Australian Consumer Law Compliance Guide

The University is committed to ensuring that its conduct and operations comply with all relevant trade practices and consumer law obligations. These obligations were historically recorded in the Trade Practices Act 1974 (C'th) and the Fair Trading Act 1999 (Vic) however commencing 1January 2011 consumer protection legislation was consolidated under what is now called the Competition and Consumer Act 2010 (C'th) (formerly the Trade Practices Act) and is known as the "Australian Consumer Law".

Failure to comply with this Law may incur significant penalties, fines, damages (including compensation to victims) and other adverse consequences (including harm to reputation and down time) to both the University and its staff. Penalties can be substantial, including - for organisations, up to $10 million or three times the value of the benefit or 10% of turnover; and for individuals (including employees) up to $500,000. Imprisonment may also apply for certain 'cartel' conduct.

This guide provides a brief outline of the main provisions of the Australian Consumer Law likely to have an impact on University operations. It is by no means comprehensive. Staff are strongly encouraged to seek advice if they have any doubts.

If you have any queries or concerns in relation to the Australian Consumer Law, please contact the University Solicitor. General information can also be obtained from the Australian Competition and Consumer Commission ('ACCC') website at:

http://www.accc.gov.au

1. Introduction

The Australian Consumer Law commenced on 1 January 2011 as a law of the Commonwealth and of each State and Territory. It is enforced and administered jointly by the by the Australian Competition and Consumer Commission ('ACCC'), by each State and Territory's consumer agency and in respect of financial services, the Australian Securities and Investments Commission ('ASIC').

The Australian Consumer Law:

Provides for general standards of business conduct
Regulates specific business/customer transactions
Makes certain contract terms 'unfair'
Guarantees consumer rights when buying goods and services
Provides for product safety laws and their enforcement

The Australian Consumer Law applies to all Australian businesses, including the University.

2. Anti-competitive conduct

The Australian Consumer Law prohibits anti-competitive practices (also referred to as restrictive trade practices) by business or persons.

The type of conduct prohibited includes:

agreements that substantially lessen competition, market sharing or price fixing agreements, and agreements that give rise to primary or secondary boycotts
misuse of market power
exclusive dealing
resale price maintenance
mergers or acquisitions substantially lessening competition.

The Law also prohibits unconscionable conduct (taking unfair advantage) in commercial and consumer transactions.

Note: ‘agreements' can include arrangements or understandings (including memoranda of understanding) whether in writing or not. All that is needed is communication with another person from which each person has an expectation of how the other will act. A "nod and a wink" is sufficient.

(a) Price fixing, market sharing and other anti-competitive conduct between competitors - e.g. cartels

Businesses cannot agree to share markets between themselves or restrict the supply of goods or services. Businesses also cannot agree on the prices they will charge. Bid rigging, where competitors agree they will not compete genuinely with each other for particular tenders (allowing one competitor to win the tender) is also unlawful [see examples 1,2 & 3].

The above arrangements are often referred to as cartels [see example 4]. New legislation provides for possible imprisonment for persons involved in certain cartel conduct.

In essence, you should:

make decisions about price independently of your competitors
compete genuinely in any tender processes
make decisions about which customers you will deal with and the terms on which you will deal with them independently of your competitors.

Also, avoid any kind of collusive conduct with your competitors that would negatively affect competition, such as:

agreeing with your competitors about the price of goods or services
agreeing with your competitors about how to approach tender processes
dividing up customers or territories with your competitors.

Some warning signals :

meetings, correspondence, discussions with a competitor
communications with a competitor from which each may have an expectation of how the other will act (remember, a "nod and wink" is enough!)
communications with a competitor regarding fees, costs, pricing
communications with a competitor regarding other competitors
communications with a competitor relating to dealings with third parties
communications with a competitor relating to allocation of territory.

(b) Exclusionary Provisions - also referred to as Primary Boycotts or Collective Boycotts

These are agreements between persons in competition with each other which exclude or limit dealings with a particular supplier or customer or a particular class of suppliers or customers.

(c) Misusing market power - e.g. predatory pricing

If the University has a substantial degree of power in a market, it is strictly prohibited from taking advantage of that power to:

(a) substantially damage or eliminate a competitor in any market;
(b) prevent a person from entering any market;
(c) prevent or deter a person from engaging in competitive conduct in any market.

Examples of high risk conduct involving misuse of market power:
Predatory Pricing - supplying goods or services for a sustained period at less than cost to eliminate a competitor or to keep a competitor out of the market.
Refusal to Supply - refusing to supply a customer because the customer also deals with the supplier's competition.

(d) Exclusive dealing

Businesses cannot impose restrictions on another business' freedom to choose with whom, or in what, it deals. However, some exclusive dealing arrangements may be protected through either the authorisation or notification process.

Third line forcing - this is absolutely prohibited. It involves providing goods or services to a person on the condition that the person buys another product from a third person [5]. It also includes offering a discount or rebate on the condition that the customer or student buys another product from a third person. You may recommend the product of a third person to a customer or student but you must not force such a product on a customer or student.

Other exclusive dealing - other exclusive dealing conduct will be unlawful if it has the purpose or likely effect of substantially lessening competition [see example 6].

(e) Resale price maintenance

Suppliers, manufacturers and wholesalers cannot specify a minimum price for the sale of their goods and services. They can suggest a recommended retail price.

(f) Mergers, asset sales, joint ventures

The Competition and Consumer Act prohibits mergers, acquisitions and joint ventures that would substantially lessen competition.

(g) Unconscionable conduct in commercial transactions

Businesses are not allowed to use their superior bargaining power in a harsh or oppressive way when dealing with other businesses. This may be unconscionable conduct.

Authorisation and Notification processes

Authorisation - The ACCC has the power to authorise some restrictive trade practices which are otherwise prohibited, provided that an application for authorisation has been made to it and it is satisfied that the public benefit from the arrangements or conduct outweighs any public detriment.

Notification - A business may file a notice with the ACCC and obtain statutory protection in relation to conduct which amounts to Exclusive Dealing. The conduct is protected whilst the notification is in force, but the ACCC can withdraw protection at any time if satisfied of an anti-competitive effect and lack of appropriate public benefit.

3. Protecting consumers

Preventing misleading and deceptive conduct

Businesses cannot engage in any conduct likely to mislead or deceive the consumer. They are required to tell the truth and not give a misleading impression. Failing to disclose important material information may amount to misleading or deceptive conduct. Often misleading and deceptive conduct arises by giving incorrect impressions in advertising, promotional or marketing material [see examples 7 & 8]. It may also arise in terms offered as conditions of employment [see example 9].

Protecting consumers when they buy goods or services: In place of the previous system of implied conditions and warranted afforded by the Trade Practices Act, the new Law provides for an established list of consumer guarantees and allocates remedies for their breach depending upon whether the breach is of a major or minor nature. These guarantees cover similar topics as the previous implied conditions (for example, guarantee as to title, undisturbed possession, acceptable quality, for a disclosed purpose, due care and skill etc)

Regulatory authorities cannot bring an action for breach of any of these statutory conditions or warranties, although the 2010 amendments provide ACCC and ASIC with an increased range of enforcement options for consumer protection laws - including the ability to issue disqualification orders, substantiation and infringement notices. These new provisions also allow the regulatory authorities to seek monetary penalties of up to $1.1m against corporations and $220,000 against individuals that make false or misleading representations or engage in unconscionable conduct.

Protecting consumers from unscrupulous behaviour

When dealing with consumers, businesses cannot take advantage of their stronger position by behaving in a harsh or oppressive way. If they do, their conduct may be considered unconscionable. The July 2010 amendments to the Law make unfair contract terms in standard form consumer contracts void (examples of what will be considered unfair is where the term could cause detriment to the party if relied on, or cause a significant imbalance in the parties' rights and obligations under the contract, or is considered to be not reasonably necessary to protect the legitimate business interests of the supplier.

Note that by the new Law, these provisions apply to a 'person' and not (as previously) to a 'business'.

4. What to do

If you are contacted

If you are contacted by the ACCC, ASIC or relevant state institution do not provide any information, documents or answer any questions without first consulting the University Solicitor. Be polite and show a willingness to cooperate. You can say something along the following lines - "I am happy to assist, but we have procedures we have to go through before dealing with regulatory bodies. I'll need to refer this to the University Solicitor and someone from that office or myself or another person will then contact you".

If there is a complaint or you suspect unlawful conduct

If you receive or hear an allegation or complaint about any of the above issues, report it immediately to your supervisor and the University Solicitor.

If you know, suspect or have any doubts that any conduct engaged in by the University or by any individual associated with the University could amount to a contravention of the Trade Practices Act, immediately notify your supervisor and the University Solicitor.

Endnotes:

1. Example: Vice-Chancellors of "A", "B" and "C" universities regularly meet to discuss educational matters. After the Government reduces funding by 20%, they commence discussions about possible efficiency savings. At one meeting, the Vice-Chancellors agree to rationalise operations. They allocate the more vocationally oriented engineering students to A University and the purely theoretical engineering students to B University. C University agrees to discontinue its engineering programs in exchange for a greater presence in the growing market for legal education. This arrangement is unlawful. It is a market sharing agreement between competitors. An agreement has been reached that some universities will not offer certain courses and others will not cater for certain classes of students - an agreement to share the market. It may, however, be sensible from an efficiency and effectiveness viewpoint for the universities to seek to have such an agreement legitimised by an approach to the ACCC for authorisation.

.2 Example: Universities and TAFE institutes find themselves in vigorous competition to provide computer courses. One university regularly undercuts other institutions to attract more students. Prevailing fees are insufficient to justify conducting these courses. Instead of discontinuing courses, two TAFE institutes and a university meet and agree to charge fees that will justify continuing. They agree to charge no less than $1,000 a course and not to undercut each other. These three institutions have breached the Competition Code and Part IV of the Competition and Consumer Act. It is an arrangement between competitors that fixes or controls prices. In the same circumstances, these three institutions will not breach the law if one institution is the "price leader" and the other institutions simply follow the leader's price settings. It is lawful, even though all institutions arrive at the same price, because there is no agreement or understanding between competitors.

3. Example: This is an actual case where price fixing was established by the court.

The Real Estate Institute of Western Australia (REIWA) developed some units for real estate training. It used those units itself as part of its teaching of a Certificate in Property Services (part of the course for getting a real estate licence). The usual price of doing one unit at REIWA was $780. A number of TAFE colleges in the area also offered real estate courses. REIWA offered to licence its units to the TAFE colleges. One of the terms of the contract was that the colleges would not offer the units to their students at a fee less than $780.

4. The Explanatory Memorandum to the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 states: "A cartel is an agreement between competitors not to compete, by manipulating prices, sharing a customer base, restricting supply, or rigging a tender process. Such conduct harms consumers, businesses and the economy by increasing prices (including input prices), reducing choice and distorting innovation processes". Example: The University enters into an arrangement with a supplier of lab coats for special discounts to students. It then requires all medical students to purchase lab coats from that supplier. The University's conduct would be unlawful as third line forcing. It could advise students of the special rates being offered by the supplier, but it must leave the choice of purchase up to the students.

5. Example: The University enters into an arrangement with a supplier of lab coats for special discounts to students. It then requires all medical students to purchase lab coats from that supplier. The University's conduct would be unlawful as third line forcing. It could advise students of the special rates being offered by the supplier, but it must leave the choice of purchase up to the students.

6. The following practices would be included in this category:

Exclusive Purchasing - Supplying a product to a student/customer on condition that the student/customer accepts a restriction (total or partial) from buying another product from a competitor.
Exclusive Selling - Acquiring a product from a supplier on condition that the supplier accepts a restriction (total or partial) from selling the same product to third parties, or in a particular geographic location
Tying Arrangements - Supplying a product to a student/customer on condition that the student/customer will buy further products from the supplier
Resale Restrictions - Supplying a product on condition that the customer accepts some restriction on the right to re-supply products to particular persons or in particular geographic areas.

7. Example: A University developed a course in international tourism designed to attract students as, after completing the course, they may then be able to obtain subsequent employment in a growth industry. The course brochures stated: "You are sure to get a job after this course!" Not one student who completed the course obtained employment within six months of completion. Industry employers later said the course was poorly designed for its purpose. In this case, unemployed graduates might complain that the University's conduct in preparing the brochures was misleading or deceptive.

8. Example: The University advertises a postgraduate course, which includes a component of work experience. When the course starts, a student complains that she thought the University was organising the placement but, in fact, students are required to find their own placements. The relevant paragraph of the newspaper advertisement stated:

"This intensive, 11-month course provides comprehensive management training in the changing Asian business context. A further three months are spent in an overseas placement with a leading company honing management skills and building the international networks essential for doing business in the region."

This was an issue in a real case. The judge decided that the advertisement:

"was ambiguous. It did not make clear who was to be responsible for organizing the 'overseas placement with a leading company'. It is, in my opinion, clearly plausible that a potential applicant for admission to the Program might have gained the impression from the advertisement that the [University] would be responsible for organizing a placement in a leading company for every applicant admitted to the Program".

9. Example: The University inserts an advertisement for a vacant position stating that a particular benefit, such as a car, will accrue to the successful applicant. After accepting the position, the successful applicant finds that he or she is given the benefit only if part of his/her salary is sacrificed and not as an additional benefit