This section covers the main consumer protection provisions in the ACL, as well as the ASICA. These provisions regulate or prohibit a range of unfair trade practices, including:
• misleading or deceptive conduct (s 18 ACL; s 12DA ASICA);
• the making of false representations in relation to the sale of goods and services (s 29 ACL; s 12DB ASICA);
• unconscionable conduct (ss 20, 21 ACL; ss 12CA, 12CB ASICA); and
• unfair terms in consumer contracts and standard form consumer contracts (ss 23–28 ACL; ss 12BF–12BM ASICA).
Consumers may find that a remedy is more easily obtained in Victoria under the ACL&FTA’s application of the ACL. This is because the Victorian Civil and Administrative Tribunal (VCAT) (where Victorian consumer disputes are generally heard) is a less formal venue than a court and legal representation is usually not permitted for consumer and trader disputes relating to amounts under $10,000.
For more information about making a complaint or obtaining a remedy at court, see Taking action as a consumer.
Generally, the ACL applies to a “consumer”. Section 3 states that a person is taken to have acquired particular goods or services as a consumer if, and only if:
a the amount payable for the goods or services is less than $40,000; or
b the goods or services were of a kind ordinarily acquired for personal, domestic or household use or consumption; or
c the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads.
However, this definition does not apply if the person acquired goods:
a for the purpose of re-supply; or
b for the purpose of using them up or transforming them, in trade or commerce:
i in the course of a process of production or manufacture; or
ii in the course of repairing or treating other goods or fixtures on land (s 3(2) ACL).
If it is claimed that a person is a consumer in any proceeding, then it is presumed that they are a consumer unless the contrary is established (s 3(10) ACL).
While it is intended that the consumer protections of the ACL are to apply across the entire economy, there are some exemptions; for example, insurance contracts are not capable of being made the subject of relief under the ACL or the ASICA (s 15 Insurance Contracts Act 1984 (Cth)). In addition, part 3–2 of the ACL, which covers consumer guarantees, does not apply to contracts of insurance (s 63(b) ACL).
Contracts for the supply of electricity and gas are also excluded from some aspects of coverage (see ss 35, 36, 39 Electricity Industry Act 2000 (Vic); ss 42, 43, 46 Gas Industry Act 2001 (Vic); and the Energy Retail Code).
Section 18 of the ACL states that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive. The effect of section 18 is the same as that of section 52 of the previous TPA and, as such, the existing jurisprudence relating to section 52 remains applicable under the ACL.
The terms “misleading” and “deceptive” are not defined in either Act, and the courts have not given a precise definition of misleading or deceptive conduct. The overall impression created by the alleged conduct determines whether it is likely to lead a significant number of people into error or has the tendency to deceive such persons. In general, misleading someone may include conduct ranging from lying to them, to making false or inaccurate claims, to creating a false impression, to leading them to a wrong conclusion, to omitting important information.
Importantly, it is not necessary to establish that the trader intended to mislead or deceive. A person or corporation may have engaged in conduct that was misleading or deceptive even if they have acted honestly and reasonably.
An objective test is used to decide whether conduct is misleading or deceptive. The court or tribunal will consider whether the conduct was likely to mislead or deceive members of the class or group of persons to whom the conduct was directed.
Silence may constitute misleading or deceptive conduct, but this will depend on the circumstances of the case. For example, the courts have held that a failure to disclose information was not misleading where it was not deliberately withheld. Silence or omission might be considered misleading if it can be shown that there is a reasonable expectation of disclosure (s 2(2) ACL; see Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32).
“Puffery” is a term used by the courts to describe enthusiastic or exaggerated claims used by advertisers to promote products and services when it is obvious that the claims should not be taken seriously. The courts have held that mere “puffery” will not constitute misleading or deceptive conduct. Generally, a statement is considered to be mere “puffery” if no reasonable person would take it seriously or act upon it. Examples of puffery might include phrases such as “making your dreams come true”, or “best ever”.
The prohibition of misleading or deceptive conduct also extends to representations about future matters. The ACL requires a person who has made a statement about a future matter to show that they had reasonable grounds for making it, or it will be taken to be misleading (s 4 ACL).
A person or corporation cannot simply rely on a disclaimer or exclusion clause against a misleading or deceptive conduct claim. However, it appears that in some circumstances, an express disclaimer that is prominently displayed may exclude liability for making misleading or deceptive statements in an advertisement.
In Butcher v Lachlan Elder Realty Pty Ltd  HCA 60, an advertisement containing two disclaimers was held to make it sufficiently clear that the real estate agent was not the source of the information that was said to be misleading in its advertisement for a property and that it was simply passing on information supplied by others. In these circumstances, the real estate agent was held not to be liable for the misleading statements contained in the advertisement.
In contrast, in Australian Competition and Consumer Commission v Telstra Corporation Ltd  FCA 1904, Telstra made various claims about its Next G mobile network, including that it had “coverage everywhere you need it”. In its defence, Telstra argued that some of the advertisements directed consumers to its website, where various disclaimers about the extent of its network’s coverage could be found. The court held that this disclaimer did not prevent the conduct from being misleading or deceptive, as it did not sufficiently communicate the information to potential customers.
Section 29 of the ACL prohibits making false representations in relation to a large number of matters with respect to goods or services, such as:
• standard, desirability, quality or value;
• history, age or place of origin;
• sponsorship, performance characteristics, accessories, uses of benefits;
• approval or affiliation;
• availability of repairs or spare parts;
• existence, exclusion or effect of any condition, warranty, guarantee, right or remedy; and
• testimonials by any person.
In connection with the sale or grant of an interest in land, section 30 of the ACL contains similar (although not so broad prohibitions) preventing:
• making a representation that a person has a sponsorship or affiliation they do not have; or
• making a false or misleading representation about the nature of the interest in land, price, location, characteristics or use that can be made of the land, or availability of facilities.
There are different types of unconscionable conduct under the ACL and ASICA. The two main types are:
1 unconscionable conduct under the “unwritten law” (s 20 ACL; s 12CA ASICA); and
2 statutory unconscionability (s 21 ACL; s 12CB ASICA).
Importantly, section 20 of the ACL (and s 12CA ASICA) does not apply to conduct that is prohibited by sections 21 of the ACL.
Section 20 of the ACL (and s 12CA ASICA) states that a person must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law from time to time.
This section appears to refer to the doctrine of unconscionable dealing as it has been interpreted in case law. However, the courts have not yet settled on what constitutes unconscionable conduct “under the unwritten law” as referred to in section 20, and it may go beyond the doctrine of unconscionable dealing to include other equitable doctrines (e.g. equitable estoppel (where a court will not grant legal relief to a party that has not acted fairly)).
Unconscionable dealing, as interpreted in case law, occurs where two requirements are satisfied:
1 one party to a contract or transaction is under a “special disability” (see “Types of special disability”); and
2 the other party takes unfair advantage of that disability, either with knowledge of that disability or where the other party has “closed their eyes” to the disability.
Although not an express requirement, the courts more readily hold that a party has taken unconscionable advantage of a person where the transaction is extremely disadvantageous to that person.
The courts have found that a special disability existed, and was exploited by the other party to the transaction, in a variety of circumstances.
For example, in Blomley v Ryan  HCA 81 at , Justice Fullagar of the Federal Court described the range of circumstances to include:
… poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary.
In that case, the court set aside a contract for the sale of a farm for less than its true value because the purchasers were held to have taken advantage of the farmer’s drunkenness when he signed the contract.
Commercial Bank of Australia Ltd v Amadio  HCA 14
The Amadios, an elderly couple, signed a guarantee with the bank on behalf of their son. They thought that their son’s business was prosperous, when in fact it was in financial difficulties. The bank enhanced the business’s appearance of solvency by selectively honouring cheques that overdrew its account. When the son’s business failed, the bank sought to enforce the guarantee against the Amadios. The guarantee was set aside by the court as unconscionable. It was held that the guarantee was “manifestly disadvantageous” to the Amadios and that the bank must have been aware of this and took no steps to ensure that the Amadios were properly advised in relation to the transaction.
An employee of Collection House contacted Taylor in 2001 about a debt that was incurred in 1992. The employee claimed that if the debt was not paid legal action might be taken against Taylor. Taylor then agreed to pay $5,000 to settle the debt. However, the next day she sought the advice of a financial counsellor and discovered that the debt was, in fact, statute barred (for an explanation of this term, see “Statute barred debts” in Are you in debt?). Collection House was also aware that Taylor was in difficult personal and financial circumstances at the time. Justice Nettle of the Victorian Supreme Court upheld the decision at VCAT that Collection House had engaged in unconscionable conduct in breach of (the then) section 7 of the FTA. He held that Taylor had been at a special disadvantage because of her lack of knowledge of the matters at issue and that Collection House had wrongly exploited its position of advantage.
In addition to the above, section 21 of the ACL (and s 12CB ASICA) states that:
(1) A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of financial services to a person (other than a listed public company);
engage in conduct that is, in all the circumstances, unconscionable.
Statutory unconscionability is broader than unconscionability within the meaning of the unwritten law. For example, section 21 of the ACL (and s 22CB ASICA) is not intended to be limited to the equitable or common law doctrines of unconscionable conduct (see s 21(4)(a); s 12CB(4)(a) ASICA). This means that claimants will not have to establish that they were at a “special disadvantage” through factors like infirmity, age or a difficulty understanding English, before a court would recognise that unconscionable conduct has occurred.
An interpretative principle also clarifies that courts can examine the terms and the manner and extent to which the contract is carried out. This principle makes it clear that unconscionable conduct is not limited to the bargaining practices leading to the formation of a contract. Unconscionable conduct can also be apparent in the way in which a party exercises its rights under a contract or in the way in which a party behaves once a contract is made. It can also apply to the way in which contracts are renewed, renegotiated or terminated (see s 21(4)(c) ACL; s 12CB(4)(c) ASICA).
Another interpretative principle provides that the prohibition on unconscionable conduct applies to systemic conduct or patterns of behaviour and that there is no need to identify a person at a disadvantage in order to attract the prohibition (see s 21(4)(b) ACL; s 12CB(4)(c) ASICA). Unconscionable conduct is not limited to individual transactions or events. A pattern of systematic conduct or patterns of behaviour occurring over a period of time – which might include an accumulation of minor incidents – can also amount to unconscionable conduct.
Section 22 of the ACL (and s 12CC ASICA) lists the factors a court needs to take into account:
• the respective bargaining strengths of the parties;
• whether the consumer was required to comply with conditions not reasonably necessary for the protection of the other party;
• whether the consumer understood documents relating to the transaction;
• whether any undue influence or unfair tactics were used against the consumer;
• the price and circumstances under which the consumer could have acquired the goods or services from a third party;
• whether the supplier’s conduct was consistent with similar transactions with other customers;
• the requirements of any applicable industry code, or any other code, if the consumer reasonably believed it would apply;
• whether the supplier failed to disclose any conduct or risks that might affect the consumer;
• if there was a contract between the parties, the terms of the contract, whether the parties complied with its terms and whether the terms were negotiable; and
• the extent the parties acted in good faith.
These factors are only a guide and the list is not exhaustive. Conduct may be considered to be unconscionable where there has been serious misconduct or something clearly unfair or unreasonable (see Australian Competition and Consumer Commission v Lux Pty Ltd  FCA 926, below).
As with misleading or deceptive conduct, the prohibition applies to any conduct, not just conduct at the time of entering into a contract.
However, the majority of the case law to date has dealt with procedural unfairness – that is, matters leading up to the formation of a contract, rather than with the substantive unfairness of a contract itself. Moreover, the case law highlights the unsettled nature of what is meant by unconscionable conduct under the ACL.
Australian Competition and Consumer Commission v Keshow  FCA 558
Members of Aboriginal communities in the Northern Territory entered into agreements for the supply of children’s educational materials and household goods with a supplier. The supplier arranged for the consumers to enter into open-ended periodic payment authorities for payment upon receipt by the consumer of the goods. The court found that the consumers were required to comply with conditions that were not reasonably necessary to protect the supplier’s legitimate interests. Both entering into the transactions and the receipt of the periodic payments was found to be unconscionable within the meaning of section 51AB of the TPA.
Excite Mobile supplied mobile telephone services promoted through telemarketing calls, including to Aboriginal communities without comprehensive mobile coverage. A gift of a free holiday and mobile phone was offered as an incentive to signing up a 24-month plan. The plan consisted of a minimum monthly fee, however, customers were also restricted by a daily cap of $2.20 a day for calls and texts on the monthly plan. The daily cap was only disclosed after the customer had agreed to the terms of the contract. In the event of the customer wishing to terminate the contract within the mandatory cooling-off period of 10 days, they were required to pay a $75 “cooling-off fee”. If the phone or its packaging were damaged when returned, the customer was required to pay for the phone outright ($195). Payments were to be by direct debit; telemarketers obtained consent to debit these payments and in the event an account remained outstanding the amount owing would be withdrawn from the customer’s account. The court found that the sales method, including the daily cap, the direct debit arrangement and the “cooling-off charges”, amounted to unconscionable conduct.
An employee of Lux used existing customer databases to contact householders, including the five witnesses who were elderly women in their 80s and 90s. The call was ostensibly to offer a free maintenance check on the householder’s existing vacuum cleaner, but was in reality a ruse to get a “foot in the door”. At each premises, the representative tested the customer’s existing vacuum cleaner and conducted a test that compared that vacuum cleaner with a near-new demonstration model. The representative used the results of the demonstration together with other selling techniques to convince the customer to replace their existing vacuum cleaner with a new Lux model.
The trial judge determined that the conduct was not unconscionable as it did not involve a significant element of “moral obloquy”, which involves deliberate wrongdoing. The judge noted that a sale should not generally be regarded as unconscionable merely for the reason that the purchaser has been persuaded to proceed against their better judgment where the contract contains specific terms that allow it to be cancelled (as an unsolicited agreement, the contract included a mandatory cooling-off period). The decision was overturned on appeal. The full Federal Court found that while “moral tainting” is relevant, whether conduct is against conscience should be considered by reference to the norms of society. The court noted that the norms and standards of today require businesses who wish to gain access to the homes of people for direct selling to exhibit honesty and openness in what they are doing.
The court found that the relative bargaining strengths between the Lux and consumers and the deception combined to show that the sales were a result of pressure tactics. On that basis, the conduct was found to be unconscionable. The court also paid particular regard to two aspects of Lux’s conduct: the failure to comply with the door-to-door selling requirements; and the “deceptive ruse” used to enter the women’s homes.
Most consumer disputes are resolved through alternative dispute resolution or ombudsmen schemes, rather than through the courts (see Taking action as a consumer). Some of these schemes issue guidance or approach documents about how they resolve disputes. For example, the Credit and Investments Ombudsman – who deals with complaints against certain lenders, brokers and other financial firms – has issued ‘Position statement 8: unconscionable conduct’. This document states that asset lending – which involves lending only on the basis of the value of the security, without considering whether the consumer can afford the repayments – significantly increases the likelihood that a financial firm has engaged in unconscionable conduct.
The ACL and the ASICA regulate unfair contract terms in standard form contracts that were entered into after 1 January 2011. For consumer contracts entered into before that date, unfair contract terms were regulated by the Victorian FTA. There are a number of differences between the national unfair contract term laws and the previous Victorian unfair contract term laws. The discussion below outlines the approach taken by the ACL and the ASICA.
Since 12 November 2016, the unfair contract term provisions in both the ACL and ASICA have applied to certain small business contracts. These are described further below.
The ACL and the ASICA provides that unfair terms in covered contracts are void. A term is “unfair” when it:
• causes a significant imbalance in the parties’ rights and obligations arising under the contract;
• is not reasonably necessary to protect the legitimate interests of the supplier; and
• causes financial or non-financial detriment to a party (s 24(1) ACL; s 12BG(1) ASICA).
A court must consider the transparency of the term and the contract as a whole in determining whether a term is “unfair” (s 24(2) ACL; s 12BG(3) ASICA).
Terms that relate to the main subject matter and upfront price of the contract will not be able to be challenged under these provisions. However, payments made under a contract that are contingent on the occurrence or non-occurrence of an event are examinable under the unfair contract terms provisions (s 26 ACL; s 12BI ASICA).
The unfair term laws only apply to standard form consumer contracts and small business contracts. A “consumer contract” is an agreement for the supply of goods or services, or the sale or grant of an interest in land, that is wholly or predominantly for personal, domestic or household use or consumption (s 23(3) ACL; s 12BF(3) ASICA).
This means that the agreement must relate to goods or services that are usually meant for consumers, rather than businesses, and that they are being supplied for use by consumers, rather than businesses. The court will look at the terms of a contract to work out what the purpose of use is, not the intention of the supplier (see Director of Consumer Affairs Victoria v AAPT Ltd  VCAT 1493).
Since 16 November 2016, unfair terms laws have also applied to small business contracts. A “small business contract” is an agreement for the supply of goods or services, or the sale or grant of an interest in land, and both the following apply:
• at least one party to the contract must be a business that employs fewer than 20 employees;
• the upfront price payable under the contract must be less than $300,000 or, if the contract has a duration of more than 12 months, $1,000,000 (s 23(4) ACL; s 12BF(4) ASICA).
The laws do not define “standard form contracts”, but in broad terms, a standard form contract will typically be one that has been prepared by one party to the contract and is not subject to negotiation between the parties; that is, it is offered on a “take it or leave it” basis. Standard form contracts are typically used in many consumer sectors, including telecommunications, finance, gyms, motor vehicles, travel and utilities.
In deciding whether a contract is a standard form consumer contract, a court may take into account any matter it considers relevant. However, the court must take into account:
• whether one of the parties has all or most of the bargaining power;
• whether the contract was prepared by one party before any discussion occurred about the transaction;
• whether one party was required to either accept or reject the contract on the terms as presented;
• whether the other party was given any real opportunity to negotiate the terms of the contract; and
• whether the terms of the contract take into account the specific characteristics of the other party or the particular transaction (s 27(2) ACL; s 12BK(2) ASICA).
Further, a consumer contract is presumed to be standard form unless the business relying on the term proves otherwise (that is, it is a rebuttable presumption that a consumer contract is standard form) (s 27(1) ACL; s 12BK(1) ASICA).
The ACL provisions apply to all other consumer contracts, except for:
• certain shipping contracts; and
• the constitutions of companies and managed investment schemes (s 28 ACL).
As a consequence of the operation of section 15 of the Insurance Contracts Act 1984 (Cth), the provisions do not apply to insurance contracts regulated by that Act.
A non-exhaustive, indicative “grey-list” of examples of types of terms that may be unfair is included in the provisions (s 25 ACL; s 12BH ASICA). These examples are subject to the unfair terms test and provide statutory guidance on issues of concern. They do not deem or presume particular types of terms to be unfair. Further examples may be added to this list by regulation. This “grey-list” includes:
• a term that permits one party (but not the other) to avoid or limit performance of the contract;
• a term that permits one party (but not the other) to terminate the contract;
• a term that penalises one party (but not the other) for a breach or termination of the contract;
• a term that permits one party (but not the other) to vary the terms of the contract;
• a term that permits one party (but not the other) to renew or not renew the contract;
• a term that permits one party to vary the upfront price payable without the right of the other to terminate the contract;
• a term that permits one party unilaterally to vary the characteristics of the goods or services to be supplied, the interest in land to be sold or granted, or the financial products or services to be supplied;
• a term that permits one party unilaterally to determine whether the contract has been breached or to interpret its meaning;
• a term that limits one party’s vicarious liability for its agents;
• a term that permits one party to assign the contract to the detriment of the other without the other’s consent;
• a term that limits one party’s right to sue another party;
• a term that limits the evidence one party can adduce in proceedings relating to the contract; and
• a term that imposes the evidential burden on one party in proceedings relating to the contract.
The ACCC, ASIC and the state and territory consumer protection agencies have prepared A Guide to the Unfair Contract Terms Law, which provides further information about the unfair contract term laws, how they apply and the effect of the law. The guide can be found at the ACCC’s website at www.accc.gov.au.
In 2013, the ACCC also published a report on the outcomes of its compliance activities with respect to unfair contract terms. The report indicated that many businesses amended standard form contracts as a result of certain ACCC activities. The types of contract terms that were the focus of the ACCC were:
• terms that allow the business to change the contract without consent from the consumer;
• terms that cause confusion about the agency arrangements that apply and that seek to unfairly absolve the agent from liability;
• terms that unfairly restrict the consumer’s right to terminate the contract;
• terms that suspend or terminate the services being provided to the consumer under the contract;
• terms that make the consumer liable for things that would ordinarily be outside of their control;
• terms that prevent the consumer from relying on representations made by the business or its agents;
• terms seeking to limit consumer guarantee rights;
• terms that remove a consumer’s credit card chargeback rights when buying the service through an agent.
Australian Competition & Consumer Commission v Bytecard
Bytecard (better known as NetSpeed Internet Communications) was a provider of internet access services throughout Australia. The case concerned the terms and conditions in Netspeed’s standard contract in use during the period from 1 January 2011 to April 2013.
The ACCC was concerned that a number of terms were unfair terms of a consumer contract, and hence void under section 23 of the ACL. Under its terms, NetSpeed was able to:
• unilaterally vary the amount payable under its contracts without prior notice, however it did not have to allow consumers to terminate to avoid the obligation to pay the varied amount or an opportunity to negotiate;
• require the consumer to indemnify NetSpeed in any circumstances (including where the consumer was not in breach of the contract and any loss may have been caused by NetSpeed’s breach and even wilful misconduct), yet there was no corresponding term applicable to NetSpeed;
• terminate its contracts at any time without cause, while the consumer’s right to terminate was subject to conditions.
It was agreed that each of the terms are unfair as they would cause a significant imbalance in the parties’ rights and obligations arising under the contract; they were not reasonably necessary in order to protect the legitimate interests of NetSpeed; and they would cause detriment (whether financial or otherwise) to a consumer if applied or relied on by NetSpeed.
Chrisco offered contracts that allowed its customers to purchase Christmas hampers by instalments through the year. Chrisco’s order form contained a term that provided that where a customer had fully paid for an order in one year, the customer would automatically roll into a “HeadStart Plan” for the next year. The term allowed Chrisco to continue withdrawing payments from a customer’s bank account or credit card and the money withdrawn could be put towards any future orders made by the customer. If a customer did not place another order, the money would be refunded without interest. Chrisco’s contract gave customers an opportunity to opt out of the HeadStart Plan.
The court found that the term was unfair because it caused a significant imbalance in the parties’ rights and obligations arising under the contract. The judge found that although the HeadStart term gave Chrisco a right to withdraw money from the customer’s account, the customer did not have any corresponding right under the contract. The judge also noted that Chrisco’s customers were generally low- to middle-income earners and the goods in the hampers were generally priced above retail prices.
As stated, an unfair contract term is “void”. This means that it should be treated as if it had never come into existence. Consumers can therefore rely on these provisions as a defence to debt collection or contract enforcement actions. Importantly, a contract containing an unfair term or a prescribed unfair term will continue to bind the parties if it can exist without that term, even though the term itself is void.
Consumers can also commence their own action to enforce their rights or to recover loss or damage incurred for breach of the unfair contracts laws.
The ACCC, ASIC and state and territory consumer protection agencies also have power to apply to a court for a declaration that a term of a contract is an unfair term. If a court makes such a declaration, it may also order:
• an injunction;
• an order prohibiting payment or transfer of moneys or other property;
• an order to provide redress to non-party consumers; or
• any other order the court thinks appropriate.