Earlier this year, the Australian Competition and Consumer Commission (ACCC) released its Compliance and Enforcement Policy (Policy) for 2015. Among other matters, the Policy sets out the ACCC’s priorities for enforcement-related activities for 2015.
This Focus Paper summarises the Policy which provides an insight into the types of conduct which will be on the ACCC’s radar this year.
What are the ACCC’s Objectives?
When enforcing compliance with the Competition and Consumer Act 2010 (the CCA) and the Australian Consumer Law (ACL) (Schedule 2 to the CCA), the ACCC aims to:
- encourage competition and correct market failures;
- protect consumer interests and safety; and
- encourage fair trading.
As the ACCC receives thousands of complaints each year and is unable to investigate all of them thoroughly, the Policy gives guidance on how the ACCC determines which complaints to investigate.
How does the ACCC decide what complaints to investigate?
When considering which complaints to investigate, the ACCC prioritises cases that are likely (or have the greatest potential) to cause the most consumer detriment or to stifle competition.
In particular, the ACCC considers whether an issue is new or emerging and its likely impact on consumers and competition. The ACCC states categorically in its Policy that it will always consider “enduring priorities” to be anti-competitive agreements and practices, cartel conduct and the misuse of market power, as well as product safety issues.1
2015 ACCC Priorities
In the 2015 Policy, the ACCC indicates that it prioritises the following matters:
1. Truth in Advertising. Truthful advertising will continue to be a priority for the ACCC in 2015. This follows on from its successes in the Federal Court in 2014 where, among other things, on the ACCC’s application:
- Reebok’s claims that its shoes, when worn, toned buttocks; and
- an egg supplier’s claims that its eggs were “free range”, were found to be misleading and deceptive.
2. Health and Medical Sectors. This is a new area of focus for the ACCC. In his speech launching the Policy, ACCC Chairman Rod Sims noted that the ACCC has received complaints about both competition and consumer issues, such as conduct seeking to restrict access to, for example, not only products, manufacturers and facilities but also access to patients. The ACCC has also received complaints about medical professionals, in particular, relating to conduct which may be misleading and deceptive or unconscionable.
3. Cartel Conduct. At the beginning of 2015, the ACCC had approximately twelve cartel investigations in progress. A group exists within the ACCC to investigate specifically cartel conduct of a serious nature. In 2015, the ACCC will focus, in particular, on cartel conduct in government procurement as it considers that government procurement processes are vulnerable to such conduct.2
4. Industry Codes. In 2015, the ACCC will focus on protecting small business, in particular, by ensuring compliance with the newly revised Franchising Code of Conduct (the Code). From 1 January 2015, changes to the Code now enable the ACCC to:
- issue infringement notices if the ACCC considers the Code has been contravened ($8,500 for companies and $1,700 for individuals); and
- if it considers breaches of the Code are serious, seek penalties from a Court up to $51,000.
The ACCC will also focus on the new Food and Grocery Code which covers the behaviour of retailers and wholesalers when dealing with suppliers. While a voluntary Code, if retailers and wholesalers sign up to the Code, enforcement action may be commenced against the retailer or wholesaler by the ACCC if the ACCC considers that the Code has been breached.
5. Product Safety. In his speech launching the Policy, Rod Sims noted that product safety was a long-term priority of the ACCC. Of particular concern to the ACCC are goods which are imported from countries where production costs are lower. The ACCC considers that suppliers should ensure that the quality of the goods they import is assured so that there are no hidden costs associated with unsafe goods, for example, recalls and legal proceedings.
6. Online. Since 2011, the ACCC has prioritised the consideration of issues in the online sector to ensure that consumers have the same rights as in the “bricks and mortar world”. The online environment continues to be a priority in 2015. In this regard, the ACCC considers the delay by online businesses in responding to consumer complaints concerning delivery and/or products supplied online is becoming more widespread.
7. Highly Concentrated Sectors. Recently, the ACCC has focused on the supermarket and fuel sectors. For example, in late 2014, Coles was found to have engaged in unconscionable conduct in its commercial dealings with a number of suppliers and was ordered to pay penalties of $10 million plus costs. Rod Sims considers that the Coles proceedings “sets a benchmark for conduct which can be applied to other businesses and other sectors”.3 The ACCC will continue to focus on these sectors and more broadly to ensure that big businesses act appropriately when dealing with smaller suppliers.
8. Disruption of Scams. In 2015, the ACCC will continue to seek to disrupt dating scams due to the continuing significant losses reported by victims of the scams. Currently the ACCC uses “financial intelligence” to identify and contact Australians, who have been transferring money to West African countries, to put them on notice that they may be caught up in a scam.4
9. Vulnerable Consumers. Consumer protection issues which affect indigenous consumers as well as consumers who may be disadvantaged or vulnerable (for example, the elderly or new arrivals to Australia, who may not be aware of their consumer rights) will continue to be a priority for the ACCC this year. Repeat of the Carbon Tax. The ACCC will continue to monitor that cost savings from the repeal of the carbon tax are being passed through to consumers.
Special Mention: Credence Claims and Door-to-Door Sales
While the Policy has identified the above areas as specific priorities for 2015, the Policy notes that the ACCC will continue to monitor previously identified priority areas and take enforcement action if required. Singled out for special mention are credence claims and door-to-door sales.
A “credence” claim is the use of a statement which makes a qualitative claim, for example, a statement that a skincare product is “organic” or that eggs are “free range”.
In particular, the Policy notes that positive outcomes have been achieved in respect of credence claims and door-to-door sales and that the ACCC will monitor these areas vigilantly so that unlawful practices in connection with these areas do not re-emerge. We have previously written about ACCC action in respect of both credence claims and door-to-door sale. Our Focus Papers on these topics are available on our website.5
What does this mean for the Direct Selling Sector?
Direct selling businesses should continually evaluate their compliance with the CCA and the ACL, in particular, to reduce any risk that they may be targeted by the ACCC for investigation and enforcement action. Care should be taken to ensure that their businesses’ independent representatives are also aware of their compliance obligations. In this regard, we note that:
- Advertising claims and marketing collateral must always be capable of substantiation. Claims should be truthful. Care should be taken to remind independent representatives regularly that they must always be mindful of this requirement when making product and income claims.
- Product safety should be paramount. If importing products (or product components), care should be taken that the products, or their components, are of such quality that safety risks will not arise.
- Addressing customer complaints, whether the complaint is in respect of products or delays in delivery, should be addressed promptly and adequately to ensure that the customer does not escalate their complaint to a regulator, such as the ACCC or the equivalent State or Territory department. In particular, this includes honouring the statutory guarantees contained in the ACL should a product supplied fail to meet the statutory guarantees.
Where sales fall within the ambit of the “unsolicited consumer agreement” (UCA) provisions of the ACL, direct selling businesses should also continue to ensure that their independent representatives comply with the various requirements for UCAs contained in the ACL, when relevant.
Given the ACCC’s priorities, it will be interesting to see which complaints the ACCC decides to investigate in 2015 and take enforcement action in respect of, if the ACCC considers enforcement action is warranted.