Consumer rights Reforming statutory implied conditions and warranties

Online auctions

Online ‘auction’ websites provide a virtual marketplace for buyers and sellers to trade new and used items. The low operating fees and the opportunity to reach a wide potential customer base are an attractive feature for suppliers whilst for consumers, the wide variety of items that are available, often at bargain prices, have made online auctions an increasingly popular way to shop.²⁴⁶

Existing regulation

Although the existing statutory implied terms in the TPA apply to goods and services sold online, they do not, however, extend to auctions which take place over the Internet, in much the same way as they do not extend to auctions which take place offline and in person.²⁴⁷

Auction websites must also be careful not to publish information that could be potentially false or misleading, for example, about descriptions and suitability.²⁴⁸

In Europe, the DS Regulations do not apply to distance contracts, including online sales contracts, which have been concluded at auction.²⁴⁹

Existing guidance

Some auction websites do provide safe trading guidelines and have buyer protection or complaint handling policies in place to help resolve consumer concerns. Consumer protection agencies in Australia have published guidance and other education materials to help improve consumer awareness of the risks associated with online auctions and to improve sellers’ awareness of their obligations.²⁵⁰

Auctions are discussed further in Chapter 11.

Online consumer protection

Consultations revealed support for the protections which consumers are afforded under the law for in store purchases to equally apply to online sales, and for all suppliers to be subject to the same obligations. However, CCAAC received mixed responses on the issue of whether additional regulation of online sales was required in Australia.

The LCA was of the view that no separate or additional regulation was required for online sales.²⁵¹ Hunt & Hunt noted that consumers are aware that shopping online carries a degree of risk not encountered with retail shopping, which is the risk that accompanies the convenience of using the Internet.²⁵² It was also suggested that such risks associated with online sales warranted consumers receiving additional protection.

Whilst Hunt & Hunt expressed support for national compulsory disclosure requirements for online transactions, similar to the disclosure requirements in Victoria’s non contact sales agreement provision, it did not support the introduction of a cooling off period and cancellation rights, which do exist for non contact sales in Victoria.²⁵³

Hunt & Hunt submitted that cooling off periods with cancellation rights were essentially equivalent to allowing consumers to return products and to obtain a refund simply for a change of mind, which in contrast is not a right consumers automatically have if they purchased the product from a store.²⁵⁴ Hunt & Hunt also believed that providing cooling off periods would not only place an unreasonable burden on business but could also act as a disincentive for businesses to sell products online.²⁵⁵

Hunt & Hunt suggested disclosure requirements as an alternative to a cooling off period for online sales, for instance, requiring websites to provide information on the rights consumers have under the law and publishing warnings of the risks associated with shopping online.²⁵⁶

In relation to online auctions, the Australian Industry Group was of the view that where a consumer is unable to inspect the goods, more protection is needed.²⁵⁷

CCAAC’s view

Whilst CCAAC acknowledges that shopping online presents unique risks for consumers which do not similarly arise when shopping in store, this should not be a reason for online consumers to receive any less protection compared to consumers who shop offline. However, at the same time CCAAC has not received enough evidence to support the conclusion that online purchases require additional protection to purchases made offline and in store, including the need for information disclosure requirements and/or cancellation rights.

CCAAC considers that there is no justification for consumers to be provided with a cooling off period and a right under the law to withdraw from purchases made online for ‘change of mind’ which consumers who have made similar purchases in store do not have. There is no evidence that consumers require more time to consider or reconsider a purchase made over the Internet. At a broader level, there is no justification for allowing consumers to cancel contracts for a ‘change of mind’, regardless of whether the purchase was made online or in store. The national statutory consumer guarantees are concerned with providing basic minimum statutory protections to consumers, which does not include a right under the law to a refund for a ‘change of mind’.

However, CCAAC notes that some online suppliers, such as airline, accommodation and events service providers, may have (voluntary) refund or exchange policies in place which allow for a ‘change of mind’ in certain circumstances. These services appear to be the most popular items purchased online by consumers.²⁵⁸

There is evidence that Australians are making repeat purchases online. For instance, of the 5.9 million Australians who were shopping online in 2006, over half of these were making repeat purchases.²⁵⁹ This repeat purchasing behaviour indicates that consumers are generally satisfied with their online shopping experience and that additional regulation is not necessary.

While CCAAC believes that up to date contact details of suppliers, and their after sales assistance processes, should be clearly disclosed to all consumers, this information should apply equally to online and offline sales. However, with regards to online sales, this could present enforcement challenges where the supplier is not registered or does not have an agent in Australia. This challenge could make any disclosure requirement difficult to regulate.

Whilst CCAAC does not consider there is a case for introducing a separate or different law for online sales, Australian governments and consumer agencies should monitor the effectiveness of the national statutory consumer guarantees regime as it applies to online sales, including gathering data on the number and nature of consumer complaints in relation to online purchases.

Australia’s consumer agencies should also provide a clear and consistent message to both consumers and suppliers that the statutory consumer guarantees equally apply to online sales of goods and services. Further, agencies should actively monitor information being published on websites by traders which are accessible to Australian consumers, and investigate potential actions for false, misleading or deceptive representations.

Finding 10.1 Online transactions should be covered by the national statutory consumer guarantees in the same way as in store transactions.