Going to Market - consumer law update - May 2016

Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 4 Privacy Commissioner 4 Australian Competition and Consumer Commission (ACCC) 5 Australian Securities and Investment Commission (ASIC) 6 1 | May 2016 G ing to Market Consumer law update Cases New Zealand Courts Barfoot & Thompson appeal on shared commission dismissed The Court of Appeal has upheld an unsatisfactory conduct finding by the Real Estate Agents Disciplinary Tribunal against two Barfoot & Thompson agents who had purchased properties listed with the company and received a cut of the commission. Barfoot & Thompson’s internal policy allowed an agent to deal directly with the vendor to buy a property listed with the company. However, the Court of Appeal upheld the High Court decision that, under s 134 of the Real Estate Agents Act 2008, such direct contact requires the informed consent of the client. Both Courts noted that agents were frequently privy to confidential information that would be helpful to purchasers, such as financial pressures on the vendor. Consequently, they owed both contractual and fiduciary duties to the client. The Real Estate Agents Authority subsequently issued a statement reminding real estate agents of their legal duties and fiduciary obligations to vendors. Link: Stuff report Going to Market is a monthly publication tracking developments in consumer legislation, regulation and case law. The risks for organisations from breaching consumer law are high with increased penalties, new fair trading and consumer credit regimes and more intensive regulatory activity. Our team of consumer law specialists can assist you in all areas of consumer law, including advice on product liability and recall, compliance programmes, contracts review, defending regulatory investigations and prosecutions as well as commercial litigation focusing on consumer law. Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 4 Privacy Commissioner 4 Australian Competition and Consumer Commission (ACCC) 5 Australian Securities and Investment Commission (ASIC) 6 2 | May 2016 G ing to Market Consumer law update Australian Courts Reckitt Benckiser penalised $1.7 million for misleading Nurofen “Specific Pain” products The Federal Court has ordered Reckitt Benckiser (Australia) Pty Ltd to pay a penalty of $1.7 million for representing that each product in its Nurofen range was formulated to treat a specific type of pain – migraine, tension headache, period, and back pain – when they all contained the same active ingredient and were no more or less effective across the different pain sources. The Court found that the products did treat the pain as advertised but that the claims were still misleading and that the consumers may have suffered financial loss due to the price premium. In December 2015 Reckitt Benckiser (New Zealand) Ltd provided an enforceable undertaking to the Commerce Commission to stop the retail sale of Nurofen Specific Pain products. The Commission was of the view that the company had likely breached the Fair Trading Act 1986 (FTA), but is yet to report on its investigation. Link: ACCC media release Europcar fined $100,000 penalty for false and misleading representations The Federal Court has declared that a number of terms in Europcar Australia’s 2013 standard rental agreement were unfair, and therefore void. In particular, the contract: • held consumers liable for loss or damage, regardless of whether the consumer was at fault, and • made consumers liable for vehicle loss or damage upon breach of the rental agreement, regardless of the severity of breach or whether it caused the loss or damage claimed. The Court found that the terms created a significant imbalance in the parties’ rights and obligations and were not reasonably necessary to protect the legitimate interests of Europcar. The Court also found that, from December 2013 to July 2014, Europcar made false or misleading representations that consumers’ liability for vehicle accident damage would be limited to a “Damage Liability Fee” of $3,650, and could be further reduced by the purchase of “extra cover” products. In fact customers faced unlimited liability in cases of overhead, underbody, or water damage, even where “extra cover” had been purchased. The Court noted that the penalty imposed reflected Europcar’s “open and responsive engagement” with the ACCC’s concerns from the moment they were first raised. Link: ACCC media release Free Range Egg Farms penalised $300,000 for false “free range egg” claims The Federal Court of Australia has imposed a penalty of $300,000 on Derodi Pty Ltd and Holland Farms Pty Ltd, for making false or misleading representations in their labelling and promotion of eggs as “free range”. The advertisements had claimed that the hens were able to move about freely on an open range when in fact conditions on some of the farms (including flock size in the barns and the nature of the physical openings) rendered free movement impossible. The case follows previous investigations by the ACCC into “free range” claims made by egg producers. Link: ACCC media release Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 4 Privacy Commissioner 4 Australian Competition and Consumer Commission (ACCC) 5 Australian Securities and Investment Commission (ASIC) 6 3 | May 2016 G ing to Market Consumer law update Commerce Commission Car finance company failed to credit early repayments Motor vehicle lender Dealer Finance Limited (Dealer Finance) will repay or credit at least $440,000 to customers who were overcharged interest on their loans. Under the Credit Contracts and Consumer Finance Act 2003 (CCCFA), if a contract does not expressly provide that payments will be credited in accordance with a specified schedule, lenders must credit payments against the unpaid balance as soon as practicable. The Commission found that Dealer Finance had failed to do this, with the result that a daily interest rate was charged to a balance that customers had partly repaid. Link: Commerce Commission media release Commission considering Fair Trading Act claims against Euro Corporation and Steel & Tube Steel & Tube is allowed to recommence selling steel mesh on the New Zealand market after giving the Commerce Commission an enforceable undertaking that will demonstrate compliance with the New Zealand/ Australian standard through the use of external testing. Similar undertakings have been given by Euro Corporation. Both retailers failed strength tests ordered by the Commission after the discovery in March 2016 that Steel & Tube had been testing its steel mesh in-house while attributing the test certificates to an independent laboratory. The Commission continues to investigate previous claims from both companies that the mesh complied with the standard when it did not. Links: Radio New Zealand report and Commerce Commission update Mobile traders plead guilty to charges under CCCFA and FTA Three mobile traders have pleaded guilty to breaching the CCCFA by failing to provide borrowers with the required credit contract information in a clear and concise way. These are the first prosecutions to be brought by the Commission following amendments last year to the CCCFA. The charges follow the Commission’s year-long investigation into the mobile trader (or truck stop) industry. The inquiry found that 31 out of the 32 traders identified did not comply with all of their obligations under the FTA and CCCFA. Link: Commerce Commission media release Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 4 Privacy Commissioner 4 Australian Competition and Consumer Commission (ACCC) 5 Australian Securities and Investment Commission (ASIC) 6 4 | May 2016 G ing to Market Consumer law update Advertising Standards Authority (ASA) Mercury Energy clarifies Fair Use policy in Good Energy promotion Mercury Energy has changed its terms and conditions relating to its “Free Good Energy Day” promotion following a complaint to the ASA. The complainant said that the fair use policy contained in the small print would see consumers charged for electricity use that exceeds their average daily consumption, which significantly diminished the offer of a day of free power. Mercury Energy clarified that that was not the effect of the term, but said it had removed the fair use policy to avoid customer confusion. Link: ASA decision Removing “save” rescues Domino’s Pizza, preserves advertised promotion Domino’s Pizza agreed to modify a promotional flyer after a customer complained that it gave the public a misleading impression that they were saving money when the price quoted was the regular menu price. The offer claimed: “Save. Cheaper Everyday Value Pizza Range Pizzas from $4.99. Quote Code 56784. Valid until 17/4/16”. Domino’s agreed to remove the word “save” to avoid confusion. But it defended the brochure on the basis that the coupon code would allow customers to redeem the $4.99 price during the period specified even if the national promotion were to cease. Use of the words “sale” or “save” that incorrectly suggest an opportunity to buy goods at a reduced price for a limited time can constitute a breach of the FTA. Link: ASA decision Privacy Commissioner Privacy Commissioner satisfied with audit of credit reporting companies The Privacy Commissioner has released compliance assurance reports submitted by the national credit reporting companies, noting that he was pleased to see “a general wariness” around accepting and loading disputed debts about consumers. The focus follows the case of Taylor v Orcan where Orcan was ordered to pay $25,000 in damages to a customer whom it had referred without due inquiry to a credit reporting agency for failure to pay a disputed bill. Orcan was found to have breached its requirement to make sure credit information was accurate. Link: Privacy Commission media release Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 4 Privacy Commissioner 4 Australian Competition and Consumer Commission (ACCC) 5 Australian Securities and Investment Commission (ASIC) 6 5 | May 2016 G ing to Market Consumer law update Australian Competition and Consumer Commission (ACCC) Hertz to refund customers wrongly charged for pre-existing damage Car rental company Hertz Australia Pty Ltd (Hertz) has acknowledged that it was likely to have breached the Australian Consumer Law by incorrectly: • representing to customers that pre-existing damage to rental vehicles had been caused during their rental period • invoicing and charging those customers for vehicle damage, and • representing that the amount Hertz charged for repairs was the actual repair cost, when it fact it received repair discounts that it did not pass on to the customer. Following an ACCC investigation, Hertz has provided a court enforceable undertaking to refund affected consumers. It will also review its damage recording procedures. Link: ACCC media release Jetstar to challenge $550,000 fine for ‘drip pricing’ The ACCC has recommended fines of $200,000 for Virgin Australia and $550,000 for Jetstar for offences against the Australian Consumer Law involving “drip pricing” – a practice whereby additional fees and charges are tacked on to the headline price, making it difficult for customers to compare offers and leading them to spend more than they thought they would. In November 2015, the Federal Court of Australia found that both airlines had engaged in misleading and deceptive conduct and made false and misleading representations about the price of certain advertised airfares. Jetstar has said it will challenge the amount of its fine and the Federal Court has adjourned the matter for further consideration. The New Zealand Commerce Commission is also looking into drip-pricing. Link: Stuff report and news.com.au report Energy retailer discontinues incentives for positive online reviews Solar energy retailer True Value Solar Pty Ltd (True Value Solar) has stopped offering a free solar panel service valued at $199 for customers who published an online review on the website www.productreview.com.au. The offer failed to follow ACCC published guidelines in that it: • was made only to customers who had indicated that they had had a positive experience with True Value Solar so were more likely to provide a good review, and • was not disclosed in the published review. True Value Solar has assured the ACCC that, were the programme to be reintroduced in future, it would offer incentives for both positive and negative reviews. Link: ACCC media release Contents Cases 1 Commerce Commission 3 Advertising Standards Authority (ASA) 4 Privacy Commissioner 4 Australian Competition and Consumer Commission (ACCC) 5 Australian Securities and Investment Commission (ASIC) 6 6 | May 2016 G ing to Market Consumer law update If you would prefer to receive this newsletter by email, or if you would like to be removed from the mailing list, please send us an email at [email protected] Every effort has been made to ensure accuracy in this newsletter. However, the items are necessarily generalised and readers are urged to seek specific advice on particular matters and not rely solely on this text. © Chapman Tripp Contacts VICTORIA HEINE – PARTNER T: +64 4 498 6327 M: +64 27 561 3707 E: [email protected] TIM SHERMAN – SENIOR ASSOCIATE T: +64 4 498 2400 M: +64 27 345 3250 E: [email protected] KELLY MCFADZIEN – PARTNER T: +64 9 357 9278 M: +64 27 473 2230 E: [email protected] SARAH QUILLIAM-MAYNE – SENIOR SOLICITOR T: +64 4 498 6307 M: +64 22 136 2601 E: [email protected] Australian Securities and Investment Commission (ASIC) Westpac car financier penalised $493,000 for breaching consumer protection provisions Capital Finance Australia Limited (Capital Finance), a subsidiary of Westpac Banking Corporation, has paid penalties totalling $493,000 for breaches of the National Consumer Credit Protection Act (National Credit Act) relating to the repossession of motor vehicles. ASIC found that between March 2015 and June 2015 Capital Finance had: • on 55 occasions begun enforcement proceedings without sending default notices advising customers of the information required under the National Credit Act, including the customer’s right to seek to vary their repayments on grounds of financial hardship, and • on three occasions, failed to provide customers with the legally required information after it had repossessed mortgaged vehicles. The breaches followed breakdowns in Capital Finance’s internal processes and were voluntarily reported to ASIC. Link: ASIC media release