BTC1110 Exam Case Studies PDF

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BTC1110 Exam Case Studies (Weeks 6-11) WEEK 6-7 AUSTRALIAN CONSUMER PROTECTION OVERVIEW OBJECTIVES 1. Giving Australian consumers the same rights and protections wherever they are in Australia 2. Simplifying the law 3. Creating a national enforcement regime ORGANISATION OF ACL Chapters 1. Single set of definitions & interpretive provisions 2. General prohibition on misleading and deceptive conduct & unconscionable conduct 3. Specific protections which address identified forms of business conduct 4. Criminal offences 5. Additional Remedies ENFORCEMENT OF ACL Damages: To compensate for loss or damage caused by the breach Injunctions: Court order to stop / prevent a contravention Compensation Orders: Order to compensate a person who suffered loss / damage or because of an unfair term in a consumer contract Penalties: May be imposed on individuals or corporations for contravening ACL. - Civil or Criminal - Maximum fines are $1.1 million for corporations and $220,000 for individuals PROHIBITION OF MISLEADING / DECEPTIVE CONDUT A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive MEANING OF ENGAGE A person must not ‘engage’ Google Inc v ACCC (2013): Facts: - Search engine displayed sponsored search results separately from its other searches - Sponsored search results were labelled as such Decision - HCA held search engine was not liable for M&D - Search engine was not the author of the misleading content, which was supplied by an advertiser - Search engine had not adopted or endorsed the sponsored search results

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MEANING OF MISLEADING OR DECEPTIVE M&D is likely if it has the tendency to lead into error, if there is sufficient causal link between the conduct and the error on the part of the person exposed to the conduct S18 & the world of marketing / advertising: ACCC V TPG Internet PTY LTD (2013): Facts: - In small print advertisements stated that the customer was required to bundle the service with a landline rental for an additional $30 per month minimum 6 months - Overall minimum of $509.89 including set up fee and deposit had to be paid Decision: - Primary judge found a reasonable consumer would not have assumption as to whether TPG’s offering was of a separate or bundled service - HCA found advertisements conveyed a representation that the internet service was available without bundling - There was a representation that there would be no set up fee or deposit needed - Dominant message ADSL2+ would be provided for $29.99 - Small print did not do enough to correct the false impression created by the dominant message - Pecuniary penalty of $2 million imposed on TPG ACCC V Turi Foods PTY LTD (2013): Facts: - As chickens grew in size and number, free roaming was impossible Decision: - Federal Court recognized that consumers paid a premium for free range eggs - Producers must not falsely represent that their eggs are from ‘happy’ chooks - This claim was M&D and a flase representation - Joint penalty of $400,000 for the 2 pultry suppliers Coles Supermarkets Australia PTY LTD v ACCC (2014): Facts: - Advertised that bread produced in its store was ‘baked fresh’ & ‘baked today’ Decision: - Federal court held that it was misleading to describe bread or baked today where part of the baking had occurred before the day of sale - Also misleading to describe the bread as ‘baked fresh’ as that suggests baking was from fresh dough - Coles restrained for 3 years from making representation that it bread products were entirely baked on the day on which they were offered for sale - Coles displayed a Corrective Notice for 90 days in prominent locations clearly visible to customers at all times in each in store bakery section admitting it o Engaged in M&D o Made false / misleading statement as the history of goods o Engaged in conduct that was liable to mislead the public as to the nature of the manufacturing process

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ACCC v Reckitt Benckiser (2016): Facts: - Product range consisted of Nurofen Back Paind, Period Pain, Migraine Pain & Tension Headache Decision: - Federal Court found that RB engaged in M&D by representing that its Nurofen Specific pain products were each formulated to treat a specific type of pain, whereas the products were all identical - Court found each contains 342mg ibuprofen lysine, thus each product is no more effective at treating the type of pain described on its packaging - RB paid penalties totaling $1.7 million - ACCC submitted that penalty of $6 million was appropriate to send a strong deterrence message - Fine was increased to $6 million Online Marketing - Disclaimers: Where a disclaimer is used to contradict, restrict or negate the main message, the potential to mislead consumers increases - Online Endorsements: Businesses and review platforms that do not remove reviews that they know to be fake, risk breaching ACL o Reviews may mislead consumers if they are presented as impartial, but were written by § The reviewed business § A competitor § Someone paid to write the review who has not used the product § Someone who has used the product but written an inflated review to receive a financial or non-financial benefit S18 as a weapon for business: McWilliam’s Wines PTY LTD v McDonald’s System of Australia PTY LTD (1980): Facts: - McWilliams, a well-known wine company, started to advertise its wines using the words Big Mac prominently displayed in the advertisements Decision: - Full Federal Court was of the view that a case had not been made out that the use of the words Big Mac was likely to decive or mislead persons by causing them to think the wines were a product of McDonald’s - Such a person was not mislead by the advertisement into believing that there was such a connection - Conduct which merely tends to cause confusion will not ordinarily be sufficient to constitute M&D Parkdale Custom Built Furniture PTY LTD v Puxu PTY LTD (1982): Facts: - Parkdale ‘Rawhide’ range was very similar to Puxu ‘Contour’ range - Almost identical in shape, design & general appearance - Parkdale always labelled its furniture stating it was from the manufacturer Decision: - HCA held Parkdale had not contravened s52(1) TPA (s18(1) of ACL)

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On the basis that potential purchasers of furniture costing substantial sums of money were able to inspect the furniture that was on display in the showroom Court took the view that purchasers would reasonable pay attention to the label, brand or mark of the suite

Apand PTY LTD v Kettle Chip Co PTY LTD (1994): Facts: - Apand began marketing a new line of potato chips under the name ‘Country Kettle’ Decision: - Full Federal Court held that at the time the appellants chips came onto the market, the name ‘Kettle’ had obtained a secondary meaning distinctive of the respondents claims - Contravened s52(1) TPA (s18(1) of ACL) S18 & Pre-contractual representations: ACCC v Metricon QLD PTY LTD (2012): Facts: - ACCC alleged the brochures contained representations that were M&D - Brochures contained specific false representations in breach of s29(1)(a)(i)(m) Decision: - Metricon admitted that it had engaged in conduct o Pictorial representations: Depiction of various house designs & elaborate photographs = were not included in the represented price o Build time guarantees: Guarantee build time but there were broad T&C’s o Discount List Price: o Upgrade Packages - Metricon paid fines of $800,000 – ‘likely to mislead or deceive’ Bavanere PTY LTD v Lubidineuse (1985): Facts: - P as principal of appellant, told Lubidineuse that the head employee at the clinic would continue the clinic after its sale - P knew that the head employee intended to leave & set up her own clinic in competition nearby Decision: - Full Federal Court held P’s statement constituted M&D Byers v Dorotea PTY LTD (1986): Facts: - Representationed as to the proposed features & quality of home units which were not yet built - Brochure contained photo of a swimming pool - Representations were proven to be untrue Decision: - Held that applicants were induced to enter into contracts by misleading statements in contravention of s52(1) TPA (s18(1) of ACL) - Court ordered refund of deposits

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Brosnan v Katke (2016): Facts: - A party sought to rescind the settlement for alleged M&D regarding financial projections in a business plan tht had been provided during the settlement negotiations Decision - Full Federal Court feld that the business plan made no representation that the projections would be achieved - It was a plan of objections not of firm commitments WHAT IS CONDUCT Can silence constitute misleading conduct?: Has s52(1) TPA (s18(1) of ACL) been infringes by conduct that involves either refusing / refraining from doing an act before that conduct is actionable? - Has the failure to inform an party M&D… - Was such conduct deliberate… Situations where non-disclosure / silence may contravene s18 of ACL - Where the information provided is incomplete: o Statement is literally true but misleading when the full story is told o Where something has changed so that what as once true is no longer true - Where the applicant has a ‘reasonable expectation’ that in all circumstances, disclosure will be made Henjo Investments PTY LTD v Collin Marrickville (1988): Facts: - Agent to HI lead CM to believe that the restaurant seated up to 128 people - Terms of license restricted seating capacity to 84 people - Reduced seating capacity had an impact on the profitability of the restaurant Decision: - Full Federal Court affirmed decision to trial judge - Vender in remaining silent as to the true seating allocation had engaged in M&D Demagogue PTY LTD v Ramensky (1992) Facts: - R contracted to purchase land from D in proposed development of several unites - An included ‘drive way’ was in fact public road - D had not infomredd R of this issue - R sought to rescind the contract upon finding this issue Decision - Court held that D silence constituted M&F because there was reasonable expectation that there should have been disclosure of the unusual circumstance surrounding access to the property This sections does not require a party to disclose information that would enable another party of equal bargaining power & competence to avoid the consequences of carelessly disregarding its own interests

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Issue of fault and intention Yorke v Ross Lucas PTY LTD (1985) Decision - HCA affirmed corporation could contravene s18 of ACL even though it acted honestly and reasonably Exclusion clauses & S18: S18 cannot be directly excluded by the presence of a term in a contract or by notice. - Any attempt to exclude from S18 is void Butcher v Lachlan Elder Realty PTY LTD (2004) Facts: - LER had brochure that contained a reproduction of a 1980 survey diagram which showed a swimming pool between the house & the water was above the mean higher water mark, which was the boundary between the land & the sea - ‘All information herein is gathered from sources we believe to be reliable…We cannot guarantee its accuracy’ - Mr Butcher purchased property for $1.36 million after advice from builders saying he could relocate the pool - Part of the new pool location was on government land Decision: - NSW Court of Appeal dismissed the claim by B - HCA affirmed that S18 imposed a strict liability by the disclaimer put the purchasers on notice not to rely on the representations in the brochure - Purchasers were shrewd investors v Small suburban office - Office did not represent he had expertise in verifying title details of the property PROHIBITION OF UNCONSCIONABLE CONDUCT INTRODUCTION Defined as conduct that is simply unfair / harsh – it must have an element of bad conscience S20 deals with unconscionable conduct within the meaning of the common law S21 is a broad prohibition on unconscionable conduct in connection with selling / supply or acquisition / purchase of goods or services UNCONSCIONABLE CONDUCT WITHIN MEANING OF UNWRITTEN LAW S20(1) ACL - ‘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’ ACCC v CG Berbatis Holdings PTY LTD (2003) Facts: - Shopping cenre tenant engaged in litigation with centre owners - Tenant wished to assign lease as part of sale of business - Lease was about to expire & did not contain option to renew Decision: - ACCC considered to be UC - Exploitation of weaker bargaining position in which lessees found themselves - HCA held the center owners conduct did not constitute UC

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A person is not in a position of special disadvantage simply because of inequality of bargaining power Good conscience does not require parties to contractual negotiations to forfeit their advantages Taking advantage of a superior bargaining power does not constitute UC or special disadvantage

ACCC v Samton Holdings (2002) Facts: - ACCC took action against lessors, SH, alleging that they engaged in UC - Lessors demanded payment of $70,000 from the purchasers for the privlage to renew the lease Decision: - Full Federal Court decided that the purchasers were not at a special disadvantage - Conduct of the lessors although avaricious & opportunistic was not extreme end of the scale UNCONSCIONABLE CONDUCT WITH GOODS / SERVICES S21(1) ACL prohibits a person from engaging in UC in connection with goods or services 1. A person must not in trade or commerce in connection with a. Supply or possible supply of goods or services to a person… b. The acquisition or possible acquisition or goods or services from a person… engage in conduct that is UC 2. For the purpose of determining whether a person has contravened a subsection a. The court must not have regard to any circumstances that were not reasonable foreseeable at the time of the alleged contravention b. The court may regard to conduct engaged in circumstances existing before the commencement of this section The term ‘unconscionable’ is not defined. Court may have regard to the following matters: a. Relative strengths of the bargaining positions of the parties b. Whether the customer was able to understand any documents relating to the sale c. Whether any undue influence or pressure was exerted d. The amount and terms for which the customer could have acquired equivalent goods or services from another vendor e. The extent to which the suppliers conduct was consistent with their conduct towards other customers in similar transactions f. The requirements of any applicable industry code g. The extent to which the supplier unreasonable failed to disclose intended conduct that might affect the customer h. The extend to which the supplier & the customer acted in good faith ACCC v Lux PTY LTD (1974) Facts: Decision: - ‘What is required is serious misconduct or something clearly unfair or unreasonable’

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ACCC v Lux Distributors (2013) Facts: - Employee of Lux using its existing customer database rang potential customers & offered a free maintenance check of their existing vacuum cleaner - representative gained entry into household of 5 elderly women - representative tested customers’ existing vacuum & conducted a test that compared that vacuum with a near new demonstration model - Representative used demonstration to show the superiority of the new model Decision: - Federal Court decided that it was not UC - Court must take a holistic view of the conduct - It also makes clear that businesses that rely on door to door sales (& similar sales strategies) must act in a manner that is honest & fair + free from deception NRM Corporation PTY LTD v ACCC (2016) Facts: - Doctors engaged by NRM were conducting consultations with patients in a manner that did not provide an appropriate diagnosis & medical treatment of male sexual dysfunction Decision: - Federal Courth found that NRM engaged in UC in the way it promoted / supplied male sexual dysfunction product - ‘It is immoral to seek harness the fears & anxieties of men suffering PD…to target the patients vulnerability in this way is to use an unfair tactic & that is a possible market of UC’ - Full Court upheld an order made permanently restraining NRM from making statements & representations to any patient or prospective patient as to the efficacy of NRM treatments UNCONSCIONABLE CONDUCT AND SMALL BUSINESS S21 S21 can also be used to protect small businesses from larger businesses engaging in UC Court may also regard factors relevant to business to business transactions a. Relative bargaining strengths of businesses b. Use of undue influence, pressure or unfair tactics c. Willingness of stronger party to negotiate d. Extent to which the parties acted in good faith ACCC has shown its willingness to use S21 to protect small businesses from allegedly UC from landlords REMEDIES FOR CONTRAVENTION Pecuniary penalties may be imposed Civil remedies (e.g. injunction or damages) may be sought for contravention of UC

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PROHIBTION OF UNFAIR CONTRACT TERMS S23-24 INTRODUCTION Standard form contract - Where one party has prepared a contract & the other party has little or not opportunity to negotiate the terms - Contracts offered on a ‘take it or leave it’ basis - Court can declare a term of a standard form contract to be unfair o Once a term is declared unfair it is made void Problems of standard form contract a. Right to unilaterally / unreasonably vary all / some of the terms or terminate the agreement b. Broad & unreasonable powers to protect themselves against loss or damage at the expense of the small business In determining issues with standard form contracts, a court may take into account a. One of the parties has all or most of the bargaining power b. The contract was prepared by one party before any discussion c. Another party was required, in effect, either to accept or reject the term d. Another party was given an effective opportunity to negotiate the terms of the contract ACCC can seek compensation for any loss that is incurred as a result of a term of a standard form contract that is declared to be unfair WHO IS CONSUMER S23 Consumer contract is one for the supple of goods or services or the sale of land to an individual who acquires them wholly or predominantly for personal, domestic or households or consumption Contracts affected by the ‘small business’ amendments are those where: - At least 1 party is a business that employs fewer than 20 people - The upfront price payable under the contract is o Less than $300,000 o $1,000,000 or less if the contract is for more than 12 months - The contract is a standard form contract

ACCC v Exetel PTY LTD (2015) Facts: - Contracts allows E to vary any part of the agreement for any reason’ - This broad term was unfair to the small business consumer & likely to contravene ACL Decision: - Company agreed to remove the term from it broadband standard from contract & compensate affected customers

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MEANING OF UNFAIR A term is unfair if it: a. Would cause a significant imbalance in the parties rights and obligations b. Is not reasonably necessary to protect the legitimate interest of the advantaged party c. Would cause detriment to a party if it was applied A term is transparent if it is expressed in reasonably plain language, legible, presented clearly & readily available to the affected party

Examples of unfair terms a. Permits only one party to avoid preforming the contract b. Permits only one party to terminate the contract c. Permits only one party to vary the terns of the contract d. Permits only one party to renew the contract e. Limits one party to sue the other f. Limits the evidence one party can bring to proceedings concerning the contract

ACCC v Chrisco Hampers Australia PTY LTD: Facts: - Term of firms contract provided that customers would continue be debited in anticipation of future order - Contract permitted customer to opt out of this term Decision: - Federal Court held that this term was an unfair term - Court considered that the term gave rise to significant imbalance of the rights and obligations of the parties in the contract - Right to demand repayment of the money was not a substantial corresponding right - Chrisco made a false / misleading represen...