It has been yet another busy first half of the year in the courts on the consumer law front in Australia. In this inaugural half year digest, we highlight some of the key cases that have been decided and new cases to keep on your radar. In particular:
recent decisions in the ACCC’s cases against Mazda and Captain Cook College shed light on what is required to meet the high bar for proving unconscionable conduct;
the penalty decision in the ACCC’s case against Booktopia signals the high price companies risk paying for misleading customers about their statutory rights; and
the ACCC’s current actions against Secure Parking and Meg’s Flowers demonstrate the ACCC’s continued willingness to take businesses to court over manipulative or deceptive online advertising practices concerning the place of origin, nature and characteristics of the products or services they offer.
ACCC v Booktopia: $6 Million penalty for misleading customers on refund rights
In March 2023, the Federal Court ordered that Booktopia Pty Ltd (Booktopia), ACCC v Booktopia Pty Ltd [2023] FCA 194 , pay a $6 million penalty for making false and misleading representations about consumers’ rights to refunds.
Booktopia, Australia’s largest online bookseller, admitted that it had told customers that they were only entitled to a refund if they notified Booktopia within 2 business days of delivery that the product was faulty, damaged or incorrect. Booktopia admitted having made these representations on its website as well as in customer service calls where customers were advised that Booktopia did not have an obligation to provide a refund or replacement if the customer had not notified Booktopia within this short time frame.
Booktopia also admitted that it represented to consumers that they were not entitled to a refund for any reason for digital products such as eBooks - even if the product was faulty.
Under the Australian Consumer Law (ACL), a consumer is entitled to a repair, refund or replacement if there has been a failure to comply with the consumer guarantees in certain circumstances. A business cannot exclude, restrict or modify the availability of the consumer guarantees or a consumer’s entitlement to exercise the rights to a remedy for goods that do not comply with the consumer guarantees.
In addition to paying a penalty, the Federal Court ordered that Booktopia publish a corrective notice on its website, enter into agreed compliance measures and pay the ACCC’s costs of the proceedings.
ACCC appeal dismissed: Mazda escapes unconscionability finding
Also in March 2023, the Full Federal Court dismissed the ACCC’s appeal against a Federal Court judgment that Mazda did not engage in unconscionable conduct, [ ACCC v Mazda Australia Pty Limited [2023] FCAFC 45 ]. The Full Court also dismissed Mazda’s appeal against the Federal Court’s judgment that it had made false representations to consumers about their consumer rights.
The ACCC’s unconscionability case relates to nine consumers who experienced serious and recurring faults with their new Mazda vehicles between 2017 and 2019. When customers raised these faults with Mazda, Mazda allegedly pressured consumers to accept a remedy that was less than what they were entitled to. The conduct alleged by the ACCC to be unconscionable included:
Mazda’s refusal to provide a refund or replacement vehicle at no cost to the consumers, even after the faulty vehicle had undergone multiple repairs which did not remedy the issue; and
offers made by Mazda to pay amounts less than a full refund or to provide a replacement vehicle only if the consumers made a significant financial contribution.
In November 2021, the Federal Court had found that Mazda engaged in misleading and deceptive conduct and made false or misleading representations in relation to the consumers’ rights under the ACL. However, the Court held that Mazda’s conduct fell short of the high standard required for a finding of unconscionable conduct. The ACCC filed a notice of appeal on this point in April last year.
On appeal, the Full Federal Court held that Mazda had not engaged in unconscionable conduct despite having made misleading representations and recognising that Mazda had given customers “the run around” and engaged in “appalling customer service”. In order to constitute unconscionable conduct, the impugned conduct needed to have sufficiently departed from what is generally understood as acceptable commercial behaviour. The Full Court took the view that Mazda’s conduct did not reach this threshold. The Full Court noted that its conclusion might have been different if there was an element of deceit or deception involved, if Mazda had denied responsibility for addressing the consumers’ complaints, or there was evidence of a systemic, deliberate strategy within Mazda.
Captain Cook College found to have engaged in systemic unconscionable conduct to maximise student loan profits
In April 2023, on appeal, the Full Federal Court upheld the trial judge’s finding that Captain Cook College had engaged in unconscionable conduct and made false or misleading representations when enrolling students in vocational education and training (VET) under government-supported student loan programs, [ Productivity Partners Pty Ltd (trading as Captain Cook College) v ACCC [2023] FCAFC 54 ].
Captain Cook College provided online VET diploma courses as part of a Commonwealth scheme to assist students pay for all or part of their higher-level education tuition fees if they used certain approved VET FEE-HELP providers.
The ACCC commenced proceedings against Captain Cook College and the former CEO in November 2018, alleging several unconscionable practices relating to its enrolment process, false or misleading representations and failure to comply with statutory requirements for unsolicited consumer agreements.
Focussing on the unconscionable conduct allegations, the alleged conduct involved:
targeting vulnerable and disadvantaged students who were unlikely to ever complete the courses as they lacked sufficient language, literacy, numeracy or technology skills;
removing consumer safeguards from its programs and making it more difficult for students to withdraw from courses;
making false or misleading representations about the quality of the courses and the job prospects for graduates; and
failing to provide students with adequate information about the costs and risks of enrolling in the courses.
In the relevant period, 7,000 vulnerable and disadvantaged consumers enrolled, over 90% did not complete their online course and 86% never logged on.
In July 2021, following contested proceedings, Stewart J found that Captain Cook College engaged in a system of unconscionable conduct, made false or misleading representations to prospective students and failed to comply with unsolicited consumer agreement requirements in providing the online diploma courses. The scale and egregious nature of the conduct is reflected in Stewart J’s finding that “the college well knew that its dramatic increase in revenue and turnaround in profits was substantially built on [VET FEE-HELP] revenue in respect of students who may have been the victims of [course advisors’] misconduct, were unsuitable for enrolment, should not have been enrolled and who would gain no benefit whatsoever from their enrolment, yet who incurred very substantial debts to the Commonwealth as a result of their enrolment.”
In relation to the unconscionability finding, Captain Cook College appealed the first instance decision, arguing that individual examples did not amount to a system of unconscionable conduct. The Full Federal Court rejected the appeal and found that Captain Cook College is required to be held responsible for the harm to thousands of students who should never have been enrolled in the online courses. The Full Court found that “the College knew of the risk and prevalence of misconduct by recruitment agents and the enrolment at the College’s online campus of unwitting or unsuitable students. Despite that knowledge, at the behest of agents and in the pursuit of increased enrolments (and the resulting VFH revenue), the College altered its enrolment processes in a manner that weakened its existing safeguards against the occurrence of agent misconduct and against the enrolment of unwitting or unsuitable students.”
ACCC v Dell: Strikethrough prices did not reflect actual standard prices
Most recently in June 2023, the Federal Court declared by consent that Dell Australia Pty Ltd (Dell) made false and misleading representations about the price of add-on monitors purchased online through the Dell website, [ ACCC v Dell Australia Pty Ltd [2023] FCA 588 ].
Between August 2019 and December 2021, when a customer purchased a Dell desktop, laptop or notebook through the Dell website, they were also offered the option of adding-on a monitor at a discounted rate. This discounted price was often shown with the higher “struck through” price, indicating a significant saving if the monitor was purchased at the same time as the computer.
However, Dell admitted that the higher strikethrough price was not the standard price of monitors and often was more expensive than if the monitor was bought on a stand-alone basis. Therefore, any representations about getting the “best price” or a saving by bundling an add-on monitor were misleading. These representations were made during the peak of COVID-19 lockdowns when many consumers were transitioning to working from home.
Dell was ordered, by consent, to refund or compensate customers who bought monitors advertised at the discounted rate where the saving was overstated or there was no discount at all. In total, Dell will compensate more than 4,250 customers including those customers which Dell had already compensated.
The Court also ordered Dell to appoint an independent compliance professional to review Dell’s consumer law compliance program, and issue corrective notices to every customer affected in the relevant time period.
A hearing to consider the ACCC’s claim for the imposition of pecuniary penalties is to be heard on 14 August 2023.
Current cases worth watching
ACCC v Secure Parking: Claims about its ‘Secure-a-Spot’ parking service may not be so secure.
Car park operators are facing increasing scrutiny from the regulator as complaints from aggrieved customers continue to roll in. On 5 July 2023, the ACCC commenced Federal Court proceedings against Secure Parking Pty Ltd, alleging it had made misleading claims that customers booking a car park using its ‘Secure-a-Spot’ service would have a parking space reserved for them at the time, date and car park specified in their booking, when this was not in fact the case, [ Australian Competition and Consumer Commission v Secure Parking Pty Ltd (NSD 668/2023) ].
The ACCC alleges that between 2017 and 2022, Secure Parking made various representations on its “Secure-a-Spot” page on its website, in its marketing emails to subscribers, and in its online, social media and print advertising, including the following:
“With Secure-a-Spot, Secure Parking’s simple-as-can-be online booking service, you can ensure you’ll have hassle-free parking whenever you need it [] That means you can forget any stress trying to find a parking spot”;
“Secure-a-Spot parking can be booked up to [X] days in advance and up to 15 minutes before you need it”;
“An advance booking with Secure-a-Spot means guaranteed parking in the CBD at a much cheaper rate”; and
“Book your parking online for a guaranteed parking spot”.
However, the ACCC says that Secure Parking did not in fact reserve a parking space for customers using its ‘Secure-a-Spot’ service. Instead, many customers arrived at their pre-booked time to find that no parking spaces were available.
The ACCC is seeking declarations, injunctions, penalties, compliance orders, corrective notices and costs.
ACCC seeks to nip allegedly misleading ‘local florist’ representations in the bud
Another recent proceeding worth keeping an eye on is the ACCC’s Federal Court action against Meg’s Flowers, [ ACCC v Meg’s Flowers Pty Ltd (QUD225/2023) ]. The ACCC alleges that Meg’s Flowers Pty Ltd, a national online flower retailer, made misleading representations that it was a local florist located in a particular town or suburb when in fact, it fulfilled orders from its corporate warehouses and did not operate any local stores.
The representations appeared on Meg’s Flowers’ location-based websites and in its Google advertisements from 2019 to 2022. The ACCC states that seven of Meg Flowers’ websites contained various references to a particular town or suburb in their domain names, headings and copyright, as well as statements such as “the finest quality flowers in [suburb or town]” or “direct from our [suburb or town] florist”, “It’s the local approach” and “our fantastic local service”, while a further 149 of Meg Flowers’ websites contained some of these elements.
The ACCC also alleges that when customers searched for local florists online, they would see a sponsored Google Ad for Meg’s Flowers with a website domain name which referenced that particular suburb or town, together with “Same Day Local Flower Delivery” and “Meg’s Florist [suburb or town]” or “Meg’s [suburb or town]”. The ACCC claims that Megs’ Flowers generated over 7,000 such ads.
The ACCC argues that these representations misled customers into thinking that flowers ordered from Meg’s Flowers originated from the town or suburb referenced on its website or in its advertisements when this was not the case. The ACCC is seeking declarations of contravention, penalties, compliance orders, corrective notices and costs.