ACCC v Carrerabenz Diamond Industries Pty Ltd - Case Study Example

ACCC V CARRERABENZ DIAMOND INDUSTRIES PTY LTD Name Corse Tutor Date Introduction In every nation all over the world, there are some rules and regulations set a side to govern business undertakings. These rules have been put in place to monitor the business firms not to go overboard for self interests but to take care of the interests of the consumers. Business rules and regulations Acts is one of the tools the governments use to bring order and sanity in the business world; through this, the governments are able to protect the consumers from being fraudulently exploited by the business firms. The main aim for every profit oriented business firm is maximizing profits and minimizing the costs. Therefore, in the course of pursuing this, firms tend to exaggerate their activities in the long run; they engage in practices that tend exploit the consumers of their products. Australia is one of the nations that have responded to this issue with some seriousness. It has first enacted a law called Trade practices Act (TPA) of 1974 an act specifically meant to watch over the practices of the business firms. The main functions of the TPA are to protect consumers’ rights, business rights, perform industry regulation, watch over the prices and prevent illegal anti-competitive behavior. Several bodies have been created to ensure that the firms abide by this act. For example, we have Australian competition and consumer commission (ACCC), Australian trade practices commission and prices surveillance authority, these bodies were formed to administer the Trade practices Act. Central Legal Issues Australian competition consumer commission (ACCC) main role is to administer the competition and consumer Act and has the standing of taking action in the federal courts of Australia to the law. There are various cases heard in the federal courts of Australia involving ACCC as a plaintiff where business firms have been the defendants (Hanks &Williams 2001, PP43). Advertisement and marketing practices which in recent times have been the subject of the actions by the ACCC for claims of misleading and deceptive behaviors include; price comparison, country of origin claims, fine print disclosure and recruitment advertising. One of the famous cases of under this act of law was ACCC v Carrerabenz Diamond Industries Pty Ltd. This paper focuses on this case how it came about and how the court ruled it. Carrerabenz Diamond Industries Pty Ltd is one of the firms in Australia dealing with buying and selling diamond (Hanks &Williams 2001, P27) In 2005, ACCC sued Carrerabenz Diamond Company on the matters related to the competition and consumers’ act ACCC commenced proceedings against Carrerabenz Diamond Company in court arguing that this company placed six advertisements in the newspapers which were misleading. It based its arguments on the basis that these advertisements misled the representation in connection to the supply of the goods hence breaching the provision of section 75AZC of the Trade Practices Act (TPA). The really idea was that the company marked its jewellery items with the usual mark price and the crazy mark price. In real sense, every jewellery item was not offered to the public for the usual marked price. Thus, ACCC stated in court that this was quite misleading to the side of the consumer, hence the company breached section 75AZC of the TPA. ACCC argued in court that due to competition, this company developed this vice to psychologically entice the consumers to buy its products without considering even their interests. This was much aimed at maximizing the profits but not taking care of the consumers’ interests. Facts of the Case Section 75AZC of the trade practices Act states that a company must not trade in connection with the supply of goods and services in the connection with the promotion by any means of the supply or use of services of following; false representation claiming that the products are of a particular standard, quality, grade, style, value. The company is also not required to make false or misleading representation about the origin of particular goods. In simple terms, section 75AZC of the Trade practices Act of 1974 is all about provision for false or misleading representation. The section aims at discouraging the firms from malpractice of false and misleading representation of the information concerning their goods and services where in truth the products cannot meet the standards needed or represented on the media. In business law, the act of misrepresentation of the information is under the law of contract. In its definition, misrepresentation is a false statement that is made by one party to a contract at or before the time of the contract was made. This false misrepresentation induced the other party to enter into the contract. A case involving false misrepresentation in court its verdicts depends on whether the misrepresentation was innocent or fraudulent. In the case of ACCC v Carrerabenz Diamond Industries Pty Ltd, the plaintiff maintained that the company actually misrepresented the information intentionally on the media and this misled the consumers to induce them buying the products. Some of the elements of the definition of the term misrepresentation include; a misrepresentation is a statement of fact, this means that it is a statement of law, opinion or the statement of intention. Secondly, the statement must be false; actually the statement must show some falsity in it in case the truth is traced. Thirdly, the misrepresentation must be made by one party to a contract to the other where the plaintiff must have suffered by relying on the false information. Lastly, the misrepresentation must have induced the other party to enter into a contract. As mentioned earlier, in the case where there has been misrepresentation of the information, the remedy of the court will much depends on when it was an innocent representation or fraudulent misrepresentation. An innocent misrepresentation is untrue statement made by one party in honest belief that it is actually a true statement. The maker of the statement should prove that he had no reasonable ground for his belief. In common law, there is no remedy for an innocent misrepresentation. A fraudulent misrepresentation on the other hand is untrue statement which is made intentionally and recklessly whether it is true or false and without belief in its truth as stipulated in Derry v Peek (1839) (Hanks &Williams 2001, PP137). For the court to take a take a legal action against the deviant party, it must prove that there a false misrepresentation of the facts and also the court must justify that the statement was made deliberately with the aim of deceiving without caring whether it was a false or true statement. Decision/Judgment The case of ACCC v Carrerabenz diamond Inc involves a misrepresentation of information where the ACCC holds that the defendant acted fraudulently without caring whether the advertisements they made in media misled the consumers. It was unfortunate that the court proved that the company was actually fraudulently misleading the consumers for its benefits without bearing in mind on how it was misleading the public by indicating two prices that seemed to attract the consumers but it could not give out the products on the indicated prices. Since ACCC is there to safeguard the consumers’ interests, the court ruled that the Carrerabenz diamond Inc was guilty. The federal court convicted the corporate defendant on all the 27 charges and imposed a fine of $220,000 as a remedy (Accc.gov.au 2008, PP5). The charges that related to the personal defendant were dismissed. Analysis of the case The law provides some remedies for misrepresentation. In case the injured party filed a case in court concern false misrepresentation by the other party to the contract, the court can award some of these remedies. First, there is restitution. This is a remedy given to the plaintiff where the defendant is compelled to place the plaintiff to the original position that he were before a contract was made. In simple terms, restitution means indemnifying the aggrieved party. When the plaintiff actually suffered a financial loss due to the false contract, the court orders the defendant to compensate the plaintiff the money he lost in the course of the contract so that he can regain his financial position as before the contract was made. Another remedy awarded by the court in a case involving misrepresentation of the information is rescission. This is where the court declares that the contract was invalid so that plaintiff should be compensated his dues plus any other expenses he used which he used in entering the contract. Rescission is the nullification of the contract where both parties are terminates their contract that was legally binding them. On the other hand, the injured party may bring a legal action for the return of any property which the fraudulent party obtained from. If he brings an action for himself, he must be ready to restore any property which he may himself have gotten under the contract. Australian law through trade practices act under section 75AZC, the business firms must ensure that they have done appropriate labeling, packaging advertising and logo to ensure that such labeling do not contravene the trade practice act (Foodlabellingreview.gov.au. 2005, p1). This is done to ensure that the product can appeal to the consumers within Australia and outside Australia wishing to promote the local economy. The government through this provision of the law tries to maintain a good image f the Australian market so as to attract more investors and open up new markets of the local products. Otherwise when the business firms are just left on their own to operate the way they want, they would want to maximize the profits without considering the effects it poses to the general market. The ACCC favors neither the consumer nor the supplier; it strives to attain the competitive market without artificial restrictions. It is committed in bringing the court actions against firms that breach t competition and consumer Act (Australia, 1991,32). In most cases, the penalties for non-compliance with the Trade practices Acts are quite severe. Most of the Australian consumers hold the ACCC in high regard acknowledging that this commission is required to aid in safeguarding the consumers’ rights. Conclusion The discussed case tend to reinforce the importance of complying with the trade practices acts (TPA) and initiating an effective program that cover both the consumers and the suppliers. There are numerous penalties set to be imposed on those firms that do not comply with the Trade practices acts. Some of these penalties include fines and orders for undertaking corrective measures Bibliographic References Australia. (1991). Australian Trade Practices legislation: Trade practices Act and Regulation with related regulations. CCH Australia Limited. University of California. USA. Austlii.edu.au. (2008). Federal court of Australia. Accessed on web 3rd April 2013. Retrieved from http://www.austlii.edu.au/au/cases/cth/FCA/2008/1103 Foodlabellingreview.gov.au. (2005). Food and beverage industry: Country of origin guidelines to the trade practices Act. Accessed on web 3rd April 2013. Retrieved from http://www.foodlabellingreview.gov.au/internet/foodlabelling/submissions.nsf/lookupSub mission Attachments/1ATAN-85Y6T620100531140503BTDC/$FILE/627i.pdf Hanks, Frances &Williams, Phillip. (2001). Trade Practices Act; A twenty five year stock take. Federation press. Sydney. Australia. Stephens.com.au. (2009). ACCC crack-down on Misleading and deceptive advertising. Accessed on web 3rd April 2013. Retrieved from http://www.stephens.com.au/Sites/2196/Images%20Files/Newsletters/July%202009%20- %20ACCC%20Crack-down.pdf Transition.accc.gov.au. (2008). A report of the Australian competition and consumer commission’s activities. Accessed on web 3rd April 2013. Retrieved from http://transition.accc.gov.au/content/item.phtml?itemId=846908&nodeId=8a820c4043f90 06c7ae6460caed6f4d8&fn=ACCCount%20July%20to%20September%202008.pdf Read More