How To Deal With Third Parties in Business

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Table of Contents

• Wholesalers
• Manufacturers
• Contractors and Suppliers
• Key Takeaways

It’s easy to forget that consumer laws not only protect individual consumers, but they also provide businesses with rights and entitlements in their interactions with third parties: wholesalers, manufacturers, suppliers and contractors. This article details the rights that commercial enterprises have in dealing with third parties.

Wholesalers

Commercial enterprises that supply wholesalers and grocery retailers have certain rights and protections under the Competition and Consumer Act 2010 (Cth) (‘the Act’). The Australian Competition and Consumer Commission (ACCC) is increasingly concerned with the relationship between businesses and wholesalers, given the significant market power that some wholesalers and grocery retailers wield in the marketplace.

Under the Act, wholesalers cannot act in a manner that:

• Misuses their market power;
• Is misleading or deceptive; or
• Is unconscionable.

While having market power is not contrary to the Act, using it for an illegal purpose is considered contrary to the Act. A wholesaler misuses their market power when they eliminate or substantially damage a competitor, deter or prevent a person from competing in a market or prevent a person or business from entering a market.

Wholesalers also cannot mislead and deceive other businesses. This behaviour occurs when a wholesaler’s overall conduct creates a false and misleading impression. A wholesaler can deceive and mislead even if they do not intend to do so and even if there is no resulting damage or loss.

Wholesalers also cannot deal with other businesses unconscionably. There exists no one definition of unconscionable conduct. Rather, courts infer it from the circumstances of a particular case. Unconscionable conduct involves offending the moral norms of society and refers to behaviour that goes beyond the parameters of unfairness. Unconscionable conduct typically refers to harsh and oppressive conduct. For example, in 2014 the Federal Court held that Coles had engaged in unconscionable conduct with suppliers. Among other things, Coles had required payment from suppliers for retrospective waste.

If a business owner believes that a wholesaler has acted towards their business in any of these ways, they should contact the ACCC immediately. The ACCC will be able to investigate and penalise the business if the claim is legitimate.  

Business owners that have commercial relationships with grocery retailers should also be aware of the Grocery Code of Conduct. The code is voluntary and regulates the conduct of complying retailers and wholesalers in their dealings with suppliers.

Manufacturers

In some instances, a business also has rights against a manufacturer. If a business sells a product intended for household and domestic use and it fails to meet a statutory guarantee or warranty, the consumer can obtain a remedy from the business. However, the business is also able to claim compensation from the manufacturer.

Similarly, a business has rights against a manufacturer for products that are not for a domestic or household use, but that have a value of less than $40,000. If a business sells such a good and it fails to meet a statutory guarantee or warranty, the business is required to provide the consumer with a remedy. It can then claim compensation from the manufacturer, for an amount equal to the cost of repairing or replacing the item.

Contractors and Suppliers

A business also has rights against contractors and suppliers. The nature of those entitlements depends on whether an enterprise purchases goods or services for itself or resale purposes.

For the Australian Consumer Law (Cth), a commercial enterprise is considered a consumer when it buys a product or service that is not intended for resale and that the business will not transform into a product for sale, and it is:

• Valued under $40,000; or
• Valued over $40,000 but will be used in a personal, domestic or household capacity; or
• A vehicle or trailer destined to transport goods on public roads.

The business is entitled to all the appropriate statutory guarantees and warranties. If the product or service does not meet these, the supplier must provide the business with all appropriate remedies.

However, if a business purchases goods or services for resale or to transform into a saleable product and subsequently experiences difficulties with the supplier of the product or contractor for services, the appropriate procedure to resolve the situation differs.

In such cases, the business should:

• Contact the supplier of goods or contractor for services.

The proprietor should clearly explain the problem and make the supplier or contractor aware of their desired outcome. They should do this in writing so that both parties have an accurate record of the complaint.

• If the difficulty remains unresolved, the business should contact the appropriate third party.

These third parties are typically government and regulatory agencies that might resolve the issue in a more informal and cost-effective manner.  They include the ACCC, the Australian Small Business Commissioner (or a state-based equivalent), state or territory consumer protection agency or an industry ombudsman. These often have specific dispute resolution schemes.

If the problem persists, a business might need to consider legal action. It would be a good idea to speak with a professional first.

All businesses have rights when a supplier or contractor engages in misleading or deceptive conduct. Similarly, a supplier cannot refuse to supply a business, and other businesses cannot participate in anti-competitive behaviour.  If a business needs to report this kind of unlawful conduct, it should contact the ACCC immediately.

Key Takeaways

Just like consumers, businesses have rights under the Australian Consumer Law against third parties such as wholesalers, manufacturers, suppliers and contractors. As a business engaging with another business or third party, it’s well worth knowing your rights, and being able to determine if and when your rights are infringed, or consumer laws are breached.

If you are negotiating supply contracts, engaging a manufacturer or dealing with third parties in the course of business, LegalVision can assist with protecting your consumer rights. Give us a call today on 1300 544 755.