As a retail business owner, there are several rules that protect your customers from misleading, deceptive and unconscionable conduct in commercial transactions. These rules fall under the Australian Consumer Law (ACL), which operates nationwide. Each state or territory also provides additional protection in separate fair trading rules. This article explains key consumer law considerations to note for Australian retailers.
The General Protections
Your customers are eligible for general protections in the ACL. In particular, there are protections against:
- conduct that is misleading or deceptive;
- conduct that is unconscionable; and
- goods not of acceptable quality, and services provided without due care and skill.
What Transactions Are Eligible?
Only some customers have a right to claim protection under the ACL. A “consumer” is a person or a business that:
- buys a good or service for less than $100,000, including GST;
- purchases a good or service for personal, domestic or household use; or
- purchases a vehicle or trailer used mainly to transport goods on public roads.
Notably, goods purchased for re-supply or for a manufacturing process are excluded from the law’s scope. Another exclusion is private sales between individuals. This is because a person must purchase a good or service in “trade or commerce,” meaning during a business or professional activity. These activities must generally occur within Australia.
Continue reading this article below the formMisleading or Deceptive Conduct
Misleading or deceptive conduct can occur by statements, representations or omissions your retail business makes. For instance, advertising that your garments are 100% Australian-made when this is not the case may lead to a claim of misleading and deceptive contact.
When advertising, inserting a disclaimer into promotional material may protect your business from being sued by customers. However, courts will look at factors such as the size and font of the text to determine whether it is sufficient to alert consumers. For example, when advertising a store-wide sale, you should make it obvious if certain items are not discounted.
Other kinds of misleading and deceptive conduct include:
- false or misleading statements about the quality of goods;
- false or deceptive testimonials about goods or services;
- false or misleading representations concerning the price; and
- false or deceptive advertising about a good’s place of origin.
Unconscionable Conduct
Unconscionable conduct refers to behaviour so harsh that it offends good conscience. Retailers can be liable for unconscionable conduct if they exploit vulnerable persons in the supply of goods or services or in forming contracts.
A court will consider factors like the parties’ bargaining positions, whether the parties act in good faith and whether a person uses undue influence.
Acceptable Quality and Skill
When you sell products to your customers, they must be of “acceptable quality”. There is no precise definition of what acceptable means, but generally, it refers to what is reasonable given the circumstances. This means the product:
- is safe, durable and free from defects;
- has an acceptable appearance and finish;
- does everything that similar products do.
If you sell clothes that contain hazardous dyes or goods that break apart easily, they would not likely be of acceptable quality.
If you carry out a service as part of your retail business, you must do so with due care and skill. For instance, you might sell bicycles as well as offer repair services. Due care and skill imply that your work must be as good as another competent provider with average skills and experience.
Unfair Contract Terms
Unfair standard-form contracts are prohibited for:
- contracts about goods or services to a consumer for personal, domestic or household use; and
- certain business contracts.
A standard-form contract is typically a ‘take it or leave it’ document with little opportunity for your customers to negotiate.
Further, a contract term may be unfair if it:
- creates a significant imbalance in rights and obligations between parties;
- is not reasonably necessary; or
- would cause detriment to the disadvantaged party.
There is no formula for what is unfair. A court will consider the contract as a whole, with each case dependent on the facts.
What Remedies Are Available?
If your goods or services fail to comply with the ACL, your customers may be eligible for a refund, replacement, exchange, compensation or cancellation of the contract. The exact remedy available will depend on whether your failure to comply with the guarantee is significant or minor.
If you enter into an unfair contract, a court may declare the offending term void. Further, a court might make orders to compensate for damage caused by the unfair term or order you to stop undesirable behaviour.
State or Territory Laws
While the ACL is a national law, each state and territory provides additional consumer protections within their fair trading legislation. If you sell products or services, ensure you know your local law or speak to a lawyer for assistance.
The LegalVision Startup Manual provides guidance on a number of common challenges faced by startup founders including structuring, raising capital, building a team, dealing with customers and suppliers, and protecting intellectual property.
The guide includes 10 case studies featuring Australia’s top VC fund partners and leading Australian startups.
Key Takeaways
When running a retail business, your dealings with consumers must be informed by consumer law. At all times, you should act honestly, fairly and reasonably, in line with the standards entrenched in law. A breach of the law may entitle your customers to a refund, replacement or compensation, among other remedies.
For more information about consumer law considerations for retailers, our experienced business lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
We appreciate your feedback – your submission has been successfully received.
