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$3 million penalty for breaches of ACL by overseas based company

17 February 2017
Read Time 3 mins reading time

Following its decision in March 2016, the Federal Court of Australia recently ordered Valve Corporation (Valve), a company based and operating in the USA, to pay a penalty of $3 million for its breach of the Australian Consumer Law (ACL).

For many, this was a surprising decision, which on its face, extended Australian law to companies not operating or located in Australia.

Importantly, the Federal Court found the ACL applied to Valve’s online supply of goods and services to Australian consumers, even though Valve is (and was) based in the USA and the relevant contract identified the laws of Washington State as being the “governing law”.  This finding confirmed the ACL may apply to the supply of goods and/or services to Australian consumers by online traders based overseas.

As the ACL was found to apply, Court held that Valve had breached the ACL by making false or misleading representations to consumers regardingits online gaming platform, Steam.  The Federal Court found Valve’s “Steam Subscriber Agreement” and two of its refund policies relating to Steam contravened the ACL by:

  • indicating consumers were not entitled to a refund for digitally downloaded games purchased from Valve via the Steam website or Steam Client
  • purporting to exclude statutory guarantees and/or warranties that goods would be of acceptable quality
  • purporting to restrict or modify statutory guarantees and / or warranties of acceptable quality.

The ACL gives consumers specific rights or redress for defective products which cannot be excluded.  It is misleading to misstate these rights or try and exclude them.  So, in effect, by Valve using “standard” contracts that were permissible in the USA, the terms of those contracts did not take into account the ACL.

What the Court ordered

In addition to the $3 million penalty, the Federal Court ordered Valve to:

  • publish a prescribed notice regarding Australian consumer rights on its website for 12 months
  • implement an ACL compliance program to be undertaken by each of its employees and all other persons who may deal with Australian consumers on Valve’s behalf
  • not make the same or any similar false or misleading representations to Australian consumers for three years.

Considering the Federal Court’s findings and the hefty penalty imposed on Valve, it is especially important for all online traders and companies based overseas to obtain advice about the application of the ACL before supplying goods or services to Australian consumers.

This case also serves as a reminder for privacy laws which require companies to comply with Australia’s Privacy Act 1988 (Cth). Even where activities are conducted outside Australia, they are covered by the Privacy Act if they carry on a business in Australia and collect or hold personal information in Australia.

Online companies which have no physical presence in Australia but collect personal information from people who are in Australia are seen as carrying on business in Australia.

For further information on how Macpherson Kelley can assist in this area, please contact Paul Kirton or Kelly Dickson.

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$3 million penalty for breaches of ACL by overseas based company

17 February 2017

Following its decision in March 2016, the Federal Court of Australia recently ordered Valve Corporation (Valve), a company based and operating in the USA, to pay a penalty of $3 million for its breach of the Australian Consumer Law (ACL).

For many, this was a surprising decision, which on its face, extended Australian law to companies not operating or located in Australia.

Importantly, the Federal Court found the ACL applied to Valve’s online supply of goods and services to Australian consumers, even though Valve is (and was) based in the USA and the relevant contract identified the laws of Washington State as being the “governing law”.  This finding confirmed the ACL may apply to the supply of goods and/or services to Australian consumers by online traders based overseas.

As the ACL was found to apply, Court held that Valve had breached the ACL by making false or misleading representations to consumers regardingits online gaming platform, Steam.  The Federal Court found Valve’s “Steam Subscriber Agreement” and two of its refund policies relating to Steam contravened the ACL by:

  • indicating consumers were not entitled to a refund for digitally downloaded games purchased from Valve via the Steam website or Steam Client
  • purporting to exclude statutory guarantees and/or warranties that goods would be of acceptable quality
  • purporting to restrict or modify statutory guarantees and / or warranties of acceptable quality.

The ACL gives consumers specific rights or redress for defective products which cannot be excluded.  It is misleading to misstate these rights or try and exclude them.  So, in effect, by Valve using “standard” contracts that were permissible in the USA, the terms of those contracts did not take into account the ACL.

What the Court ordered

In addition to the $3 million penalty, the Federal Court ordered Valve to:

  • publish a prescribed notice regarding Australian consumer rights on its website for 12 months
  • implement an ACL compliance program to be undertaken by each of its employees and all other persons who may deal with Australian consumers on Valve’s behalf
  • not make the same or any similar false or misleading representations to Australian consumers for three years.

Considering the Federal Court’s findings and the hefty penalty imposed on Valve, it is especially important for all online traders and companies based overseas to obtain advice about the application of the ACL before supplying goods or services to Australian consumers.

This case also serves as a reminder for privacy laws which require companies to comply with Australia’s Privacy Act 1988 (Cth). Even where activities are conducted outside Australia, they are covered by the Privacy Act if they carry on a business in Australia and collect or hold personal information in Australia.

Online companies which have no physical presence in Australia but collect personal information from people who are in Australia are seen as carrying on business in Australia.

For further information on how Macpherson Kelley can assist in this area, please contact Paul Kirton or Kelly Dickson.