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The Australian Consumer Law (ACL) sets out rules which businesses must comply with when providing goods and services to consumers. The purpose of the ACL is to protect consumers from unfair sales practices and help consumers trust businesses. 

When a business breaches a provision of the ACL, the Australian Competition and Consumer Commission (ACCC) may fine the infringers. In more extreme cases, the ACCC may take the offending business (and sometimes its owners or directors) to court and seek a range of penalties, including: 

  • fines; 
  • declarations in respect of the conduct; 
  • disqualification of directors; and
  • consumer redress. 

However, the ACCC may choose the middle ground between a fine and prosecution in court in certain circumstances. To do this, they may have the offending business or person give an enforceable undertaking. This article will explain what an enforceable undertaking is under the ACL and how it is given. 

What is an Enforceable Undertaking?

An enforceable undertaking is essentially a binding promise made by a party to the court to either take or cease taking certain actions. In circumstances where the ACCC is alleging that you or your business has breached the ACL, offering an enforceable undertaking could be a way to try and avoid the ACCC taking legal action.

The ACCC does not have the power to demand that a party gives an enforceable undertaking. However, suppose it considers that an enforceable undertaking is sufficient to ensure that the offending business does not breach the ACL again. In that case, it could also make an offer to the party to give the undertaking as opposed to taking the matter to court.

How is an Enforceable Undertaking Given?

The enforceable undertaking must be given in writing and must be detailed, specific and free from ambiguity. Usually, undertakings will contain a positive covenant to make a change, compensation or correction. This can cover a range of acts including, but not limited to:

  • compensating consumers who have suffered from the breach of the ACL;
  • reviewing and improving consumer guarantees and warranties that are not adequate under the ACL;
  • making marketing or strategic changes within the business to avoid any future misleading or deceptive conduct;
  • running corrective advertisements to fix any previous advertisements that have mislead consumers; or
  • implementing new consumer policies that better protect consumer rights.

You can negotiate the exact terms of the enforceable undertaking with the ACCC. Further, the ACCC will need to approve the final language before the undertaking is given. Importantly, the ACCC will not permit an undertaking that denies a breach of the ACL or imposes any obligation on the ACCC.

After the agreeing on the terms of the undertaking, the party then gives the undertaking to the ACCC. The ACCC can accept it under section 87B of the Competition and Consumer Act 2010 (Cth). This section also broadly sets out the rules around enforceable undertakings. 

The undertaking is then published on the public register. The business or person who has given the undertaking can withdraw or vary it only with the consent of the ACCC.

What Happens After the Enforceable Undertaking is Given?

Once the enforceable undertaking is given, the ACCC can monitor compliance (for example, through an audit) with the undertaking either: 

  • periodically, in certain circumstances (such as if it suspects that there is a further breach of the ACL by the party); or 
  • at the ACCC’s request.

If the relevant party fails to uphold its undertaking, the ACCC can apply for a court order to direct the person/business to:

  • comply with the terms of the undertaking;
  • pay an amount equivalent to the financial benefit received by breaching the undertaking; or
  • compensate anyone else who has suffered loss or damage as a result of the breach of the undertaking.

The ACCC can also obtain any other order the court considers appropriate.

Perhaps more importantly, enforceable undertakings are not confidential. They will appear on a public register, which means that anyone can see the original undertaking. A recent example of an undertaking the ACCC accepted is that provided by Metcash.

Key Takeaways

Businesses or individuals who breach the ACL and face possible prosecution by the ACCC may be able to avoid court and legal costs. They can do so if they provide an enforceable undertaking. An undertaking is binding. As such, parties should know that a breach can attract court orders either by forcing compliance or by payment of compensation. Breaches may also result in further fines for contempt of court. If you have any further questions about enforceable undertakings or need assistance with your dispute, contact LegalVision’s disputes lawyers on 1300 544 755 or fill out the form on this page. 

Frequently Asked Questions

What is an enforceable undertaking? 

It is a binding promise made by a party to the court to either commence or cease taking certain actions. 

What happens if a party fails to uphold its undertaking?

The ACCC can apply for a court order to direct the person/business to comply with the terms of the undertaking, pay an amount equivalent to the financial benefit received by breaching the undertaking or compensate anyone else who has suffered loss or damage as a result of the breach of undertaking.

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