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Consumer Matters
Sparke Helmore Lawyers Issue 1 | December 2018
2018 in review
and outlook
for 2019
Inside this issue: Domain name ACCC inquiries Further action in
deception and market the vocational
studies education
industry
Consumer Matters | Issue 1 Consumer Matters | Issue 1
Welcome
Contents In our February update, we wrote about the release of the Australian
Competition and Consumer Commission’s (ACCC) competition and
consumer law enforcement priorities for 2018, which has become something
Welcome 3
of a tradition. On the consumer law front, the ACCC had indicated a focus
By Nick Christiansen, Partner Regulatory & Investigations
on unfair contracts and enforcement of industry codes (particularly in relation
2018 in review and outlook for 2019 to franchising) together with a renewed emphasis on compliance with
consumer guarantees in new car retailing and by large national retailers, as
Highlights 4
well as misleading claims about broadband and the NBN. The ACCC’s work
ACCC inquiries and market studies 6
in those areas is now well underway and we can expect to see further signs
Legislative developments 7
of investigations and enforcement actions in 2019.
Outlook for 2019 8
In announcing its 2017 priorities the year before, the ACCC signalled a willingness to “take
Case notes on” large companies in relation to misleading representations to consumers. The results
Further action in the vocational education industry 10 are evident in the outcomes from the actions commenced in 2017 and resolved in 2018—
Avoiding bad reviews a costly business 14 such as the Federal Court proceedings against Apple for misleading representations about
Optus and ACCC agree on penalties for false or misleading 16 consumer guarantees (resulting in $9 million in pecuniary penalties), against Optus for false
representations about NBN services
or misleading representations about the transition to the NBN (resulting in a $1.5 million
Penalties imposed for Thermomix safety issues 17 penalty), against Telstra for false or misleading representations about premium content on
Indonesian-made “Indigenous Australian art” misleading 19
mobile devices (resulting in a $10 million penalty), and against Ford for unconscionable
Misleading health claim about children’s food product 20
conduct in dealing with customer complaints (resulting in a $10 million penalty) . These are
Penalties for Telstra billing representations 22
among the cases we have reviewed in this issue.
Domain name deception 23
Failed challenge to ad agency’s hair loss campaign 24 These cases—as well as the penalties imposed—serve as a reminder to all businesses
Damages in the case of the “billion dollar business” 25 operating in consumer markets of their obligations under the trade conduct and consumer
Contractual time limit for misleading and deceptive conduct claim ruled unenforceable 27 protection provisions of the Australian Consumer Law, the ASIC Act and the Corporations
Compensation and penalties in case of ineffective “credit repair” service 28 Act. Ensuring compliance is particularly important now that the ACCC has a bigger stick to
Costly conduct: $9m fine and permanent ban for financial advisor 29 wield in the form of increased penalties under the Australian Consumer Law to the greater
Ford’s faulty gearbox 30 of $10 million, three times the value of the benefit received, or 10% of annual turnover in
Related companies ordered to compensate victims of permanent residency scam 33 the previous 12 months—as well as $500,000 per breach for individuals.
Confirmation that overseas-based companies selling to Australian consumers are 34
caught by the long arm of the ACL In this inaugural issue of Consumer Matters, we consider the Australian Consumer
Apple’s misleading representations about consumer rights and third party repairs, 35 Law highlights from 2018—including a look at the ACCC’s current investigations and
and a warning about “Jo Consumer” priorities—and offer insights into likely developments in 2019. Finally, we review a
Silence as to statutory rights not of itself misleading or deceptive 38 selection of this year’s consumer law decisions—specifically in relation to the priority areas
Supplier cops a serve for unfair standard form contract terms 41 of misleading and deceptive conduct, unconscionable conduct, consumer guarantees, and
Still to come … 42 unfair contract terms— as well as some interesting cases where the Australian Consumer
Law has been deployed in private claims.
About the authors 43
I hope you enjoy Consumer Matters and we look forward to bringing you further insights
during 2019.
If you have any questions or suggestions about Consumer Matters contact the editor,
Nick Christiansen, on +61 2 9260 2443 or nick.christiansen@sparke.com.au
If you would prefer to receive a soft copy of future issues, or no longer wish to receive this publication, Nick Christiansen, Partner
email sparkehelmorelawyers@sparke.com.au Regulatory & Investigations
Copyright 2018 © Sparke Helmore. This publication is not legal advice. It is not intended to be comprehensive. Sparke Helmore Lawyers
You should seek specific professional advice before acting on the basis of anything in this publication.
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Consumer Matters | Issue 1 Consumer Matters | Issue 1
2018 in review and outlook for 2019
…but the majority of actions remain …and unconscionable conduct
about misleading and deceptive Likewise, a number of the most significant
Highlights conduct… actions this year have involved claims of
Despite action on consumer guarantees unconscionable conduct. These include
Enforcement actions are consistent Penalties are up and unfair contract terms, the majority of the various vocational education industry
Although the number of in-depth Australian 2018 has seen a significant increase in the the ACCC’s actions this year, and of the proceedings, the Malouf “credit repair”
Consumer Law investigations completed by total penalties recovered by the ACCC, with private litigation employing the Australian proceedings, the Australian Securities and
the ACCC (as the principal consumer law $170 million achieved over the 2017-18 Consumer Law, remain in the area of Investments Commission (ASIC) proceedings
regulator) has fallen slightly on the previous financial year—$48.7 million of which was misleading and deceptive conduct and false against financial advisor Financial Circle and the
year, the number of court proceedings in consumer law matters—compared with or misleading representations about goods proceedings against Ford—each of
commenced by ACCC in the 2017-18 $40.7 million total ($16.2 million consumer) or services. which are reviewed in this issue.
financial year was 18, which is consistent in 2016-17. Seventeen of the cases featured in this
with the previous two financial years in issue involved a claim of misleading
This is partly the result of huge individual
which 19 cases were commenced in each. and deceptive conduct or false or
penalties—such as the record-setting
The ACCC also has been consistently active $46 million penalty imposed on Yazaki misleading representations.
in the issue of “section 155” notices requiring Corporation for cartel conduct—but also
companies to produce information or due to the consistency of wins for the ACCC Action on franchising First product safety policy
documents or to attend examinations—the during the course of the year. A number of The ACCC signalled early in 2018 that The ACCC released its first standalone product
ACCC’s principal information gathering tool. those wins came about through defendants franchising would be an area of focus for the safety policy in 2018, which sets out the ACCC’s
There were 240 such notices issued in the admitting to contraventions and agreeing year, with the Parliamentary Joint Committee priorities and the principles it will apply in
2017-18 financial year, an increase on 2016- penalties with the ACCC, including the cases on Corporations and Financial Services addressing product safety risks.
17 (230), but a decrease on 2015-16 (303). against Thermomix, Telstra, Ford and Apple, Inquiry into the Franchising Code of Conduct
In 2018, the ACCC has been heavily involved
reviewed later in this issue. underway throughout 2018.
It is worth noting that the majority of the in the enormous task of recalling defective
ACCC’s enforcement actions have been The flow-on effects of the substantial The ACCC’s proceedings against franchisors Takata airbags, which has required a significant
within its identified priority areas. increase in maximum penalties under the Ultra Tune and Geowash for breaches of investment from the regulator. Additionally,
Australian Consumer Law, which took effect the Franchising Code have been heard with the ACCC has signalled priorities in improving
from September 2018, will start to be seen judgment reserved. quad bike safety, ensuring product safety in the
in 2019. online marketplace and progressing reforms to
The ACCC has been active in the
the product safety provisions of the Australian
Parliamentary Inquiry, calling for stronger
New attention on consumer …and on unfair contract terms Consumer Law.
penalties for breaches of the Franchising
guarantees… The ACCC has been similarly active in the Code and the unfair contract terms laws.
On the back of a 39% increase in reports relatively new area of unfair contract terms,
of consumer guarantee issues to the ACCC including conducting reviews of standard Active consumer protection in NSW Criticism of ASIC
in 2017, the regulator has given renewed form contracts in its areas of focus. The As we have seen from the passage of In 2018 we saw the Royal Commission into
attention to enforcing supplier compliance ACCC raised concerns about unfair terms the Fair Trading Legislation Amendment Misconduct in the Banking, Superannuation
with consumer guarantee obligations with a number of companies, obtaining (Reform) Bill 2018 into law in October, the and Financial Services make some damning
in 2018. agreement or court-enforceable undertakings New South Wales Government has been comments about conduct in the industry and
to change or not enforce unfair terms in particularly active in pursuing its “Better ASIC has faced criticism for apparent inaction
Notable examples include obtaining court-
their standard form contracts, including AWB Business Reforms”, cutting red tape for in addressing these issues. For example,
enforceable undertakings from Hyundai and
Harvest Finance Pools, Cardtronics, Wisdom small businesses and improving consumer information released in 2018 showed the
Fitbit to improve their systems for compliance
Properties Group and Warrnambool Cheese protections. number of infringement notices issued by ASIC
with consumer guarantees, infringement
and Butter. in 2016-17 had fallen by nearly 40% on the
notices issued against Jenny Craig and the One of the most significant changes to the
proceedings for misleading representations Other companies are or have been the previous year.
New South Wales Fair Trading Act is the new
about consumer guarantees taken against subject of proceedings, including claims requirement for suppliers to notify consumers The result of this criticism—and of the
Thermomix, Ford, Apple and LG. against Equifax (formerly Veda), Mitolo about substantially prejudicial terms relating government’s regulatory response to the Royal
and Servcorp. to the supply of goods or services and to Commission—may well be renewed vigour in
The focus has been on systemic issues
involving large or national traders and this is disclose the existence of commissions and ASIC’s enforcement actions, particularly in the
likely to continue for the foreseeable future. referral fees. consumer protection parts of ASIC’s remit.
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ACCC inquiries and market studies Digital platforms offers and the impact of wholesale prices to the Australian Securities and Investments
Communications sector In December 2017, the ACCC was on retail prices Commission Act 2001 (ASIC Act), the
directed by the Australian Government to • competition issues that may arise in Australian Consumer Law, and the
The ACCC released the final report in its
undertake a public inquiry into the impact the market Competition and Consumer Act 2010 (CCA).
communications sector market study in April
2018, which included 28 recommendations of digital platforms. The inquiry will focus • the profits generated by electricity The Amendment Act brings into law a
and actions on competition and consumer on competition in media and advertising wholesalers and retailers, and number of the recommendations of the
issues. Of particular note: industries and specifically in relation to the review of the Australian Consumer Law
• the effect of policy changes on the
supply of news and journalistic content. The by Consumer Affairs Australia and New
• the ACCC found that the markets for electricity market.
inquiry will also look at the extent to which Zealand (completed in April 2017) to ensure
broadband and voice services are consumers understand what data is being The ACCC will be monitoring the market from
consumers are well-informed and that
operating competitively collected about them by digital platforms 2018 to 2025, and report every six months.
consumers and traders better understand
• the industry has been working towards and how this data is being used. The first report is due in March 2019.
their rights and obligations under Australia’s
improved service standards for consumers Foreign exchange consumer protection laws.
The ACCC will examine the effect of search
• the ACCC will monitor customer engines, social media platforms and other In October 2018, the ACCC launched an The key amendments include:
complaints about unfair terms in digital aggregator platforms as well as its inquiry into foreign currency conversion
communications contracts, particularly implications for media content creators, services, citing the fact that Australia is • permitting a private litigant to rely on
in relation to long term plans, and advertisers and consumers. the third most expensive G20 country for admissions of fact and findings of fact
• similarly, the ACCC will monitor consumers and small businesses to send made in other proceedings
The ACCC is due to provide a final report by
customer complaints about bundled money overseas. • extending the unconscionable conduct
mid-2019.
telecommunications products and take protections to publicly listed companies
action where necessary. The ACCC’s inquiry will focus on the way
Wine grape industry • clarifying that the unsolicited services
prices are presented to customers, including
New car retailing In September 2018, the ACCC announced whether customers are able to understand provisions extend to services that are
The ACCC released its market study report it would commence an in-depth review and compare different prices charged unrequested and not actually supplied
into the new car retailing industry in December of the wine grape industry in an effort to for international money transfers. In this • clarifying that an unsolicited consumer
2017 and, as foreshadowed in our February identify any competition or consumer law regard, the big four banks are likely to find agreement may be entered into in a
2018 update, this is an industry likely to see issues that may impact wine grape growers themselves coming in for particular attention public place
further focus from the ACCC as the report’s and winemakers. In particular, the ACCC in relation to the “mark-up” applied to • requiring that fees or charges associated
recommendations are implemented. The key will consider: exchange rates and to transaction fees. with pre-selected options must be included
recommendations include: • competition between winemakers and in the headline price
The ACCC expects to provide its report to
• car manufacturers must update their other purchasers of wine grapes the Treasurer in May 2019. • strengthening the powers of the Minister
complaint handling systems to improve • bargaining power and relationships and the regulator to obtain information
handling of consumer guarantee claims. between parties in the supply chain Legislative developments about product safety, including from
This follows an ACCC finding that • contracting practices within the industry, Australian Consumer Law review third parties
consumers are having difficulty enforcing including unfair contract terms, and In August 2018, the Federal Parliament • broadening the regulators’ investigative
their consumer guarantee rights when • the effect of the existing voluntary industry passed the Treasury Laws Amendment powers to allow investigation of possible
problems occur with new cars, which code and dispute resolution process. (2018 Measures No.3) Act 2018, which unfair contract terms
suggests a systemic failure. In particular, increases the maximum financial penalties • clarifying the scope of the consumer
new car manufacturers tend to focus on The ACCC is due to provide a preliminary
under the Australian Consumer Law. The guarantees in relation to goods that are
their own warranty obligations to the report in March 2019, with a final report to
maximum penalties for corporations and transported or stored, to provide that
exclusion of the statutory guarantees, follow in June 2019.
body corporates have been increased from the exemption from the requirement to
fail to respond appropriately to major Electricity market monitoring $1.1 million to the greater of $10 million, provide a consumer guarantee for the
failures, commonly use non-disclosure three times the value of the benefit or 10% transport or storage of goods only applies
In August 2018, the Australian Government
agreements when resolving complaints, of annual turnover. For individuals, the where the consignor and consignee are
directed the ACCC to conduct a public inquiry
and lack effective independent dispute maximum penalty has increased from a business
to monitor the prices, profits and margins in
resolution options $220,000 to $500,000.
the supply of electricity in the National Energy • bringing consistency to the consumer
• a scheme should be established to allow car Market. protection terminology in the ASIC Act and
The Treasury Laws Amendment (Australian
manufacturers to share technical information the Australian Consumer Law in relation to
The key matters that the ACCC will be Consumer Law Review) Bill 2018 (Amendment
with independent repairers, and land, and
monitoring are: Act) passed parliament in October 2018,
• more accurate information about fuel paving the way for a raft of amendments
consumption and emissions should be • electricity prices faced by customers across
provided to prospective new car buyers. Australia, including the spread of price
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• clarifying that the Australian Consumer • Similarly, there appears to be more work representations and unconscionable In relation to enforcement action,
Law consumer protections applying to for the ACCC to do on the consumer conduct in relation to benefit limits for in- we anticipate ASIC will focus on the
financial services also apply to financial guarantees front. Having issued clear hospital pathology and radiology services superannuation sector, including pursuing and
products under the ASIC Act. warnings to large and national retailers • the unfair contract terms proceedings penalising corporations and company officers
in 2018, we anticipate the ACCC will against Ashely & Martin and Mitolo in relation to unconscionable and misleading
NSW Government’s better business
take action on stragglers that have failed Group, and and deceptive conduct by superannuation
reforms
to ensure compliance or where systemic fund trustees. We also expect ASIC will
In addition to the updates above, also in • the misleading pricing cases against
problems have not been remedied. carry on its enforcement role in pursing
October 2018, the Fair Trading Legislation Viagogo and Trivago.
• A further focus area likely to be continued corporations and company officers in relation
Amendment (Reform) Bill 2018 (NSW) passed We anticipate that the ACCC will issue its
in 2019 is telecommunications and to misleading or unconscionable conduct in
both houses of Parliament and is currently usual update on enforcement priorities in
broadband. The ACCC has indicated providing financial services to consumers.
awaiting assent. The Bill will amend the Fair early-2019.
its intention to continue monitoring ASIC has a number of legal proceedings on
Trading Act 1987 (NSW) and the Fair Trading
misleading representations in relation to Australian Securities and Investments foot, which may be resolved or decided over
Regulation 2012 (NSW), and aims to ensure
internet speed and NBN migration. We Commission the next 12 months. According to ASIC’s
consumers are provided with the information
are likely to see other related areas of The Royal Commission into Misconduct in latest enforcement report, there are some
they need, while cutting the “red tape” for
focus emerge from the digital platforms the Banking, Superannuation and Financial 18 pending financial services enforcement
small businesses.
review, complemented by action on Services Industry has brought attention to matters relating to dishonest conduct and
The amendments will: enforcing consumer protections in the impacts that misconduct in the financial misleading statements. We can expect that
online marketplaces. system can have on consumers and investors. ASIC will continue to pursue individuals and
• enable the Commissioner for Fair
Trading to publish certain information • In June, the ACCC indicated it would In the aftermath of the Royal Commission, organisations that engage in misleading and
about licence holders and traders on commence market surveillance checks we expect ASIC will focus on rebuilding deceptive or unconscionable conduct.
the internet for free public access on 10,000 food products for compliance consumer trust and confidence in Australia’s
with the mandatory Country of Origin financial system by promoting its regulatory
• require suppliers to notify consumers
food labelling requirements in effect from role and exercising its investigatory and
about substantially prejudicial terms
1 July 2018. Any serious non-compliance enforcement powers.
relating to the supply of goods or
discovered through this surveillance
services and to disclose the existence
may well result in false or misleading
of commissions and referral fees
representations proceedings in 2019.
• enable the regulations to prescribe
information standards for the supply This has been a year of significant penalties
of goods or services and to create an won by the ACCC against corporations for
offence for non-compliance with any contraventions of competition and consumer
such standard, and laws. For example, this year saw $10 million
penalties awarded against Telstra and Ford,
• prevent non-disclosure agreements from
and $9 million awarded against Apple in the
limiting the information that may be
consumer law sphere as well as a record $46
provided to the Commissioner about
million awarded against Yazaki Corporation
complaint relating to the supply of goods
in relation to breaches of competition law.
or services.
Following legislative changes increasing the
Outlook for 2019 maximum penalties available for breaches of
Australian Competition and Consumer the Australian Consumer Law, we expect this
Commission trend of high penalties to continue into the
We expect the ACCC to increase its future as the ACCC sets its sights higher.
enforcement action over the next year in There are a number of key cases that we
many key areas and industries: expect to be decided in 2019 (summarised on
• We expect the ACCC will take further page 40 of this issue). Of particular interest
action on unfair contract terms, particularly will be the outcomes in:
in the area of franchising following the • the ACCC’s appeal against the Federal
Parliamentary Joint Committee inquiry. Court’s August 2017 decision dismissing
We expect to see this reflected in the its claim against Medibank Private over
ACCC’s 2019 priorities statement early alleged false, misleading or deceptive
in the New Year.
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Further action in the vocational In relation to Empower’s marketing methods:
• there was evidence that its marketing had
failed to provide copies of the agreement in
10 instances. The Court further found that
education industry
Empower’s recruiters had contravened the
targeted particular locations, including
law by failing to inform consumers that their
rural and remote towns and Indigenous
purpose was to seek that person’s agreement
communities with significant populations
to a supply of Empower’s services.
in low socio-economic conditions. The
ACCC led expert evidence showing that Finally, the ACCC alleged that Empower
We have seen further decisions to maximise the financial benefit to Empower
Empower’s rate of enrolments increased had engaged in unconscionable conduct in
this year resulting from the ACCC’s through VET FEE-HELP payments from the
by remoteness from major centres and contravention of the Australian Consumer
activity investigating and prosecuting Commonwealth. To that end, Empower
that there were a disproportionate Law in various ways, including by taking
misleading and deceptive conduct as engaged in recruitment tactics that were
number of students enrolled in socially advantage of vulnerable consumers, using
well as unconscionable conduct in the unconscionable and its recruiters made false
disadvantaged postcodes undue influence and unfair tactics, failing
vocational education industry as part of and misleading representations to prospective
• there was evidence that Empower’s to adequately disclose information, and
its work in protecting the interests of students—including by targeting areas of
recruiters had paid or offered to pay enrolling unsuitable students. The ACCC
vulnerable consumers. social disadvantage and remote Aboriginal
Indigenous people to assist in recruiting relied on evidence in relation to a sample
communities, recruiting in people’s homes and
Two decisions were handed down on 19 Indigenous students, and set of consumers and invited the Court to
in public bars, and providing incentives to sign
September 2018—the first by Justice Gleeson extrapolate a general system or pattern of
up in the form of “free” laptops and cash. • recruiters made false or misleading
in the Federal Court in proceedings by the behaviour on Empower’s part. The Court
Recruiters also failed to explain to potential representations, e.g. that the courses were
ACCC against Cornerstone Investment refused to do this, finding that the ACCC
students that they would become indebted to free unless the student’s income was in an
operating as “Empower Institute”, and had not made out its contention despite
the Commonwealth for around $15,000 for amount that they were unlikely to earn on
the second from the Full Federal Court in the evidence giving grounds to suspect that
the cost of the courses. completion of the course, or at all, or that
an appeal by Unique International College Empower’s conduct occurred more generally.
students would receive a “free” laptop
and cross appeal by the ACCC in relation Additionally, the ACCC alleged that the low
by signing up to a course and providing The Court found that the VET FEE-HELP
to a Federal Court decision in June 2017, completion rates called into question the real
identification, and that the courses were system, because of how it was set up,
that Unique had engaged in systematic nature of Empower’s business and that its
specifically for Aboriginal people. “provided a strong temptation to an
unconscionable conduct. senior staff allowed its recruitment system to
In relation to 15 consumers in respect of unscrupulous educational services provider
continue notwithstanding their knowledge
Empower Institute whom the ACCC led evidence, the Court (and its recruiters) to prey on vulnerable
of the completion rates, the unsuitability of
In the Empower matter, the ACCC brought found that Empower had contravened the consumers in order to increase its revenue
the candidates enrolled and the numerous
proceedings alleging contraventions of Australian Consumer Law prohibitions on from government funding”, however the
complaints received.
the misleading and deceptive conduct, misleading and deceptive conduct or false evidence did not establish that Empower’s
The Court found that candidates were processes were deliberately designed to
unconscionable conduct, and false and and misleading representations or both.
offered inducements to enrol by Empower’s take advantage of vulnerable consumers,
misleading representation prohibitions in the
employees and marketers, who received Additionally, the ACCC alleged that each rather it reflected a “callous indifference to
Australian Consumer Law. Further allegations
commissions for each enrolment. Those of the agreements entered into by the considerations of consumer protection”.
were made of contraventions of the
marketers were not provided with any or consumers was an unsolicited consumer The Court concluded that, by operating that
unsolicited consumer agreement provisions.
any adequate training on proper enrolment agreement, in respect of which the Australian system, Empower had engaged in conduct
In the period from March 2014 to June 2015, procedures and no training on the Australian Consumer Law imposes stringent conditions, that was unconscionable.
Empower enrolled 8,425 students in diploma Consumer Law. In particular, the Court including (for example) requirements about
courses, for which it received more than $64 the times during which a caller may approach The Court’s determination on what relief
found that Empower had not instructed
million in VET FEE-HELP payments, but less than a person, a requirement that the dealer will be granted in the case is expected in
its recruiters about their obligations not to
1% of those students completed their course. expressly advise that they are obliged to early-2019.
mislead or deceive consumers or to engage in
unconscionable conduct, nor did they provide leave a premises immediately on request, Unique International College
The ACCC alleged that it was predictable
a marketing script to ensure that what and a requirement to give the person
at the time of enrolment that the students On the same day as the decision in Empower,
they said to prospective students was not information about their right to terminate
were highly unlikely to complete the courses the Full Federal Court handed down judgment
misleading and complied with the stringent the agreement. Another requirement is that
because they were unlikely to be able to take in an appeal by Unique International College
requirements of the unsolicited consumer dealers of unsolicited consumer agreements
advantage of the skills taught, and so were against an earlier Federal Court decision in
agreement provisions. Further, Empower had must give a copy of the agreement to the
not suitable candidates to begin with. favour of the ACCC. In this decision, the
no process in place to monitor marketing consumer immediately after the consumer
Federal Court had determined that Unique
The ACCC alleged that Empower’s marketing and recruitment practices or to ensure that signs the agreement. The Court found
engaged in a system of conduct or pattern
and enrolment process was geared towards unsuitable students were not enrolled. that, in contravention of the Australian
of behaviour in connection with the supply
maximising the number of students recruited Consumer Law, Empower’s recruiters had
of online vocational education courses,
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which system or pattern of behaviour was unsuitability of consumers for the courses
unconscionable in contravention of the that they were enrolled in
Australian Consumer Law. • Unique, having taken advantage of its
At trial, the ACCC alleged that Unique superior bargaining power, using unfair
engaged in contraventions of the misleading tactics and offering inducements, and
and deceptive conduct provisions, the • Unique giving misleading information or
unsolicited consumer agreement provisions, failure to adequately disclose information.
and the unconscionable conduct provision, The trial judge accepted that the use of
and was successful to a large extent on each laptops or iPads as inducements, incentivising
cause of action. In particular, the Court found staff to sign up students and holding “sign
that Unique represented to students that up meetings” could constitute a system of
their courses were free, when in fact they conduct or pattern of behaviour because
were incurring debts under the VET FEE-HELP they were the result of “considered
scheme of up to $25,000 per course. decision making by senior management why evidence about what happened in a The Full Court allowed Unique’s appeal and
The ACCC had pursued two unconscionable within Unique”. In relation to the alleged number of individual cases cannot also be dismissed a cross-appeal by the ACCC.
conduct claims—first in relation to Unique’s strategy of targeting disadvantaged people, adduced as evidence to prove a system, the
although the judge was “certain that it was This decision demonstrates the considerable
enrolment processes and second in relation evidence required to establish a system case
happening” but not clear about precisely difficulties that the ACCC will face in similar
to Unique’s behaviour towards six named was different to the evidence required to
what mechanism was used, he was prepared unconscionable conduct cases in the future in
individuals. establish unconscionable conduct in individual
to conclude that the targeting conduct was presenting sufficient and appropriate evidence
cases. The ACCC had not led evidence about
The appeal concerned only the first a pattern of behaviour, at least as it occurred to establish systematic unconscionable conduct.
a sufficient number of individual instances to
claim concerning an alleged “system” of in New South Wales. The ACCC will either need to be in a position to
establish a pattern of behaviour or a system,
unconscionable conduct. This was important adduce evidence of a sufficiently large number
The trial judge concluded that although or alternatively led persuasive evidence of how
because the unconscionable conduct of individual instances or else evidence that
the inducements and incentives were not the six cases on which it did lead evidence
prohibition in the Australian Consumer a lesser number of individual instances are
necessarily unconscionable, when “deployed were representative of the class of more
Act is capable of applying to a system of representative of a process or system.
against a targeted group of disadvantaged than 3,600 consumers involved.
conduct or pattern of behaviour without the
ACCC having to establish that any particular persons” the use of the incentive was likely to The appeal Court considered that the Other cases underway
individual has been disadvantaged. confuse those persons into thinking that they vulnerabilities of the consumers in the The ACCC has taken action against a
were being offered a good deal when in fact Unique case depended on their individual number of providers in the vocational
The ACCC alleged that Unique, among other it was not, which in the judge’s opinion was circumstances, including their level of education sector. Three other cases alleging
things: an unfair tactic. The trial judge described the education, literacy and numeracy, intellectual false or misleading representations and
• visited consumers in their homes, targeting effect of the incentive as being “to supercharge impairments, what was explained to them unconscionable conduct, of a very similar
particular locations, including rural and the exploitation of the disadvantaged group and the like. They were not matters from nature to the Unique and Empower cases,
remote locations, Indigenous communities, which was being targeted”. which the Court considered it was possible are outstanding:
and low socio-economic areas On appeal, Unique contended that the to draw inferences of systematic conduct
• a case against the Australian Institute
• directed its employees to target consumers trial judge erred in his finding that Unique without sufficient evidence.
of Professional Education went to trial
in those locations had engaged in systematic unconscionable The Full Court concluded that, on the in September 2018, with judgment
• had its employees visit those locations with conduct because there was no evidence as to case as presented by the ACCC, it was pending, and
boxes of “free” laptops to give to those Unique’s conduct towards the vast majority erroneous for the trial judge to rely on the • a further case against Phoenix Institute
who signed up of its students. Unique also challenged the evidence of individual consumer cases as of Australia and Community Training
• represented to consumers that the courses finding that it had a strategy of targeting a significant part of the evidence for the Initiatives is awaiting final hearing.
were free, or free up to a certain income disadvantaged people by reference to ACCC’s system case. Although the ACCC
Indigenous background, remoteness and In November 2018, the ACCC commenced
threshold, and had established unconscionable conduct
social disadvantage. proceedings against Captain Cook College
• used an enrolment process that failed to against individual consumers, it had not
alleging systematic unconscionable conduct
ascertain the consumer’s suitability for the The appeal Court considered a number of established contravening conduct against
by reason of the removal of consumer
course of capacity to pay fees and failed to earlier cases involving systems of conduct a group of consumers. For that reason, it
safeguards from enrolment and withdrawal
explain the VET FEE-HELP scheme. or patterns of behaviour and identified a was not open to the trial judge to conclude
processes for its online courses to improve
number of issues with the ACCC’s case. It that Unique acted unconscionably towards
The ACCC characterised the unconscionability financial performance.
noted that there was no analytical evidence the group of more than 3,600 students who
of Unique’s conduct in terms of: were enrolled in Unique’s courses, or even a
at all establishing the systematic nature of
• the vulnerability of the consumers and the the conduct. Although there is no reason majority of them.
Page 12 | December 2018 | Sparke Helmore Lawyers Sparke Helmore Lawyers | December 2018 | Page 13
Consumer Matters | Issue 1 Consumer Matters | Issue 1
Avoiding bad reviews a costly business
In a judgment delivered in November Meriton’s conduct mislead consumers
2017, the Federal Court found that The Court disagreed with Meriton and found
serviced apartment provider Meriton that it had contravened the prohibition
had engaged in misleading and on misleading and deceptive conduct in
deceptive conduct in connection with the Australian Consumer Law. In reducing
posting reviews of its properties on the the possibility of a customer posting a
TripAdvisor website. This action was bad review, Meriton had created a more
part of the ACCC’s work in the online favourable impression of the nature,
consumer space, where the ACCC has characteristics and suitability of Meriton
focused on the use of digital platforms, properties on TripAdvisor. Meriton’s conduct
algorithms and consumer data. had the effect of reducing consumer
awareness of the prevalence of service • in determining the extent of the conduct, • as Meriton accepted, senior management
Meriton participated in a service offered by
disruptions—as well as the frequency and the Court did not accept an ACCC was aware of and sanctioned the conduct
TripAdvisor called “Review Express”, by which
kinds of negative guest experiences—at contention that each instance of Meriton • Meriton had not adduced evidence of
Meriton supplied TripAdvisor with the email
its properties, creating an inaccurate and masking or withholding an email address the existence or implementation of any
addresses of its guests, allowing TripAdvisor
incomplete impression for the consumer. constituted a separate contravention of consumer law compliance programs or
to contact the guests to prompt a review of
From the ACCC’s perspective, the case was the law, but rather considered that there training of any sort for its staff during the
the accommodation.
an example of a business undermining the were contraventions in relation to each of relevant period, such that a reduction in
Rather than sending the email addresses integrity of a third party review process to the thirteen Meriton properties in issue in penalty on that basis was not warranted
for all of its guests to TripAdvisor, Meriton mislead or deceive consumers. the proceedings, which meant a maximum
• although Meriton had cooperated with
adopted two practices designed to avoid bad possible penalty of $14.3 million
the ACCC by providing a large amount
reviews on the site. First, by deliberately and Arriving at an appropriate penalty • among other things, the fact that the of information and documents, this was
systematically altering the email addresses of The matter returned to Court in mid-2018 masking practice was standard across undermined by Meriton having given a
certain guests who had complained or who for a hearing on penalties. the Meriton organisation, involved well misleading statement to the ACCC, such
were thought likely to have had a negative in excess of 14,584 email addresses,
Noting the “considerable public interest in that no discount would be allowed for
experience and secondly, by withholding occurred over a period of 11 months, and
corporations observing the requirements cooperation, and
email addresses for all guests staying at a involved the world’s largest travel website,
property during a period when there had of the Australian Consumer Law”, the • the contraventions arising from a single
meant that Meriton’s contraventions were
been a major service disruption. These appropriateness of the Court recording its corporate policy, it was appropriate to
serious and required the imposition of a
practices were contrary to TripAdvisor’s rules disapproval of the contravening conduct and impose a single penalty in relation to all
substantial penalty
for using the Review Express service. the assistance it would provide to the ACCC contraventions.
in carrying out its duties as regulator, the • as Meriton accepted, consumers suffered
a loss of opportunity to adequately Additionally, the Court made orders
The conduct came to the ACCC’s attention Court made declarations that Meriton had
compare accommodation services and restraining Meriton from engaging in
in October 2015 as a result of a program contravened the Australian Consumer Law
choose between them on a fully-informed similar conduct for three years as well as
that aired on the Australian Broadcasting prohibitions on misleading and deceptive
basis, and competitors suffered a loss of requiring Meriton to establish and maintain
Corporation (ABC). conduct as well as misleading conduct as to
opportunity to obtain that custom, again an Australian Consumer Law compliance
Meriton accepted that it had engaged the nature of services.
warranting a substantial penalty program for three years.
in those practices with the purpose of The ACCC sought a pecuniary penalty of $20
preventing certain guests from receiving the • Meriton is a substantial company with a
million against Meriton’s proposed penalty of
invitation to review Meriton properties and gross revenue from the 13 properties of
$330,000 to $440,000. The Court ordered
from leaving a review. However, Meriton approximately $240 million, such that a
Meriton to pay a penalty of $3 million. In
disputed that the ACCC had established that large penalty is required to specifically
arriving at that figure, the Court considered
those practices had the effect or likely effect deter Meriton from similar conduct
a number of factors:
of reducing the number of recent negative • the conduct, which was enshrined in
reviews and therefore improving the relative • the Court noted purpose of pecuniary company policy, was deliberate and
number of favourable to unfavourable reviews penalties to deter contraventions of the systematic
on the TripAdvisor website. law and promote compliance
Page 14 | December 2018 | Sparke Helmore Lawyers Sparke Helmore Lawyers | December 2018 | Page 15
Consumer Matters | Issue 1 Consumer Matters | Issue 1
Optus and ACCC agree on penalties Penalties imposed for Thermomix
for false or misleading representations safety issues
about NBN services
A Federal Court decision in May Optus reached agreement with the ACCC In June 2017, the ACCC commenced product or will at least warn consumers of the
2018 saw the end of the ACCC’s to resolve the proceedings, admitting that it proceedings against Thermomix safety issue”.
proceedings of Optus for false or made the representations and that they were Australia, alleging contraventions
The Court accepted the parties’ joint
misleading representations in relation false or misleading. Optus and the ACCC of the prohibitions on misleading or
submission that a penalty of $2.5 million
to its NBN services, with the Court jointly submitted proposed orders to the deceptive conduct, false or misleading
was appropriate for these contraventions. In
approving penalties agreed between Court, on the basis of which the Court made representations and the requirement to
doing so, it considered the contraventions to
the parties. This is part of the ACCC’s a declaration that Optus had contravened the report death or serious injury caused by
be significant and serious, in particular given
focus on misleading and deceptive Australian Consumer Law, ordered that Optus a consumer good.
the risk of serious injury to a large number of
conduct and representations in the be restrained for three years from making
Thermomix is the Australian distributor consumers, Thermomix’s deliberate conduct
telecommunications sector. any representation to the same effect, that
of German-made Thermomix appliances, in continuing to sell the appliances despite
Optus pay $1.5 million in penalties and that
During a period of 16 months between 2015 which are a multi-purpose high-end kitchen its knowledge of the risk, the very substantial
Optus implement upgrades to its complaints
and 2017, Optus Internet (part of the Singtel appliance that heats, blends, purees and profit it made and the involvement of senior
handling system for consumer law complaints
Optus group) sent letters and messages to a weighs food. management in making a deliberate decision
about the NBN for a period of three years.
number of its customers receiving telephone, not to inform consumers of the safety issue.
In March 2018, the ACCC and Thermomix
internet and television services through its Optus had already paid $833,000 in
reached an agreement whereby Thermomix Recall representations
hybrid-fibre coaxial cable networks at more compensation to affected customers whose
would admit to contraventions in four
than 14,000 addresses. services had been disconnected. From October 2014, as part of a “recall”
categories of claim and the Court imposed a
action by the manufacturer, Thermomix
In those communications, Optus made series of penalties in April 2018.
distributed new sealing rings to owners of
representations to the effect that if the
Safety representations the TM31 appliance identified as possibly
customer did not move to an NBN service
having the safety defect.
then Optus would disconnect their existing Thermomix admitted that for approximately a
services and that if the customer wanted three-month period (July to September 2014), In March 2016, as a result of adverse publicity
to receive home telephone and/or internet it was aware—from information it had about from media reports of burns, Thermomix
services then it would need to acquire an a series of incidents—that the mixing bowl published a media statement to the effect
Optus NBN service. of some of its TM31 model appliances might that there had been no recall of the TM31,
move and lift during use, with the potential that it was “absolutely safe providing it
Optus was entitled to receive migration
risk of serious injury to users if hot food or is used in line with the manufacturer’s
payments from the NBN for each customer
liquid escaped causing burning or scalding. It instructions” and there was “no safety issue
that shifted to an NBN-based service and
did not disclose this safety issue to consumers involving the seal of the lid of the TM31
obtained a benefit of around $750,000 as a
until the end of that period, when it posted a appliance that required consumer action”.
result of the communications.
notification on its Facebook page. Thermomix
Thermomix admitted that those
The communications came to the attention of admitted that it impliedly represented to
representations contravened the prohibitions
the ACCC, which commenced proceedings consumers who purchased the TM31 during
on misleading or deceptive conduct and false
against Optus in December 2017 alleging the relevant period that it was not aware
or misleading representations about goods.
misleading and deceptive conduct, and false of any safety risk that had the potential to
or misleading representations in contravention cause injury (other than as disclosed in its The Court accepted the parties’ joint
of the Australian Consumer Law. The ACCC manuals, labelling and safety videos), which submission that a penalty of $1 million was
pointed to the fact that the agreements representation was false. The Court noted appropriate, taking into account Thermomix’s
between Optus and its customers did not that if a supplier becomes aware of a safety deliberate decision to make the media
permit Optus to cancel services in the way that issue with its product with the potential to statement containing false and misleading
was represented and left customers free to cause serious injury, there is “a reasonable representations, in circumstances where it
acquire telephone and/or internet services from consumer expectation that the supplier will was aware of the manufacturer’s recall, the
an internet service provider of their choice. either stop selling the potentially dangerous fact that they were authorised by senior
Page 16 | December 2018 | Sparke Helmore Lawyers Sparke Helmore Lawyers | December 2018 | Page 17
Consumer Matters | Issue 1 Consumer Matters | Issue 1
Indonesian-made “Indigenous Australian
art” misleading
In October 2018, the ACCC succeeded in • the back of the boomerang featured
proceedings against wholesaler Birubi Art the words “HAND PAINTED” and
Pty Ltd in which it claimed that Birubi had “AUSTRALIA” in large lettering, as well
made false or misleading representations the words: “Art featured is from originals
that products it sold were made in by Australian Aboriginal Artist Trisha
Australia and hand painted by Australian Mason” and “Birubi Art Pty Ltd supports
Aboriginal persons. and promotes ethical dealings with
Aboriginal people”, and
management and the potential for the Conditional refunds and “no refunds” Birubi sold Aboriginal cultural objects,
including boomerangs, bullroarers and • nothing on the boomerang itself or its
statement to undermine the recall process. representations labelling identified it as having been
digeridoos produced by artisans in Indonesia.
Thermomix admitted that in 2015, in respect made in Indonesia.
Late submission of mandatory reports Three of the products were reproductions
of one of its customers who had requested a
Section 131 of the Australian Consumer of artwork designed by Trisha Mason, an In relation to another product in issue, the
refund or replacement, it had unsuccessfully
Law requires suppliers of consumer goods Aboriginal Australian artist. labelling included the words “Suppliers
attempted to repair the appliance three
to report to the relevant Minister within two It was not alleged that Birubi had expressly of quality Australian souvenirs, genuine
times and then offered a refund only if
days of becoming aware of any incident or represented that the products were made Aboriginal art”.
the customer signed a settlement deed
accident involving death, serious injury or containing a confidentiality clause and a non- in Australia or were made by Australian In a hearing in October 2018, the Court
illness caused (or potentially caused) by the disparagement clause. Thermomix admitted Aboriginal persons. Rather, it was alleged concluded that the implied representation
use or foreseeable misuse of a consumer that it had represented to the customer that that the representations were implied by that the products were hand painted by
good. she did not have an unqualified right to a the characteristics of the products and their Australian Aboriginal persons was false or
Thermomix admitted that on 14 occasions refund and that it had the discretion to only labelling, packaging and cultural associations misleading, and was more likely than not to
it failed to give the required notice to the provide a refund if the customer agreed to together with the imputed attributes of a mislead the public into inferring that this was
Minister within two days. In fact, it delayed conditions, when in fact the customer was “reasonable ordinary” potential purchaser the case when it was not. Similarly, Birubi
reporting the burns caused by the TM31 entitled to the remedy of a refund under of the products. In other words, the ACCC contravened the Australian Consumer Law by
for periods ranging between one day and the consumer guarantee provisions in the alleged that an ordinary purchaser of the engaging in misleading or deceptive conduct
three years. Australian Consumer Law. products in a retail store in which they and falsely impliedly representing that the
were sold would have understood them to place of origin of the goods was Australia.
The Court considered that a delay of one Thermomix further admitted to representing
be Indigenous Australian art produced in
or two days was “not a matter of great to three other customers that refunds or In November 2018, the Court made
Australia.
significance” but that the lengthier delays left replacements were not available in respect of declarations to this effect, by which time Birubi
consumers at risk by denying the regulators their a appliances at any time—again, clearly The Court found that Birubi had contravened had been placed in voluntary liquidation. As a
access to timely information that might help false in light of those customers’ rights under the Australian Consumer Law. For example, in result, the ACCC must now seek leave from
identify potential safety issues and actions the Australian Consumer Law. relation to one of the boomerang products, the Court to continue the proceedings against
that could be taken to protect consumers. the Court considered that: Birubi to determine penalties and other orders
The Court imposed pecuniary penalties of
• it was integral to the impression conveyed sought by the ACCC.
The Court considered that the delay $100,000 for each of the four contraventions.
highlighted a need for a penalty providing by the boomerang that “a boomerang
Other orders is readily recognisable as a traditional
specific and general deterrence, and accepted
the parties’ joint submission that a penalty of In addition to a total of $4,608,500 in Australian Aboriginal cultural object”
$108,000 was appropriate. pecuniary penalties, the Court made and that the visual images, symbols and
declarations of contravention of the Australian styles reproduced on the boomerang were
Consumer Law, ordered Thermomix characteristic of Australian Aboriginal art
to establish and maintain a consumer as painted by Australian Aboriginal artists.
compliance program and ordered Thermomix The Court found that this suggested an
to publish a corrective notice on its website association between Australian Aboriginal
and Facebook page. people and the production of the item
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