Trust me, this widget is 10 times better than ?, environmentally friendly, and will last forever. Reality is you cannot say this unless you can substantiate every statement. This guide will look at Australian competition and consumer law that you need to understand.
This guide is a summary of what you should consider as a small business. It cannot be used as a definitive guide and it is strongly recommended that you further research this subject on the government websites Australian Consumer Law (ACL) and Australian Competition and Consumer Commission (ACCC). This summary does not cover every aspect.
The ACL offers consumer protections in the areas of: (1) Unfair contract terms, covering standard form consumer contracts. (2) Consumer rights when buying goods and services. (3) Product safety. (4) Unsolicited consumer agreements covering door-to-door sales and telephone sales. (5) Lay-by agreements.
The ACCC Competition and Consumer Act 2010 (the Act) is a national law that regulates fair trading in Australia and governs how all businesses in Australia must deal with their customers, competitors and suppliers. The Act promotes fair trading between competitors while also ensuring that consumers are treated fairly.
WHY should I care what the ACL and ACCC laws are?
There is significant government legislation associated with this subject and lack of knowledge is not an acceptable defence. Significant fines apply for breaking the rules to ensure unfair activity does not occur.
WHAT Australian Competition and Consumer Law do I need to understand?
Australia Consumer Law (ACL)
- Unfair contract terms – This protects a business or consumer when they agree to a standard contract which is subsequently deemed as unfair. For example, terms change, you agree to a price but the price is changed without notice.
- Consumer Guarantees – applies to a consumer or business that purchases a product for less than $40,000. The guarantee is that a good or service will meet certain minimum standards. For example, a consumer buys a washing machine for $2000 with a 1-year warranty. After 2 years the product fails. Under ACL the consumer can claim that this product should have lasted more than 2 years and as such should be repaired or replaced.
- Consumer product safety – As a business owner who sells a product you must be aware of mandatory standards or voluntary rules that exist around the safety of your product. You will also have obligations around bans or recalls. For example, you cannot sell children’s toys that have small detachable parts that could be swallowed.
- Sales practices – The ACL prohibits businesses from using unconscionable conduct when selling, unsolicited supply of goods, unsolicited consumer agreements, harassment and coercion, or refusing to provide proof of a transaction when dealing with their customers. For example, you cannot try to trick someone into buying your service nor threaten them or refuse to give them a receipt if they ask for one.
- Avoiding unfair business practices – The ACL prohibits businesses from engaging in unconscionable conduct including misleading or deceptive conduct and representations. For example, you cannot do an advertisement with disclaimers that are too small to read. Nor can those disclaimers change the main meaning of that advertisement, for instance, when the ad implies the item costs $50 but a condition in fine print means the real cost is $75
Australian Consumer & Competition Commission (ACCC)
- Treating customers fairly
- Offering warranties. A product or service must do what it says. For example, if it has a speed of 10 it must reach a speed of 10. If you provide a warranty against defects you must comply with that warranty. A warranty against defects is provided in addition to consumer guarantees under ACL and does not limit or replace them.
- Unfair business practices. It is illegal to engage in referral selling, pyramid selling, unfair contract terms, and accepting payment without intent to supply
- Rules for gift cards. Cards must be redeemable for 3 years after the date of purchase and clearly show the expiry date.
- Debt collection. It is illegal to mislead, hassle, or use physical force on someone who owes you money.
- Selling parallel imports or grey marketing is when you directly import a product outside of a formal manufacturer distribution network. If you do you must
- be aware of, and comply with, product safety and labelling requirements
- provide accurate information to consumers about the products you sell
- ensure that you do not mislead consumers about their refund, return and warranty rights, and
- understand your general obligations under the ACL.
- Advertising & promoting your business
- False or misleading statements. It is illegal for a business to make statements that are incorrect or likely to create a false impression. This includes advertisements or statements in any media (print, radio, television, social media, and online) or on product packaging, and any statement made by a person representing your business.
- Managing online reviews. You will be breaching the law if you do not remove fake reviews. You must disclose commercial arrangements. It is also considered misleading if you remove or edit negative reviews.
- Door-to-door & telemarketing sales. If selling door to door you may not approach if a do not knock sticker is present and you must leave if asked. Telemarketing must fall under the Do Not Call Register Act and specified hours. These types of sales are bound by a 10 business day cooling-off period allowing customers to cancel for any reason.
- Country of origin claims – It is illegal to misrepresent country of origin. Some food products must display country of origin. Businesses wishing to display Australian-made can find more details here. https://www.australianmade.com.au/
- Pricing & surcharging
- Setting prices is at your discretion but cannot be done in collaboration with a competing business. You may not set a minimum price which a product or service can be sold by your retailers. Selling below cost is illegal if it is found it was done so to damage a competitor.
- Displaying prices must be clear and accurate and display the total price.
- Payment surcharges for EFTPOS should not be excessive.
- Anti-competitive behavior
Business practices that limit or prevent competition are illegal.
- Anti-competitive conduct. Prohibits contracts, arrangements, understandings or concerted practices that have the purpose, effect or likely effect of substantially lessening competition in a market.
- Cartels. Agreements made with competitors to fix pricing, share tender information, or agree to restrict production is illegal. For example, two competing businesses agree to sell their product for the same price.
- Collective bargaining & boycotts. It is illegal to agree with a competitor to negotiate with a single supplier on terms as it is to agree to boycott a supplier.
- Exclusive dealing. It is illegal to force another business to comply with your conditions under the threat you will withhold supply or pricing. This could include ceasing supply if they deal with a competitor or if they keep discounting your product.
- Imposing minimum resale prices. Suppliers may suggest a retail price that a reseller charges but cannot stop resellers charging or advertising below that price.
- Refusal to supply products or services. Suppliers have the right to choose who they do business with however it is breaking the law if that refusal is based on one of the above anti-competitive points.
HOW can I learn more about Australian competition and consumer law?
You must understand the rules and follow the rules. Additional details can be found:
- Treating customers fairly – https://www.accc.gov.au/business/treating-customers-fairly
- Advertising & promoting your business – https://www.accc.gov.au/business/advertising-promoting-your-business
- Pricing and surcharges – https://www.accc.gov.au/business/pricing-surcharging
- Anti-competitive behaviour – https://www.accc.gov.au/business/anti-competitive-behaviour
For more details on how these laws are admistrated see Fair trading – The Competition and Consumer Act of 2010 is a national law administered by ACCC nationally and state and territory regulators https://www.business.gov.au/products-and-services/fair-trading/fair-trading-laws
SUMMARY – protect you and your customers
Australian competition and consumer law is designed to protect both consumers and businesses from practices that misrepresent, disadvantage, deceive, or reduce competition. The government has large departments to police the associated laws and you should ensure you and your staff are familiar with those laws that will affect your business.
The following guide published by the ACCC explains Australian competition and consumer law in more detail. https://www.accc.gov.au/publications/small-business-the-competition-and-consumer-act