Chapter 3 Pt 3-1 of the Australian Consumer Law prohibits a range of specific forms of conduct that unfairly disadvantage consumers. This includes false or misleading representations, unsolicited supplies, pyramid schemes and pricing conduct.

Breaches of each of the provisions attract pecuniary penalties. In addition, Chapter 4 Pt 4-1 creates criminal offences with significant fines per breach. Fines for corporations are the greater of $50m, three times the value of the benefit received or 30% of adjusted turnover during the breach turnover period for the offence. Individuals may be fined up to $2,500,000.

Section 29 prohibits false or misleading representations in connection with the supply or promotion of good or services. The section lists 14 types of representations.

Sections 30 to 34 prohibit other types of misleading conduct, including relating to employment, falsely offering gifts or prizes or misrepresenting the nature of goods or services.

Section 35 prohibits bait advertising, which is the practice of by a store of advertising goods or service at a low price to entice consumers, but then intentionally having insufficient stock to satisfy demand. The aim is to attract consumers to the store or service to buy higher priced goods or services.

Under section 36, a business is prohibited from wrongly accepting payment for goods or services that it does not intend to supply or is unable to supply. This is particularly relevant during current restrictions relating to events, travel and consequential limitations on supply of goods. It is difficult to anticipate when restrictions on gatherings or travel will reduce or supply chains will be fully restored. Businesses need to be careful when accepting payment in advance because of the risk of not being able to fulfill obligations when promised or within a reasonable time.

Unsolicited Goods or Services

Section 40 to 41 relate to the unsolicited supply of goods or services. A business cannot demand payment for unsolicited goods or services, and a consumer who receives goods or services without ordering them is not obliged to pay for them. The consumer can ask the business to collect the goods. If the business does not do so within a month of the notice, the goods become the consumer’s property. If no notice is sent, the goods become the property of the consumer after a period of three months. However, a consumer cannot keep goods that they knew were not intended for them, or unreasonably refuse to allow the business to collect the goods.

In relation to services, a prudent business should obtain authorisation from a consumer to perform a particular service. If the work is not authorised, the business cannot demand payment. The situation is not always clear and if there is any doubt it is best to obtain legal advice regarding demanding payment or liability for payment.

Pyramid Schemes

This is a type of multi-level marketing scheme where participants receive a payment for the recruitment of new members to join a scheme. The scheme may involve the selling of products or services, but the payment is not related to purchase or sale of the goods or services. The scheme usually collapses when there are no more people to recruit. There are several iterations of a pyramid scheme.

Section 44 prohibits the participation in a pyramid scheme, whether as promoter or participant. Section 45 sets out the features of a pyramid scheme and section 46 distinguishes a pyramid scheme from a legitimate marketing scheme.

Section 164 states that participation in a pyramid scheme is an offence and sets out the penalties for doing so. The maximum penalty for a body corporate is $50,000,000, or 3 times the value of the benefit obtained or 30% of adjusted turnover during the breach turnover period of the offence, whichever is the greater. An individual may be convicted and fined up to $2,500,000.

Pricing Conduct

Consumers rely on pricing to make informed decisions about purchasing goods or services. Sections 47 and 48 set out the requirements for pricing conduct to ensure that consumers are not misled or deceived by unscrupulous businesses.

Section 47 states that a business cannot sell goods if there are two prices and the goods are for sale at the higher price. If two prices are displayed, the business can remove the goods from sale and correct the pricing. Errors may occur in price displays and a business that makes such an error should not be forced to sell the goods at the lower price. A consumer does not have a right to force a business to sell the goods at the lower price. Pricing is known as an invitation to treat in contract law and does not form part of the bargain between the seller and the buyer unless the seller agrees to sell at the lower price.

Section 48 states that a supplier must not display a price that is only part of the total cost without prominently displaying the total cost. Component pricing is not prohibited, but the total cost must be displayed. For example, a lounge suite is for sale for $1500, but there is an additional cost for warehouse retrieval of $100 and commission for the salesperson of $150. The extra costs are displayed in fine print. A consumer cannot buy the lounge suite without paying the extra $250 so the true price is $1750.

Harassment and Coercion

Section 50 prohibits the use of physical force or undue harassment or coercion in connection with:

Unnecessary or excessive contact with a person, or communication that is intimidating or demoralising to a person are forms of repetitive conduct that are considered undue harassment.

Coercion involves threatened or actual force that restricts another person’s choice or freedom to act.

The conduct of debt collection agents has attracted the attention of regulators when debtors are subject to excessive contact or potentially threatening behaviour. Whilst a business has the right to take action to collect a debt including issuing legal proceedings, threatening a person with legal proceedings for the sole purpose of intimidating the debtor may be considered coercion.

Unconscionable Conduct

Sections 20 and 21 of the Australian Consumer Law (ACL) prohibit a business from engaging in unconscionable conduct in two ways described below.

Unconscionable conduct occurs when one person takes advantage of another person exploiting a weakness or special disadvantage of the other person. The weakness or special disadvantage must affect that person’s judgment and may be a result of illness, illiteracy, age or emotional dependence. The conduct must be so harsh that it goes against ‘good conscience’.

Commercial Bank of Australia Ltd v Amadio(1983) 151 CLR 447 is a leading case in unconscionability in Australia. Mr and Mrs Amadio gave a guarantee to CBA for finance to assist their son’s business. The couple had limited English and did not get independent advice regarding the effect of the guarantee, relying on their son’s assurances about the viability of the business.

The bank knew that the business was in financial difficulty but the Amadios did not. The Amadios also did not understand that their liability was unlimited.

When the business failed, the Amadios discovered the truth. They also applied to the Supreme Court of South Australia to set aside the guarantee.

The dispute ended up in the High Court of Australia. Mason J (as he was then) stated (at 462):

Section 20 states that a business must not engage in conduct that is unconscionable within the meaning of the unwritten law. This provision allows an affected person (including a regulator such as the ACCC) to access the range of remedies available under the ACL if relying on unconscionable conduct. The unwritten law refers to the evolving equitable doctrine of unconscionable conduct.

Section 21 prohibits unconscionable conduct in connection with the supply or acquisition of goods or services. Whilst it seems complicated to have two separate sections about unconscionable conduct, section 21 is broader in its reach. It is not limited to considerations of the special disadvantage of the weaker party, but also the conduct of the stronger party including a pattern of conduct.

Section 22 sets out the matters that a court may have regard to when determining if a business (the supplier) has breached section 21.