 (1) (a), (c) and (d) and (2) (a), (c) and (d)
deal with procedural unconscionability.

IMPORTANT: The equitable doctrine in Cth v Amadio

focuses on procedural unconscionability.
Examples of Substantive Unconscionability

1. Imbalance in the terms (leaning towards the

stronger party);
2. Harsh, oppressive or unreasonable terms;
3. Exclusion clauses or excessive payment clauses
advantaging the stronger party;
4. Overall terms of the contract that operate to
benefit the stronger party and are unduly one-
sided from the perspective of the weaker party;

• Section 22 (1) (b), (j) and (k) and (2) (b), (j) and (k)
provide examples of substantive unconscionability.
 Unfair Terms – ACL

Sections: 23, 24, 25, 27.

A term of a contract will be unfair, in contravention of

ACL s23 and therefore void if:

1. The contract is a consumer contract;

2. The contract is a standard form contract; and
3. The term is unfair.
 Unfair Terms – ACL
Consumer contract: s23(3) – a contract for the supply of
goods, services or an interest in land to an individual whose
acquisition of the goods, services or interest is wholly or
predominantly for personal, domestic or household use or
consumption;
• Note: not applicable when contract is for business use.

Standard form contract: s27 – Not individually negotiated

for each customer– the same standard terms for all?
• s27(2) sets out matters to determine if a contract is a
standard form contract or not.
 Unfair Terms – ACL
Unfair term: S24(1) – a term of a consumer contract is ‘unfair’ if:

1. It would cause a significant imbalance in the parties’ rights and

obligations arising under the contract – it has to be significant,
not minor or trivial;
2. It is not reasonably necessary to protect the legitimate interests
of the party who would be advantaged by the term. Businesses
do have the right to protect their legitimate interests, but was this
a legitimate interest that was reasonably necessary to protect in
the circumstances?;
3. It would cause detriment (whether financial or otherwise) to a
party if it were to be applied or relied on – often financial but it
could also be inconvenience, delay or distress.
 Unfair Terms – Possible Defence
• Section 24 (2): In determining whether a term of a contract is
unfair under ss(1), a court may take into account such matters as it
thinks relevant, but must take into account the following:
                     (a)  the extent to which the term is transparent;
                     (b)  the contract as a whole.
(3) A term is transparent if the term is: (a) expressed in reasonably
plain language; and (b) legible; and (c) presented clearly; and
(d) readily available to any party affected by the term.

• Look at the context of the whole contract – was the term

‘transparent’: was the contract and/or the term expressed in
reasonably plain language, legible, presented clearly or readily
available to any party affected by the term?
• Rationale: if anyone can understand it, they should have objected
to it or walked away from the contract.
 Unfair Terms – s25 (Examples)
Examples of unfair terms: s25 assists in determining if a
term is unfair or not under s24 by having a non-exhaustive
list of examples of unfair terms – that allow one party to do
something (generally the one who drafted the contract and
the term), but not allowing another party to do the same
thing (generally the customer).

Examples include (not an exhaustive list):

• To avoid or limit performance of the contract;
• To terminate the contract. See: Director v AAPT (2006);
• To breach the contract;
• To vary the terms. See: Director v Trainstation (2006);
• To renew or not renew the contract;
• To unilaterally determine whether the contract has been
breached or to interpret its meaning.
Unfair Terms – Case Example?
 Major ACL Provisions discussed…

1. Misleading and Deceptive Conduct

2. False Representations
3. Implied Consumer Guarantees
4. Unconscionable Conduct
5. Unfair Terms
 Australian Consumer Law

Other ACL Provisions include:

• Section 35 – Bait Advertising

• Section 36 – Wrongly Accepting Payment
• Section 40 – Inertia Selling
ACL – Other Specific Prohibitions
ACL s35 – Bait Advertising:
• A person must not engage in bait advertising. A business
engages in bait advertising when it advertises a product
at a price that is likely to attract buyers to its premises
when it knows or should know that it is likely to run out
of stock very quickly.
See: Repco’s $1 Million Sizzling Sound Sellout.

ACL s36 – Wrongly Accepting Payment:

• A person must not accept payment from a buyer when it
either does not intend to supply the product or it knows
or should know that it will be unable to provide the
product within the specific time or a reasonable time.
See: Dawson v World Travel (1981);
See: Ozdirect – see next slide.
OZDIRECT: Electronics website breached Trades Act: ACCC
16 July 2009 
CANBERRA, July 15 AAP – Popular electronics website Ozdirect has been taken to court over
accusations it deliberately misled consumers about its products, delivery times and
warranties. The Australian Competition and Consumer Commission (ACCC) has responded
to an online campaign against the website by launching legal action in the Federal Court. It
alleges the site, which sells cameras, computers and a range of other electronics, breached
three sections of the Trade Practices Act. A number of irate consumers have used online
forums to vent their frustrations as far back as August 2008, claiming the site took their
money.
"It's been five weeks, I've still not received anything," one user who bought software
worth $1,000, wrote. "All emails, faxes, customer service centre ... ignored. What a joke!"
said another. "Worst online shopping experience ever," rated a third, who added they'd
made an official complaint.
On another site in March, 111 people signed a petition asking for the media's help in
publicising the issue. The ACCC has since lodged a statement of claim with the Federal
Court in Sydney over the alleged breaches and said it will pursue costs. "The ACCC alleges
that Ozdirect accepted payment from consumers for goods it knew or ought reasonably to
have known, it would not be able to supply within a reasonable time. It made
misrepresentations to consumers, about the availability and likely delivery times of items
and also, consumer warranty and refund rights.”
 ACL – Other Specific Prohibitions
ACL s40 – Inertia Selling:

• Inertia selling is sending an unsolicited product to a person and then

pressuring the person to pay for that product.
• A business must not claim a right to payment unless it reasonably
believes that it in fact has a right to payment.

If a business has sent an unsolicited product to a

person, the person:
1.) Does not have to pay for it; and
2.) Is not liable for the loss of or damage to the
product unless the loss or damage results from a
wilful and unlawful act.

After the expiry of a certain period, the product

becomes the property of the person, free of charge.
 Remedies for Breach of the ACL
Remedies that can be granted by a court for
contravention of the ACL include:
• Pecuniary penalties;
• Rescission of contract;
• Injunctions (s232);
• An order that the business pay damages to any
person who has suffered loss because of the
contravention (S236);
• A compensation order for injured persons;
• An order declaring a contract void, varying a contract, refusing to
enforce a contract, ordering a refund, ordering compensation,
ordering repair of the goods, or ordering the provision of services;
• Non-punitive orders including orders directing the business to perform
a community service or to establish compliance and education
programs for its employees;
• An adverse publicity order;
• An order disqualifying a person from managing a corporation;
• The ACCC may take investigative, administrative or court actions
against parties in breach of the ACL and the CCA.
Coming up next week...

Competition &
Consumer Law (II)