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Does the Australian Consumer Law apply to your online business?

Reading time: 17 mins

The Australian Consumer Law is one of the most important laws for online businesses to understand. In this article, you’ll hear from an eCommerce lawyer about how consumer law applies to your online business and some helpful tips to make sure you comply with the law.

Before we get started – protect your revenue

Before we dive into the ins and outs of the Australian Consumer Law, I want to make one thing clear. The law is designed to protect consumers’ rights. But this doesn’t mean that you should agree to every claim that is made against your business.

For this reason, it’s important to investigate the root cause of the product defect.

If you have a reasonable basis to determine that the product is not faulty or the claim is not well-founded, you can decline to provide a remedy to your customer.

Some businesses skip this part and instead take the position that they will refund, replace or repair all allegedly faulty products. You can do this too, but you don’t have to.

What is the Australian Consumer Law?

The Australian Consumer Law describes several consumer rights and obligations that businesses owe to their customers. The consumer law aims to protect consumers and ensure that customers can hold businesses accountable for faulty or defective goods or services.

The Australian Consumer Law is set out in Schedule 2 to the Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act).

Businesses are not able to exclude or agree with their customers that the Australian Consumer Law does not apply.

If businesses mislead their customers about whether and how the consumer law applies to them or states that their business policies override the Australian Consumer Law, there may be additional legal consequences for the business.

For this reason, it is important to understand what the Australian Consumer Law requires of your business.

Furthermore, because the regulator of the Australian Consumer Law, the Australian Competition and Consumer Commission, has spent years educating the public about their rights, many of your customers are likely to be well informed about their rights.

Does the Australian Consumer Law apply to online businesses?

Yes. The Australian Consumer Law applies to online businesses as well as the typical bricks-and-mortar businesses.

The Australian Consumer Law applies to the sale of goods and services in Australia, if:

  1. the goods and/or services are or are likely to be used for domestic, household, personal use; or
  2. the goods and/or services are not used or likely to be used for domestic, household, or personal use however they are valued at under $100,000; or
  3. the goods are commercial road vehicles or trailers used primarily to transport goods on public roads.

The consumer law applies to both business customers and individual customers, provided that one of the above rules applies.

Krystal Parle | Senior Lawyer - I hold a Bachelor’s Degree in Law from Queensland University of Technology. I am also a Queensland Justice of the Peace.

What does your online business need to do to comply with the Australian Consumer Law?

Understand your legal obligations

It is important that online businesses understand what they are required to do (or not do) to comply with consumer law.

If you want tailored advice about how the Australian Consumer Law applies to your online business, it may be helpful to ask an eCommerce lawyer.

Alternatively, if you are happy to do your own research, the ACCC has a lot of helpful information about consumer law on their website.

Develop procedures and train your staff

Once you understand what the consumer law requires of your online business, you need to implement those requirements across your business. This could include developing procedures to carry out quality checks on new and existing products, dealing with customer complaints, and investigating product defect claims.

Even if your online business has not technically breached the consumer law, or is not sure whether your business has breached the law, your business must develop a policy for dealing with issues.

It is also highly important to educate and train your staff. If your staff provides incorrect advice to customers, this could also cause your business to be in breach of consumer law.

What happens if your business does not comply with the Australian Consumer Law?

There are several different remedies available to customers where businesses breach the consumer law. There is also a risk that the ACCC will separately pursue your online business.

Reputational risk and bad customer experience

If your customer has a complaint about goods and/or services you sold to them, it is important that you deal with issues in a fast, efficient and caring way.

If you don’t provide your customer with a seamless experience during the complaints process, there may be a higher risk that the complaint will have a bad outcome for your online business.

If you are directed by the ACCC to issue a public notice that your business has breached the law, or individual customers have a bad experience with your business, this may damage your business’s reputation. It may have broader financial consequences for your business that are not easy to identify and calculate.

Customer legal proceedings and claims

Running an online business will always run the risk that a customer will start legal proceedings. It’s a necessary part of running a business. If you do receive a letter of demand or a customer starts a legal process, it is important to quickly hire an eCommerce lawyer.

If the consumer claim has gone this far, the risk of an unfavourable outcome to your business must be quickly assessed. This will determine how far your business should go to defend the claim or try and settle the dispute out of court.

Fines and enforceable undertakings

If your online business gets the attention of the ACCC, and they investigate and find that your business has breached the Australian Consumer Law, your business may face fines. Alternatively, your business may be required to provide an enforceable undertaking. This is a legally enforceable promise to the regulator that your online business will do or not do something.

Micaela Diaz Associate Lawyer Micaela advises our independent contractor clients and provides commercial legal advice.

Frequently asked questions

How does the Australian Consumer Law protect consumers?

The Australian Consumer Law (ACL) provides a comprehensive set of protections to ensure consumer rights are upheld in the marketplace. Here are key ways in which the ACL protects consumers in Australia:

  1. Consumer Guarantees: The ACL provides consumers with guarantees for goods and services. For goods, this includes that they are of acceptable quality, fit for purpose, match their description, and meet any extra promises made about them (like performance, condition, and quality). For services, it guarantees that they will be provided with acceptable care and skill, will be fit for a particular purpose, and will be provided within a reasonable time when there is no agreed end date.

  2. Protection Against Misleading or Deceptive Conduct: Businesses are not allowed to engage in conduct that is misleading or deceptive, or is likely to mislead or deceive, in their marketing, advertising, and selling practices.

  3. Unfair Contract Terms: Consumer contracts cannot contain terms that create a significant imbalance in the parties’ rights and obligations, are not necessary to protect legitimate interests, or would cause detriment (either financial or otherwise) if they were to be applied.

  4. Product Safety and Compliance: The ACL sets standards for product safety and provides for recalls if products are found to be unsafe. Businesses must comply with these standards and cannot sell products that have been banned.

  5. Right to Repair, Replacement or Refund: Consumers have the right to repair, replacement, or a refund if goods do not comply with one or more of the consumer guarantees.

  6. Prohibition of Unconscionable Conduct: Businesses must not engage in conduct that is unconscionable, which means they must not act in a manner that is particularly harsh or oppressive.

  7. Prohibition of Unfair Practices: The ACL prohibits certain unfair practices like bait advertising, referral selling, accepting payment without intending to supply, and other misleading or dishonest conduct.

  8. Regulation of Specific Sales Practices: The ACL regulates specific types of sales practices, such as door-to-door sales, telemarketing, lay-by agreements, and consumer leases.

  9. Information Standards: The ACL allows the government to set mandatory information standards about how certain information is presented to ensure clarity and prevent deception.

  10. Access to Redress: Consumers have access to various mechanisms for resolving disputes and seeking compensation when their rights have been violated. This includes complaints to state and territory consumer protection agencies, and legal action in the courts.

If a business breaches the Australian Consumer Laws (ACL), various consequences can follow, depending on the nature and severity of the breach. The enforcement of the ACL is carried out primarily by the Australian Competition and Consumer Commission (ACCC), as well as state and territory consumer protection agencies. Here are some potential outcomes and actions that can be taken when a business violates the ACL:

  1. Warnings and Infringement Notices: For minor breaches, the ACCC or state/territory agencies may issue a warning or an infringement notice to the business. Infringement notices can include fines.

  2. Court Action and Legal Penalties: For more serious breaches, the ACCC or consumer protection agencies can take legal action against the business. The courts can impose significant penalties, including heavy fines. As of my last update in April 2023, these fines can be up to $10 million for corporations, three times the value of the benefit received from the breach, or 10% of annual turnover in the preceding 12 months, whichever is greater. For individuals, fines can be up to $500,000 per breach.

  3. Compensation Orders: Courts can order the business to compensate consumers who have suffered loss or damage due to the breach.

  4. Compliance Programs: The business may be required to implement or enhance a compliance program to ensure future adherence to the ACL.

  5. Disqualification of Directors: In serious cases, company directors can be disqualified from managing corporations.

  6. Public Warnings and Adverse Publicity Orders: The ACCC or courts can issue public warning statements or require the business to publicize its breaches, as a means of informing and protecting consumers.

  7. Enforceable Undertakings: The business might agree to an enforceable undertaking – a legally binding agreement to undertake certain actions, such as improving business practices or making compensation to affected consumers.

  8. Product Recalls and Bans: If the breach involves product safety, the ACCC can mandate recalls or impose bans on the sale of products.

  9. Redress for Consumers: Depending on the breach, consumers may seek redress directly from the business, such as refunds, repairs, or replacements.

  10. Reputation Damage: Breaches of the ACL can lead to significant reputational damage, impacting consumer trust and business relationships.

The Australian Consumer Law (ACL) is primarily designed to protect consumers, but it also provides benefits and protections for businesses in several ways:

  1. Creating a Level Playing Field: By setting clear rules for commerce that all businesses must follow, the ACL helps to create a fair and level playing field. This consistency across the marketplace benefits businesses by ensuring that competitors are also adhering to the same standards, particularly in terms of product quality, safety, and marketing practices.

  2. Reducing Uncertainty: The ACL provides a clear set of guidelines for business conduct. This clarity helps businesses understand their legal obligations and reduces uncertainty about how they should operate. Knowing the rules helps businesses to avoid legal risks and potential disputes.

  3. Protecting Against Misleading Conduct by Others: Businesses, like consumers, are protected from misleading or deceptive conduct by other businesses. This includes protection against false advertising, misleading representations, and other forms of dishonest business practices.

  4. Business-to-Business Protections: While the ACL is often associated with consumer protection, certain provisions also apply to transactions between businesses, particularly small businesses. For example, the unfair contract terms provisions apply to standard form contracts where at least one party is a small business.

  5. Facilitating Trust in the Market: By promoting fair trading and compliance, the ACL helps in building consumer trust and confidence in the market. This trust is beneficial for all businesses as it encourages consumer participation and spending.

  6. Consumer Redress Mechanisms: The ACL’s provisions for dispute resolution and redress mechanisms not only protect consumers but also benefit businesses by providing structured ways to resolve disputes. This can help preserve business relationships and reputations.

  7. Product Safety and Compliance: By enforcing product safety standards and conducting product recalls, the ACL helps ensure that only safe products are available in the market, which helps protect businesses from the costs and reputational damage associated with selling unsafe products.

  8. Informed Consumers: Educated and informed consumers, which the ACL promotes, can make better decisions. This leads to a healthier marketplace where high-quality products and services are valued, benefiting businesses that prioritize these aspects.

About the Author

Farrah Motley
Director of Prosper Law. Farrah founded Prosper online law firm in 2021. She wanted to create a better way of doing legal work and a better experience for customers of legal services.

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