Australian Consumer Law 2010 - Coursework Example

Australian Consumer Law Number Department Introduction The Australian Consumer Law (ACL) was recently repealed to protect consumers from unfair practices of suppliers. Since the enactment, the country has made tremendous steps to protect the consumer from unfair contract terms. ACL is not new to the Commonwealth, the United States and the United Kingdom have enacted similar laws in the past to safeguard the interest of their respective consumers, since they are more vulnerable to deceit and inaccurate information. This paper examines Section 18 of the ACL, which regulates misleading or deceptive conduct. Section 18 of ACL Misleading or deceptive provision is a principle of Australian law, seeking to streamline the production and supply of goods and services in the country by eliminating misleading practices from business (McCredie, 2010). Section 18 of the ACL, existing under schedule 2 of the Competition and Consumer Act 2010 outlaws any false behaviour that are expected to misinform or lie to unsuspecting consumers. The practice was regulated by The Trade Practices Act 1974 prior to the enactment of the new legislation. The State Fair Trading law has similar clauses in relation to deceptive conduct by parties, but is limited to the states where it is in force. The Australian Securities and Investment Commission Act 2001 under section 12DA outlaws such conduct in pecuniary services. The “misleading or deceptive” principle aims mainly to achieve consumer protection by deterring corporations from lying to their unsuspecting customers. Nonetheless, the provisions play an overarching role in all situations relating to business transactions. The law provides for a several forms of compensation for victims of misleading or deceptive business behaviour, depending on the situation (Jones and Eagleton, 2012). Pre-contractual deceptions may offer contractual compensations at common law or legal remedies as envisaged in the Competition and Consumer Act 2010. In most cases, courts normally refer to the Trade Practices Act 1974 when granting remedies because it has wider latitude and it generally offers better remedies. As McCredie (2010) has argued, the statutory outlaw of misleading and deceptive practices, now well taken care of under section 18 of the Act, states that misleading or deception must be avoided in trade or business by any party, either directly or indirectly. This law aims to provide the best form of protection to unsuspecting consumers. The clear mention of ‘trade or commerce’ arguably leaves out purely private business in its coverage of most business activities (Mardirossian, Robbins and Leibler, 2010). Enforcement of the provision Section 18 of ACL is arguably wide in its application, considering that it takes care of any individuals who participate in deceptive behaviour and or those intending to do so. Owing to the fact that the Competition and Consumer Act 2010 (CCA) is a statutory provision, section 51 of the Australian Constitution limit its enforcement. Nonetheless, section 18 of the ACL is premised upon the power of the business organizations as enshrined in the Constitution to operate freely in legal business and act in good faith. Mardirossian, Robbins and Leibler (2010) noted that the condition imposed by “trade or commerce” is important to its enforcement. As Heinrich and Bracken (2009) have argued, parties may be indirectly liable for violations of s18 if the court establishes their knowledge of the breach before its commission or omission. Each of the federations and regions of Australia are covered under fair trading laws, which draws several similarities to the ACL, but whose mandates are limited. Misleading and Deceptive practices The outlaw of misleading practices as set out in section 18(1) of the ACL should be interpreted together with section 4(2)(a) of the CCA in order to give it a complete, productive meaning. Under the latter provision, misleading or deceptive conduct is one where a party does or refuses to act in a reasonable way, including the drawing of, or the enforcement of a clause of an agreement; the generation of, or the implementation of a provision of, and knowledge of a binding agreement (Jones and Eagleton, 2012). Despite the seemingly clear definition of misleading conduct in the Act, Barker and Knight (2010) have noted that establishing whether an act meets the legal thresholds is left to the courts to decide, in which case, judges are obliged to examine all of the facts in question and the context within which such illegal practices were carried out. As Morrison, Abraham and Sheargold (2010) have indicated, to be deceptive or misleading, the practice must comprise a distortion of fact capable of enticing the relevant victim into arriving at an erroneous judgment. In most cases, misrepresentations are inaccurate statements of information. Nonetheless, statements that are credible may also have the intent to misrepresentations if their use is capable of swaying consumers into making mistakes. The appropriate test applied in common law with regard to misleading and deception practices is whether the practice is in itself erroneous; or has the potential to create an erroneous judgment in the consumer (Schaper, 2009/2010). Accordingly, it is meaningless if the practice intends to misinform, or amounts to negligent. It may be important to prove that the individual engaging in the misleading practice did not foresee a deception, for example, when the party is just conveying the message. Puffery may not be considered as misleading or deceptive to consumers. According to Bhati (2009), puffery entails the use of overenthusiastic or overstated claims by advertising companies to promote the sale of goods and services when in the real sense the information has some element of lies. Australian law says puffery does not amount to misleading or deceptive practices. Generally, such statements are construed to mean mere “puffery” in the sense that no reasonable individual would consume them in their entirety when or after the information has been presented to them. According to Schaper (2009/2010), statements such as “best ever” or “be 100 percent sure” are examples of puffery stunts, which in the real sense cannot be acted upon by a reasonable person. In some limited situations, silence has been construed as misleading, especially when the circumstances call for some reaction of the party or duty of care by a corporation. According to Morrison, Abraham and Sheargold (2010), when there is contractual obligation between the corporation and the consumer at common law level to divulge facts, then a supplier that fails in the duty would be liable to misleading or deceptive conduct. In addition, even if the transaction was not guided by a common law obligation to reveal the facts related to the case, silence by the party, when reviewed according to the prevailing circumstances may constitute misleading behaviour. In other cases, mere silence may not amount to misleading conduct especially where there is no reasonable anticipation that the party should reveal the facts (Jones and Eagleton, 2012). Regardless, courts normally consider other pieces of evidence presented to them by both sides and other preliminary behaviours between the parties based on case by case in order to establish where the truth lies. If the parties have engaged in previous dealings, for instance, then courts would be persuaded to examine how they were conducted and resolve the dispute based on successful previous dealings in the past (Liyanage, 2012). As Henry (2010) has argued, in the event that the relevant practice points to a future dealing as opposed to current issues, then section 4 of the ACL would swing into action. According to the provision, the practice will be considered misleading if the individual making it has no proof that their actions were reasonable. Under these circumstances, prospective representations are taken as misleading, and in case of disputes, the corporation or any other party from whom the behaviour had originated, are under the obligation to prove that their actions were reasonable under the prevailing conditions (Barker and Knight, 2010). Despite the fact that section 18 of the ACL is normally construed as a provision whose enactment serves to protect the consumer from unscrupulous corporations, it’s enactment is not restricted to these conditions. The clause is applicable in virtually any commercial transaction, and guides the relationship between franchising and transfers of ownership. The Legal Exceptions Despite its efficiency in protecting consumer interests, “misleading” and “deceptive” are not well defined in section 18 of the ACL. Unfortunately, Australian courts have yet to provide a definition of the terms because the legislation is still new. Nonetheless, the literal rule of legal interpretation with regard to “deception” and “misleading” may encompass conduct such as providing the consumer with open lies, making inaccurate or false allegations, creating untrue impression about a good or service, guiding them to an incorrect conclusion or deliberately leaving out vital information. As Heinrich and Bracken (2009) argue, it is not important to prove that the corporation intended to deceive the consumer because courts will normally consider individuals or organizations liable for deception even if their conduct was fair and reasonable under the prevailing conditions. In light of this lowered bar, establishing that a party who was acting in good faith had engaged in deception is still not easy under the Act. The challenge is especially important when it comes handling exclusion clauses in contracts. On disclaimers, a party cannot simply cushion themselves from a misleading claim, but occasionally, a clear exclusion clause which is clearly spelt out may void liability for creating or relying on deceptive information in an ad (Barker and Knight, 2010). Remedies The ACL under section 18 does not provide for any pecuniary damages for a violation of the law. However, for a violation of a number of the associated clauses in the Act, the Australian Competition and Consumer Commission (ACCC) is mandated to order monetary penalties amounting to a maximum of $1.1 million from businesses and $220,000 from individual parties. Regardless, victims of breach of the provision are only entitled to monetary compensation as damages, if the breach had precipitated losses or damages to them (McCredie, 2010). Granted, courts are required to apply the same rules which are applicable in tort law or contract law. In such cases, section 82(1B) of the CCA, which has been in place for a decade now provides that in case the victim’s negligence contributed to the losses they incurred, then they are entitled to lesser remedies. Regardless, they often enjoy unconditional protection from the ‘excesses’ of the other party. For instance, if the perpetrator of the misleading conduct had the intention to mislead or lie to the consumer, or had exhibited behaviours similar to those of a fraudster, then the maximum damages would suffice. Above all, section 236(2) imposes time limitations for filing such claims to six years in order to cushion businesses and parties from unnecessary harm originating from deception claims in contracts closed more than six years earlier (Barker and Knight, 2010). Similar Commonwealth Laws The ACL is similar to consumer protection laws of other Western countries including the US and the UK (Grant, 2014). In the US, the Federal Trade Commission Act 1914 is the body of law which regulates the Federal Trade Commission (FTC) in preventing “misleading acts” among other trade-related torts. In the UK, The Unfair Contract Terms Act 1977 seeks to enforce contract terms that are fair to both parties. The Consumer protection Act 1987, the Unfair Terms in Consumer Contracts Regulations 1999, and the Unfair Consumer Contract Terms Directive 93/13/EEC are the other major bodies of law regulating misleading and deceptive practices in business. Authorities In the case of Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60, the court held that an ad containing two exclusion terms contained no ambiguity in its statement that the property agent was not the originator of the misleading information in the commercial (Liyanage, 2012). It was held that the agent was not liable for the injury caused to consumers as he was merely conveying the information provided by third parties. By contrast, in Australian Competition and Consumer Commission v Telstra Corporation Limited [2007] FCA 1904 the court granted the claims. In the latter case, Telstra, a telecommunications company made several allegations about the impressive coverage of its Next G mobile network, which put “everywhere” within range. In its defence against misleading and deceptive claims, Telstra claimed that the additional information about the actual range of the network available on its website was sufficiently clear because it provided links to the site on the ad. But in its decision, the court ruled that this exclusion clause was not sufficient to reach the consumers (McCredie, 2010). In another recent case of Google Inc. v ACCC [2013] HCA 1, the claimant lost misleading and deception claims against Google Inc. because Google’s display of ad links made the company’s conduct remote from the injuries that consumers might suffer if they acted upon the misleading ads (Holley, 2012). The court unanimously agreed that Google was merely conveying the advertiser’s information to consumers and prospects. Conclusion The ACL under section 18 aims to protect consumers from pecuniary losses and injuries which might arise from their action upon misleading or deceptive information. Misleading and deceptive behaviours are those that may mislead or prompt the consumer to adopt a misleading judgment regarding a product or service. Parties that act in good faith but whose actions eventually cause injuries may be held liable for deception under the Act. Silence may actionable under the law, especially if the rules of engagement between the parties envisaged a duty of care. In light of this, disclaimers can only be valid if they are clear enough to the other party. Otherwise, any violation of the statutory provision attracts several remedies such as compensation, the annulment of the contract or alterations of the terms. References Barker, S., and Knight, S. 2010. The new Australian Consumer Law - the end for extended warranties? Keeping Good Companies, 62(10), pp.618-620. Bhati, S. 2009. Competition and Consumer Regulation for Australian Banks. ICFAI Journal of International Business Law, 8(3), pp.53-67. Grant, D. 2014. The consumer protection from unfair trading regulations: a commentary - part nine. Travel Law Quarterly, 6(1), pp.19-24. Heinrich, R., and Bracken, M. 2009. Reforms of Australian Consumer Law - targeting standard form contracts. Keeping Good Companies, 61(5), pp.299-501. Henry, P.C. 2010. How Mainstream Consumers Think about Consumer Rights and Responsibilities. Journal of Consumer Research, 37(4), pp.670-687. Holley, G. 2012. Old law meets the new world of cyberspace -- ACCC v Google (round 2). Keeping Good Companies, 64(5), pp.292-294. Jones, S.C. and Eagleton, K. 2012. What do Australian consumers think about current advertising standards? Journal of Public Affairs, 12(4), pp.315-325. Liyanage, K.C. 2012. The Regulation of online dispute resolution: effectiveness of online Consumer Protection Guidelines. Deakin Law Review, 17(2), pp.251-282. Mardirossian, Z., Robbins, D., and Leibler, A.B. 2010. Australian Consumer Law - second bill. Keeping Good Companies, 62(8), pp.480-484. McCredie, D. 2010. New product safety provisions under the Australian Consumer Law. Keeping Good Companies, 62(8), pp.480-484. Morrison, A., Abraham, R., and Sheargold, M. 2010. Antipodean Alignment: Impact of the Proposed Australian Consumer Law. Defense Counsel Journal, 77(3), pp.353-365. Schaper, M.T. 2009/2010. Competition law, enforcement and the Australian small business sector. Small Enterprise Research, 17(1), pp.7-18. Read More