Australia: Trade Practices Act Compliance Programs – Why Your Business Needs One

Last Updated: 25 August 2009
Article by Greg Hipwell and Jessica Rowe

If you operate a small business, advertise goods or services, negotiate with suppliers, are a franchisor or distributor, or compete with other businesses, then you should have a Trade Practices Act (TPA) compliance program in place.

Experience shows that compliance with the TPA does not "just happen". Indeed what is often considered to be "commercial' or "good" business practice falls foul of the TPA. Businesses are commonly surprised to learn that their supply chain, pricing practices or advertising campaigns breach the TPA.

The following companies agreed to implement a Trade Practices Compliance Program (Program) (amongst other things), following investigations by the Australian Competition and Consumer Commission (ACCC):

  • Janome Australia Pty Ltd sought to impose a minimum advertised price policy on its retailers between February and April 2008, which the ACCC considered was likely to constitute resale price maintenance in breach of the TPA.
  • Kogan Technologies Pty Ltd ran newspaper and on-line advertisements that used price comparisons such as "Now $X (Save Y%)" and save "over $X". The advertised products however, had not been offered by Kogan Technologies at the higher price and did not take into account "value adding features" (such as warranties). In 2009, Kogan Technologies undertook to implement a Program following the ACCC's allegation that the conduct was likely to have misled or deceived customers.
  • A retail blitz in 2007 targeted sunglasses that failed to comply with the prescribed mandatory product safety standards. Following this, Fossil Retail Stores (Australia) Pty Ltd and Paris Miki Australia Pty Limited provided court-enforceable undertakings to implement a Program.

These ACCC proceedings, which were no doubt costly and time consuming for the companies, may have been avoided had the companies had an effective Program in place.

Although navigating the legislation can be difficult, ignorance of the law is no defence. The Australian Competition and Consumer Commission (ACCC) may initiate an investigation into a company's operations independently, or may act on a complaint made by a customer, competitor, franchisee or distributor. The role of the ACCC is to promote competition within the Australian market and to project fair trading by enforcing the TPA. Thus the ACCC has and will take action against any business in any sector.

Businesses can reduce their risk of breaching the TPA by implementing a Program. Evidence of a genuine commitment to TPA compliance may minimise any penalty imposed if the TPA is inadvertently breached.

The ACCC has produced a checklist for small businesses as to how they should establish, and what should comprise, a Program. A summary of these steps is set out below.

Demonstrate commitment

The importance of demonstrating a commitment to TPA compliance cannot be understated.

As a preliminary step, businesses should pass a board resolution evidencing their intention to implement a Program, to establish a culture of TPA compliance within their company and to appoint a "TPA compliance officer". The resolution may also set out the business' policies regarding the matters discussed below.

Understand and rank your TPA risk areas

The next step is to investigate and understand where a business' "risk areas" lie. This may be things such as:

  • pricing (i.e. price fixing and resale price maintenance)
  • exclusive dealing (i.e. imposing conditions on the supply of goods or services to or by a 3rd party)
  • unconscionability (i.e. an unfair exploitation of power)
  • misleading and deceptive conduct (e.g. advertisements that create a false impression)
  • product safety and recalls, and
  • compliance with the TPA's industry codes (e.g. the Franchising Code of Conduct).

Implement procedures

Based on a business' particular risk areas, a Program should be developed that addresses the relevant issues. At a minimum, an effective Program should comprise:

  • TPA training for staff and company officers
  • a complaints handling system in relation to TPA issues, and
  • mechanisms for the Compliance Program to be regularly reviewed and updated, and its delivery recorded.

As part of the establishment of a Program, a "TPA Compliance Officer" should be appointed. The officer is generally responsible for delivering and updating the Program, monitoring and acting on TPA related complaints, and maintaining records in relation to the operation of the Program. Additional staff members may be responsible for monitoring compliance in their area of expertise.

Get your staff involved

The key element in any Compliance Program is that it is "active". Developing a policy or manual that staff read once or twice is not sufficient.

Businesses engage staff in TPA training in different ways. Some arrange training workshops where staff learn about TPA issues relevant to their day to day operations. For example, sales staff may learn about the importance of truth in advertising, whilst procurement staff may focus on third line forcing and the dangers of discussing prices with competitors.

Alternatively, an electronic training program may be purchased by the business. Deacons has produced a TPA compliance training software package called "e-Comply". e-Comply is an on-line training tool whereby staff and company officers read materials on various TPA issues (which include examples tailored to the business) and then do an on-line quiz to test their comprehension. Such programs have the advantage of being easily and frequently delivered and collecting evidence of staff's participation and understanding.

TPA training should be conducted frequently. When a staff member's role changes this may require further training. All new staff should be given TPA training as part of their induction.

Update and assess compliance arrangements and keep records

A compliance program should be updated regularly to account for changes in business practices and the law. For example, the Program may need to refer to the new "cartel conduct" or "component pricing" provisions of the TPA.

Records should be kept by businesses regarding the delivery of their Program, the collection and resolution of TPA related complaints, and how the business has reviewed and updated its Program. Such records will be of great value of any complaint is made to the ACCC.

The implementation of a Program should be viewed by businesses as an essential investment and part of good business management. A failure to comply with the TPA can result in the imposition of a range of sanctions, including requirements that the business:

  • publish corrective advertising
  • pay significant fines, and
  • implement a compliance program that complies with the Australian Standard (which is an extremely high standard to meet).

Individuals involved in breaches of the TPA may also be personally liable to civil and criminal sanctions. Accordingly, TPA issues should be treated seriously and should not be ignored.

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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Greg Hipwell
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