2018: A Milestone in Australian Consumer Law

2018 will be a year to remember with the plethora of changes passed by Federal Parliament to strengthen the Australian Consumer Law (ACL) regime.

Warranties against defects

Firstly, the laws regarding “warranties against defects” were expanded in June 2018, to include a requirement for mandatory wording where a warranty is provided in connection with the supply of services, or the supply of goods and services together. Previously, the mandatory text was only required when a warranty against defects was given in connection with the supply of goods.

The new laws have allowed for a one year transition period, so businesses have until 8 June 2019 to be compliant.

Any voluntary warranty offering communicated to a consumer in relation to the supply of goods and/or services, must contain certain details. The penalty for non-compliance currently sits at $50,000.

Increased penalties

The second key reform, passed in August 2018 dramatically increased the maximum financial penalties payable under the ACL

 FromTo
For Companies$1.1 millionThe greater of:
- $10 million;
- 3 x the value of the benefit received from the contravention; or
- 10% of turnover in the preceding 12 months
For Individuals$220,000$500,00

The higher penalties will apply to misleading and deceptive conduct, unconscionable conduct, unfair practices, breaches of safety standards, and failure to comply with recall obligations.

The increased penalties have been intentionally designed to hurt. They send a clear message to businesses that they can no longer dismiss or justify breaches of the ACL as “just a cost of doing business.”

Strengthened consumer rights

Further reforms were passed by Parliament in October 2018 aiming to clarify and strengthen consumer protections around consumer guarantees, unsolicited consumer agreements, product safety, false billing, unconscionable conduct, pricing and unfair contract terms.

The changes include:

  1. Headline pricing
    The new reforms now mean fees or charges that are associated with pre-selected extras for a customer must now be included in the minimum headline price advertised. Traders will have 12 months from October 2018 to become compliant.If a consumer does not specifically de-select the pre-selected options they will be charged a higher price than the single price. It can be difficult for some consumers to identify all the pre-selected options in a transaction. This reform bolsters protection for consumers in situations where pricing is not transparent – such as online shopping, and in particular, airline bookings.The new laws mean a single headline price must include charges automatically applied by the seller, even though, during the transaction, the customer may deselect these options. As such, under the new regime, the advertised price must include charges automatically applied.
  2. Expansion of ACCC and ASIC’s powers
    Previously, the inclusion or reliance on an unfair contract term is not a contravention of the Competition and Consumer Act, rather, it only becomes a problem when a court declares the term unfair, and void. The new laws expand the ACCC and ASIC’s powers to investigate compliance and take enforcement action with respect to unfair contract terms.

Biggest ACL fine to date

Finally, a business recently  received the biggest penalty ever awarded under the ACL to date.”We Buy Houses” and its director, Mr Rick Otton, have been fined a record $18 million for making false or misleading representations about how people could create wealth through buying and selling real estate.

The Court found We Buy Houses and Mr Otton misled consumers through advertising and running real estate investment seminars and boot camps which claimed people could:

  • buy a house for $1, without needing a deposit or bank loan, using little or none of their own money;
  • quit their jobs due to the passive income streams created through property investment; and
  • start making profits immediately.

The income generated by We Buy Houses through the running of the investment seminars and boot camps was estimated to be $20 million during the period of 2011 to 2014.

We Buy Houses has received a $12 million penalty, whilst Mr Otton has been fined $6 million personally.  Mr Otton has also been banned from managing any corporations for the next 10 years, and both We Buy Houses and Mr Otton have been permanently banned from being involved in the real estate industry.

2019 and beyond

The recent law changes indicate an increase to the already established and ongoing trend of significant ACCC investment into the investigation of consumer protection issues. The ACCC is also unashamedly active, clear and vocal that these types of issues are and remain a significant regulatory priority.

Macpherson Kelley has experience in advising and acting for businesses in a wide range of consumer issues and disputes, as well as representing businesses in dealings with the ACCC. For any assistance or further information, please contact Kelly Dickson.

This article was written by Alymer Low, Lawyer – Commercial.