When a business breaches a provision of the Australian Consumer Law (ACL), the Australian Competition and Consumer Commission (ACCC) can either fine the infringers or in more extreme cases, prosecute and take the offending company to court. In certain circumstances, the ACCC may choose the middle ground and have the offending business or person offer an enforceable undertaking. Below, we answer what is an enforceable undertaking under the ACL and the process involved.

What is an Enforceable Undertaking?

An enforceable undertaking is essentially a binding promise made to the court by the party who has made the undertaking. If the relevant party fails to uphold its undertaking, the ACCC can apply for a court order to either:

  • Direct the person/business to comply with the terms of the undertaking;
  • Direct the person/business to pay an amount equivalent to the financial benefit received by breaching the undertaking;
  • Direct the person/business to compensate anyone else who has suffered loss or damage as a result of the breach of undertaking;
  • Any other order the court considers appropriate.

Perhaps more importantly, enforceable undertakings are not confidential as they will appear on a public register. Consequently, businesses and individuals can see the original undertaking. A recent example of an undertaking the ACCC accepted is that provided by Metcash.

How is an Enforceable Undertaking Given?

An entity or individual who allegedly breached the ACL must provide the enforceable undertaking in writing. 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;
  • Implementing new consumer policies that better protect consumer rights.

The undertaking party then gives the undertaking to the ACCC who 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 business or person who has given the undertaking can withdraw or vary it only with the consent of the ACCC.

Key Takeaways

Businesses or individuals who have breached the ACL and face possible prosecution by the ACCC may be able to avoid court and legal costs if they provide a written undertaking. An undertaking is binding and 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, get in touch with our consumer lawyers on 1300 544 755.

Lianne Tan

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