e-commerce: online shopping

Whether you purchase goods or services online or in a shop, the same laws apply in Australia, but are less clear with overseas traders. Below is some advice before buying online or bidding at an internet auction and what to do if something goes wrong.

The same laws apply online

There are no laws in Australia that specifically deal with online shopping. Legally the same requirements exist whether a purchase is conducted over the internet or at a shop. So when you buy goods or services over the internet from an Australian trader, Australian consumer protection laws apply.

Consumer protection laws

These are discussed in detail in Consumers, contracts, the internet and copyright.

The most significant issues in protecting the rights of an Australian consumer shopping online are:

unconscionable conduct (see Consumer protection laws);

misleading or deceptive conduct and “passing off” (i.e. pretending someone else’s goods or services are yours) (see Consumer protection laws);

conditions and warranties (see How contract law works and Consumer guarantees).

Actions you can take if you believe any of these rights have been breached are covered in Taking action as a consumer.

Other consumer protection

If you are buying goods and/or services over the internet, other consumer protection laws may also apply, depending on your circumstances.

Consumer credit laws regulate the purchase of goods and/or services by credit; for example, credit cards, home loans, personal loans, associated mortgages and leases.

The ePayments Code regulates consumer electronic payment transactions, including ATM, EFTPOS and credit card transactions, online payments, internet and mobile banking and BPAY.

The ePayments Code replaces the Electronic Funds Transfer Code of Conduct (“EFT Code”) and provides protections in cases of fraud and unauthorised transactions.

The Australian Securities and Investments Commission (ASIC) administers the ePayments Code, which includes monitoring compliance and reviewing the ePayments Code regularly.

The Electronic Transactions Act 1999 (Cth) applies to all laws of the Commonwealth. It provides that if Commonwealth law requires information to be given in writing or with a handwritten signature, this requirement is deemed to be met if the information is given electronically. Similarly, if written records are required to be kept, an electronic version of the documents satisfies this requirement.

The equivalent state legislation is the Electronic Transactions (Victoria) Act 2000 (Vic).

For more information, see Understanding credit and finance, Mortgages, credit cards and other finance products, Credit reporting.

Protect yourself when shopping online

Before you buy goods or services online, you should find out the following information.

Who is the trader?

Establish who is selling the goods or services, including details of the trader’s business: their physical address, business registration details (e.g. business name and ACN/ABN), and contact details.

On ASIC’s website (www.asic.gov.au), you can search for registered business names for free. The ACNs and ABNs of Australian organisations are listed at www.asic.gov.au.

What are the transaction details?

Knowing the full details of the transaction before entering into an agreement with a trader will help you to know what to expect if you buy the trader’s goods or services. Details you should obtain include:

a clear description of the goods or services;

the full cost in Australian dollars of the goods or services being purchased, including costs like delivery, insurance and credit card charges;

any relevant return, exchange, refund and warranty policy;

when you will receive the goods or services;

the terms of any insurance over the goods or services bought (e.g. whether it includes damage during delivery);

the terms and conditions of the agreement. Read them carefully as they outline what you agree to be bound by. Always print out any terms and conditions that you agree to, because traders may change them subsequently. Keep any correspondence (including emails) between you and the trader, and print out any forms that you fill in and any offers on webpages that you accept, as they will be relevant to your transaction;

the trader’s policy on handling complaints and resolving disputes.

Are there any privacy and security concerns?

Always check if there is a privacy policy on the trader’s website. The policy should outline why the trader collects your personal information, and how the trader will use this information. Traders might want to use your personal information for marketing purposes or to sell to third parties. The trader’s privacy policy should tell you if this is so.

If there is no privacy policy on the trader’s website, you should be concerned because the trader is not telling you what will happen to the personal information you give them.

Consumers often use credit cards when shopping online. The nature of the internet means that transmitted information may be intercepted by a third party. To minimise the risk, make sure that the trader is using a secure system for transferring information during a transaction. The most common method of security used in online shopping is the Secure Sockets Layer (SSL) technology. SSL technology encrypts data transmitted to protect the information being sent, including your credit card details.

An unbroken key or padlock at the bottom of a web browser indicates there is a secure connection, and that the information you send will be encrypted. To obtain information about the security used by a website, double-click the unbroken key or padlock.

Internet auctions

Consumer protection laws

Through internet auction sites (e.g. eBay), individuals can enter into transactions with each other. These transactions are often referred to as consumer-to-consumer (C2C) transactions.

If the website operator has control over the goods being auctioned it is likely to be a business-to-consumer (B2C) transaction. If the website is acting as a trading centre, it is more likely to be a C2C transaction, provided that the vendor is not a business using the site to clear stock.

C2C transactions conducted through internet auctions may be regarded as private sales between individuals, and not as trade or commerce, and are therefore not covered by the Competition and Consumer Act 2010 (Cth). This does not mean that the consumer has no rights in this situation, but they have fewer rights than if consumer protection laws applied.

If you buy goods or services through an internet auction and consumer protection laws do apply (because you bought from a business, or in the course of trade or commerce) you may still have lower protection than if you had not bought the item at an auction. This is because some of the implied conditions and warranties do not apply when the goods are purchased at an auction.

The specific law varies from state to state. For example, in Victoria, according to the Goods Act 1958 (Vic), goods bought at auction should be of merchantable quality and match the description given or the sample shown.

Before bidding at an internet auction

Before bidding at an internet auction, read the auction site’s policies, rules, terms and conditions to understand the service that the auction site is providing and what to expect. If there is a “how to use” tutorial on the auction website, go through it and familiarise yourself with the services offered. Read what the site says about how they handle frauds and complaints. Some sites offer protection to successful bidders in the form of free insurance of up to a specified amount if things go wrong (e.g. if the item purchased is not delivered).

Also before the auction, verify the seller’s identity and contact details and make arrangements with the seller about what to do if there is a problem. If you have any queries, contact the seller for answers. If their answers are unsatisfactory, do not make a bid.

Check for any comments or ratings about the seller on the auction website. Comments from previous purchasers will help you decide whether to participate in the auction.

Know the product that interests you. Look at the market or retail price, written descriptions and photographs of the product, and any warranties.

Find out the terms of sale, including: who pays for shipping and handling; whether there is insurance, what it covers, who pays for it and what it costs; whether there is a return policy; and what payment mechanism can be used.

Bidding at an internet auction

Set the maximum price that you are willing to pay for the goods or services, and do not exceed it. The maximum price should include all costs, including insurance, taxes, shipping and handling. Setting a limit on what you are willing to pay helps to prevent you from bidding an excessive amount for an item.

Note that prices can be inflated by fake bids; although they are not allowed by auction websites, fake bids do occur.

A good method of payment when shopping online is to pay the supplier when the product is delivered (i.e. cash on delivery (COD)). If the seller does not agree to such an arrangement, a credit card should be used because of the “charge-back” service that many financial institutions attach to their credit cards (i.e. reversing the charge if the seller fails to deliver the product).

Sending a bank cheque or money order before you receive the goods or services exposes you to a higher risk of fraud. If a seller will not send the product unless you make such a payment, you have to decide if you are willing to take the risk.

PayPal is an electronic payment system commonly used on auction sites and is an alternative to cheques or money orders. The recipient of a PayPal payment gets a financial transfer from PayPal, which processes payments for a fee.

An alternative is to use an “escrow agent”. An escrow agent’s role is to hold the payment for the buyer until they receive the product. Escrow agents are used to protect both parties from fraud. They usually charge the buyer a percentage of the cost of the product. If you use an escrow agent, familiarise yourself with the terms of the service offered, and check if the agent is reputable.

Always keep records, either by saving or printing details of the transaction, including the product description (a written and photographic description), the seller’s identification, every bid made, all emails between you and the seller, and every receipt or record provided.

Consider using the insurance offered by the auction site (or another organisation) to protect yourself if something goes wrong.

If something goes wrong

Post feedback about the seller on the auction website

Many auction websites allow you to post a comment about and/or ranking for a trader you bought goods or services from. This allows subsequent users to be warned about them, but it will not provide you with any refund or exchange.

Make a claim to the auctioneer

Some auction websites offer free insurance. Check the terms and conditions of the insurance policy on the auction website to see if you can make a claim. You will probably need to first apply to your credit card provider for a “charge-back” (seeBidding at an internet auction”) before you can make a claim with the auctioneer.

Complain about the auction website

Although you did not purchase the goods or services from the auction website but from a trader via the website, the auction website might have breached your rights as a consumer.

Case example: online auctions

Evagora v eBay Australia & New Zealand Pty Ltd [2001] VCAT 49

Few complaints about internet auctions have come before the courts. However, in Evagora v eBay Australia & New Zealand Pty Ltd [2001] VCAT 49, VCAT determined that hosting online auctions is providing a service. This means that a complaint about the provision of this service can be regarded as a fair trading dispute under section 107 of the Fair Trading Act 1999 (Vic) (“FT Act”).

This decision appears to be precedent for bringing an action at VCAT alleging breaches of the FT Act. For further information, see  Consumers, contracts, the internet and copyright.

Purchasing from overseas

Consumer protection laws

When you buy goods or services on the internet from an overseas trader, it can be uncertain whether Australian consumer protection laws apply or whether an Australian court has any jurisdiction.

The Competition and Consumer Act 2010 (Cth) applies to overseas traders “carrying on business” (i.e. doing business) in Australia, but it is not clear whether this includes sales made via the internet by overseas traders.

If an overseas internet trader is found to have been carrying on business in Australia, then Australian consumer protection laws apply, even if the contract states otherwise (e.g. “This contract is governed by the laws of California”).

If there is no Australian consumer protection (i.e. the trader is found not to have been carrying on business in Australia), then only the consumer protection laws of the trader’s country (if any) apply. These may provide you less rights than if you had purchased the good or service within Australia.


NOTE

Even if Australian consumer protection laws apply and an Australian court has jurisdiction over an overseas trader, it may be too difficult and/or too expensive to enforce a judgment against a trader who has no assets in Australia.


Australian customs service and GST

When an overseas trader sends goods to a consumer in Australia, the Australian Customs Service (ACS) checks whether the goods should be cleared for entry into Australia.

Prohibited or restricted goods are seized; other goods may require a permit. Imported goods may also be subject to a customs duty. The ACS’s classification of the goods, and the country of origin, is relevant in determining the duty payable by the importer (i.e. the consumer).

In addition, the ACS levies a Goods and Services Tax (GST) on imports above a “low value threshold” (except tobacco and alcohol). The method of ordering (electronic, phone or mail) does not affect whether GST is payable.

Tips for purchasing from overseas

Find out from the ACS whether you can legally import the goods you wish to buy, and whether the goods are subject to GST or other taxes. Goods bought from overseas can have significant delivery expenses, so always check the delivery charges carefully. Also, overseas traders may not list the purchase price in Australian dollars, so you should do the conversion.

Always check the overseas trader’s website for any terms and conditions that state which country’s laws apply, and which country’s courts would be relevant to your bringing an action in case of a dispute. It is common practice for an overseas trader to designate the law and courts as being in the country in which the business is located. However, there is some legal uncertainty in this area.

Internet scams

Fraud occurs online, just as it does in the offline world. Because the internet allows for cross-border transactions, it may be difficult to seek redress if you are the victim of online fraud.

Your options when things go wrong

Contact the trader

Contact the trader/seller via telephone, fax, post or email to try to resolve the dispute. Explain the problem and what you want (e.g. a refund, or return of the goods). Keep records of all your communications with the trader. It is recommended that you write a letter, so there is a record of your complaint, which can be used if further action is taken.

For help in writing a complaint letter, visit the consumer assistance portal on the Australian Competition and Consumer Commission (ACCC) website (www.accc.gov.au/consumers).

Contact your payment card provider

If you purchased the goods or services with a payment card (e.g. credit card, debit card or stored value card), there may be protections available. For example, some credit cards have a “charge-back” facility (seeBidding at an internet auction”).

Contact an industry body

Many traders are members of an industry body or professional association that follows a Code of Conduct. If the trader belongs to such an organisation, the industry body may be able to help resolve your dispute. The ACCC (www.accc.gov.au/consumers) provides comprehensive information on where to go to make a complaint.

If the trader is based overseas, the relevant consumer protection agency of that country may be able to advise you whether the trader belongs to an appropriate industry organisation.

Contact a consumer protection agency

If the problem is not resolved, contact the consumer affairs agency for the state or territory where the trader is located. If you are in a different state or territory from the trader, you can contact the ACCC.

The ACCC may also be able to help you if the trader is overseas. When dealing with overseas traders, you can also visit www.econsumer.gov, which is a joint project of consumer protection agencies from around the world that provides information for international consumers and facilitates cross-border complaints.

Take legal action

If your dispute has not been resolved, you can take it to the relevant court or tribunal. However, legal action can be costly and may only be worth pursuing if the dispute concerns a significant sum of money.

Legal action against an overseas trader is significantly more expensive than against a local trader, and even if you are successful, a judgment may be too difficult to enforce. Before proceeding, obtain legal advice about your prospects of recovering damages and an estimate of your legal costs.