01 Sep 2016

Is your B2B sale of goods really B2C? Yes, when a business is actually "acquiring as a consumer"

By Sara Dennis, Grace Ness 

A business can sometimes be a consumer, and enjoy consumer law protections.

The consumer is at the heart of consumer laws ‒ but who is a consumer? The concept of "acquiring goods or services as a consumer" in the Australian Consumer Law (ACL), among other things, triggers  the consumer guarantees regime and the protections from unsolicited consumer agreements.  The legislative meaning of this phrase is reasonably complex but it still might come as a surprise that businesses, in some instances, can be consumers too, and receive consumer protections available under the ACL.

Acquiring goods/services "as a consumer"

There are three ways in which a person is taken to have acquired particular goods or services "as a consumer", but it is the first one that we will focus on here: where the amount paid/payable did not exceed $40,000.

There are some exceptions to this definition; most importantly, businesses acquiring goods for re-supply, or to use them up or transform them in trade or commerce as part of a manufacturing process, or to repair goods or fixtures, will not "acquire as a consumer".  

Is it $40,000 per item or per order?

Let us assume a business purchased 10 large photocopiers at a price of $5,000 each, under a single invoice for $50,000. Is the business "acquiring goods as a consumer"?

Based on price alone, it could appear that it did not "acquire goods as a consumer" as the price paid for the goods exceeded $40,000. It is however arguable that the price of each photocopier ($5,000) would be relevant for the purpose of the consumer definition, making the business a consumer.  Both interpretations are open on a plain reading of the ACL, yet there has been surprisingly little judicial consideration of this issue.

In 2008, the New South Wales Supreme Court noted that "the uninstructed one would have thought that the aggregate [of] what has been sold is referred to.  However, there are strong arguments the other way".  Cases have shown that the determination of whether the price is based on the price of each item or an aggregate of the price of all items will depend upon the circumstances of that specific purchase.  The primary considerations have been: can the items be easily separated? are they usable if they are separated?

The upshot is that if you require multiple pieces of equipment to perform a function, the relevant price is likely to be the aggregate of the cost of all items.  However, if you don't, the relevant price will be the price of each individual item.  Using our example above, the relevant price is likely to be $5,000 per item and the court would most likely hold that the business acquired the photocopiers as a consumer.

Buying or selling, your business could be a consumer ‒ so understand your rights and obligations under the ACL

If you are a business that sells goods, you should consider whether the goods constituting an order costing more than $40,000 are easily separable, independent goods which do not rely on each other when used.  If they are, and the individual items cost $40,000 or less, it is likely that your purchaser will be considered to be a consumer (unless an exception applies). 

This means that the ACL provisions relating to consumer guarantees and unsolicited consumer agreements will apply. There are remedies available to the consumer for breaches of these guarantees which cannot be excluded, restricted or modified in any way (unless the goods/services are not of a kind ordinarily acquired for personal, domestic or household use or consumption, in which case some restrictions are possible).

On the other hand, if you are the business doing the buying, do not be too quick to assume that you do not enjoy the same consumer law rights as a natural person.

Therefore, the key messages for businesses are:

  • ensure that your staff and compliance materials recognise that businesses can acquire goods and services "as a consumer";
  • although an individual good under $40,000 can trigger consumer protections, so can certain bulk orders;
  • if you are buying or selling bulk orders for a price of more than $40,000, ask yourself: can the goods be easily separated? are they usable if they are separated?  If yes, then the purchaser, even if it is another business, may be a consumer, and be protected both by the consumer guarantees regime and the unsolicited consumer agreements regime.

This might not be the last word. Having been in force for a little over five years, the ACL is currently being reviewed by Consumer Affairs Australia and New Zealand, with an interim report due to be released for public consultation shortly. One of the issues it will consider is some, but not all, aspects of the definition of "acquiring goods as a consumer" ‒ so watch this space. 

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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.