The Australian Competition and Consumer Commission (ACCC) has recently released guidance for businesses about their rights and obligations under the Australian Consumer Law (Schedule 2 of the Competition and Consumer Act 2010 (Cth) (ACL) during the COVID-19 pandemic. The ACCC has also established a COVID-19 Taskforce to educate businesses around topical consumer law issues such as cancellations, refunds, and suspension of services.
This article considers some of the main consumer law challenges businesses may be facing, with a focus on consumer guarantees and unfair contract terms.
‘Consumer guarantees’ are the automatic guarantees that consumers receive when they buy certain goods and services from Australian businesses. For example, guarantees that goods/services will be of reasonable quality, and be supplied by an agreed end date or within a reasonable time.
If a business fails to comply with a consumer guarantee, the consumer may be entitled to a remedy under the ACL. Remedies generally include repair, replacement, or refund. Requests for refunds have been particularly common during COVID-19 due to the number of cancellations and delays. However, the ACCC has explained that consumers will not automatically be entitled to a refund. If a cancellation/closure or service suspension is due to government restrictions, it is unlikely that the consumer will be entitled to a refund under the consumer guarantees regime. A consumer who has a ‘change of mind’ (for example due to concerns about COVID-19) is also not generally entitled to a remedy under the ACL.
Businesses are however, required to honour their existing contract with a consumer, which may entitle a consumer to a refund regardless of the ACL. The terms and conditions that apply are those that the consumer agreed to at the time of the purchase/booking. A business cannot retrospectively change those terms due to COVID-19.
Unfair contract terms
Businesses should be careful not to seek to rely on unfair terms in their contracts in response to challenges posed by COVID-19. Terms that may be considered unfair include those that enable only one party to the contract to:
- avoid or limit their obligations under the contract;
- terminate the contract; or
- vary the terms of the contract.
The ACCC has also explained that a term which allows a supplier to retain the full deposit or payment without having delivered any goods or services, may (amongst other things) be considered an ‘unfair’ term under the ACL. This is relevant during COVID-19, where services may not have been provided due to restrictions, for example gym memberships.
The consequences of having an ‘unfair’ term in contracts is that they can be declared void and unenforceable by a Court. There are also potential reputational consequences for businesses investigated by the ACCC for unfair contract terms.
Other risks under the ACL
The ACCC’s COVID-19 Taskforce is also investigating claims of breaches of other ACL risk areas, including:
- Misleading and deceptive conduct. For example, misrepresenting to consumers that COVID-19 is the reason for diminished stock levels, delay, or increased prices.
- Unconscionable conduct. For example, actions such as wrongly accepting payment for goods/services that the business is unable to provide or where there are reasonable grounds to believe those goods/services will be unable to be provided within a specified timeframe or reasonable timeframe (e.g. due to the impact of government restrictions) or increasing prices for critical goods or services can be considered unconscionable conduct in some circumstances.
Penalties for breaches of the ACL are severe. Corporate penalties for most breaches can reach up to $10 million, three times the gain or benefit, or 10% of the Australian group turnover.
The recent ACCC guidance provides a timely reminder for businesses to ensure they are aware of their rights and obligations under the ACL. Businesses are encouraged to review their contracts, policies and advertising materials to ensure they comply with the Australian Consumer Law and are suitable for their future needs.
If you have any queries or would like further information about this article, please contact:
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Published: 22 July 2020