The new Australian Consumer Law (the ACL) has the potential to affect wagering operators, particularly in respect of:
- unfair terms in contracts;
- failure to supply:
- rebates, prizes or gifts; and
- reasonable quantities of services at advertised prices;
- unsolicited selling.
Wagering operators should review their sales and marketing practices to ensure they comply with the ACL.
The ACL will replace the existing consumer protection framework provided by the Trade Practices Act 1974 (Cth) (the TPA) and similar legislation at the State and Territory level. The TPA will be renamed the Consumer and Competition Act 2010 (Cth) (the CCA) and the ACL will be included as a schedule to the CCA.
As detailed in our previous FocusPapers1, the ACL is being introduced in two phases:
- Phase 1 of the ACL was passed by the Federal Parliament in March 2010 with provisions coming into effect on 1 July 2010.
- Phase 2 of the ACL was passed by the Federal Parliament in June 2010 and will come into effect on 1 January 2011.
While one of the key justifications for the ACL has been the reduction of regulatory burdens on businesses, wagering operators should be aware how the ACL may extend existing consumer protections to their businesses.
Unfair Terms in Contracts
The provisions of the ACL relating to unfair terms came into effect on 1 July 2010 and have the effect of rendering void an unfair term of a standard form consumer contract. As far as possible, a contract with unfair term(s) will continue to bind the parties but a court will interpret any agreement as if it did not include the unfair term(s).
The ACL does not define what constitutes standard form and it will be necessary for a court to decide whether or not a contract is standard form. However, it appears to include nonnegotiable, general "terms and conditions" agreements given to consumers to sign before a company provides goods or services. Accordingly, terms and conditions under which wagering operators offer services to customers are very likely to be considered standard form.
A contract is a consumer contract if, among other things, the person receiving the services is receiving them for personal use. Contracts between wagering operators and most customers are likely to be considered consumer contracts.
A term is an unfair term if it causes an imbalance in the parties' rights and obligations and is not reasonably necessary to protect the legitimate interests of the party advantaged by the term.
A quick review of the terms and conditions of various online wagering operators revealed terms likely to be considered unfair, such as:
- the wagering operator's unilateral right to terminate the contract;
- the wagering operator's unilateral right to vary the contract; and
- limits on a customer's rights to sue the wagering operator.
Failure to Supply
The ACL also regulates two areas of a failure to supply likely to apply to many wagering operators, namely:
- failure to supply rebates, prizes and gifts; and
- failure to supply reasonable quantities of services at advertised prices.
Under the current regime, a wagering operator must not offer prizes, gifts or other free items in connection with services if the operator has no intention of providing the prize, gift or other free item.
The ACL will extend the existing consumer law from 1 January 2011. The ACL will make it explicit that this prohibition covers rebates and will increase the penalties to a maximum of $1.1 million per offence.
Wagering operators will need to ensure terms are clearly communicated to people who see the advertisement. For example, in order to comply with State and Territory based advertising laws, many operators exclude residents from particular jurisdictions in promotional campaigns that are advertised nationally. The limitations on these rebates need to be clearly communicated.
Free bet offers may also present problems. It is common for operators to offer free bets that only return the amount above the original amount bet. So, if a customer makes a free $100 bet on odds of 2-1 and is successful, the customer will only win $100, not $200. These conditions will also need to be communicated.
The ACL also sets out prohibitions concerning the failure to supply a reasonably quantity of services at advertised prices. These provisions will apply from 1 January 2011 and will, as with the prohibition on a failure to supply rebates and gifts, impose penalties of up to $1.1 million.
This may be relevant in areas where betting operators advertise odds (the "price") but refuse to accept bets of a certain size (the "quantity"). Operators should take care to ensure that they are willing to accept a reasonably sized bet at the prices that are offered.
The final area of particular relevance to wagering operators relates to unsolicited selling. From 1 January 2011, the ACL will introduce new provisions that restrict unsolicited consumer agreements. These provisions are new and are not contained in the current TPA.
An unsolicited consumer agreement is an agreement:
- which is either:
- made between a supplier and a consumer in each other's presence at a place other than the trade premises of the supplier; or
- made by telephone; and
- where the consumer did not invite the supplier to approach or telephone them for the purpose of entering into negotiations in relation to the supply of the services; and
- where the total price paid under the agreement is more than $100.
It is important to note that the wording of the ACL means that an agreement may be an unsolicited consumer agreement even if the consumer made the telephone call.
Although in most instances where a consumer telephones a wagering operator it will be for the purposes of negotiating the supply of wagering services, operators should be careful to ensure any calls do not lead to unsolicited consumer agreements.
The ACL regulates the negotiations of unsolicited consumer agreements and the rights consumers have under those agreements. Penalties of $50,000 per offence may apply for breaches.
The ACL extends the provisions of the TPA, introduces new provisions and significantly increases the penalties for breaches. Wagering operators would be well advised to conduct a review of sales and marketing practices to ensure compliance with the new regime before it becomes fully operational on 1 January 2011.
1. See FocusPapers "Australian Consumer Law Reform – the introduction of unfair contract terms legislation", FocusPaper No. 102, "Phase 1 of the Australian Consumer Law reform process begins!" FocusPaper No. 115 and "Direct-Selling/Multi-Level Marketing – How will Phase 2 of the Proposed Australian Consumer Law Reforms Affect Your Business?" FocusPaper No. 120.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.