A landmark decision of the Federal Court on 11 October 2013 examines, for the first time in Australia, the issue of what constitutes a "request" to leave premises for the purposes of section 75 of the Australian Consumer Law ("ACL")1. In ACCC v AGL Sales,2 Middleton J held that a "request" to leave the premises under section 75 of the ACL can include the display of a "Do Not Knock" sign on the front door of premises.
Section 75(1)(a) of the ACL provides that "a dealer who calls on a person at any premises for the purpose of negotiating an unsolicited consumer agreement, or for any incidental or related purpose, must leave the premises immediately on the request of the occupier of the premises, or any person acting with actual or apparent authority of the occupier". The ACL does not contain a definition of "request".
This case has serious implications for direct selling companies who use door-to-door marketing strategies as it raises an additional layer of compliance under the ACL. This summary outlines what the decision means for direct selling companies and the steps which should be taken to prevent contravention of the ACL.
We have previously discussed the proceedings commenced by the Australian Competition and Consumer Commission ("ACCC") against two energy retailers (AGL Sales Pty Ltd and AGL South Australia Pty Ltd) and their marketing company (CPM Australia Pty Ltd) in respect of the door-to-door sales practices used by their salespeople.3
Since our previous Focus Paper on the proceedings, two further developments have occurred:
- On 20 May 2013, the parties agreed to consent orders ("Consent Orders"); and
- On 11 October 2013, Justice Middleton handed down his judgment in respect of the sole contested aspect of the proceedings as to whether the sales representative contravened section 75 of the ACL ("Judgment").
On 20 May 2013, Justice Middleton ordered, by consent of the parties, that penalties of $1.485 million, $70,000 and $200,000 be paid by AGL Sales Pty Ltd ("AGL Sales"), AGL South Australia Pty Ltd ("AGL SA") and CPM Australia Pty Ltd ("CPM"), respectively.
In addition to the pecuniary penalties, the Court also ordered, by consent, that:
- the defendants establish an adequate compliance program;
- AGL Sales, AGL SA and CPM undertake corrective advertising in The Age, The Advertiser and The Herald Sun respectively; and
- the defendants pay the ACCC's legal costs totalling $60,000.
The penalties were imposed on the basis of the defendants' breach of three sections of the ACL, namely:
- the prohibition on misleading or deceptive conduct (section 18 of the ACL);
- the prohibition on false or misleading representations about goods or services (sections 29(g)-(i) of the ACL); and
- obligations to disclose purpose and identity as part of negotiations for unsolicited consumer agreements (section 74 of the ACL).
The Court declared that the defendants contravened the above provisions as the sales representatives engaged by the defendants:
- failed to advise clearly the consumer that the salesperson's purpose was to seek the consumer's agreement for the supply of retail electricity and/or retail gas;
- failed to advise clearly the consumer that the salesperson is obliged to leave the premises immediately on request;
- were involved in conduct designed to mislead the consumer about the salesperson's reason for calling; and
- made a number of false or misleading representations including the price of the defendants' products and that the consumer had been overcharged by its current supplier.
The only contested aspect of the proceedings was whether Mr Kansagara (a sales representative for CPM) contravened section 75 of the ACL by starting to negotiate with Ms Plant (the consumer) despite the presence of a 'Do Not Knock' sign on Ms Plant's front door. In order to establish if there was a contravention, Middleton J was required to decide whether there was a 'request' to leave the premises.
In his Honour's analysis of section 75 and the nature of "Do Not Knock" signs, Middleton J noted that:
- Section 75 does not provide expressly the manner in which the request must be made. Therefore a "request" can be made orally, in writing or by conduct;4
- The provision should be construed broadly as it is directed at unsolicited visits by salespersons to consumers in their homes and is designed to protect consumers due to the inherent vulnerability of the relationship;5
- The wording of subsection (1)(a) contains no indication that face to face contact is envisaged and that the subsection extends to conduct before the negotiations begins;6
- Subsection (1)(a) is drafted for the purpose of ensuring that negotiations do not start at all;7
- A determination as to whether a "request" has been made is a question of fact;8
- A "Do Not Knock" sign could constitute a request, even if the request was not made in the context of face to face communication between the consumer and sales representative;9 and
- A "Do Not Knock" sign does not contain an express request to leave the premises but, depending on the facts, it could constitute an implied request.10
Looking at the factual elements of the case, Middleton J considered the following factors relevant in indicating Ms Plant's implied "request" that Mr Kansagara was to leave her premises before commencing the negotiations and that Mr Kansagara had not complied with such request:
- At the time of the alleged contravention, Ms Plant's door was closed and a "Do Not Knock" sign was affixed to the door;
- The "Do Not Knock" sign would have been seen by Mr Kansagara;
- Despite the sign, Mr Kansagara remained on the premises and knocked on the front door of Ms Plant's house; and
- When Ms Plant opened the door, Mr Kansagara commenced discussions with Ms Plant in relation to making an agreement for the supply of retail energy to Ms Plant by AGL SA.
Accordingly, Middleton J held that section 75(1) had been contravened and his Honour ordered the proceedings be adjourned to a later date for a further hearing in relation to the penalty to be imposed.
Take Home Message
In light of this decision, direct selling companies should be mindful of their obligations under the ACL and to ensure, either by training or otherwise, that their independent contractors are aware of their obligations under the unsolicited consumer agreement provisions in the ACL, particularly in relation to:
- advising the consumer that the salesperson's purpose is to seek the consumer's agreement for the supply of goods or services;
- advising clearly the consumer that the salesperson is obliged to leave the premises immediately on request;
- engaging in any conduct that may mislead or deceive the consumer about the salesperson's purpose; and
- complying with any "Do Not Knock" signs or similar notices which are clearly displayed on the consumer's premises.
1 The ACL constitutes Schedule 2 of the
Competition and Consumer Act 2010 (Cth)
2 Australian Competition and Consumer Commission v AGL Sales Pty Ltd & Ors (2013) FCA 1030 ("ACCC v AGL Sales")
4 ACCC v AGL Sales, para 95
5 ACCC v AGL Sales, para 96
6 ACCC v AGL Sales, para 98
7 ACCC v AGL Sales, para 98
8 ACCC v AGL Sales, para 122
9 ACCC v AGL Sales, para 123
10 ACCC v AGL Sales, para 127-134
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.