Post on 11-Feb-2021
transcript
17/11/2015
1
That’s unfair!Contracts, pricing &
the Australian Consumer Law
Dr Michael Schaper, ACCC Deputy Chair
Outline
The ACCC: Who we are & what we do
Unfair contract terms: Coming soon!
Pricing: What your clients need to know
Scams: Tax time and crowdfunding
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1.The ACCC: What We Do
• National regulator: oversees laws on consumer protection,
equitable competition, product safety, infrastructure access
• Also regulates some specific industries (such as energy,
telecommunications), industry codes (franchising, horticulture)
and price monitoring (airports, postage, stevedoring)
• An independent statutory agency within the Treasury portfolio
• Dual educative and enforcement function
• Enforcement agency…does not set policy
Legal Framework
• Principal legislation: Competition & Consumer Act 2010 (previously known as Trade Practices Act 1974). Includes the Australian Consumer Law
• Laws apply across the country
• Apply to all activities “in trade or commerce” – legal structure is usually irrelevant
• Covers both goods and services
• Activities of government often exempt
• Generally cannot impose penalties: court-based litigation (but can issue infringement notices)
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Competition &
Consumer Act
2010
Applies to all businesses -
including professionals
Many accountants run small firms
Accountants are trusted advisors for small businesses
Governs most day-to-day business-to-business, business-
to-consumer transactions
Why is the Competition & Consumer
Act Relevant to Accountants?
2. Unfair Contract Term Laws
• Currently apply to standard form
consumer contracts
• Protect consumers from unfair
terms where they have little or no
opportunity to negotiate
• The government proposes
extending the unfair contract
protections to cover small
businesses
Hire a car, book a
holiday, or top up
your phone account
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What is an Unfair Contract Term?
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Standard form consumer contracts cannot contain
terms that:
cause a significant imbalance in consumer’s rights
are not reasonably necessary to protect the business’s interests, and
cause any detriment to the consumer
The Federal Court looks at transparency and the contract as a whole before deeming a term unfair.
Unfair term is void (treated as though it never existed), however the rest of contract will continue to bind.
Terms that set out the price are not covered. Price terms are exempt from unfair contract terms.
An Example: ByteCard
In 2013, the Federal Court declared clauses in ByteCard standard form consumer contracts unfair and therefore void.
ByteCard is an ISP that provides internet connectivity, domain registration, hosting and web design
The unfair contract terms:
• enabled ByteCard to unilaterally vary the price without providing the customer with a right to terminate the contract
• indemnify ByteCard in any circumstance
• enabled ByteCard to unilaterally terminate the contract at any time
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Unfair contract terms Law
for Small Business
NEW Small Business
Unfair Contract Terms Law
Applies to standard form contracts
One of the parties to contract has less than 20 employees
Upfront price is less than $300,000 ($1 million for multi-year contracts).
Laws enforced by ASIC (financial products and services) and ACCC
and state/territory ACL regulators (every-day goods and services)
https://www.youtube.com/watch?v=0b9vZIgn7owhttps://www.youtube.com/watch?v=0b9vZIgn7ow
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Time To Get Ready…
• New law applies to any standard form B2B contracts entered
into or renewed from 12 November 2016
• Some industries of focus: advertising, telcos, franchising,
commercial leases, independent contracting (IT consultants,
engineers, architects)
• Potentially problematic areas: unilateral variations, automatic
rollovers, liability limitations, wide-ranging indemnities
• Check your client contracts now
3. Pricing
Can a supplier stop me from discounting?
What is drip pricing?
What information do I have to display to
customers?
When is was /now pricing misleading?
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Advertising & Selling
• Two fundamental rules apply:
1. you must not engage in conduct that is likely to mislead or deceive
2. you must not make false or misleading claims or statements.
• The overall impression created is important
PENALTIES
Misleading or deceptive conduct: injunction, damages
False or misleading misrepresentations: Up to $1.1 million for corporations and
$220,000 for individuals
You should always display the single total price of a product or service
You must not show a price that is only part of the cost, unless you also prominently advertise the single total price
The single total price must include any tax, duty, fee, levy or other additional mandatory charges (e.g. GST or airport tax)
This single price is the minimum total cost that can be quantified (or calculated) at the time
Component Price Advertising
$40 + fees and charges $40 + $3 booking fee + $4.30 GST = $47.30
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March 2015: iiNet Limited pays $204,000 in
penalties following ACCC infringement notices for
Naked Broadband Plan advertisements
The Age
27 September 2014
Plus $11/mth
handset payment
$81/mth
December 2014:
Telstra paid an
infringement notice
penalty of $102,000
after the ACCC
considered an
advertisement
misrepresented the
price of the phone
and phone plan bundle.
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Imposing Minimum Resale Prices
• Retailers should be free to set their own prices.
• It is illegal for suppliers to:
– put pressure on businesses to charge their RRP or any other set price (e.g. by threatening to stop supplying to firm)
– stop resellers from advertising, displaying or selling goods from the supplier below a specified price
• There is nothing wrong with suppliers using a RRP list - as long as prices on that list are really just recommended (not enforced!)
Exam
ple In December 2014, Italiatech and TMO
admitted to restricting the resale prices of bicycle parts and accessories which prevented Australian retailers from competing effectively with international online sellers.
Was / Now Pricing
Key
co
nsid
era
tio
ns • Would a consumer have paid the ‘was’ price for a reasonable
period before the sale?
• What is ‘reasonable’ will depend on the type of product or market and usual frequency of price changes.
• Savings must be genuine: statements are likely to be misleading if the product had not been offered for sale at the ‘was’ price
• Using ‘was/now’ pricing, where there were very little or no sales at the ‘was’ price is likely to be risky
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Drip Pricing
• …a headline price is
advertised at the start of
an online purchasing
process and additional
fees and charges which
may be unavoidable are
then incrementally
disclosed.
In October 2015, the ACCC accepted undertakings from
Airbnb & eDreams to improve pricing practice.
The ACCC considers they failed to adequately disclose
mandatory fees on key pages of their online booking platforms.
Be upfront: Always display the single total price of a product or service
Set your own prices: Do not agree with competitors to fix prices, share markets, restrict output or rig bids
You are free to discount: Suppliers can use a RRP list as long as prices on that list are really just recommended
Don’t rely on small print: You can’t rely on disclaimers as an excuse for a misleading overall message
Be genuine: When using two price (was/now) comparisons savings must be real
Golden Rules for Pricing
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Government Response to Financial System
Inquiry: Credit Card Surcharges
4. Scams
Tax-time scams
• threatening and persistent phone calls which claim that failure to immediately settle a tax debt could result in arrest or jail time
Crowdsourcing fraud
• people chip-in funds for a new product, the entrepreneur offers incentives and refunds to backers but cuts and runs with the money
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NEW
Follow the ACCC
on LinkedIn
5. Need More Info?
Small business helpline 1300 302 021
www.accc.gov.au/smallbusiness
Small Business Info Network
Sign up at www.accc.gov.au/sbin
Publications
Small Business in Focus
The Franchisee Manual