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2016

Volume 9, No 6 Legal Studies - Lifeline


Australian Consumer Law and the ACCC an
update for 2016 and beyond.
By Neil Kusi-Appauh

Introduction
The Competition and Consumer Act, 2010, (Cth), which introduced the broad framework of Australian
Consumer Law (ACL) has been operating for 5 years. It is designed to promote vigorous competition
and fair trading in the marketplace, and to protect consumers against particular unfair practices. It
provides a general standard for the conduct of traders and their dealings with consumers and other
businesses.

ACL deepened the general level of protection for consumers and extended the regulation of
competitive behaviour. Of note were the strengthened consumer guarantees especially the
introduction of the concept of durability as integral to an expectation of acceptable quality. This
means consumers are expressly protected if products fail within a reasonable period of time.
Importantly, not only does this provide redress in specific instances, it has also raised standards
across a range of products. For example, Apple warranties are now for two years rather than the
previous 12 months.

ACL also extended prohibitions on specific false and misleading representations, attempted to clarify
restrictions on contractual terms which are deemed to be unfair, and introduced a single national
product safety regime.

The peak enforcement body, the Australian Competition and Consumer Commission (ACCC),
remains the guardian of ACL. The ACCC was also given enhanced investigation and enforcement
Editor: Julie Gleeson (B. Arts; Master of Arts)

powers in 2010 with expanded sanctions and administrative proscriptions designed to improve
compliance in specific industries and across the entire business landscape. Regulation and
enforcement is predicated upon a one law with multiple regulators model. The framework is provided
by ACL with state fair trading laws complementing federal legislation. The ACCC, ASIC and state Fair
Trading departments are pivotal in monitoring compliance and handling consumer complaints. Where
there is a jurisdictional overlap, joint investigations between ASIC and the ACCC are also a feature of
recent years.

Challenges to the ACCC


2016 has seen the ACCC focus on the enforcement of the provisions of ACL. Rod Simms Chairman
of the ACCC outlined the following areas1:

Indigenous consumers, especially those in remote areas, are now an enduring priority for the ACCC.
Action has been taken against providers who target remote communities with services, which are

1
Mr Rod Sims, ACCC Chairman, ACCC compliance and enforcement priorities for 2016, speech delivered at the
Conference for the Committee for Economic Development of Australia, Sydney, 23 February 2016

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Legal Studies Lifeline Vol 9 No 6, 2016

inappropriate, overly expensive or exploitative. Training courses, portrait photography, first aid kits and
tax return services have come under scrutiny. The reality is that vulnerable indigenous communities
remain a target for predatory sellers.

The ACCC is also cognisant of the exposure to exploitation faced by older and newly arrived Australians.
The aged are vulnerable in many areas especially in relation to health and medical issues and retirement
accommodation options. Newly arrived migrants are open to exploitation across a range of consumer
areas.

Product safety is another enduring priority. Woolworths Ltd, were ordered to pay over $3 million in
penalties for breaches of the ACL relating to safety standards. State Fair Trading departments retain a
pivotal role in identifying and acting upon product safety breaches although the system remains reactive
rather than proactive generally harm occurs then a manufacturer or retailer is brought to account.

Extended warranties have long provided a significant revenue stream for retailers. This has been an
ACCC focus in the past and its re-emergence as a priority reflects the important foundation guarantees
play in consumer protection. If a product is faulty, consumers automatically have rights under ACL to a
repair, replacement or, if there is a major failure, a refund. This means the manufacturers warranty
period is somewhat superfluous unless it extends beyond the reasonable time frame which is implicitly
guaranteed. Consequently, it is unlawful for a retailer to provide an extended warranty that only provides
a guarantee which is commensurate to what the statute warrants anyway. In practice, companies have
renamed and rejigged extended warranties (as product care for example), which in essence remain the
same. The statement from Mr Simms that large companies should avoid misleading consumers into
paying for extra protections they already have under the law is somewhat underwhelming2. The practice
is unlawful and should be robustly prosecuted.

Noises have also been made by the ACCC that it is finally willing to tackle new car sales. Despite a
motor vehicle being, for many, the most significant consumer purchase of their lives, the provisions of
the Trade Practices Act and now ACL in relation to implied guarantees have not been stringently
adhered to. Vehicles should be of acceptable quality (including reasonable durability) and fit for the
purpose. Rod Simms opines Hopefully, (my emphasis) if a vehicle fails these guarantees, a consumer
will have rights against the supplier and in some cases the manufacturer3. Consumers who have
purchased a brand new lemon in the past would appreciate a more forceful expectation. Moreover,
meaningful sanctions may improve standards across the entire industry.

Complaints about scams continue to be an ongoing issue. In 2015 there were over 105,000 scam related
contacts fielded by the ACCC4. There is a dedicated Fraud task force, Scamwatch website and specific
communication with potential victims of relationship scams who have sent money overseas.

Cartel conduct remains a conundrum for the ACCC despite regulatory emphasis criminal convictions
remain elusive. This is significant, not only in terms of prosecuting those who breach the law but also in
relation to public perceptions of the effectiveness of the regulatory framework. A general resignation that
big business is always going to rort the little guy undermines confidence and erodes the very purpose of
the ACCC and ACL.

2
Ibid
3
Ibid
4
Ibid

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Recent important Cases
Case 1: ACCC v Colgate-Palmolive Pty Ltd, Pz Cussons Australia Pty Ltd, Woolworths
Ltd
Background
From 2009 Woolworths colluded with Colgate-Palmolive Pty Ltd (Colgate) and their executive Mr Ansell,
PZ Cussons Australia Pty Ltd (Cussons) and Unilever Australia Limited (Unilever) - manufacturers who
dominate the laundry detergent market in Australia. In December 2013, the ACCC filed proceedings in
the Federal Court alleging anticompetitive conduct and collusion in that the parties:
agreed to cease supplying standard concentrate laundry detergents and supplied only ultra
concentrates;
sold ultra concentrates for the same price per wash as the equivalent standard concentrated
products and did not pass on the cost savings to consumers.
In a nutshell, the colluding parties restricted the supply of detergent and charged inflated prices for what
was available. The ACCC also alleged that Mr Ansell and Woolworths were knowingly concerned in
these arrangements. Colgate also admitted that it and Unilever shared sensitive market information,
including information about when they would increase the price of their laundry detergents through
telephone contact between Mr Ansell and senior Unilever executives.
Judgement
The Federal Court ordered that Colgate pay total penalties of $18 million, that they update their trade
practices compliance program, and pay a contribution of $450,000 towards the ACCCs costs. Mr Ansell
was disqualified from managing corporations for seven years and ordered to pay a contribution of
$75,000 towards the ACCCs costs.
In a later determination, the Federal Court ordered Woolworths to pay penalties totalling $9m following
admissions that they were a knowing participant in the collusive practices. Unilever was granted
immunity from prosecution (because they helped the ACCC).
The issue here is the inadequacy of the penalty. The ACCCs own admission suggests that successful
prosecutions for such conduct are a rarity. Detection and supportive evidence to establish corporate
responsibility is problematic. Such relatively lenient penalties are unlikely to act as a significant deterrent.
One could argue that the negative publicity is itself a sanction. However, the disconnect between a brand
on supermarket shelves and the manufacturer means most consumers are unaware of who makes a
particular product. Additionally, given the extent of the collusion, there are limited alternatives anyway.
Whether this case may encourage customers to forsake the manufacturers, or Woolworths, is unlikely
given the complex range of factors which determine grocery shopping choice. The available penalties
under the ACL need to be dramatically increased and the judiciary must institute sanctions which act as
a genuine deterrent for corporations who have very deep pockets.
Case 2
ACCC v Reckitt Benckiser (Australia) Pty Ltd (No 4) [2015] FCA 1408 (11 December 2015)
Background
The Australian Competition and Consumer Commission successfully established in the Federal Court
that Reckitt Benckiser (Australia) Pty Ltd engaged in misleading conduct in contravention of ACL by
representing that its Nurofen Specific Pain products were each formulated to treat a specific type of pain,
when the products contained an identical active ingredient. The makers of Nurofen intentionally

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marketed their products as targeting specific pain types, and they charged more accordingly (almost
double) despite knowing that each separate product was in fact exactly the same.
The Australian Competition and Consumer Commission had asked the Federal Court to impose a fine of
$6 million. Instead the fine was a manifestly inadequate $1.7 million. The Court also ordered that the
products be removed from retail shelves, and that the corporation publish website and newspaper
corrective notices, implement a consumer protection compliance program, and pay the ACCCs costs.
Justice Edelman said in determining the fine that he took into account other similar cases and that the
products actually did provide pain relief. "The products were effective to treat the pain that they
represented so that the only potential effect of the conduct on consumers or competitors was monetary,"
he said. "Although the packaging and website promotion was designed for profit, the contravening
conduct did not cause any physical harm to any consumer."5
Reckitt intentionally misled customers and exploited their desire for pain relief to inflate their profit
margins. The court was concerned with how much harm the consumers suffered rather than imposing a
sanction which would act as a genuine deterrent for such cynical exploitation. The eventual pecuniary
penalty (despite Justice Edelmans assertions) does little to actually punish the company for their
deliberate transgression. $1.7 million in corporate terms is not a significant sum nor does it really send a
message that such behaviour, designed, as it is to mislead and deceive customers, is not acceptable.
There is a proposal for a possible class action against Reckitt. While potentially this may amount to a
significant cost to the company it is not an ideal mechanism to establish standards for consumer
protection. The class action is likely to benefit Bannister Law, who are representing consumers, far more
than the individual aggrieved customers.

The Harper Review


The Harper Review of Australias competition framework is considered to be the most significant since
1993. It has recommended an overhaul of policy, law and regulatory institutions. It will be interesting to
see the extent to which the government implements the recommendations.
[Source: Mr Rod Sims, ACCC Chairman, speech delivered at The Conference for the Committee for Economic Development of Australia,
Sydney, 23 February 2016
The Ashurst View, 2016 in Competition Law, viewed from www.ashurst.com, June 2016]

Syllabus links: HSC course: Consumers Principal focus: Investigate the legal rights of consumers and the effectiveness of the law in
achieving justice for consumers

Student Activities Australian Consumer Law and the


ACCC an update for 2016 and
beyond.
1. Why are statutory guarantees important in protecting consumers?
2. Outline the challenges facing the ACCC in 2016
3. Explain the role of the ACCC in encouraging cooperation and resolving conflict in consumer law
4. Select ONE challenge and examine why this area is important in reflecting ethical values in
consumer law
5. With reference to both the Colgate and Nurofen cases, assess the effectiveness of the legal
system in ensuring compliance with the law in order to protect consumers.

5
http://www.abc.net.au/news, Nurofen maker fined $1.7m , Apr 2016.

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Emerging Legal Issues Stay Connected


Greyhound racing shut down in NSW

Media Release from Premier Mike Baird and Deputy Premier and Minister for Racing Troy Grant

NSW will become the first Australian state to shut down greyhound racing after a Special Commission of
Inquiry found overwhelming evidence of systemic animal cruelty, including mass greyhound killings and
live baiting.
On Thursday, 7 July 2016, Premier Mike Baird and Deputy Premier and Minister for Racing Troy Grant
announced that the NSW Government is acting to protect animal welfare as a priority, and is planning for
an orderly industry shutdown as of 1 July 2017.
Mr Baird and Mr Grant released the report of the Special Commission of Inquiry into the Greyhound
Racing Industry in NSW, which found that between 48,000 and 68,000 greyhounds or at least half of
all greyhounds bred to race were killed in the past 12 years because they were deemed uncompetitive.
The report states up to 20 per cent of trainers engage in live baiting and 180 greyhounds a year sustain
catastrophic injuries during races, such as skull fractures and broken backs that resulted in their
immediate deaths.
Inquiry Commissioner Michael McHugh AC, QC (former High Court judge) has recommended Parliament
considers whether the industry had lost its social licence to operate and should be shut down. If the
industry continued, his alterative recommendation is extensive reform including tighter regulation, but Mr
McHugh stated there was a very real risk that practices such as live baiting would continue.

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As a humane and responsible Government, we are left with no acceptable course of action except to
close this industry down, Mr Baird said. This is the inevitable conclusion to be drawn from the appalling
revelations in Mr McHughs report and his considered view that any other measures are unlikely to
protect animals from further cruelty.
Mr Baird said the Government will announce a detailed industry shutdown plan during the second half of
2016 following consultation with stakeholders in industry and animal welfare organisations.
The transition plan will set a path for the winding down of the industry as of 1 July 2017, and will include:
o A welfare plan for existing greyhounds, including opportunities for re-homing;
o An adjustment package for industry participants; and
o A transition arrangement for existing Greyhound Racing NSW assets that will ensure they are
used for open public space, alternative sporting facilities or other community use.
Mr Grant said he asked Mr McHugh to leave no stone unturned and thanked him for delivering a
comprehensive report that shone a light on sickening animal mistreatment.
NSW is the first Australian state to ban greyhound racing but, as Mr McHugh notes, we are following in
the footsteps of so many jurisdictions across the United States and the world which have banned
greyhound racing to protect animal welfare, Mr Grant said.
The Government will prepare and consult on legislation to be presented to Parliament to cease the
industrys operation and to appoint an administrator for Greyhound Racing NSW.
A summary of key findings and observations of the inquiry are attached and the Commission of Inquirys
report is available at: http://www.greyhoundracinginquiry.justice.nsw.gov.au/
[Sources: Justice NSW]
Syllabus links: Preliminary course: Law Reform in Action a contemporary law reform issue;
o sport and the law;
o animal welfare

Student Activities Greyhound racing shut down


1. What conditions gave rise to the law reform of banning greyhound racing?
2. What role did the Special Commission of Inquiry into the Greyhound Racing
Industry in NSW play in the development of this law reform?
3. What were the main agencies and mechanisms of reform?
4. Why is this both an animal welfare and a sport and the law reform issue?
5. What are the conflicting issues involved in this controversial law reform?

2016 Legal Studies Assist Phone: 9522 6352


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