Businesses should take note that on 26 October 2018 a number of changes, including to laws regulating advertising based on price, were made to the Australian Consumer Law (ACL) and the Competition and Consumer Act (CCCA). These changes are intended to “clarify and strengthen consumer protections”.
The most significant changes and their impact on your business are:
1. New pricing requirement: All pre-selected options must be included in the single price Sometimes businesses will offer goods and services for sale, together with options that may be purchased by consumers for extra cost. Sometimes, these options are preselected by the seller, and the consumer will then need to deselect them if they don’t wish to include the options as part of their purchase.
Previously under the ACL, sellers were not required to include any optional charges in the headline price advertised to consumers. As a result the headline price for goods or a service may not be a true representation of the total price where the seller had included pre-selected, chargeable options. This was particularly an issue with online sales.
For example: A florist offers a bouquet of flowers for sale on their website for $50 (which is the headline price). However a box of chocolates can be purchased for extra $15 and is included as a preselected option. This means that when the consumer selects the flowers, they are automatically asked to pay $65, rather than $50. The consumer can choose to purchase just the flowers, but only if they deselect the chocolates option first.
The new changes require that businesses must now ensure that the headline price must include charges automatically applied by the seller, regardless of whether the consumer can choose to deselect these options during the course of the transaction. Looking at the florist example, this means that they must advertise a headline price of $65 if the chocolates are included as a preselected option. The headline price would be $50 only if the flowers included no preselected options.
Note that these changes will apply from 26 October 2019 onwards. This time allows businesses the opportunity to undertake any alterations to their systems so as to ensure compliance with these new pricing requirements.
2. Stronger powers for Australian Competition and Consumer Commission (ACCC) to obtain information Previously under the CCA, the ACCC had powers to obtain disclosure of information about the safety of goods and services from suppliers only. This restriction meant that the regulators did not have the powers to compel disclosure from other parties who may be able to provide relevant information, documentation and evidence regarding safety of goods and services.
The new changes now remove this restriction and allow the regulators to seek disclosure from third parties, not just from suppliers. These third parties may include other traders, test laboratories, safety consultants, consumers or persons who have been injured.
3. Regulators can now use powers to assess unfair contract terms Up until now, ASIC and the ACCC have only been able to exercise their investigative powers in relation to potential contraventions of the law, but not in relation to unfair contract terms.
An example of an unfair contract term is one that effectively permits one party, but not another, to avoid or limit performance of the contract.
If a business includes or relies upon an unfair contract term in an agreement, this would not constitute a contravention, but rather would render the term void or unenforceable. As a result, the investigative powers of ASIC and the ACCC did not extend to unfair contract terms.
The recent changes now broaden these powers to enable the regulators to undertake investigations to determine if a term in a consumer contract or a small business contract may be unfair for the purposes of determining whether to bring court proceedings in relation to the term.
4. Making evidence easier for consumer litigants Consumers who suffer harm because of consumer law contraventions may seek redress by commencing a private action in the Federal Court.
Previously under the CCA, these consumers could rely upon findings of fact made by the court against a business in earlier proceedings, for example, a previous action against that business which had been initiated by the ACCC. These ‘follow on’ provisions are intended help to reduce the length of the legal proceedings and the legal costs associated with the consumer’s action. Consumers could not however rely upon any admissions of fact made by a business in the earlier action.
The new changes now extend the ‘follow on’ provisions to enable consumers and regulators to rely upon admissions made by a business as well as facts established in earlier proceedings as evidence in their own case.
What does your business need to do?
The new changes indicate the increasing focus on consumer protections, particularly with respect to online sales. If your business sells goods or services online, and offers additional options at extra cost, you must ensure that any preselected options are included in the headline price, regardless of whether the consumer has the option to deselect these options.
Businesses should also ensure that any system changes required to meet this requirement are undertaken prior to 26 October 2019 (which is the date these changes take effect).
Businesses should also bear in mind the regulators’ increased investigative powers and ensure that all staff members participate in regular compliance training, both as a reminder of business obligations under the consumer laws and to keep up to date with any changes.