Archive for the ‘Trade Practices Law’ Category

ACCC says, ‘”No, Harvey Norman!”

Tuesday, November 20th, 2012

The Australian Competition and Consumer Commission has ruined Christmas for eleven Harvey Norman franchisees accused of misrepresenting consumer rights.  On 19 December, when most people will be counting sleeps til Christmas, the franchisees will be in the Federal Court in Sydney as orders are made for progress of the case.

ACCC says that the eleven retailers gave consumers false information about their rights when goods weren’t up to scratch.  It says that staff rolled out old red herrings like:

  • “We only have to replace damaged goods if you return them within 24 hours.”
  • “Sorry, this is under the manufacturer’s warranty.  You’ll have to contact them.”
  • “No, sir.  That was just a $20 item and we don’t replace or refund for those low cost items.”
  • “Yes, we can fix that, but there’s a $75 transport and repair charge.”

Some of these statements can sometimes be valid in some circumstances.  But where goods simply aren’t of reasonable quality when supplied, traders can’t use excuses to push complaining customers away.  Australian law says they have rights to a remedy, and no store can limit or exclude them.

A familiar story

Of course, there have been no adverse findings against any of the eleven yet.  But ACCC’s allegations have a familiar ring.  Just last year, discount computer chain MSY was caught making up its own law on consumer warranties.  According to MSY:

  • They did not provide any statutory warranties to consumers in relation to their products.
  • They would only provide statutory warranties to consumers in a restricted range of circumstances.
  • They required consumers to pay a fee to obtain a warranty beyond that provided by the manufacturer.

According to the Federal Court, they could pay a $203,500 penalty and submit to a five year court restraint for misleading consumers about their rights.

ACCC:  It’s a campaign

ACCC has made no secret of the fact that it has these kinds of misrepresentations in its legal gun sights.  “Consumer Guarantees has been identified as a national priority by ACL Regulators and is a matter of particular concern for the ACCC with more than 16,000 contacts from members of the public to the ACCC’s Infocentre so far this year” said its Chairman Rod Sims this week.  And its website now states that “The ACCC is conducting a number of investigations into other large manufacturers and retailers for alleged misrepresentations of consumer guarantee rights in breach of the ACL.”  And to prove the point, ACCC launched the same kind of legal action last month against Hewlett-Packard Australia Pty Ltd.

A good website or policy is not enough

Many businesses think they can cover off legal risk with paperwork.  It’s true that a well drafted contract or a comprehensive trade practices compliance policy document is a key tool in managing risk.  But they’re almost never enough, if they aren’t backed up in practical ways.

Harvey Norman’s website has clear and accurate information about what remedies consumers are entitled to if goods are not satisfactory.  If ACCC’s case is right, it means that the franchisees were operating in disregard of the information on their own group website.  That would indicate a serious disconnect between what the group’s head office knows (ie that consumers have bedrock rights) and what’s filtered through to staff on the shop floor.  And that kind of disconnect can be very expensive.

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ACCC takes action over Apple’s 4G iPad claims

Tuesday, March 27th, 2012

The Australian Consumer and Competition has today reported that it is launching legal proceedings against Apple claiming that it is misleading consumers.

The ACCC’s actions arises from Apple’s  claims that the latest iPads are 4G. It has been reported that the new iPad is not in fact compatible with 4G services currently offered in Australia as they cannot operate on the frequencies that Telstra use to operate its 4G or LTE network.

In its press release today, the ACCC said:

The ACCC alleges that Apple’s recent promotion of the new “iPad with WiFi + 4G” is misleading because it represents to Australian consumers that the product “iPad with WiFi + 4G” can, with a SIM card, connect to a 4G mobile data network in Australia, when this is not the case.

The ACCC alleges that Apple’s conduct contravenes sections 18, 29(1)(a), 29(1)(g) and 33 of the ACL.

The ACCC is seeking urgent interlocutory relief to ensure consumers are made aware of the correct technical capabilities of this device.

Additionally the ACCC is seeking final orders including injunctions, pecuniary penalties, corrective advertising and refunds to consumers affected.

The matter is due to be heard for the first time before the Federal Court of Australia in Melbourne tomorrow.

 

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ACCC to appeal Google judgment

Saturday, October 22nd, 2011

The ACCC has announced that it intends to appeal the recent Federal Court decision which found that Google was not liable for misleading and deceptive conduct in publishing Adwords advertisements.

In its recent press release the ACCC said:

The ACCC alleged that Google had engaged in misleading or deceptive conduct by publishing these advertisements on Google’s search results page where a headline of the advertisement comprised a business name, product name or web address of a business not sponsored, affiliated or associated with the advertiser. When a user clicked the words in the heading of the advertisement associated with the competitor’s business or product, he or she was taken to the advertiser’s website.

Justice Nicholas found that although a number of the advertisements were misleading or deceptive, Google had not made those representations. Google merely communicated representations made by the advertiser. As such, Justice Nicholas ruled that Google had not breached the Trade Practices Act.

On appeal the ACCC has indicated that it will be challenging this finding by the Court with respect to 4 advertisements. The ACCC also indicated:

The ACCC takes the view that Google’s key word insertion system, plus the role of Google staff, were fundamental to the representations being made.

This is a significant case as there is a lack of Australian case law on Google Adwords advertisements, which are now one of the most commonly used advertisement methods for Australian businesses, with some businesses spending thousands of dollars per week.

 

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ACCC fails in legal bid to label Google ads misleading

Thursday, October 6th, 2011

The ACCC has failed in its bid to have the Federal Court declare that the manner in which Google differentiates sponsored links to organic search results was misleading and deceptive within the meaning of the Australian Consumer Law.

The ACCC had argued that by failing to adequately distinguish advertisements from search results, Google had engaged in misleading or deceptive conduct.

While the Court failed to agree with the ACCC, Google has since changed the labeling of advertisements from ‘sponsored links’ to ‘Ads’ in line with comments by the Court, that the labeling was unclear, but not misleading and deceptive within the sense of the Australian Consumer Law.

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Optus hit with $5.26 million fine

Monday, July 11th, 2011

Optus has been hit with a $5.26m penalty in the Federal Court, for falsely advertising  broadband download quotas.  The decision heralds a new level of risk in communications advertising in Australia.

The clear rule is that high-powered headlines plus small print equals advertising danger.

This bulletin explains:

  • what Optus advertised
  • how the advertised plans really worked
  • how Optus defended the plans
  • why ACCC took action
  • what the court said and did in 2010
  • what the court did on 7 July 2011
  • why a $5.26m penalty is now possible
  • other provisions that can attract penalties.

What Optus advertised

(a)            In April 2010, Optus campaigned for a new range of ‘Think Bigger’ broadband plans.

(b)            Each plan included a large data allowance (120/150/170GB) divided into ‘peak’ and ‘off-peak’ entitlements eg the 120GB plan was advertised with 50GB peak usage and 70GB off-peak usage allowance.

(c)             The disclaimers stated:  ‘Speed limited once peak data exceeded’.

How the advertised plans really worked

(a)            When peak allowance was used, entire service was shaped to 64kbps for rest of month.

(b)            Shaping applied to remaining off-peak allowance as well.

(c)             So, for instance, if customer used whole 50GB peak allowance first, then entire 70GB off-peak allowance shaped to 64kbps.

(d)            But if off-peak was exhausted first, further off-peak MBs were deducted from peak allowance, and shaping applied when that was exhausted.

How Optus defended the plans

Optus said that ‘Speed limited once peak data exceeded’ was a sufficient explanation:  Once your peak allowance is reached, speed is limited.

Why ACCC took action

ACCC disagreed that the disclaimer was a clear and proper explanation.  It argued:

(a)            Public would assume that peak and off-peak entitlements were independent.

(b)            Public would not understand that exhausting peak use would result in off-peak speed shaping to non-broadband speed.

What the court said and did in 2010

(a)            The court agreed with ACCC.

(b)            Court said that ordinary people simply wouldn’t understand the full rules of the plans, based on the advertising.

(c)             Court particularly attacked ‘headline advertising’ where a powerful headline told one story and small print told a different story.

(d)            Said there was:

(i)              misleading and deceptive behaviour generally, and

(ii)            likely specific misleading about ‘the quantity of services’.

(e)            29 October 2010:  Court ruled that advertising was deceptive.

(f)              2 November 2010:  Court banned Optus from repeating that kind of advertising for 3 years[1].

(g)             19 November 2010:  Court ordered Optus to write to all affected customers offering remedies.

(h)            8 December 2010:  Court held a penalty hearing.

What the court did on 7 July 2011

Announcing the result of the penalty hearing, the court ruled that Optus must pay the Commonwealth a pecuniary penalty of $5.26m.

Why a $5.26m penalty is now possible

(a)            Before 2010, no financial penalty was possible under the law in a case like this.

(b)            In 2010, the Competition and Consumer Act[2] (‘CCA’) was amended to allow the court to impose penalties on a company of up to $1.1m per breach of certain sections of the CCA.  That includes breaches of the law against misleading about ‘the quantity of services’.

Other provisions that can attract penalties

The new penalties are available for a wide range of breaches that communications providers should keep in mind.  Here’s a non-exhaustive list:

(a)            misrepresentations that goods are of a particular standard, quality, value, grade, composition, style or model

(b)            misrepresentations that services are of a particular standard, quality, value or grade

(c)             misrepresentations that a particular person has agreed to acquire goods or services

(d)            misrepresentations that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits

(e)            misrepresentation that the person making the representation has a sponsorship, approval or affiliation

(f)              misrepresentation with respect to the price of goods or services

(g)             misrepresentation concerning the availability of facilities for the repair of goods or of spare parts for goods

(h)            misrepresentation concerning the need for any goods or services.

Summary

Obviously, communications advertising has just become more challenging.  It’s a strong argument for having every advertisement checked by an expert in the area.



[1] That doesn’t make it legal in three years.  It means that, should Optus break the ban, it will incur even higher penalties.

[2] As it is now called … it was then the Trade Practices Act.

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‘Max Cap’ lands Optus in Hot Water

Thursday, May 19th, 2011

The ACCC has fined Singtel Optus Pty Ltd $178,000 for misleading conduct arising out of its ‘Max Cap’ marketing campaign.

The ACCC’s view is that the Optus’ Max Cap advertisements:

….gave the impression that a consumer could purchase these cap plans and expect to pay a maximum specified amount per month, when in fact the specified amount was the minimum the consumer would pay each month.

The advertisements at issue contained the Max Cap $49, which wasn’t a cap, but rather the minimum a customer would need to spend.

In commenting on the conduct of concern to the ACCC, acting ACCC Chairman Mr Peter Kell said:

If you advertise a service as a ‘$49 Max Cap’ when $49 is the minimum that consumers have to pay, then you risk breaching the law by misleading consumers about the cost of the service,” and “Claims that a service allows consumers to call ‘anyone’ are likely to be misleading if the reality is that some types of calls are excluded“.

All ISPs and Telcos should have a process in place to review advertisements, not only to ensure compliance with the Competition and Consumer Act 2010 but also the Telecommunications Consumer Protections Code.

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More Posts Coming Soon

Tuesday, December 7th, 2010

We have more IT Law, Domain Law and Telecommunications Law posts coming soon.

Watch this space.

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Posted in Domain law and domaining, General, ISP and Telco Law, IT Law, Podcasts, Privacy, Spam, Trade Practices Law, Uncategorized | Comments Off

Fixed Line Wholesale Pricing Under Review

Saturday, September 18th, 2010

The Australian Consumer and Competition Commission (ACCC) has released a draft report into the pricing model of fixed line telephony services, proposing radical price reductions, which is likely to see Telstra’s fixed line revenues fall even further.

The ACCC has suggested a move away from the traditional wholesale pricing model based Retail Price less Retail Cost, instead the ACCC has suggested an alternative model:

The ACCC has used a building block pricing model (also known as a regulated asset base, or “RAB” model), which calculates prices based on the assets and costs associated with providing the regulated services. It is consistent with the ACCC’s approach in other regulated industries. All submissions received in response to the ACCC’s December discussion paper supported such an approach.

The new model has suggested an across the board charge of $20 per month for line rental down from the two consumer and business rates that exist, while the ACCC has suggested a reduction of wholesale local call costs from 17c to 7c, a massive drop, which is likely to anger Telstra. Below we have extracted the draft pricing for the period 2011 to 2014:

Draft indicative prices

For ULLS services, the Bands relate to different geographical areas.

  • Band 2 covers non-CBD metropolitan areas, where approximately 70 per cent of Australia’s population live.
  • Band 4 price for more remote areas is notional, as there is very little demand, significant technological limitations on the copper and no reliable information on which to determine a price using the ACCC’s model. In June 2010, there were only about 144 active ULLS services in Band 4 compared to over 690,000 active ULLS services across Bands 1, 2 and 3.
Summary—Current indicative prices compared with proposed draft indicative prices to apply from 1 January 2011 to 31 December 2014
Current indicative prices Draft indicative prices
ULLS access prices with geographically de-averaged prices
Band 1 $6.60 $6.50
Band 2 $16.00 $16.00
Band 3 $31.30 $31.00
Band 4 (notional price) $100
WLR (per line per month) $25.57 (Homeline)

$26.93 (Businessline)

$20.00 (nationally averaged)
LSS (per line per month) $2.50 $2.50
PSTN OA and TA (per minute) 1c (headline rate) 1.1c (headline rate)
LCS (per call) 17c 7c
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ACMA determination on premium SMS restrictions

Wednesday, May 5th, 2010

Consumers will have the choice of barring all premium SMS from their mobile phones as of 1 July 2010, with the latest package of measures announced by the ACMA.

The ACMA has said that the package has been created so that “…mobile users can feel confident they will only receive and pay for services they actually want”.

In a meeting with senior representatives of mobile phone companies the ACMA will discuss the possibility of the introduction of a service where consumers can request quick and easy barring via SMS.

Complaints to the Telecommunications Industry Ombudsman regarding premium SMS services have decreased by an astonishing rate of 50% following measures introduced by ACMA last year. As the ACMA is hoping that this trend will continue, it will be closely monitoring the industry over the next 12 months to ensure that consumer concerns are adequately being dealt with.

Recent enforceable undertakings that the ACMA has accepted from Funmobile Australia Pty Limited, which included a payment of $55 000, emphasize the ACMA’s commitment to pursuing telcos which repeatedly operate in breach of the law.

Industry has welcomed the new package as a further reinforcement of the existing suite of consumer protection measures included in the Communications Alliance Mobile Premium Services Industry Code C637:2009.

Despite both consumers and industry receiving the package with a warm welcome, the telcos will be hit hard. In a quote published by Computer World, Warren Chaisatien, research director and principle analyst at Telstyle, says that although the rule will aid consumers who have unintentionally signed up to a premium services, it is likely to have a negative impact on telco revenues as the premium SMS market was worth approximately $250 million in 2009.

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Happy Holidays – Seasons Greetings

Sunday, December 27th, 2009

To all of our clients and visitors to our blog, we wish you seasons greetings and a safe and prosperous new year.

Thank you for your support in 2009, and we look forward to working with you in 2010.

Our office will be re-open on 11 January 2010.

Stay tuned for our new IT Law, Telecommunications Law, Domain Law and general Commercial Law articles / posts.

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