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All businesses should be aware of their fair trading obligations. The Competition and Consumer Act 2010 is a national law that regulates fair trading across Australia. However there are fair trading laws at the State and Territory level.
If you’re in NSW you’ll need to be compliant with the Fair Trading Act 1987 (NSW) (The Act). If you’re in other States and Territories, the following may apply:
- ACT Fair Trading Act 1992
- NT Consumer Affairs and Fair Trading Act 1990
- QLD Fair Trading Act 1989
- SA Fair Trading Act 1987
- Australian Consumer Law (Tasmania) Act 2010
- Australian Consumer Law and Fair Trading Act (VIC) 2012
- WA Fair Trading Act 2010
The Act is designed to protect consumers against unfair trading practices by requiring businesses to comply with a number of requirements. One of these is disclosure obligations, which requires businesses to tell consumers about certain things prior to making a purchase.
In this article, we’ll cover what these obligations are and how businesses can comply with them.
What Obligations Do I Have?
Most businesses need to ensure they remain aware of what obligations they have, whether it be privacy or consumer protection.
Under the Fair Trading Act, businesses need to ‘take reasonable steps’ to disclose two important things to consumers:
- Businesses need to disclose the effect of terms that may ‘substantially prejudice’ the interests of consumers
- If a business has an arrangement with a third party supplier for a financial incentive, the consumer needs to be made aware of this too.
These obligations generally apply to conduct that:
- Is related to goods/services supplied in NSW
- Affects a person in NSW
- Results in loss/damage in NSW
- Relates to a ‘consumer’
Who Is Considered A ‘Consumer’?
The Australian Consumer Law (ACL) previously defined a ‘consumer’ as someone who purchases goods or services for:
- Less than $40,000, or
- More than $40,000 but is purchased for personal, domestic or household use
However, from 1 July 2021, some changes were implemented. Currently, the new definition applies which increases this threshold to $100,000. This means that purchasers and consumers in general have extra protection under fair trading laws. Accordingly, businesses need to take extra steps to ensure they are compliant with these laws and to remain aware of any updates.
This recent change is also great for consumers because it decreases the chances of businesses hiding unfair terms in lengthy documents that are unlikely to be read and comprehended.
Now that we’ve covered the basics around consumer protection, let’s take a closer look at what businesses are required to do as part of their disclosure obligations.
Terms or conditions that may substantially prejudice
Like we mentioned, businesses need to disclose any terms or conditions that may substantially prejudice the interests of consumers (as defined under the ACL). Section 47A of the Fair Trading Act sets out what would be considered such a term.
If the term:
- Excludes the supplier’s liability, or
- Provides that the consumer is liable for any damage or losses, or
- Allows the supplier to give identifiable consumer data to third parties, or
- Requires the consumer to pay an exit fee, balloon payment or something similar,
Then this term may substantially prejudice the interests of the consumer and needs to be disclosed under the Act.
Businesses also need to make sure that they ‘take reasonable steps’ to disclose this kind of information. So, what would this look like?
What Are ‘Reasonable Steps’?
Generally speaking, when businesses are required to disclose information to consumers, they need to make sure it’s easily accessible and easy to understand. This also involves making sure the consumer doesn’t need to go and find that information themselves, otherwise this defeats the purpose of protecting the consumer.
You may want to use plain english, or present the information where it would be obvious. For example, it’s a good idea to have a clear and concise summary of the disclosure when the consumer is about to make a payment. You may also want to include it in any relevant emails you send to them. The idea is to make it as clear as possible.
It’s also good business practice to seek confirmation that the consumer understands what you are disclosing. This might be in the form of a box that they can tick to confirm ‘I understand’.
| Example 1 Sam runs a streaming service (similar to Netflix), but he has a term where he can automatically renew a customer’s subscription after the 12 month period has ended. This is a term that can substantially prejudice the customer’s interests, so he needs to make sure this is clearly disclosed to all customers. The best way to do this is to present this information on their website, and include it in relevant emails (for example, monthly emails or newsletters). Sam could also disclose this to the customer as soon as they sign up, followed by a confirmation by the customer that they understand the effect of this term. |
| Example 2 Betty owns an extremely well-known restaurant in Sydney. Her terms have changed following the easing of COVID-19 restrictions, as she is prepared to receive large volumes of bookings. Her terms provide that no refunds will be provided in case of cancellations, and once bookings have been made, no changes are permitted. This kind of term substantially prejudices the interests of customers hoping to book, so Betty needs to disclose this in a way that is clear and accessible. She can display it on her website and post it on Instagram, too. When customers make a booking, she can include it in their confirmation email. |
Commission And Referral Arrangements
Section 47B of the Act requires intermediary businesses to take reasonable steps to ensure customers are aware of arrangements with third parties.
So, if you’re a business that has an arrangement with a supplier in exchange for a fee, this is something you need to disclose to the consumer under the Act. You need to make sure this is disclosed prior to the supply.
What Is An Intermediary?
Section 47B applies to intermediary businesses, so what are some of the key features?
An intermediary business acts as a medium between suppliers and consumers, in return for a fee. For example, a broker or a marketplace. This is because you’re connecting consumers with suppliers, and you receive a commission.
If this arrangement sounds like the situation you’re in, you need to ensure you disclose the existence of this relationship to your customers. You don’t necessarily need to tell them every detail about the nature of the arrangement, but you still need to indicate that it exists for a financial incentive.
This includes situations where you recommend that customers purchase from a particular supplier.
The last thing you want as a business is to face a heavy fine for something that could have been prevented quite simply. For corporations, there is a $110,000 fee and for individuals, it can go up to $22,000. It’s important that businesses take steps to make sure they are compliant as they will be subject to review. For example, your websites and written documents may be checked for any unfair terms or important information that has not been properly disclosed.
Next Steps
If any of your terms of sale involve:
- Terms which substantially prejudice the interests of consumers, or
- An arrangement with a third party supplier for a commission or fee
Then you will need to disclose these things to customers under the Fair Trading Act. If you’re not too sure whether your business is required to comply based on your arrangements or terms, Sprintlaw has a team of lawyers who can help you out. Alternatively, you can get an overall Legal Health Check done to make sure you’re compliant.
It’s always important to make sure you’re up to date with all of your obligations as a business owner. You can reach out to us at team@sprintlaw.com.au or contact us on 1800 730 617 for an obligation-free chat.
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