Australia: Lessons to learn from ACCC proceedings in 2016

Last Updated: 14 February 2017
Article by Dorota Bryks

ACCC releases a list of compliance and enforcement priorities for each year (see our article titled 'ACCC: Compliance and Enforcement Priorities 2016'). One of the central and continuing focus areas is the protection of consumers and small businesses. Below are three key cases that deal with this focus area and that fall under Schedule 2 (Australian Consumer Law) of the Competition and Consumer Act 2010 (Cth) ('ACL').

ACCC v Valve Corporation (No 3) [2016] FCA 196

Valve is a US company that operates online computer game distribution program, Steam. Valve sells digitally downloadable computer games through Stream but it has no physical retail stores in Australia.

The Federal Court held that Valve had made misleading representations about Australian consumer guarantees in its terms and conditions. It was held that Valve 'carried on business in Australia' since Valve had established game servers in Australia with subscribers and made representations to each Australian consumer who agreed with the terms and conditions. The Federal Court also questioned whether the licence agreement to use the Steam software constituted a supply of goods. The Court found that the computer software fell under the definition of 'consumer goods' in the ACL, particularly because the games purchased through the software could be played offline.

Lesson to take away: Foreign based businesses selling goods and/or services to Australian consumers can be subject to ACL obligations. Additionally, digital goods supplied though online platforms are considered 'consumer goods' under the ACL.

ACCC v Online Dealz Pty Ltd [2016] FCA 732

Online retailer 'Online Dealz' sold baby strollers, household cots and portable cots that failed to comply with safety standards and posed numerous risks to children, including suffocation, limb entrapment and strangulation. These products were also incorrectly labelled. Around 250 of these products were sold online between August 2014 to March 2015, including on eBay and Gumtree. In March 2016, ACCC secured an injunction to stop Online Dealz from selling these unsafe products.

In June 2016, Online Dealz was fined $100,000 for failing to comply with safety standards and for engaging in misleading and deceptive conduct. Sole director, Janet Lucas, was fined an additional $20,000 for being knowingly concerned in the conduct.

The cots and strollers failed to comply with the relevant safety standards and advertisement of the cot was found to be misleading for using phrases such as 'Certified to Australian Standards' and 'Meeting Australian and New Zealand Standards AS/NZS 2172,' when this was not the case.

Lesson to take away: Regardless of whether you are a national retailer or a small online business, you must comply with the Australian Consumer Law provisions if you sell goods that will fall within the definition of 'consumer' in the ACL. All retailers, suppliers and manufacturers need to be aware of their obligations to uphold product safety standards. This includes obtaining regular compliance certificates, carrying out relevant inspections and having appropriate warnings and labels on products.

ACCC v Reckitt Benckiser (Australia) Pty Ltd (No 7) [2016] FCA 424

Reckitt Benckiser sells Nurofen pain relief products, including four Nurofen Specific Pain Relief products. Benckiser represented that each of these four products were specifically formulated to treat particular types of pain (back pain, period pain, migraines and tension headaches) even though each product included the same active ingredient, ibuprofen lysine 342mg. ACCC alleged that this representation misled consumers. The Federal Court agreed with ACCC's allegations.

On 26 April 2016, the Federal Court ordered Benckiser to pay a civil pecuniary penalty of $1.7 million. ACCC, however, submitted that the pecuniary penalty should be $6 million.

Under section 224(3) of the Australian Consumer Law, the maximum civil pecuniary for each contravention of section 33 by a body corporate is $1.1 million. The Court ordered a cumulative penalty of $1.2 million for contraventions on the packaging and $500,000 for contraventions on the website.

The Federal Court considered several factors when determining the penalties, including:

  • nature, extent and circumstances of the contravening conduct;
  • size of Reckitt Benckiser;
  • sales and profit from contravening conduct, and potential losses to consumers and competitors;
  • whether the conduct was deliberate or covert;
  • extent of co-operation with the ACCC;
  • compliance programs and the involvement of senior management; and
  • any prior contraventions.

The Federal Court explained that Benckiser's penalty would have been greater if it were not for the following three factors:

  • the contravention was not intentional or reckless;
  • there were only two courses of conduct involved in the contravention (packaging and on its website); and
  • the products were effective to treat the pain they represented so that the only potential effect of the conduct on consumers or competitors was monetary.

Lesson to take away: The courts will consider a multitude of factors in determining the appropriate penalty for contraventions of the ACL. ACCC is in the process of appealing the Court's fine of $1.7 million, however, because it is believed to be too low for a company with a revenue of $45 million. At the time of this article, this appeal has not been published.

At Bryks Lawyers, we have extensive experience in dealing with the Competition and Consumer Act. Start the conversation today!

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.

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