19 Dec 2013

ACCC's annual report 2012-2013: regulator follows through on stated consumer law priorities

by Sara Dennis, Daniel Bolkunowicz

Businesses should be aware of the ACCC's key priorities but do still need to comply with all aspects of the Australian Consumer Law.

The actual enforcement activities and areas of focus which are detailed in the ACCC's recently released 2012/2013 annual report are consistent with the priorities that were specified prior to, and during, the period. This should be a guide for business as it enables internal focus to ensure compliance with all aspects of the ACL and especially those areas which have been specifically prioritised. The annual report is 300+ pages long so this article focuses on some key consumer safety/ consumer protection aspects of the report.

The year by numbers

In 2012/2013:

  • 27 infringement notices across 10 consumer law matters with penalties totalling over $300,000.
  • Courts ordered pecuniary penalties for breaches of the Australian Consumer Law (ACL) with 6 proceedings involving penalties of $1 million or more.
  • 450 product safety recalls involving more than 2,000,000 hazardous products (representing a 2% increase from the previous year) with the ACCC monitoring and administering almost 60%.
  • ACCC involvement in 54 court cases relating to consumer protection enforcement.
  • ACCC accepted 12 consumer protection-related undertakings.
  • The number of mandatory reports received by the ACCC fell by 7% from the previous year. This may suggest businesses, which were very cautious when the provisions regarding the mandatory reporting of serious injuries or illnesses caused by the use (or foreseeable misuse) of consumer goods were first introduced, were initially over-reporting and are now more comfortable with understanding when they need to lodge a report.
  • The ACCC investigated 174 matters where it was alleged a product was not complying with product safety regulations. This represents a 29% increase from last year. In determining whether to enforce, the ACCC considers factors such as the severity of the hazards posed by the breach, the level of consumer harm, the market profile of the trader and its compliance history.

Door-to-door sales: do not knock unless you know how you must behave

The ACCC's education initiatives and enforcement activities regarding door-to-door sales received significant publicity during 2012/2013. The marketing practices of a number of energy retailers were found to be in breach of the specific requirements in the ACL for unsolicited consumer agreements and the ACCC secured a penalty of $1.555 million against one large energy retailer. As at 30 June 2013, Australia's three largest energy retailers decided to cease door-to-door marketing. This continues to be an area of focus for the ACCC.

Protecting online consumers: is that testimonial too good to be true?

Given consumers' increasing reliance on information obtained online, the ACCC launched a project to determine the extent of misleading or deceptive conduct in online reviews or expert testimonials. It commenced proceedings in relation to written testimonials on websites and video testimonials on YouTube which were not made by genuine customers. Businesses which rely upon online testimonials must monitor their content and source and avoid selectively editing their content.

Credence claims ("extra virgin olive oil", "free range eggs"): new enforcement & compliance priority

Credence claims are statements made about a particular quality of a product and are designed to differentiate them from similar products. They are only acceptable if they do not mislead the consumer and can be substantiated. Examples include the suggestion that a product is safer ("non-toxic"), that it offers a moral benefit ("free range eggs") or that it is of a perceived quality ("Swiss Chocolate"). Misrepresenting a product's country (or region) of origin has also been pursued. Misleading and deceptive credence claims resulted in court awarded penalties and infringement notices totalling over $700,000.

Consumer guarantees, warranties and refunds: a continuing focus

Until this period, the ACCC had focussed on educating businesses of their obligations regarding the ACL's consumer guarantee provisions. They have now moved to an enforcement phase so business should familiarise themselves with the remedies associated with consumer guarantees. The consequences for getting it wrong can be significant: in July 2013, the Federal Court ordered a multinational company to pay a $3 million civil pecuniary penalty for making false or misleading claims to consumers about their warranty and guarantee rights.

During the current financial year, the ACCC has continued to focus on this issue and extended warranties are also becoming an area of increased focus. Business must ensure that, when asking consumers to pay for extended warranties, the protection they offer must exceed the protection available to consumers under the ACL.

What to look out for

The ACCC normally details its priorities, and planned areas of focus, for the coming year in mid to late February.

Whatever it does set out, businesses still need to comply with the Australian Consumer Law even if they are not specifically a focus for the ACCC. They need to be particularly vigilant about compliance if they operate online (especially if they rely on customer testimonials), in the telecommunications and energy sectors, in highly concentrated sectors such as fuel, in areas with significant indigenous communities or if they make credence/premium claims (especially food and beverage), market via door-to-door sales, provide remedies when consumer guarantees are breached or offer extended warranties.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.