Competition & Consumer Law Update – June 2019 Edition
COMPETITION AND CONSUMER LAW UPDATE – JUNE 2019 EDITION
This is the first in a monthly series detailing updates on developments in competition and consumer law in Australia, including the activities of Australia’s competition and consumer regulator, the Australian Competition and Consumer Commission (ACCC), published judgments, newly issued proceedings and any relevant changes in the law.
It is important for any company doing business in Australia to stay on top of developments in Australian competition and consumer law, particularly now that penalties for breaching the Australian Consumer Law (ACL) have risen dramatically and the courts have clarified that the ACL may apply to overseas businesses selling products or services to Australian consumers, even if they do not have a physical presence in Australia.
Claims relating to “flushable” wipes found not to be misleading
In ACCC v Kimberley-Clark Australia Pty Ltd  FCA 992, Justice Gleeson dismissed the ACCC’s claim that Kimberly-Clark misled consumers regarding the use of the word “flushable” on its toilet wipes. The ACCC argued that use of the word was misleading because the wipes did not break apart quickly when flushed (causing harm to sewerage systems) and therefore should not have been considered “flushable”. However, Justice Gleeson found that there was insufficient evidence concerning household sewerage blockages (with roughly one complaint per ten million wipes sold) and was not prepared to accept that Kimberly-Clark’s wipes specifically had caused harm to municipal sewerage systems, even though wipes in general are a “significant management problem”. Kimberly-Clark admitted that separate claims that the wipes were “Made in Australia” were misleading when in fact the wipes were made in Germany, South Korea and the UK (the hearing on relief in relation to these claims will be held at a later date). The ACCC has until 19 July to appeal the decision.
Birubi Art ordered to pay $2.3 million penalty for misrepresenting its products were “Australian Aboriginal art”
In ACCC v Birubi Art Pty Ltd (in liq) (No 3)  FCA 996, the Federal Court ordered Birubi Art to pay a penalty of $2.3 million for falsely representing that its products were hand painted by Australian Aboriginal persons and were made in Australia, when they were actually made in Indonesia. In determining the penalty, Justice Perry paid particular attention to the need to deter other businesses from falsely representing a connection with Aboriginal Australians due to the cultural and economic harm which may be caused by such misappropriation and for this reason considered that the award was appropriate, despite Birubi Art being in liquidation. However, his Honour made an order preventing the ACCC from enforcing the penalty order until the Court orders otherwise.
Jetstar ordered to pay $1.95 million penalty for misleading consumers about refund rights
Following Jetstar admitting that it misled consumers and made false representations about their refund rights, the Federal Court, in ACCC v Jetstar Airways Pty Ltd  FCA 797, ordered that the $1.95 million penalty proposed by both Jetstar and the ACCC is an appropriate penalty. The misrepresentations in question concerned statements:
- on Jetstar’s website that certain airfares were not refundable; and
- in Jetstar’s terms and conditions that certain consumer rights under the ACL did not apply to the airline’s services.
In December 2018 (as part its broader enforcement strategy to tackle consumer issues in the airlines industry), the ACCC accepted court enforceable undertakings from four Australian airlines (including Jetstar) to review their refund policies, compliance programs, websites and booking systems to ensure compliance with the consumer guarantee obligations under the ACL.
ACCC commences proceedings against franchisor Jump Swim for false representations
Consistent with its 2019 enforcement priority of curtailing misconduct by franchisors , the ACCC has commenced proceedings against the collapsed franchisor Jump Swims (Jump Loops Pty Ltd and its parent company Swim Loops Holdings Pty Ltd) and its director, Ian Campbell, alleging that Jump Swims misrepresented to franchisees of its swimming school business that they would have an operational school within 12 months. The litigation follows an investigation by two Fairfax newspapers, The Age and The Sydney Morning Herald, which found that many franchisees still did not have an operational swim school some two years after signing the franchise agreement. In June 2019, the ACCC was granted an ex parte freezing order against the assets of Jump Swim and Mr Campbell in ACCC v Campbell  FCA 886. Find the ACCC media release here. Media reports suggest that Jump Loops has recently gone into liquidation but that the ACCC will be seeking leave to proceed with its claims.
Optus sued for misleading NBN messages
On 27 June 2019, the ACCC commenced proceedings against Optus, one of Australia’s largest telecommunications service providers, alleging that it made false representations and mislead consumers by advising them that their existing internet service would be “disconnected very soon” so as to encourage them to switch to Optus’ NBN service. The ACCC alleges that this was a misrepresentation because the recipients of the advertisements (Optus’ mobile customers) were contracted to other ISPs, meaning that Optus had no reasonable basis to assert that their service would be disconnected. Find the ACCC media release here.
ACCC alleges that Sony’s PlayStation refund policy was misleading
The ACCC has instituted proceedings in the Federal Court against Sony, claiming that the company told Australian PlayStation customers that it did not have to provide a refund if a faulty game had been downloaded or if 14 days had passed since its purchase. The ACCC also alleges that Sony told customers it could provide refunds in the form of the virtual PlayStation currency. According to the ACCC, this is a breach of the ACL, as consumer rights continue to exist even after a digital product has been downloaded, and refunds must be offered in the form of the original payment. Find the ACCC media release here.
ACCC releases draft guidelines on the repeal of the intellectual property safe harbour
The ACCC has released draft guidelines on the repeal of subsection 51(3) of the Competition and Consumer Act 2010 (Cth). Following the repeal, as of 13 September 2019, arrangements involving the licensing or assignment of some intellectual property rights which were previously exempt from many of the anti-competitive conduct prohibitions will now be subject to Australian competition law, including the prohibition on engaging in cartel conduct. The ACCC draft guidelines are intended to ensure that parties understand their obligations under the amended legislation, including how it will impact existing agreements. Stakeholders are invited to comment on the draft guidelines by 19 July 2019. More information on these reforms is available here and here.
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