In brief - Councils not exempt from operation of
Competition and Consumer Act (CCA)
It has long been considered that local councils (like trade
unions) are not engaged in trade or commerce and therefore are
exempt from the operation of the Competition and Consumer Act 2010 (Cth), which
replaced the well-known Trade Practices Act. However, that
is not the case. Like individuals, partnerships and companies,
councils can fall foul of the CCA, including its misleading or
deceptive conduct provisions.
Council issues "Expression of Interest" and
negotiates with two supermarkets
In 2005 Port Macquarie-Hastings Council sought expressions of
interest (EOI) for the development of council land. Coles and
Woolworths both expressed interest in the project. The council
initially approved Woolworths' proposal. When those
negotiations reached an impasse, the council commenced negotiations
Dissatisfied with the progress made, in 2007 the council again
sought EOIs for the development of the land. Coles and Woolworths
again expressed their interest. In 2008 the council gave in
principle approval to Woolworths' development proposal.
However, after several months of negotiations, the council and
Woolworths were unable to reach agreement on the terms of the
Unsuccessful party sues council for misleading and deceptive
As a result of the impasse it had reached with Woolworths, in
2009 the council re-opened negotiations with Coles. For commercial
reasons, the council deliberately refrained from informing
Woolworths that it was also negotiating with Coles. Woolworths
continued negotiating with council and carrying out preliminary
works in the belief that it had an exclusive arrangement with the
On 1 July 2009, council agreed to sell the land to Coles.
Woolworths sued the council, alleging amongst other things that the
council's failure to disclose to Woolworths that it was also
negotiating with Coles was misleading and deceptive.
The court held that the council's conduct was misleading and
deceptive. Moreover, the court found that the council's conduct
fell well short of commercial fair dealing and the standards which
a commercial party was entitled to expect when dealing with a
Councils need to act with honesty and candour in their
Councils (and their officers) need to ensure that when carrying
on their commercial activities, they act with honesty and candour.
Otherwise, councils, like any other person or entity involved in
trade or commerce, run the risk of being found to have engaged in
misleading or deceptive conduct in contravention of the CCA.
Exposure to risks from engaging in misleading or deceptive
Councils that are found to have engaged in misleading or
deceptive conduct expose themselves to:
Having damages awarded against them (e.g. a party in
Woolworths' position would in most cases be entitled to receive
compensation for the expenditure it incurred in negotiating with
Being injuncted from engaging in the contravening conduct
Having executed contracts set aside or varied in order to
overcome the contravention
Prosecution and the imposition of penalties by the ACCC
Reputational damage due to adverse publicity
Risks to officers who work for councils
Further, officers acting as the organ of the council are also
exposed to the risk of being found to have been knowingly involved
in, or aiding, abetting, counselling or procuring the
contravention. In the event that an officer is found to have been a
party to the contravention of the CCA, the aggrieved party would be
entitled to seek damages from the officer.
Officers of councils need to be covered by liability
To the extent that council officers are involved in commercial
negotiations or commercial decisions, officers ought to ensure that
the council has appropriate directors and officers liability
insurance policies in place.
The Sportscraft refunds and returns policy limitations went beyond consumer's rights under the Australian Consumer Law.
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