1. Who does trade practices legislation apply to?
In Australia, the Trade Practices Act 1974 (Cth) generally applies to corporations rather than individuals. It will apply to individuals who are engaging in interstate trade or commerce or aiding or abetting a breach of the Act by a corporation. The actions of individuals are otherwise covered by equivalent State or Territory trade practices legislation.
If an organisation is incorporated in or carries out business within Australia it is bound by the trade practices legislation. Breach of the trade practices legislation by a corporation or individual may result in significant fines and in some cases criminal liability.
The trade practices legislation impacts on the internet in the following areas:
(a) implies warranties into certain transactions;
(b) prohibits unconscionable conduct and contracts; and
(c) prohibits misleading or deceptive conduct.
2. Terms implied into consumer contracts by the trade practices legislation (TPL)
The TPL implies into all consumer contracts a number of non-excludable conditions and warranties. Any term of a contract that has the effect of excluding, restricting or modifying rights or liability under these implied terms will be void. The definition of consumer includes a purchaser of goods or services for less than A$40,000 or if the price exceeds A$40,000, where the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption.(1)
(a) Warranties and conditions implied in relation to goods include:
* a condition that goods supplied by description will comply with that description;(2)
* a condition that goods will be of merchantable quality (this right does not apply if goods were sold at auction or if the relevant defect was specifically drawn to the consumerÌs attention before the contract was made, or the consumer examined the goods prior to sale, and that examination should have revealed the defect);(3) and
* a condition that where the purpose is made known the goods are fit for the purpose.(4)
(b) Warranties and conditions implied in relation to services include:
* a warranty that services will be rendered with due care and skill;(5)
* a warranty that any materials supplied in connection with the services will be reasonably fit for the purpose for which they are supplied;(6) and
* if the consumer makes known any particular purpose for which the services are required, a warranty that the services and materials supplied will be reasonably fit for that purpose (unless the consumer does not rely, or it is unreasonable for him or her to rely on the skill or judgment of the corporation).(7)
Where any of the above conditions and warranties are breached the consumer has a right to take action for breach of contract rather than an action for breach of the TPL.(8)
Given the definition of consumer is so broad the above conditions and warranties will be implied into a large number of contracts and cover contracts between businesses.
In cases where the cost of the goods or services in question does not exceed A$40,000 and the goods or services are other than those ordinarily acquired for personal, domestic or household use, the legislation permits suppliers to limit their liability to the replacement or repair of the goods, or the cost of their replacement or repair or, in the case of services, to the resupply of the services or the cost of resupply.(9) This is subject to an overriding test of fairness. In determining what is fair, a court will consider all the circumstances of the case, including the strength of the bargaining positions of the respective parties and whether the buyer knew or ought reasonably to have known of the existence of the limitation.
3. Unconscionable Conduct
The TPL imposes on corporations a general duty to trade fairly by prohibiting them from engaging in unconscionable conduct:
* in the supply of domestic goods or services to consumers;(10) and
* in the supply or acquisition of goods or services worth up to A$1 million to businesses that are not listed companies.(11)
The term unconscionable is not defined in the Act but is defined by the courts. Whether a court will identify conduct as unconscionable will depend on all the circumstances of the case. Generally unconscionable conduct occurs whenever one party to a transaction is at a special disadvantage in dealing with the other party because of illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affecting his ability to conserve his own interests, and the other party unconscionably takes advantage of this opportunity.(12)
Whilst the courts are entitled to take into account whatever considerations they see fit, the legislation sets out various issues to be taken into account in determining whether conduct was unconscionable. The list differs slightly for unconscionable conduct in relation to consumers as opposed to businesses.
(a) For consumers the factors to be considered include:
* the relative bargaining power of the parties;
* whether conditions imposed by the supplier were reasonably necessary for the protection of its legitimate interests;
* whether the consumer was able to understand the documentation;
* whether undue influence was exerted, or unfair tactics used; and
* the amount for which and circumstances under which the consumer could have acquired equivalent goods or services from a third party.
(b) For businesses the factors to be considered include those listed above in addition to the following:
* the extent to which conduct was consistent with conduct in similar transactions with like customers;
* the requirements of any industry code applicable to the supplier;
* any risks to the business consumer arising from the supplier's intended conduct that the supplier should have foreseen that would not be apparent to the business customer;
* the extent to which the supplier was willing to negotiate the terms and conditions of any contract of the supply of goods and services; and
* the extent to which the parties acted in good faith.
The above considerations are not exhaustive. The circumstances in which a court might find conduct unconscionable are very broad. They include, for example, lack of education or lack of assistance or explanation in circumstances where assistance or explanation are necessary.
Remedies available for unconscionable conduct include remedial orders (such as rescission of any contract entered into as a result of unconscionable conduct) and injunctions.(13) The Court has a wide discretion to make orders as it thinks fit. Application for relief may be made by a party who has suffered loss or damage as a result of a contravention or by the Australian Competition and Consumer Commission (ACCC) on their behalf.
The ACCC is responsible for overseeing compliance with the TPL and has clearly indicated that one-sided contracts present a high risk situation for a party seeking to enforce them. Some examples of terms and conditions that the ACCC has indicated may be considered to be one-sided are those which:
* appear to exclude the legal rights of the weaker party;
* state that the weaker party has agreed to, read or understood terms when this is not so;
* purport to agree that no misrepresentations have been made by the stronger party, or
* require a weaker party to comply with onerous or unrealistic conditions.
The ACCC has also indicated that the failure to negotiate reasonable amendments to standard form terms and conditions will be considered as a factor towards unconscionability particularly when high risks are involved for the weaker party.
4. Misleading and deceptive conduct
The TPL makes misleading or deceptive conduct illegal. With regard to the internet, it may be misleading or deceptive conduct where a consumer is or is likely to be mislead or deceived by a statement on the website or if it is unclear when you connect from one website to another.
The use on websites of internal and external links, frames, metatags, the location and prominence of disclaimers and content generally must not be misleading or deceptive to the extent goods or services of A are passed off as those of B.(14) The prohibition applies to unintentional misleading or deceptive conduct whether through silence or gratuitous expression of opinion, and cannot be contracted out of. Under the TPL, it is not necessary to prove customers have actually been misled.(15)
See fact sheets on Misleading and Deceptive Conduct and Consumer Protection.
A domain name on the internet may constitute misleading information. For example, an internet user may have arrived at a "wrong" website from a misleading impression of some relationship existing between the website and the owner of a well known trade mark or business name.
Possible categories of misleading and deceptive conduct in relation to domain names include:(16)
(a) falsely suggesting a connection between the site and a known business or particular goods or services (eg ninenews.com);
(b) falsely suggesting particular qualities or attributes (eg free.shareware.com);
(c) buying the domain name of a rival company and redirecting traffic from that site to the former site; or
(d) exploiting deliberate reading or typing mistakes (eg westcap.bank.com) or abbreviations.
5. Other relevant provisions of the trade practices legislation
Information considered misleading or deceptive conduct(17) may also be subject to liability under other provisions of the TPL including:
(a) making false or misleading representations about attributes of goods or services or about the corporation's relationship with others;(18)
(b) making false representations or engaging in other misleading conduct in relation to the sale of land;(19)
(c) engaging in misleading conduct about the nature or terms of employment;(20)
(d) offering gifts, prizes and free items without the intention of supplying them;(21)
(e) engaging in misleading conduct about the nature, characteristics, suitability or quantity of any services;(22)
(f) offering goods or services for a price if the corporation reasonably believes it will not be able to do so;(23)
(g) making false or misleading representations about the profit or risk of business that the corporation has represented can be carried on at home;(24) and
(h) asserting the right for payment for unsolicited goods or services, or for making an entry in a directory.(25)
6. Treatment of trade practices legal risk on websites
Consumers shopping online should be aware, that an organisation:
(a) should comply with the TPL provisions referred to above;
(b) usually limits its liability to the extent permitted by law in each jurisdiction it operates in. However, organisation should not attempt to exclude all conditions and warranties with general disclaimers as this is an offence under the TPL;
(c) usually limits the jurisdictions it operates in where it is not possible to exclude or restrict their liabilities in all circumstances;
(d) should ensure goods supplied are of merchantable quality and fit for any purposes made known to the organisations by the consumer.
(e) should ensure services supplied are rendered with due care and skill and be reasonably fit for the purposes specified; and
(f) should present information to consumers in a clear, conspicuous, accurate and easily accessible manner. It may be necessary for certain websites to adopt technical processes to enable the website to communicate information to people with disabilities. See Disability Discrimination fact sheet.
7. Other consumer protection laws concerning the internet
Consumer Credit Code of Conduct: Consumers who purchase goods or services or other things using credit are protected under the Credit Code. The Credit Code is Australia wide as each State has enacted mirror legislation. A credit transaction will be regulated by the Credit Code when a consumer uses the credit for household or domestic purposes, the period for repayment exceeds 62 days and there is a charge made for the provision of credit (eg interest). In most cases the Credit Code regulates credit cards, home loans, personal loans and also regulates associated mortgages and leases.
EFT Code of Conduct: Consumers who make an electronic transaction using an organisation’s ATM, EFTPOS, internet, telephone banking, or stored value facilities (including smart cards) are protected under the Electronic Funds Transfer Code of Conduct(revised version 2001) provided that the organisation subscribes to it. The original EFT Code only applied to transactions initiated by a consumer through an electronic terminal by combined use of an EFT plastic card and a PIN.
For more information on the protection afforded to consumers by the revised version of the EFT Code, see Consumer Protection fact sheet.
Chargebacks: Many credit card companies offer what is known as chargebacks to internet shoppers. This allows a credit card holder who pays for goods or services to dispute some or all aspects of the transaction through the payment card issuer. Where disputes occur, chargebacks allow customer to bypass legal proceedings by encouraging the resolution of disputes with traders. A dispute may arise when a customer has received goods that are damaged in transit or are not received at all.
The banks operate under a loose rule sometimes known as the 120 day rule. The rule states that where a credit transaction is effected without any signed documentation and the bank cannot obtain payment from the customer within 120 days after the transaction was allegedly effected, the merchant must repay the money previously paid to it by the bank plus any administration costs incurred by the bank. The bank will generally obtain redress from the merchant and it is for the merchant to prove the transaction against the customer.
Other relevant Articles on this site:
Best practice model
Terms and conditions of website
Spamming
Customer information privacy
Security
Other relevant Fact Sheets:
Consumer Protection
Disability Discrimination
Misleading and Deceptive Conduct
End Notes
1. Trade Practices Act 1974 (Cth), section 4B. To fall within the definition, the person must not have acquired the goods for the purpose of resupply or to use them in a process of production, manufacture or repair.
2. Trade Practices Act 1974 (Cth), section 70.
3. Trade Practices Act 1974(Cth) section 71(1). Goods are of Îmerchantable qualityÌ if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances (section 66(2)).
4. Trade Practices Act 1974 , section 71(2). This condition will not apply where the circumstances show that the consumer does not rely, or it was unreasonable for him to rely, on the skill or judgment of the vendor.
5. Trade Practices Act 1974 (Cth), section 74(1).
6. Trade Practices Act 1974 (Cth), section 74(1).
7. Trade Practices Act 1974 (Cth), section 74(2).
8. E v Australian Red Cross Society (1991) 27 FCR 310.
9. Trade Practices Act 1974 (Cth), section 68A.
10. Trade Practices Act 1974 (Cth), section 51AC.
11. Trade Practices Act 1974 (Cth), section 51AC.
12. Blomley v Ryan (1956) 99 CLR 362 per Kitto J (at 415).
13. Trade Practices Act 1974 (Cth), sections 80 and 87(1A).
14. See generally B Finch Consumer Protection on the Internet in Going Digital 2000: Legal Issues for E-commerce, Software and the Internet (2000); Misleading and Deceptive Conduct fact sheet.
15. Applied Business Technology Pty Ltd v Grandmaster Computers [1999] FCA 36.
16. B Finch p 270.
17. Under the Trade Practices Act 1974 (Cth) section 52 and State and Territory equivalents.
18. Trade Practices Act 1974 (Cth) section 53. See Trumpet Software Pty Ltd v Ozemail Pty Ltd (1996) 34 IPR 481; Applied Business Technology Pty Ltd v Grandmaster Computers [1990] FCA 36.
19. Trade Practices Act 1974 (Cth) section 53A.
20. Trade Practices Act 1974 (Cth) section 53B.
21. Trade Practices Act 1974 (Cth) section 54.
22. Trade Practices Act 1974 (Cth) section 55A. See ACCC v Internic (1998) ATPR 41-646.
23. Trade Practices Act 1974 (Cth) s 56.
24. Trade Practices Act 1974 (Cth) section 59.
25. Trade Practices Act 1974 (Cth) section 64. See ACCC v Goldstar (unreported, Fed Ct (Qld), No 1440/98, 06/11/1998, Drummond J).