Consumer rights Reforming statutory implied conditions and warranties

Existing regulation

Trade Practices Act 1974

The definition of ‘supply’ under the TPA extends to online transactions, including online sales. The online supply of goods or services is not currently excluded from the existing statutory implied terms in the TPA.²⁰⁴ In other words, goods or services that are sold online are subject to the statutory warranties in Part V, Division 2 of the TPA, in the same way as offline in store sales. The right to expect that the goods supplied will correspond with description, will be of ‘merchantable quality’ and will be fit for purpose applies to online purchases. Similarly, these statutory rights cannot be excluded, varied or restricted, irrespective of whether the sale occurs online or offline.²⁰⁵ Further, suppliers must not include information on their website which may be potentially false, misleading or deceptive, and therefore contrary to the TPA.²⁰⁶

However, goods or services that are not sold ‘in the course of business’ and lack commercial character, such as private sales, are not subject to the statutory implied terms regime, irrespective of whether the goods have been sold in store or online.²⁰⁷

With respect to overseas purchases, the TPA prevents suppliers from being able to exclude any of the statutory implied terms through a choice of law clause or from substituting another country’s law for the implied terms regime.²⁰⁸

Fair Trading Act 1999 (Vic)

Victoria’s Fair Trading Act 1999 contains provisions which require suppliers to disclose certain information to consumers prior to the conclusion of a non contact sale, including online purchases.²⁰⁹ Specifically, the supplier is required to provide the following information to the consumer in a conspicuous and prominent manner in the sale agreement:

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  the total price to be paid by the consumer, including any postal or delivery charges;
  
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  any cancellation rights which the consumer has; and
  
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  the name, business address and phone number of the supplier.²¹⁰
  

A supplier who fails to comply with these disclosure requirements may be guilty of an offence and will not be able to enforce the sale agreement against the consumer.²¹¹

If the sale agreement allows the consumer to cancel the sale within a cooling off period, the Victorian FTA requires the period to be at least 10 days, starting from the day the consumer received the goods or the day the service contract was made.²¹² Where a consumer cancels the sale within the cooling off period, the supplier is required to refund the price paid and the consumer is required to take reasonable care of the goods and arrange for the goods to be returned to the supplier.²¹³

Self regulation

Online trading in Australia is subject to some degree of voluntary regulation and self regulation in the form of business practices and standards set out in industry guidelines and industry codes.

The Australian Government has developed a best practice model, The Australian Guidelines for Electronic Commerce, that provides guidance to suppliers and consumers for transacting over the Internet.²¹⁴ The Australian Direct Marketing Association has also developed a voluntary code of practice, Direct Marketing Code of Practice, which in part protects the interests of consumers when transacting online.²¹⁵ Compliance with these is self enforced by the industry.

Purchasing online

Information on websites

The information which suppliers disclose on their website can play an important role in the purchasing decisions consumers make, including descriptions, photos, price, fees and charges, and the terms and conditions of the sale. It is not unusual, however, for websites to mislead consumers into believing that a product is of a particular description which it does not meet or can perform a specific function which it cannot, or to misrepresent that consumers have fewer rights than they do under the law (such as by excluding certain liabilities or remedies).²¹⁶ The statutory implied conditions of merchantable quality, correspondence with description and fitness for purpose are particularly important where online shoppers are unable to examine the good and may be unable to make pre sale enquiries prior to purchasing, and therefore rely on the accuracy of any information that is provided.

Accordingly, clauses on websites which misrepresent the rights of the consumer or make misleading claims, not only distort the decision making process for consumers, but could also potentially be in breach of the law.²¹⁷ Clauses which provide that sellers cannot ensure, and assume no responsibility for, the accuracy of the information on a website may similarly constitute a breach.²¹⁸

Consideration should be given to requiring online retailers to display notices informing consumers about statutory consumer guarantees in a similar form to that recommended in Chapter 6 of this Report. This would ensure that online retailers are treated in the same way as other retailers in respect of the requirement to display notices at the point of sale.

Awareness of statutory rights

With the increasing use of the Internet for shopping, it is important that consumers are aware of what rights they have when it comes to purchasing goods or services online. In particular, it is important that consumers are aware that they have similar rights when buying online to those they have when shopping in person in a store. That is, online consumers can expect that goods bought over the Internet will correspond with their description, be of merchantable quality and comply with the other statutory implied terms.

Based on the NEIAT study which found evidence of a general lack of awareness amongst consumers of the statutory warranties, there is no reason to believe that this general lack of awareness is not similarly faced by online shoppers. Whilst it was submitted during consultations as an indication of awareness of rights that there are online consumers who cancel sales and return defective goods²¹⁹, this does not necessarily indicate that online shoppers are any different to offline shoppers in relation to awareness of statutory warranties and remedies.

After sales assistance

Accessing after sales support can be a particular challenge facing consumers who have purchased a product online. In contrast, after sales assistance is more readily accessible to offline consumers who can return the product in question to the original retailer. Some websites also contain the supplier’s complaints handling process designed to help resolve consumer concerns.²²⁰ However, some suppliers disclose their refund, exchange and/or cancellation policies on their websites.

The absence of the supplier’s (or its agent’s) contact details and access to after sales support for consumers poses unique problems for online purchases compared to most offline sales. Further, where the supplier is not registered in Australia and does not have a local agent, it poses particular difficulties for consumers who want to access after sales assistance.

Existing guidance

CCAAC notes that consumer protection agencies in Australia have published information about online trading for consumers and suppliers, as well as information on the avenues available to consumers if they have problems. For instance, the ACCC has published information on its website to make businesses and consumers more aware of their rights and obligations when trading online, and outline whom consumers can turn to for consumer protection advice. The ACCC has also been monitoring Australian trading websites and investigates appropriate cases.²²¹

Within Australia, there are also websites such as ‘Scamwatch’²²² dedicated to protecting consumers from cyberscams and online unfair trading practices. Consumers may need to contact the responsible consumer protection regulator in the other country for assistance. The International Consumer Protection and Enforcement Network (ICPEN), with which the ACCC has assumed a lead role, is a global network of more than 40 countries focused on enhancing consumer protection by increasing cooperation between consumer agencies across international borders.²²³ ICPEN has set up a database for consumers to report online shopping complaints where the online supplier is from another country and the dispute cannot be resolved.²²⁴