INTELLECTUAL PROPERTY AND TECHNOLOGY ALERT
The conduct of the review
The Australian Competition and Consumer Commission (ACCC) published a report recently which highlights the outcomes of the ACCC's unfair contract terms review.
The review forms part of the ACCC's initial compliance review phase, which will be followed by an enforcement phase.
As part of the review phase, the ACCC directly engaged with businesses to address its fairness concerns and to restore balance to a number of important provisions in their contracts and the report outlines specific terms of concern to the ACCC emerging from the review.
Some businesses have not fully cooperated with the ACCC during the reviews or have not chosen to change their standard terms and the ACCC is now considering whether further actions and in some cases the possibility of court action is warranted.
The report provides guidance on what types of terms are of concern to the ACCC. Accordingly, any business that uses standard form contracts, including online retailers using online terms, should take this opportunity to review its terms.
We outline the terms identified in the report that are relevant to online retailers below.
Unilateral variation right without
The ACCC stated that contracts that include a term that allows one party to unilaterally vary the contract without the consent of the other party may be considered unfair. In the online environment, this type of term is usually expressed to apply to both new and existing contracts. The latter is of the most concern to the ACCC. For example, the ACCC identified the following term in its review:
We may change or update this website and the terms and conditions at any time without providing you with prior notice.
Further, the ACCC stated that even if a consumer is provided with due notice, the term will still be of concern to the ACCC for changes made to existing contracts. For example, the ACCC also identified the following term in its review:
We may change or update this website and the terms and conditions at any time by giving you notice.
Terms that suspend or terminate the
A term that permits the online retailer to avoid or limit performance of the contract or permits the retailer to decide whether the contract has been breached without the consumer having a right to respond is of concern to the ACCC.
As a guide, the ACCC stated that it is likely to view suspension or termination clauses as problematic if:
- The retailer does not consider the impact on the consumer before seeking to rely on the term;
- The retailer seeks to suspend or terminate the service without notice or any prior communication with the consumer; or
- The term does not provide an accompanying right for the consumer to seek a remedy, such as a refund or cancellation of the contract.
The ACCC stated that even if a term refers to the provision of a refund of an accepted payment, that can imply that a retailer may cancel an order after the consumer has paid for it. For example, the ACCC identified the following term in its review:
...if your order is rejected or is not accepted, we will provide a full refund of any payment received.
Consumer liable for things that would ordinarily be
outside their control
The ACCC is concerned about terms that operate in ways that hold consumers responsible for things that would ordinarily be outside of their control. In the online sector, the ACCC identified some broadly drafted terms that were of concern that sought to exempt the business from liability for errors or inaccuracies the retailer would otherwise be responsible for, while making the consumer responsible for ensuring information provided to them was correct.
Terms that prevent the consumer from relying on
representations made by the business
Under the Australian Consumer Law, a consumer is entitled to rely on representations, such as a representation as to quality. The ACCC stated that broadly drafted clauses that seek to absolve a business of responsibility for statements they make to consumers may be unfair. Accordingly, the ACCC stated that the following term was significantly non-compliant with the law:
You acknowledge that you enter this agreement entirely as a result of your own enquiries and that you do not rely on any statement, representation or promise by us or on our behalf not expressly set out in this agreement.
Terms seeking to limit consumer
The ACCC stated that a number of contract terms were identified that sought to limit consumer rights to refunds or warranties. The ACCC stated that in some cases, these terms mislead consumers as to their rights under the consumer guarantees provisions of the ACL. Overly broad statements about limitations of liability purporting to place the entire onus of risks on the consumer will be of concern to the ACCC. For example, the ACCC identified the following term in its review:
Clause 13 (para 2): To the fullest extent permitted by law, we disclaim all representations and warranties, express or implied, including but not limited to implied warranties of merchantability and fitness for a particular purpose and non-infringement.
Clause 13 (para 7): You understand, acknowledge and agree that you are assuming the entire risk as to the quality, accuracy, performance, timeliness, adequacy, completeness, correctness, authenticity, security and validity of any and all features and functions of the website and content.
The ACCC stated that any term used must expressly acknowledge the online retailer's liability to the consumer in relation to the supply of goods or services is subject to the ACL.
The ACCC has stated that the release of the report will mark its move from the initial compliance review phase into the enforcement phase.
In this regard, the ACCC has a variety of ways to ensure that businesses comply with the ACL. It may take enforcement action or alternatively engage with the business to articulate its concerns and to provide the business an opportunity to review those concerns. The ACCC can also apply to a court for a declaration that the term of the contract is unfair. A court then may make an order:
- To vary the contract
- To refuse to enforce any or all of the terms of the contract; or
- To direct a refund to the consumer.
This review provides valuable insight into the ACCC's approach to standard form contracts. Accordingly, online retailers should review their standard terms, having the benefit of this insight.
© DLA Piper
This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.
DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to www.dlapiper.com