The Competition and Consumer Act 2010 (Cth) (CCA) (formerly known as the Trade Practices Act 1974 (Cth)) deals with almost all aspects of commercial dealings, including dealings with (and between) suppliers, wholesalers, retailers, competitors and customers.
Some of the key matters regulated by the CCA include:
- restrictive trade practices and anti-competitive behaviour, including cartel conduct;
- consumer protection;
- mergers and acquisitions that lessen competition;
- industry codes of practice (such as the Franchising Code of Conduct); and
- specific industries, such as telecommunications, gas, electricity and airports.
The CCA is enforced by the Australian Competition and Consumer Commission (ACCC).
Restrictive Trade Practices, including Cartel Conduct
Broadly speaking, the restrictive trade practices provisions prohibit the following market conduct:
- contracts, arrangements and understandings that contain a cartel provision;
- other contracts, arrangements or understandings that substantially lessen competition (but do not contain a cartel provision);
- exclusionary provisions;
- misuse of market power;
- exclusive dealing, including third line forcing; and
- resale price maintenance.
The restrictive trade practices provisions (including those relating to cartel conduct) have extraterritorial application, and may apply where the relevant conduct occurs in a foreign jurisdiction but in some way involves or affects Australia.
Companies must be especially mindful of the cartel provisions of the CCA, which can attract both civil and criminal penalties (see "Penalties" section below). A cartel provision in a contract, arrangement or understanding is a provision:
- fixing prices;
- restricting outputs in the production and supply chain;
- allocating customers, suppliers or territories; or
- involving bid-rigging,
between parties that are, or would otherwise be, in competition with each other.
The ACCC has the power to authorise certain arrangements which would otherwise breach the anti-competitive provisions of the CCA. In certain circumstances, it may be advisable for companies to take advantage of the authorisation and notification provisions under the CCA to mitigate the risk of investigation and prosecution.
Schedule 2 of the CCA, known as the Australian Consumer Law (ACL), contains a range of consumer protection provisions including those which are aimed at ensuring accuracy in advertising. Other provisions within the ACL relate to the fairness of contracts with consumers, direct selling and multi-level marketing business arrangements and product recalls. Each state and territory has adopted the ACL as a law of its respective jurisdiction. This means that the same consumer protection provisions apply across Australia.
Specifically, the ACL:
- prohibits misleading and deceptive conduct;
- prohibits unfair terms in standard form consumer contracts;
- provides statutory consumer guarantees for consumers against suppliers and manufacturers;
- provides for product liability and recall schemes; and
- regulates direct selling and multi-level marketing businesses.
In addition, manufacturers' liability can apply to importers of products into Australia under the ACL.
Mergers and Acquisitions
The CCA prohibits mergers or acquisitions that have, or would be likely to have, the effect of substantially lessening competition in any market.
The CCA does not set out a mandatory notification regime. However, the ACCC encourages parties to notify the ACCC of a proposed merger where:
- the products of the merger parties are either 'substitutes' or 'complements'; and
- the merged business will have a post-merger market share of greater than 20% in the relevant market(s).
The ACCC monitors actively both domestic and international mergers that may have an impact on Australian markets, and has standing to apply for a court order to 'block' any proposed transaction, and 'unwind' any completed transaction, that it considers may have the effect of substantially lessening competition.
To assist parties in assessing whether a proposed transaction is permissible under the CCA, companies may apply to the ACCC for its preliminary views as to whether a merger proposal – including confidential merger proposals and proposed acquisitions where no approach has been made to the target company – may be objectionable on the above basis.
Misleading or Deceptive Conduct
The ACL contains various provisions which prohibit conduct by businesses which is misleading or deceptive or which is likely to mislead or deceive. Whether or not conduct is held to be misleading or deceptive will depend on the particular circumstances of each case.
In addition to the general prohibition on misleading and deceptive conduct, there are specific prohibitions on certain types of false or misleading statements made by businesses to consumers.
Unfair Contract Terms
Unfair terms in standard form, non-negotiated contracts entered into with customers are now unenforceable. A contract term will be unfair if:
- it would cause a significant imbalance in the parties' rights and obligations arising under the contract;
- it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
- it would cause detriment (whether financial or otherwise) to a party if it were to be applied.
Businesses need to be mindful of these provisions of the ACL if their operations involve contracting with consumers. Examples of industries where these provisions are particularly relevant are car hire, hospitality, removals and fitness.
Along with guarantees as to title, encumbrance and undisturbed possession, the ACL sets out guarantees that cannot be excluded by contract. Suppliers of goods of a kind normally purchased for personal or household use or with a value of less than A$40,000 have a legal obligation to ensure that:
- the goods are of acceptable quality;
- the goods are fit for the purposes specified by the supplier;
- a reasonable supply of spare parts or repair facilities is available after purchase;
- the goods match any description or sample given to the consumer; and
- the goods will satisfy any extra promises made about them (express warranties)
Under the ACL, remedies may be available – including compensation, costs, refunds and replacement – where one or more of these guarantees are breached. The severity of the remedy will depend on the seriousness of non-compliance.
In the case of products manufactured overseas, importers will be liable to customers in respect of a breach of consumer guarantees relating to products for which the manufacturer would be responsible if the manufacturer were in Australia.
The ACL also sets out guarantees relating to the supply of services. These include guarantees as to due care and skill, fitness for particular purpose, as well as reasonable time for supply.
Australia's Product Safety Regime
The ACL also provides the legal framework for Australia's consumer product safety regime, incorporating recalls, mandatory reporting requirements, mandatory safety standards and product bans.
When a safety problem is identified in a consumer product, suppliers or government regulators may determine that the product needs to be recalled. Many recalls are initiated voluntarily by suppliers when they become aware of safety issues in a consumer good, in which case they must notify the relevant Commonwealth Minister. However, the relevant Commonwealth, State and Territory Ministers also have the power to order a compulsory recall to protect the public from an unsafe good. When this happens, the ACCC will direct the manner in which the recall is to occur and will enforce compliance.
The ACL introduces a mandatory reporting regime within the Australian product safety framework. Under the ACL, within two business days of becoming aware of an incident where a person has suffered death or serious injury or illness that was caused by, or may have been caused by, a consumer good or service which it supplied, the relevant supplier must provide a written report (notice) to the Commonwealth Minister.
Additionally, mandatory safety and information standards set out compulsory safety or information requirements for certain types of consumer goods supplied into the Australian market. These apply where the products are likely to be especially hazardous. Examples of goods covered by these mandatory safety standards are baby walkers, bicycle helmets, bunk beds and bean bags. It is an offence to supply consumer goods in Australia covered by a mandatory safety or information standard if they do not comply.
Finally, while interim bans on certain types of consumer goods can be imposed by the relevant State and Territory Ministers in their respective jurisdictions, the Commonwealth Minister may impose both interim and permanent bans throughout Australia. Where a ban is imposed in respect of a consumer good, it is unlawful to supply, manufacture, possess, or have control of the banned consumer good for the purposes of sale.
Direct Selling and Marketing
The ACL also sets out a national framework that regulates unsolicited sales practices, including door-to-door selling, telephone sales and other forms of direct selling outside the retail context.
The ACL contains specific provisions as to the time of day and the manner in which businesses may interact with consumers through direct selling. The ACL also regulates the content of agreements made with consumers using direct selling.
Companies that breach the anti-competitive provisions of the CCA can be ordered to pay pecuniary penalties of up to the greatest of:
- A$10 million;
- three times the value of the benefit (when the value of the illegal benefit can be ascertained); or
- 10% of the annual turnover of the company and all of its related companies in the relevant period (when the value of the illegal benefit cannot be ascertained).
Additional criminal penalties may be imposed in respect of cartel conduct. For a criminal conviction, it must be proven, beyond reasonable doubt, that the prohibited arrangement was given effect intentionally and the accused knew or believed that the prohibited arrangement contained a cartel provision.
The criminal penalties for cartel conduct includes up to 10 years imprisonment. However, companies and individuals may be granted immunity from criminal (and civil) penalties for engaging in cartel conduct where they are the first to apply for immunity and co-operate fully with authorities. Significant penalty reductions may be available to those that cooperate with authorities.
There are also significant penalties of up to A$1.1 million for companies and A$220,000 for individuals that breach certain provisions of the ACL.
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.