Trade Practices Law
Notes
Trade Practices Law Notes – S2/2007
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Table of Contents
Topic 1 – Introduction to Trade Practices Law ............................................................................... 8
Historical Background ......................................................................................................................... 8
Why Regulate for Competition? .......................................................................................................... 8
Development of Australian Competition Law and Policy .................................................................... 8
Hilmer Report into National Competition Policy ................................................................................. 8
The Intergovernmental Agreements ................................................................................................... 8
Topic 2 – Overview of the Trade Practices Act 1974....................................................................... 9
Structure of the TPA ............................................................................................................................ 9
Overview of Parts ............................................................................................................................ 9
Anti-competitive Conduct ................................................................................................................... 9
Consumer Protection......................................................................................................................... 10
Unfair Practices ............................................................................................................................. 10
Product Safety and Product Information ...................................................................................... 10
Conditions and Warranties in Consumer Transactions ................................................................ 10
Actions against Manufacturers and Importers of Goods .............................................................. 11
Product Liability ................................................................................................................................ 11
Unconscionably Conduct ................................................................................................................... 11
Enforcement and Remedies .............................................................................................................. 11
Authorisation and Notification ......................................................................................................... 12
Enforcing the TPA .............................................................................................................................. 12
The ACCC ....................................................................................................................................... 12
The National Competition Council ................................................................................................ 12
The Australian Competition Tribunal ............................................................................................ 12
Topic 4 – Introductory Concepts ................................................................................................. 13
Market Definition .............................................................................................................................. 13
Market Power in a nutshell ........................................................................................................... 14
From the SG .................................................................................................................................. 14
Sub-markets, single brand markets and single product markets ..................................................... 15
Competition....................................................................................................................................... 15
Substantial lessening of market competition ............................................................................... 16
Market power ................................................................................................................................... 16
From the SG .................................................................................................................................. 17
A common theme of substitution ...................................................................................................... 17
Topic 5 – Section 45 – Horizontal Restraints Restricting Dealings or Affecting Competition .......... 18
Contract, arrangement or understanding ......................................................................................... 18
Some examples of contracts, arrangements for understandings ................................................. 19
Exclusionary provisions ..................................................................................................................... 20
Contracts, arrangements or understanding which substantially lessen competition....................... 20
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Price fixing ......................................................................................................................................... 21
Exceptions ..................................................................................................................................... 21
Checklist: Section 45(2) ..................................................................................................................... 21
Restrictive covenants ........................................................................................................................ 22
Secondary boycotts ........................................................................................................................... 22
Authorisation .................................................................................................................................... 23
Topic 6 – Misuse of Market Power .............................................................................................. 24
Elements of section 46 ...................................................................................................................... 24
A corporation with a substantial degree of market power .......................................................... 24
Taking advantage of market power .............................................................................................. 25
The prescribed purposes............................................................................................................... 26
Examples of prohibited conduct ........................................................................................................ 26
Common price strategies .............................................................................................................. 26
Common non-price strategies ...................................................................................................... 27
Topic 8 – Section 47 – Exclusive Dealing ...................................................................................... 28
Restraint of trade .............................................................................................................................. 28
The structure of section 47................................................................................................................ 28
Exemptions.................................................................................................................................... 28
Checklist – Section 47 ........................................................................................................................ 29
Preliminary definitions ...................................................................................................................... 29
The Elements of section 47 ............................................................................................................... 30
Goods and services ....................................................................................................................... 30
Leases and licences ....................................................................................................................... 31
Substantial lessening of competition ............................................................................................ 32
Authorisation and notification .......................................................................................................... 32
Exceptions ......................................................................................................................................... 32
Remedies ........................................................................................................................................... 32
Topic 9 – Resale Price Maintenance ............................................................................................ 33
Resale Price Maintenance under the TPA ......................................................................................... 33
The elements of section 48 ............................................................................................................... 33
Direct RPM – Section 96(3) ............................................................................................................... 33
Section 96(3)(a) ............................................................................................................................. 33
Section 96(3)(b)............................................................................................................................. 34
Section 96(3)(c) ............................................................................................................................. 35
Section 96(3)(f).............................................................................................................................. 35
Indirect resale price maintenance ................................................................................................ 36
Agency ............................................................................................................................................... 37
Authorisation .................................................................................................................................... 37
Penalties and remedies ..................................................................................................................... 37
Checklist – RPM ................................................................................................................................. 38
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Topic 10 – Mergers and Acquisitions ........................................................................................... 39
Elements of section 50 ...................................................................................................................... 39
A corporation ................................................................................................................................ 39
Direct and indirect acquisition ...................................................................................................... 39
Substantial lessening of competition ............................................................................................ 40
Assessing substantial lessening of competition ................................................................................ 40
Role of the ACCC................................................................................................................................ 41
Extraterritorial operation .................................................................................................................. 41
Merger authorisation ........................................................................................................................ 42
Authorisation procedure ................................................................................................................... 42
Clearance to Merge....................................................................................................................... 43
Powers and remedies ........................................................................................................................ 43
Divestiture ..................................................................................................................................... 43
Topic 11 – Authorisation and Notification ................................................................................... 44
Conduct which may be authorised or notified .................................................................................. 44
Effect of authorisation and notification ............................................................................................ 44
The tests for authorisation ................................................................................................................ 44
The first test .................................................................................................................................. 44
The second test ............................................................................................................................. 45
The third test................................................................................................................................. 45
Public benefit in Authorisations ........................................................................................................ 45
Public detriment in Authorisations.................................................................................................... 46
Authorisations process ...................................................................................................................... 46
Notifications process ......................................................................................................................... 46
Revocation and alteration of Authorisations .................................................................................... 46
The Australian Competition Tribunal ................................................................................................ 47
Topic 12 – Consumer Protection Provisions................................................................................. 48
Topic 13 – Misleading or Deceptive Conduct ............................................................................... 49
Section 52 .......................................................................................................................................... 49
Is the conduct misleading or deceptive or likely to mislead or deceive? .......................................... 49
Considerations .............................................................................................................................. 50
Section 52 and Intellectual Property ............................................................................................ 51
Section 52 and Passing on Information ........................................................................................ 52
Section 52 and Silence .................................................................................................................. 53
Remedies ........................................................................................................................................... 53
Disclaimers ........................................................................................................................................ 53
The Fair Trading Acts ........................................................................................................................ 53
Examples ........................................................................................................................................... 53
Topic 14 – Future Matters .......................................................................................................... 54
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Topic 15 – False and Misleading Representations ........................................................................ 55
Section 53 – False Representations ................................................................................................... 55
Country of origin claims .................................................................................................................... 58
Section 53A ....................................................................................................................................... 58
Sections 53B and 53C ........................................................................................................................ 58
Section 54 .......................................................................................................................................... 59
Section 55 .......................................................................................................................................... 59
Section 56 - Bait Advertising ............................................................................................................. 59
Section 57 .......................................................................................................................................... 59
Section 58 .......................................................................................................................................... 59
Section 59 .......................................................................................................................................... 59
Section 60 - Harassment ................................................................................................................... 60
Pyramid Selling.................................................................................................................................. 60
Sections 63A, 64 & 65 – Unsolicited Goods....................................................................................... 60
Topic 16 – Unconscionable Conduct ............................................................................................ 61
Unconscionability in Equity ............................................................................................................... 61
Unconscionable conduct under the TPA in consumer transactions .................................................. 61
Other matters ............................................................................................................................... 62
Unconscionable conduct under the TPA in commercial transaction................................................. 62
Section 51AC ..................................................................................................................................... 62
Other matters ............................................................................................................................... 63
Remedies and limitations .................................................................................................................. 63
Financial Services .............................................................................................................................. 63
Topic 17 – Product Safety and Product Information .................................................................... 65
Warning notices ................................................................................................................................ 65
Product safety standards and unsafe goods ..................................................................................... 65
Product information standards ......................................................................................................... 66
Recalls ............................................................................................................................................... 67
The conference procedure................................................................................................................. 67
Power to obtain information and documents ................................................................................... 68
Non-compliance ................................................................................................................................ 68
Defences ............................................................................................................................................ 68
Topic 18 – Terms Implied into Contracts for the Supply of Goods or Services ............................... 69
Terms implied into contracts for the sale of goods or services ......................................................... 69
Undertakings as to title ................................................................................................................. 69
Supplied by description................................................................................................................. 70
Merchantable quality .................................................................................................................... 70
Fitness for purpose ....................................................................................................................... 71
Supply by sample .......................................................................................................................... 72
Services ......................................................................................................................................... 72
Limitation of liability ......................................................................................................................... 72
Remedies ........................................................................................................................................... 73
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Topic 19 – The Liability of Manufacturers and Importers of Goods............................................... 74
Who can claim................................................................................................................................... 74
Determining the manufacturer ......................................................................................................... 74
Terms implied .................................................................................................................................... 74
Section 74B – Fitness for purpose................................................................................................. 74
Section 74C – Purchase by description ......................................................................................... 75
Section 74D – Merchantable quality............................................................................................. 75
Section 74E – Supply by sample .................................................................................................... 76
Section 74F - Repairs and parts.................................................................................................... 77
Section 74G – Non-compliance with express warranties ............................................................. 77
Limitation of liability ......................................................................................................................... 78
Remedies ........................................................................................................................................... 78
Statute of limitations ................................................................................................................. 78
Jurisdiction ........................................................................................................................................ 78
Topic 20 – Liability for Defective Goods ...................................................................................... 79
Part VA .............................................................................................................................................. 79
Strict liability ................................................................................................................................. 79
Liability .......................................................................................................................................... 79
What is a defect? .............................................................................................................................. 80
Inferences ..................................................................................................................................... 80
Who is the manufacturer? ................................................................................................................ 81
Indeterminate manufacturer ........................................................................................................ 81
Actions............................................................................................................................................... 81
Section 75AD ................................................................................................................................. 81
Section 75AE ................................................................................................................................. 82
Section 75AF ................................................................................................................................. 82
Section 75AG ................................................................................................................................. 82
Defences ............................................................................................................................................ 82
Statute of Limitations........................................................................................................................ 83
Representative actions by the ACCC ................................................................................................. 83
Topic 21 – Enforcement, Remedies and Defences........................................................................ 84
Liability under the TPA ...................................................................................................................... 84
Ancillary liability ............................................................................................................................ 84
Principle liability under Part IV ..................................................................................................... 84
Principles in assessing penalties for Part IV .................................................................................. 85
Defences for Part IV ...................................................................................................................... 85
Principal liability under Part V....................................................................................................... 86
Principles in assessing fines for Part V .......................................................................................... 86
Defences to Part V ........................................................................................................................ 86
Public enforcement of the TPA .......................................................................................................... 87
Private remedies under the TPA........................................................................................................ 87
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Injunctions..................................................................................................................................... 87
Other orders.................................................................................................................................. 88
Declarations .................................................................................................................................. 88
Damages........................................................................................................................................ 89
Inducing intention for corporations .................................................................................................. 90
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Topic 1 – Introduction to Trade Practices Law
Historical Background
‘The way to make money is to get, if you can, a monopoly for yourself’.
Aristotle
The Romans attempted to legislate for the abolition of restrictive trading practices while English
monarchs in the Middle Ages tackled the guilds. Trade practice regulation has gone on throughout
the ages.
TB [1.1.2]
Why Regulate for Competition?
The object of this Act is to enhance the welfare of Australians through the promotion of competition
and fair trading and provision for consumer protection.
s2, TPA
A competitive market ensures that researches are distributed efficiently.
TB [1.2.2]
In competitive markets, for firms to increase profits, they must become more efficient by selling
better products, providing better customer service and developing new marketing strategies.
It is often said that the existence and exercise of market power is the opposite of competition. This is
also why the Trade Practices Act is principally concerned with the acquisition and use of market
power in a variety of forms.
Development of Australian Competition Law and Policy
TB p4-7
Hilmer Report into National Competition Policy
TB p8-9
The Intergovernmental Agreements
TB p12
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Topic 2 – Overview of the Trade Practices Act 1974
Structure of the TPA
TB p17
Overview of Parts
a) Part IIIA – the access regime
b) Part IV – restrictive trade practices
c) Part IVA unconscionable conduct
d) Pact IVB – small business unconscionable conduct
e) Part V – consumer protection
f)
Part VA – product liability
g) Part VII – authorisations and notifications
h) Part XIA – the Competition Code
i)
Part XIB – competition in the telecommunications industry
j)
Part XIC – telecommunications access regime
Anti-competitive Conduct
Underlying PtIV of the TPA are two basic principles:
a) Any conduct which has the effect or likely effect of substantially lessening competition in a
market for goods or services is prohibited
b) Where this conduct leads to some public benefit which outweighs its anti-competitive effect,
then the conduct should be able to be authorised.
Conduct prohibited by PtIV includes:

Anti-competitive agreements between competitors such as price fixing, exclusionary
provisions (including primary and secondary boycotts).
s45, TPA

A corporation with substantial market power from taking advantage of that power to injure
a competitor, prevent entry of another into the market or deterring competition within the
market.
s46, TPA

Exclusionary dealing; either full line forcing or third line forcing.

The practice of resale price maintenance.

Mergers and acquisitions that would have the effect or likely effect of substantially lessening
competition in a substantial market.
s50, TPA
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s47, TPA
s48 & 96-100, TPA
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Consumer Protection
Unfair Practices
Pt5 Div1 proscribes a number of unfair practices:

Conduct which is misleading or deceptive or likely to mislead or deceive
s52, TPA

Specific false representations
s53, TPA

False representations in relation to land
s53A, TPA

Misleading conduct in relation to employment
s53B, TPA

Cash prizes
s53C, TPA

Bait advertising
s56, TPA

Referral selling
s57, TPA

Accepting payment without intending or being able to supply as ordered
s58, TPA

Misleading statements about certain business activities
s59, TPA

Pyramid selling
s61, TPA

The assertion of a right to payment for unsolicited goods or services, or for making entry in a
directory.
S64, TPA
Product Safety and Product Information
PtV, Div1A deals with matters relating to product safety and product information, such as:

The publication of warning notices by the government in relation to goods which are under
investigations
s65B, TPA

The banning of goods which do not comply with the prescribed product safety standards, or
goods which are unsafe
s65C, 65D & 65E, TPA

The compliance with consumer product information standards
s65D, TPA

The compulsory recall of unsafe goods
s65F, TPA

The notification to the government of voluntary recalls
s65R, TPA
Conditions and Warranties in Consumer Transactions
PtV, Div2 deals with these sorts of matters.
Importantly, if any of these sections are breached, it is considered a breach of contract, not of the
TPA. This is because all of these conditions and warranties are implied into the contract between the
parties. As such, breaches can only be actioned by the aggrieved parties, not by the ACCC.
In relation to goods, this includes:
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
A warranty as to title

A warranty of quiet possession and enjoyment s69(1)(b), TPA

A condition that goods supplied by description will comply with that description

A condition that where the purpose for the goods is made known, the goods will be fit for
that purpose
s71, TPA

A condition that goods supplied by sample will correspond with the sample
s69(1)(a), TPA
s70, TPA
s72, TPA
In relation to services, this includes:

A warranty that the services will be rendered with due care and skill
s71(1), TPA

A warranty that goods supplied witch the service will be fit for their purpose
s74(1), TPA

A warranty that where the purpose for the service is made known, the service and any
material will be fit for that purpose
s74(1), TPA
Actions against Manufacturers and Importers of Goods
Pt5, Div2A covers the liability of these parties for defects in goods, including where:

Goods which are not reasonably fit for a purpose which was made knows before the supply
of the goods or for a purpose for which the goods are commonly supplied
s74B, TPA

Goods which do not correspond to the description on which the purpose was based
s74C, TPA

Goods which are not of merchantable quality

Goods which have been supplied by reference to a sample and do not correspond with the
sample
s74E, TPA
s74D, TPA
Product Liability
Consumers have a statutory right to compensation from a manufacturer which does not depend on
contract or tort law, but on whether injury or loss has occurred as a result of a product having a
defect within the meaning given in PtVA.
s75AA, 75AQ, TPA
Unconscionably Conduct
Unconscionably conduct is prohibited in the context of commercial transactions;
s51AA, TPA
And in the context of supplying goods to consumers.
s51AB, TPA
Enforcement and Remedies
TB [2.6.1]
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Authorisation and Notification
TB [2.7.1]
Enforcing the TPA
The ACCC
TB [2.8.1] – [2.8.3]
The objectives of the ACCC are:

Improving competition and efficiency in markets

Encourage fair trading practices

Promote price competition and prevent price rises in markets where competition is
ineffective

Educate the community about the TPA and the obligations the Act imposes on businesses
The National Competition Council
TB [2.8.4]
The Australian Competition Tribunal
TB [2.8.5]
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Topic 4 – Introductory Concepts
Many of the section of the TPA require that before there is a breach, the conduct must have the
effect or likely effect of substantially lessening competition.
Market Definition
“market” means a market in Australia, and, when used in relation to any goods or services, include a
market for those goods and services and other goods or services that are substitutable for, or
otherwise competitive with, the first-mentioned goods or services
s4E, TPA
What the “market” actually is happens to be a very difficult question to answer, and guidance on the
matter varies enormously, and is frequently very vague.
‘in identifying the relevant market …the object is to discover the degree of defendant’s market
power…’
Qld Wire Industries Pty Ltd v Broken Hill Proprietary Co Pty Ltd
The word market is not susceptible of precise comprehensive definition when used as an abstract
noun in an economic context. The most that can be said is that “market” should, in the context of
the Act, be understood in the sense of an area of potential close competition in particular
goods/services and their substitutes.
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989)
A market is the field of activity in which buyers and sellers interact and the identification of market
boundaries requires consideration of both the demand and supply side. The ideal definition must
take into account substitution possibilities in both consumption and production.
TPC v Australia Meat Holdings Pty Ltd
‘an important consideration in identifying a market is the ease of substitution by suppliers as well as
buyers’.
Re Howard Smith Industries Pty Ltd
The summary of market definition:
TB p50
To assess whether there is a conduct breach of TPA, we need to define a ‘market’;
It is the degree of market power that is to be ascertained, but to do this we need to identify the
market it question;
Why? – Because, it is this power which may have the effect of substantially lessening the market – a
breach of TPA;
Substitutable source of supply and substitutable products are said to ‘constrain’ the exercise of
market power by the defendant;
In defining the market, we are therefore employing the concept of supply and demand substitution
to discover the sources of supply and products which consumers could practically switch to if the
defendant firm attempted to exercise market power by giving less and charging more. This involves
looking for ‘cross elasticities of supply and demand’;
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From product market definition it progresses to the geographic and functional level of the market. In
each case, we ar elooking for that grouping of products over which the defendant can exercise
market power. This process starts with the defendants products and expands outwards to include all
of the product groups over which the defendant can exercise market power.
This process of expansion continues until cross elasticities of demand and supply which would
constrain the defendant from exercising market power are exhausted, and stops at a point where
there are no more realistic substitutes;
Crucial stage: Do the identified substitutes constrain the exercise of market power by the
defendant? – Question asked: ‘if the defendant comapnies were to raise the prices of its goods,
would customers go for the identified substitutes’;
If Yes : defendant company does not have market power.
If No: likely that the defendant company has market power.
From here, we investigate whether the defendant company’s conduct on competition within a
market is to be assessed.
Market Power in a nutshell
The ‘market’ in question is the market over which the defendant exercises market power (both pull
each other up by the boot straps – market power cannot exist without a market, but it’s hard to find
the market if there is no market power).
If market power exists over the market in question, then that power must be looked at to see if any
behaviour on the part of the defendant has breached the Act.
From the SG
We can visualise a market like this:
When we do so, we are thinking of its functional dimension.
It also has the following dimensions:
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TB [4.2.14].
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•
Product dimension: TB [4.2.8]
•
Geographic dimension: TB [4.2.11]
•
Temporal dimension: TB [4.2.16]
Of these four dimensions in total, the most important is the product dimension. It is defined by the
concept of substitution.
TB [4.2.5]-[4.2.7], and above
Sub-markets, single brand markets and single product markets
Sub-markets are more narrowly defined, typically registering some discontinuity in substitution
possibilities.
Where the defining feature of a market is the existence of substitutes, the defining feature of a
submarket is the existing of still closer and more immediate substitutes.
Re QCMA (1976)
Sub-markets remain problematic.
It would seem that a company cannot misuse market power in a submarket, simply because how can
a firm possess market power in an area of very close substitutes?
TB p52, [4.4.3]
Arguably, however, there are no such thing as sub-markets, just more markets.
TB p52, [4.4.4]
Single product markets, do exist. For instance, in the case of ski-boots (a normal boot would make a
poor substitute). Obviously, market power may be even more pronounced in such an area, but it still
qualifies as a market, just a narrow one.
Competition
Competition is the very state of affairs the TPA is designed to foster.
Competition expresses itself as rivalrous markets behaviour. Competition is a process rather than a
situation. Nevertheless, whether firms compete is very much a matter of the structure of the
market in which they operate. The elements of market structure which we would stress as needing
to be scanned in any case are these:

The number and size distribution of independent sellers, especially the degree of market
concentration

The height of barriers to entry, that is, the ease with which new firms may enter and secure
a viable market

The extent to which the products of the industry are characterised by extreme product
differentiation and sales promotion

The character of ‘vertical relationships’ with customers and with suppliers and the extent of
vertical integration

The nature of any formal stable and fundamental arrangements between firms which
restrict their ability to function as independent entities.
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Re QCMA (1976)
Substantial lessening of market competition
This is a concept which throughout TPA.
Many sections of the act will only be breached whether the effect or likely effect of the conduct will
be to substantially lessen competition within a market.
It is intended to mean an effect on competition which is real or of substance, not one which must be
large or weighty.
However, the term substantial lessening of competition has been given a number of meanings
depending on the context in which it is used.
In the context of s47(10) in my opinion the word substantially is not intended to convey the idea of
some proportion of the whole of the actual or potential competition in the relevant market. It must
be capable of being fairly described as a lessening of competition and is real or of substance as
distinct from a lessening that is insubstantial, insignificant or minimal.
Cool & Sons Ltd v O’Brian Glass Industries Ltd (1981)
In relation to s45, substantial means considerable or large.
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982)
It does not focus on the competitiveness of individual corporations.
TB p55, [4.6.4]
Market power
Put simply, the corporation enjoys market power when it can give less than charge more for its
products/service without customers switching away to substitutable products/services, or no
entrance entering the market and producing substitutable products.
A firm possesses market power when it can behave persistently in a manner different from the
behaviour that a competitive market would force on a firm facing otherwise similar cost and demand
conditions.
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989)
There are five major elements of market structure which will determine whether market will
facilitate the development of competition or market power:
Re QCMA (1976)

The breadth of the market and the character of demand

The number and size distribution of sellers and buyers

The conditions of entry for new sellers and expansion for existing sellers

The character and importance of product differentiation

The degree of independence of action among sellers and buyers
Other major factors in identifying market power:

Power over price
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Dowling V Dalgety Australia Ltd (1992)
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
The constraining influence of competitors

The market share of the firm

Existence of vertical integration

The extent of barriers to entry
From the SG
Competition is basically defined by the height of barriers to entry to a market.
TB [4.5.1]
Market power is basically defined by the ability of, for example, a wholesaler to “give less and charge
more”.
TB [4.7.2]
We can visualise competition and market power like this:
A common theme of substitution
TB p58
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Topic 5 – Section 45 – Horizontal Restraints
Restricting Dealings or Affecting Competition
There are several different types of conduct which may contravene the section including:

Contracts, arrangements or understandings which contain an exclusionary provision. An
exclusionary provision is where there is an agreement between competitors to prohibit or
limits dealings of a particular person or customer for a particular class of personal customer.
An exclusionary provision is a per se breach of the act.

Agreements which restrict the supply of goods or services if such an agreement has the
purpose, effect or likely effect of substantially lessening competition.

Agreements between competitors to fix the price of goods or services.

Restrictive covenants regarding supply of goods or services or price fixing

Conduct which amounts to a secondary boycott.
Contract, arrangement or understanding
Section 45 prohibits the making of the contract, arrangement for understanding if it contains an
exclusionary provision or which has the purpose, effect or likely effect of substantially lessening
competition.
TB p65
Despite their fundamental importance, the terms are not defined in the act.
Nevertheless it is clear that the aim of the section was to catch informal agreements as well as those
of a more formal, legalistic nature.
To establish whether the parties have entered into a contract normal common law principles will
apply.
A reference to a contract should be construed as including a reference to a lease or licence in
respect of land, building or part of a building.
s4H, TPA
An arrangement is something whereby the parties to had accept mutual rights and obligations.
TPC v Nicholas Enterprises Pty Ltd (No 2) (1979)
The term understanding is broad and flexible and it appears would require less formality than either
an arrangement or contract.
An understanding must involve the meeting of two or more minds. Where the minds of the parties
are at one that a proposed transaction between them proceeds on the basis of the maintenance of a
particular state of affairs for the adoption of a particular course of conduct, it would seem that there
would be an understanding.
TPC v Nicholas Enterprises Pty Ltd (No 2) (1979)
The essential elements of the requisite meeting of the minds are:
TPC v Nicholas Enterprises Pty Ltd (No 2) (1979)

For each of the parties to have communicated with the other
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
For each to have raised an expectation in the mind of the other

For each to have accepted an obligation qua other
The parties can also be caught in circumstances where there has been an attempt to enter into a
contract, arrangement or understanding.
An attempt involves a step towards the commission of an illegal act but is not necessary that the
attempt has reached an advanced stage.
TPC v Parkfield Operations Pty Ltd (1985)
Some examples of contracts, arrangements for understandings
The existence of a contract, arrangement or understanding can be established by direct, but usually
circumstantial evidence.
Certain conduct on the part of the party’s main points to the existence of collusive conduct and it
then becomes a matter for the ACCC or the applicant to build a case.
The standard of proof is on the balance of probabilities, keeping in mind the gravity of the conduct
alleged.
TPC v Leslivale Pty Ltd (1986)
Evidence of parallel conduct
Due to the structure of particular industries a price leader may emerge and all other firms may
follow the price set by the price leader. Parallel, actor, often referred to as conscious parallelism,
may occur as a matter of course in certain industries and not be objectionable. On the other hand,
in other cases it may be evidence of the existence of a prescribed contract, arrangement or
understanding.
The forwarding of price lists to a competitor may not amount to conscious parallelism because
although the price list is sent to the competitor there is no obligation to follow the price set in the
price list.
TPC v Email Ltd (1980)
Joint action
Joint action by parties in respect of certain types of conduct may be evidence of the existence of a
prescribed contract, arrangement or understanding.
The reduction of the number of bottles of beer per dozen across a number of localities is evidence of
this.
TPC v Nicholas Enterprises Pty Ltd (No 2) (1979)
On the other hand staggered and inconsistent increases in prices throughout an area may not be
sufficient to infer the requisite understanding.
ACCC v Pioneer Concrete (QLD) Pty Ltd (1996)
Evidence of opportunity for parties to reach an understanding
Meetings or communications prior to suspicious conduct may be useful in showing that the parties
intended to reach an understanding.
However, simply meeting was that more is clearly not enough. TPC v JJ and YK Russell Pty Ltd (1991)
The circumstances and the conduct in the aftermath of the meeting are relevant.
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Exclusionary provisions
Entering into or giving effect to a contract, arrangement or understanding which amounts to an
exclusionary provision is prohibited.
s45(2)(a)(i) & (b)(i), TPA
An exclusionary provision is a per se breach of the act so therefore it is unnecessary to apply the
substantial lessening of competition test.
An exclusionary provision is:
(a) A contract, arrangement for understanding
(b) between two persons any two or more of whom are competitive with each other
(c) for the purpose of preventing, restricting or limiting the supply or acquisition of goods or
services to or from certain persons or classes of person
(d) by all or any of the parties to the contract
s4D, TPA
An applicant has to prove that two or more of the parties to the exclusionary provision were in
competition with each other.
Where there is no such competition they could not be an exclusionary provision.
TPC v Garden City Cabs Co-operative Ltd Inc (1995)
The parties must be in competition for the very goods and services which are implicated in the
prescribed conduct.
Broderbund Software Inc v Computermate Products (Aust) Pty Ltd (1992)
The area of real competition must coincide with the area of contractual relation.
Eastern Express Pty Ltd v General newspapers Pty Ltd (1991)
The purpose of boycotting the target must be common to all parties.
Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing (NSW) Ltd (1987)
Therefore where parties enter into an agreement and one of the parties wishes to harm the target
and the other enters into the agreement for other reasons the section will not be satisfied.
The person or class of persons boycotted through the operation of the exclusionary provision may
be identified by the fact they were precluded from access to relevant matters unless a restraint was
accepted.
ASX Operations Pty Ltd v Pont data Australia Pty Ltd (No 1) (1990)
Contracts, arrangements or understanding which substantially
lessen competition
With the exception of exclusionary provisions and price fixing, conduct will not contravene section
45 unless it has the purpose, effect or likely effect of substantially lessening of competition.
The purpose of substantially lessen competition must be the substantial purpose.
s4F, TPA
Such a purpose may be inferred from the nature of the arrangement, the circumstances in which it
was made and its likely effect at the time the contract, arrangement or understanding is made.
Dowling V Dalgety Australia Ltd (1992)
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The term substantial can mean considerable all big and not merely ephemeral or minimal.
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1983)
Competition means competition in any market in which the corporation which is a party to the
particular contract, arrangement or understanding (or any related corporation) supplies, acquires,
would be likely to supply or acquire, or would, but for a provision in the contract, arrangement or
understanding supply or acquire, goods or services.
“to apply the concept of substantially worsening competition in a market, it is necessary to assess the
nature and extent of the market, the probable nature and extent of competition which would exist
there in but for the conduct in question, the way the market operates and the nature and extent of
the contemplated lessening. To my mind one must look at the relevant significant portion of the
market, ask oneself how and to what extent there would have been competition therein but for the
conduct, assess what is left and determine what has been lost in relation to what would have been, is
seen to be a substantial lessening of competition.”
Dandy Power Equipment Pty Ltd v Mercury Marine Pty Ltd (1982)
Price fixing
Price fixing is deemed to substantially lessen competition.
s45A, TPA
Therefore, in effect, price fixing is a per se breach of the act.
Prices can be fixed even if all that is proposed is an increased to a certain figure, without any
provision as to when, or by what machinery, or what amount, a further change may take place.
Assurance of permanency, or one duration, or constant relativity is not necessary.
TPC v Parkfield Operations Pty Ltd (1985)
Maintaining or fixing involves some element of continuity, not merely being a momentary or
transitory. Generally, to maintain a price assumes that it has been fixed beforehand.
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982)
Exceptions
The price fixing prohibition will not applied provisions in certain joint venture arrangements.
s45A(2), TPA
The activities of such entities are still subject to the substantial lessening of competition test.
Checklist: Section 45(2)
1. To have a contract, arrangement or understanding?
If so:
2. Does the contract, arrangement or understanding contain an exclusionary provision?
Examine the elements of exclusionary provision.
If so there will be a per se breach of the act without the need to examine the competitive
affect of the behaviour.
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3. Does the contract, arrangement or understanding have the effect will likely effect of
substantially lessening competition?
If so: there will be a breach of the act. Remember, unless there is an exclusionary provision
involved there will only be a contravention of s45(2) if the purpose or effect of the contract,
arrangement or understanding has or is likely to have an anti-competitive effect.
4. Is authorisation available?
Restrictive covenants
A covenant is unenforceable if it has or is likely to have the effect of substantially lessening
competition in any market in which the corporation or any associated person supplies were acquires
goods or services or would acquire goods or services but for the covenant.
s45B, TPA
The covenant is defined as a covenant annexed to or running with an estate or interest in land and
whether or not for the benefit of other land.
s4(1), TPA
It is also prohibited for a corporation or an associated person requiring or giving a covenant which
offends the substantial lessening of competition test. Further, it is prohibited to threaten to engage
in particular conduct if a person fails or refuses to comply with such a covenant or the carrying out of
such a threat.
s45B(2), TPA
Where provision of a contract is unenforceable the offending provision is to be severed from the
contract.
s4L, TPA
Also prohibited are covenants which have the purpose, effect or likely effect of fixing, controlling or
maintaining the price of or the discount, allowance, rebate or credit in relation to the supply or
acquisition of goods and services.
s45C, TPA
Secondary boycotts
The secondary boycott occurs where two or more parties (A and B) in concert to engage in conduct
for the purpose of hindering of preventing a third person (C) from supplying requiring goods to or
from fourth person (D) in circumstances where the purpose, effect or likely effect of this conduct is
to cause substantial loss or damage to the fourth persons business.
Such secondary boycotts are forbidden.
s45D, TPA
Any of the parties involved could be natural persons, corporations, unions or government
departments.
Industrial Enterprises Pty Ltd v Federated Storemen and Packers Union of Australia (1979)
However the provisions will only apply so long as:
1. Both the C and D are corporations;
2. Either C or D are corporations; but
3. Where D is not a corporation the provisions can apply so long as C is a corporation and the
conduct would have the requisite loss or damage to C’s business.
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And if neither A nor B are employees of D.
In concert with each other involves knowing conduct which is the result of communication between
the parties are not simply simultaneous actions occurring spontaneously.
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA branch) (1992)
To hinder or prevent has been held to encompass physical interference, verbal intimidation and
threats.
Australian Broadcasting Commission v Parish (1980)
For instance the establishment of a picket line involves an implied direction not to cross the picket
line has to do so would run the risk of retaliatory action.
J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA branch) (1992)
The purpose of A and B’s conduct must be to cause a substantial loss or damage to D’s business.
sS45D(2), TPA
Secondary boycotts whose purpose and effect or likely effect is the substantial lessening of
competition in any market in which the target supplies requires goods or services are prohibited.
s45DA, TPA
Secondary boycotts which prevent or substantially hinder the engaging in trade or commerce
involving the movement of goods between Australia and places outside Australia are also prohibited.
s45DB, TPA
If two or more union members or officers act together for a certain purpose, the relevant union is
deemed to be acting in concert with them and for the same purposes.
s45DC(1), TPA
Whether dominant purpose of the conduct substantially relates to employment matters such as
wages and working hours involving the workplace of those persons involved in the dispute ss45D,
45DA and 45DB will not be contravened.
s45DD, TPA
There is a prohibition on contracts, arrangements and understandings affecting the supply or
acquisition of goods or services.
s45E, TPA
This section aims to discourage persons such as C from agreeing with the union not to deal with the
target to avoiding trouble for their own business.
Building Workers Industrial Union of Australia v Odco Pty Ltd (1991)
Similarly, the person is prohibited from giving effect to a contract, arrangement or understanding if,
because of the provision, the making of the contract, arrangement or understanding contravened
s45E.
s45EA, TPA
Authorisation
Authorisations available in relation to conduct which may otherwise contravene the various section
45 provisions.
ss88 & 90, TPA
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Topic 6 – Misuse of Market Power
Corporations with an effective competitive strategy will generally acquire market power.
The TPA does not prohibit corporations from acquiring market power however, it does prohibit
corporations from taking advantage of market power for the purpose of eliminating or substantially
damaging a competitor, preventing the entry of the person into a market or deterring or preventing
a person from competing in a market.
Section 46 and is aimed at the protection of the competitive process and thereby protection of
consumers.
Elements of section 46
Section 46 will only be breached where:
1. Corporations with a substantial degree of market power;
2. Took advantage of that market power;
3. For at least one of the following purposes:
a. Eliminating or substantially damaging a competitor of the corporation or of a body
corporate that is related to the corporation in that or any other markets;
b. Preventing the entry of a person into that or any other market; or
c. Deterring or preventing the person from engaging in competitive conduct in that or
any other market.
s46, TPA
A corporation with a substantial degree of market power
A firm possesses market power when it can behave persistently in a manner different from the
behaviour that a competitive market would enforce on a firm facing otherwise similar cost and
demand conditions.
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989)
Two factors in determining this is the number and size distribution of buyers and sellers, and the
conditions of entry for new sellers and expansion for existing sellers (barriers to entry).
Another way would be to ask whether a corporation would be able to give less and charge more for
its products without its market share and customers being undermined by competitors.
What degree of market power
All corporations are likely to possess some degree of market power.
However, for the purposes of section 46, the corporation must have a substantial degree of market
power.
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Substantial has been construed to mean real or of substance and not insubstantial or nominal.
Eastern Express Pty Ltd v General Newspapers Pty Ltd (1991)
However, because of its imprecise character, the extent of a corporations market power must be
considered on the facts of each case.
Radio 2UE Sydney Pty Ltd v Stereo FM Pty Ltd (1982)
The ACCC has stated that in section 46 enquiries, it will ask whether the degree of market power
held by the corporation in question is considerable in the context of the market under examination.
Measuring market power
In determining market power a court must have regard to the extent to which the corporation is free
to determine its own conduct in the market without being consistently constrained by competitors,
customers or suppliers.
s46(3), TPA
Market power rests on a lack of substitutable of all products for a corporation’s products.
Substitutable products cannot be produced if competitors cannot enter the market at a competitive
scale and produce them, or once in the market, cannot gain some market share.
A large market share may well be evidence of market power, but the ease with which competitors
would be able to enter the market must also be considered.
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989)
The ACCC has identified several factors which it will consider in the context of barriers to entry:

Whether entry to the market is restricted by government regulation saw institutional areas
such as patents or exclusive licenses. If the firm has a patent or government licence which
authorises only it to make a certain product, then new entrants will find it difficult to enter
the market to produce substitutes’ unless it also obtains a licence.

Whether the market is characterised by significant economies of scale that makes new entry
difficult or problematic.
If a new entrant must enter the market at a very large scale relative to the size of the
market, then it may be reluctant to enter at all because it may be too expensive, or it may
fear that it could not survive

Whether there are any absolute or natural barriers to entry to the industry

Whether the upfront costs or capital expenditures of very high which would force the new
entrant into spending a lot on establishing itself
Taking advantage of market power
Taking advantage of market power does not require evidence of hostile intention.
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989)
There must be a causal connection between the respondent’s market power and the conduct which
is said to breach section 46.
Natwest Australia Bank Ltd v Boral Gerrard Strapping Systems Pty Ltd (1992)
Because section 46 is concerned with the exercise of market power, this causal nexus will be broken
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where the respondent is exercising not market power, but some other form of commercial power.
For example, where using the rights available to a corporation under a contract.
Helicruise Air Services Pty Ltd v Rotorway Australia Pty Ltd (1996)
Or under intellectual property.
Warman International Ltd v Envirotech Australia Pty Ltd (1986)
The prescribed purposes
The corporation will only breach s46(1) if it is taking advantage of its market power for one or more
of the following purposes:
1. Eliminating or substantially damaging a competitor of the corporation, or of a body
corporate that is related to the corporation in that or any other market
2. Preventing the entry of a person into that or any other market
3. Deterring or preventing a person from engaging in competitive conduct or any other market.
Where conduct is engaged in with more than one purpose in mind, it is sufficient if the prescribed
purpose is one among other purposes, so long as it was a substantial purpose.
s4L, TPA
Purpose is not directly concerned with the effect of the conduct, but with purpose in the sense of
motivation and reason for engaging in the relevant conduct. Dowling v Dalgety Australia Ltd (1992)
Examples of prohibited conduct
TB p93-102
Common price strategies
Maximum pricing
Section 46 doesn’t really do much about maximum pricing strategies this is because it is suggested
that the corporation engaging in maximum pricing actually encourages greater efforts by
competitors or new entrants to enter the market and take away customers were not happy with the
high prices they are paying.
Price leverage/squeeze
A vertically integrated producer, wholesaler and retailer of Steel Products competed with QWI in the
downstream market for rural fencing products. BHP agreed to supply QWI with the fencing product,
but only at an excessively high price. QWI is profit margin would have been squeezed to the point
where it would have been unable to compete with BHP in the downstream market for rule fencing
products.
BHP was found to have contravened section 46.
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989)
A company enjoyed a substantial degree of market power in both the stock exchange market and
the stock information market. A court found that by raising the price of a product to a wholesale
customer the company had contravened section 46.
ASX Operations Pty Ltd v Pont data Australia Pty Ltd (No 2) (1991)
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Common non-price strategies
The most common non-price strategies which have been considered in the context of section 46
include:

Refusals to deal

Exclusive dealing contracts

Abuse of process/sham litigation
Refusal to supply
In general there is no duty to deal on corporations with a substantial degree of market power to
supply any new entrant into the market.
Tavernstock Pty Ltd v John Walker & Sons Ltd (1980)
However section 46 may be infringed so long as it can be shown that the refusal to supply cannot be
explained on other legitimate business grounds.
Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989)
A good example would be where it is a monopoly supplier.
Exclusive dealing contracts
Even though such contracts would be assessed under section 47 they may still contravened section
46.
If for instance accompanied takes advantage of its market power to impose an exclusive dealing
contract when it would not have been able to do so if not for that market power.
General News Papers Pty Ltd v Australian and Overseas Telecommunications Corp (1993)
Abuse of process/sham Litigation
This is a practice in which a litigation is commenced or continued, not for the purpose of advancing a
worthy claim, but simply to delay a competitor setting up a business in competition or to raise the
costs of that competitor.
The test here would be to see if there was an arguable question of fact to be tried. This is a fairly
easy test to meet.
Cadbuy-Schweppes Pty Ltd v Kenman Developments Pty Ltd (1991)
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Topic 8 – Section 47 – Exclusive Dealing
A vertical restraints spans different functional levels of production and distribution chain and may
include arrangements between manufacturers, wholesalers and retailers.
Restraint of trade
This is a common law doctrine.
Pursuant to the doctrine a contract which is in restraint of trade is prima facie void as contrary to
public policy unless it can be established that the clause extends no further than is reasonably
necessary to protect the contracting parties and the interests of the public.
Nordenfeldt v Maxim Nordenfeldt Guns & Ammunition Co Ltd [1894] {UK}
Vertical transactions such as solus agreements and tying may potentially infringe the doctrine.
In the case of tying however, the doctrine will not be infringed unless the person upon whom the
restraint is imposed gives up pre-existing freedom.
Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] {UK}
The TPA does not affect the operation of the common law on this matter.
s4M, TPA
The structure of section 47
A corporation in trade or commerce is prohibited from engaging in practice exclusive dealing.
s47, TPA
Not all vertical non-price restraints contravene the act, only the practices described within:

Supply or acquisition of goods and services on a prescribed condition
s47(2), (4) & (6), TPA

Refusal to supply, or refusal to wire, upon five well as rich and
s47(3), (5) & (7), TPA

Conduct of the above-mentioned kind in relation granting or renewal of a lease or licence
s47(8) & (9), TPA
However such practice must have the purpose, or is or is likely to have the effect of substantially
listening competition.
s47(10), TPA
Except for those breaches which amount to a third line forcing, which is a per se breach of the act.
These are the breaches of s47(6), (7), (8)(c) & (9)(d).
Exemptions
(11) Subsections (8) and (9) do not apply with respect to:
(a) conduct engaged in by, or by a trustee for, a religious, charitable or public
benevolent institution, being conduct engaged in for or in accordance with the
purposes or objects of that institution; or
(b) conduct engaged in in pursuance of a legally enforceable requirement made by, or
by a trustee for, a religious, charitable or public benevolent institution, being a
requirement made for or in accordance with the purposes or objects of that
institution.
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(12) Subsection (1) does not apply with respect to any conduct engaged in by a body corporate by
way of restricting dealings by another body corporate if those bodies corporate are related to
each other.
s47, TPA
Exclusive dealing may also be the subject authorisation or a process known as notification.
Checklist – Section 47
1. Is a corporation involved? If yes:
2. Is the conduct in the trade or commerce? If yes:
3. Does the conduct amount to the practice exclusive dealing is defined by ss47(2)-(9)? If yes:
4. Does the conduct amount of third line forcing? If it does, there has been a per se breach of
the act and there needs to be no investigation of the anti-competitive effect (goto 6). If not,
goto 5.
5. If the conduct does not amount to third line forcing the substantial lessening of competition
test must be applied to conduct in question. If the conduct does substantially lessen
competition there will be a contravention of the Act. If it does not there will be no
contravention.
6. Doesn’t exemption apply?
7. Can the conduct be authorised? Also consider notification.
8. In the case of a contravention what remedies are available?
Preliminary definitions
Sections 47(2)(a)-(c) & (6)(a)-(c) refer to circumstances where:

A supplies or offers to supply B with product X

A supplies or offers to supply B with product X at a particular price

A supplies or offers to supply be with product X at a discount or accompanied by an
allowance, rebate or and
Section 47(3)(a)-(c) & (7)(a)(c) for certain circumstances where the there is a refusal to supply due to
failure to comply with such a condition.
Section 47(4)(a) & (b) refers to circumstances where:

B acquires or offers to acquire product X from A

B acquires or offers to acquire product X from A at a particular price on the condition A
complies with a prescribed condition
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The Elements of section 47
Sections 47(2)-(7) deal with goods or services, 47(8) & (9) deal with leases and licences.
Goods and services
Corporation will engage in exclusive dealing where there is a supply or an offer to supply goods or
services, supply or offer to supply those goods or services or at a particular price or with the
provision of a discount, allowance, rebate or credit so long as certain prescribed conditions are met.
s47(2), TPA
It is also prohibited refuse to supply goods or services as a result of the failure to comply with such a
prescribed condition.
s47(3), TPA
There are three types conduct:

Product restrictions which restrain the way in which an acquirer may resupply goods or
services

Customer restrictions which restrain the way in which an acquirer may resupply goods or
services to particular customers

Territorial restrictions which restrain the way in which an acquirer may resupply goods or
services to particular locations
Product restrictions are usually one of four general varieties:
1. requirements contracts
2. solas agreements
3. full line forcing
4. third line forcing
Solas Agreements
TB p112, [7.6.5]
A solas agreement involves agreement by the parties that the supplier will provide goods or services
to the acquirer on the condition that the acquirer will not obtain those goods or services from any
other supplier.
Such agreements are forbidden.
s47(2)(d) & (3)(d), TPA
Requirements contracts
The requirements contract is an arrangement where a person agrees to acquire all or a substantial
portion of its requirements for certain goods or services from one supplier.
Such arrangements may be prohibited in circumstances where there is a supply on condition that
the acquirer will not, or will not limited extent, obtained the goods or services of a competitor.
s47(2)(d) & (3)(d), TPA
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There needs to be limiting of the ability of the acquirer to deal with the suppliers competitors
resulting in a lessening of competition in the particular market.
O’Brien Glass Industries Ltd v Cool and Sons Pty Ltd (1983)
Tying
Full line or second line forcing, involves the supply of a particular good or service on the condition
that the acquirer will also obtain another product from the supplier.
Such conduct may contravene the act.
s47(2)(d) & (3)(d), TPA
For instance corporations supplying photocopiers insisting that persons acquiring the photocopiers
also had purchased a photocopy paper from the corporation.
Re Nashua Australia (1975)
The line forcing involves the supply of goods or services to the acquirer on the condition that the
acquirer also agrees to obtain goods or services from a third party. This behaviour is prohibited.
s47(6) & 47(7), TPA
A possible defence to third line forcing is the single product defence.
This is where the acquirer is ultimately acquiring only one product, though another product or
service may be involved in the process.
For example, where beer is delivered by one delivery company the acquirer is only acquiring the
beer, not the method of delivery.
Castlemaine Tooheys Ltd v Williams and Hodgson Transport Pty Ltd (1986)
Also were a sporting venue utilises a particular ticketing agency.
Paul Dainty Corp Pty Ltd v National Tennis Centre Trust (1989)
Third line forcing is a per se contravention of the act. Full line forcing is not.
Suppliers are prohibited from supplying goods or services on the condition that the acquires will not,
or will not too limited extent resupply the goods or services to particular persons all classes of
persons.
s47(2)(f)(i) & (3)(f)(i), TPA
Suppliers are also prohibited from supplying goods or services on the condition that the acquires will
not, or will not to a limited extent resupply the goods or services in particular places or classes of
places.
s42(2)(f)(ii) & (3)(f)(ii), TPA
Where a person acquiring goods or services acquires those goods or services on condition that the
supplier accept a restriction on its breed and Rees applied to a third party there may also be a
contravention of the act where such conduct has the requisite affect on competition.
s47(4) & 47(5), TPA
Leases and licences
There are provisions against the grant or renewal of the lease or licence on essentially the same
conditions that are prohibited for goods and services.
s47(8) & (9), TPA, TB p116
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Substantial lessening of competition
In determining whether there is the requisite effect on competition the conduct can be aggregated
with other conduct of the same or similar kind.
In cases intimidatory tactics could be regarded as having the requisite impact on competition.
Otherwise the normal principles apply.
Authorisation and notification
Conduct which is a contravention of section 47 can be authorised.
s88(8), TPA
With the exception of third line forcing, the test to be applied is whether in all the circumstances the
public benefit resulting from the continuation of the conduct outweighs the detriment caused by the
substantial lessening of competition.
Conduct amounting to third line forcing is subject to an inquiry as to whether the proposal would
result in such a benefit to the public it should be allowed.
s90(8), TPA
Notification provides annuity from prosecution by the commission in circumstances where the
commission is notified of the exclusive dealing conduct.
After notification the conduct can continue and remained permissible until there is determination
that the conduct is anti-competitive and is without benefit to the public.
s93(3), TPA
Third line forcing can also been notified.
s93(3), TPA
Exceptions
Sections 48(8) & (9) do not apply to conduct engaged in by religious, charitable or public benevolent
institutions in circumstances where the conduct is for or in accordance with the objects of the
institution or is engaged in pursuant to a legally enforceable requirement of the institution made for
or in accordance with the objects of the institution.
s47(11), TPA
Conduct engaged in by related corporations pursuant to which one of the related corporations
restricts the dealings of the other related corporation is also exempt.
s47(12), TPA
Remedies
See Topic 21.

Pecuniary penalties
s76, TPA

Injunction
s80, TPA

Damages
s82, TPA

Other orders
s87, TPA
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Topic 9 – Resale Price Maintenance
Retail price maintenance provisions deal with conduct on the part of the supplier which
demonstrates that the supplier has used direct or indirect means to ensure the person receiving the
goods or services complies with the specified price.
Not all types of vertical price restrictions will contravene the Act.
Resale Price Maintenance under the TPA
Corporations and other persons are prohibited from engaging in the practice of resale price
maintenance with respect to both goods.
s48, TPA
And services.
s96A, TPA
Resale price maintenance is always a per se contravention of the act.
The elements of section 48
Only suppliers can be in contravention of the RPM provisions.
Part VIII, TPA
The person to whom the goods or services are supplied cannot be guilty of RPM, although
inappropriate circumstances could be liable.
ss45, 45A & 47, TPA
At least one person in the transaction must be a corporation. If the supplier is a corporation this
presents no problem.
However if the supplier is a non-corporate individual than the supply must be to a corporation.
s96(2), TPA
Except where the individual is involved in trade and commerce internationally, between states and
territories, within the territory, or to the Commonwealth.
s6(2)(b), TPA
If a supplier engages in the practice of resale price maintenance section 48 will be contravened.
Unless the price has been specified by the supplier the RPM provisions will not be contravened.
s96(3), TPA
The price must be in some way identifiable, although a precise sum is not required. Price may be
specified so long as it can be ascertained or is calculable in some way.
TPC v Bata Shoe Co of Australia Pty Ltd (1980)
For instance a price may be specified in circumstances where reference could be a standard with
been particular industry.
TPC v Mobil Oil Australia Ltd (1984)
The price need not be static, it may fluctuate within a range. Pye Industries Sales Pty Ltd v TPC (1979)
Direct RPM – Section 96(3)
Section 96(3)(a)
RPM will occur in circumstances where the supplier makes it known to the second person that the
supplier will not supply goods or services to the second person unless the second person agrees not
to sell at less than the stipulated price.
s96(3)(a), TPA
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Making it known
The term are making it known requires the supplier to communicate the specified price to the
second person and also impress upon the second person that unless they agree to the specified
price the goods or services will not be supplied.
This can include direct and indirect communication, whether oral, written or by conduct.
The supplier must actually inform the second person that the supply is conditional upon the
agreement. This information must be received and understood by the second person.
TPC v Bata Shoe Co of Australia Pty Ltd (1980)
Agrees
The subsection does not require a legally binding contract nor did the parties need to actually reach
an agreement.
Heating Centre Pty Ltd v TPC (1986)
Nor does the agreement have to be temporally connected the suggested minimum price.
Heating Centre Pty Ltd v TPC (1986)
Those goods
The RPM provisions will only apply in circumstances where the goods or services supplied and sold
are the same.
s96(3)(a), TPA
To a second person
A supplier cannot engage in resale price maintenance unless the goods mentioned are supplied to
the person whom it seeks an arrangement to enforce a minimum price.
Thus if a supplier sells to a wholesaler who then sells on to a retailer, the supplier if the supplier
would threaten retailer this would not constitute a breach of s96(3)(a) as the supplier does not
supply the retailer directly.
TPC v Sony (Aust) Pty Ltd (1990)
Section 96(3)(b)
This section deals with circumstances where supplier induces, or attempts to induce, a second
person not to sell, at a price less than a price specified by the supplier, goods supplied to the second
person by the supplier or by a third person who, directly or indirectly, has obtained the goods from
the supplier.
ACCC v Mayo International Pty Ltd (No 2) (1998)
Inducing or attempting to induce
Mere persuasion with no promise or threat may well be an attempt to induce.
Heating Centre Pty Ltd v TPC (1978)
The term can involve the use of conduct designed to intimidate the dealer into compliance, for
example, threats to withdraw supply.
Heating Centre Pty Ltd v TPC (1978)
Similarly where the supplier suggests non-compliance may result in adverse consequences for the
dealer, for example the loss of advertising allowances.
Parrys Department Store (WA) Pty Ltd v Simpson Ltd (1983)
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The conduct need not be sinister on its face. Requests, persuasion or advice may amount to an
inducement in circumstances where adverse consequences could follow should the dealer not
comply.
TPC v Stihl Chain Saws Pty Ltd (1978)
However, merely imposing pressure to raise prices will be insufficient. There can be no inducement
without a stipulated price.
TPC v Penfolds Wines Pty Ltd (1991)
State of mind
No mental element is required for an inducement.
However, in order for there to be an attempt, intention to induce is required.
TPC v Tubemakers (Aust) Ltd (1983)
Recommended prices
It is permissible for the supplier to recommend a price for goods so long as it is not essential that the
dealer comply with that price.
s97, TPA
The supplier should make it clear that the price is a recommended price only and there is no
requirement to comply.
TPC v Bata Shoe Co of Australia Pty Ltd (1980)
It is a question of substance of the transaction and all the circumstances whether a recommendation
is genuine or is in fact a specified price.
Mikasa (NSW) Pty Ltd v Festival Industries Pty Ltd (1972)
Goods supplied
This includes goods or services already supplied as well as those to be supplied in the future.
Mikasa (NSW) Pty Ltd v Festival Industries Pty Ltd (1972)
Section 96(3)(c)
This section deals with circumstances where the supplier enters into an agreement, or offers to
enter into an agreement, or the supply of goods to a second person, being an agreement one of the
terms of which is, or would be, that the second person will not sell the goods at a price less than a
price specified, all that would be specified by the supplier.
Therefore the supplier enters or offers to enter into an agreement with the second person in which
the second person agrees he or she will not sell below a specified price.
Agreement or offer
It is the actual entry or offer to enter into an agreement for the supply of goods or services where a
term of the agreement is or would be that the price of the goods or services when resupplied will
not be less than the price specified by the supplier that is prohibited.
TPC v Commodore Business Machines Pty Ltd (1989)
Section 96(3)(f)
This section expands RPM to include circumstances where supplier uses, in relation to any goods or
services supplied, or that may be supplied, by the supplier to a second person, a statement of price
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that is likely to be understood by that person is a price below which the goods or services are not the
sold.
The width of the section often says that in use in addition to a number of other subsections.
Statement of price
This requirement has been interpreted in the same way as price specified.
The section will apply where the circumstances do not fall within s98(a), (b) or (c) is no agreement
has been entered into or sort.
Heating Centre Pty Ltd v TPC (1978)
All because the supplier lacked the intention to induce required by s98(b).
TPC v Mobil Oil Australia Ltd (1984)
Statements in relation to goods or services
In addition to the more overt statements is found in the other subsections, this can include the
preparation of a list of recommended prices.
Heating Centre Pty Ltd v TPC (1978)
Likely to be understood
The crucial matter is the effect of the statement on the second person rather than the intention of
the supplier in making the statement.
The court will apply an objective test.
TPC v BP Australia Ltd (1986)
Therefore in circumstances where the reasonable person would understand the statement to be a
statement price paragraph will be satisfied even if it was not in fact the intention of the supplier.
Indirect resale price maintenance
RPM may occur where a supplier withholds its supply of goods or services because of the second
person who obtains the goods or services directly through the supplier or through a third party has
not agreed to adhere to the specified price or has or is likely to do so.
s93(d) & (e), TPA
Withholding supply
Withholding supply may occur in circumstances where:
s98(1), TPA, TB p131-132

There is a refusal or failure to supply

The supply is on disadvantageous terms

The supply is on a less favourable conditions in comparison to other dealers

There is a causing or procuring the withholding of supply
Goods
It would seem that the goods and services referred to need not be the same goods and services as
those whose price the supplier is concerned to maintain.
Reason
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Unless the conduct is deemed to constitute holding of supply, is committed for one of the specified
reasons, no contravention of the act is involved.
TPC v Stihl Chainsaws (Aust) Pty Ltd (1978)
These reasons include:

not agreeing to the specified resale price

has sold, or is likely to sell, goods supplied to him or her by the supplier, or goods supplied to
him or her by a third person who, directly or indirectly, has obtained the goods from the
supplier, at a price less than a price specified by the supplier as the price below which the
goods are not to be sold.
Presumption
If the supplier has been supplying goods or services to the second person and the supplier has acted
in a manner which constitutes withholding supply after becoming aware within the previous six
month of a matter which might constitute a reason mentioned above will be presumed that supply
will be withheld for one of those reasons.
s100, TPA
Loss leader defence
This is the practice of selling goods at less than cost to attract custom or recoup the loss profits
made by the sale of other goods.
While this practice is not prohibited, it provides a defence for suppliers to withhold supply in circles
where the supplier’s product is being used as a loss leader and the image or reputation the product
will suffer as a result.
TPC v Orlane (Aust) Pty Ltd (1984)
A genuine seasonal or clearance sale will not be grounds for this difference.
s98(3), TPA
The loss leader defence is only applicable to s96(3)(d).
Agency
For the purposes of RPM they can be no resale until property in goods passes.
In an agency situation were in principle passes on goods to an agent title and the goods will not pass
to the agent.
Therefore there can be no RPM until those of third party involved.
TPC v Leslisvale Pty Ltd (1986)
Authorisation
RPM involving goods or services can be authorised by the commission.
s88(8A), TPA
The commission may authorise the conduct so long as, in the commission’s opinion, the public
benefit test is satisfied.
s90(8)(a)(iv), TPA
Penalties and remedies
These include:
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
Pecuniary penalties

Injunction
s80, TPA

Damages
s82, TPA

Other orders
s87, TPA
s76, TPA, TPC v Commodore Business Machines Pty Ltd (1989)
Checklist – RPM
1. General issues that the matters such as what is resale price maintenance, what are the
relevant sections the act? Discuss generally ss48, 4(1) and Part VIII
2. Who has engaged in the prescribed conduct whom is that person supplying the goods or
services? Consider ss96(1) & (2)
3. Has a price been specified
4. Has resale price maintenance occurred? Consider s96(3)(a)-(f)
5. Is a defence available?
6. Is authorisation of the conduct available?
7. Remedies.
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Topic 10 – Mergers and Acquisitions
Anti-competitive mergers can lead to monopoly because the absence of predators means that the
market power may be unconstrained. Such managers can also make it easier the corporation to
preserve its market power by engaging in anti-competitive conduct, by either excluding new
entrants through predatory behaviour or collusive conduct.
Elements of section 50
A corporation is prohibited from either directly or indirectly acquiring shares in a corporation or
assets of a person if the acquisition would have the effect, or likely to have the effect, of
substantially lessening competition in market.
s50(1), TPA
A person is also prohibited from doing the same so long as the target is a corporation.
s50(2), TPA
Market means a substantial market for goods or services in Australia.
s50(6), TPA
A corporation
Under the Federal act, one or both of the parties must be a corporation.
However note, that one of the parties can be a natural person or non-corporate entity.
Also state equivalents of that TPA can apply where both parties are non-corporate entities.
Direct and indirect acquisition
In order for there to be an indirect acquisition, the acquisition must have been made by the wholly
owned subsidiary acting as agent on behalf of parent company.
TPC v Australian Iron and Steel Pty Ltd (1990)
Direct acquisition does not really pose a problem.
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Substantial lessening of competition
In assessing the effects of a merger several factors should be considered:
s50(3), TPA
(a) The actual and potential level of import competition in the market;
(b) The height of barriers to entry;
(c) The level of concentration within the market;
(d) The degree of countervailing power in the market;
(e) The likelihood that the acquisition would result in the acquirer being able to significantly and
substantially increase prices or profit margins;
(f) The extent to which substitutes are available in the market or are likely to be available in the
market;
(g) The dynamic characteristics of the market, including growth, innovation and product
differentiation;
(h) The likelihood that the merger would result in the removal from the market of a vigorous
and effective competitor;
(i) The nature and extent of vertical integration in the market.
Assessing substantial lessening of competition
The factors in s50(3) are directed towards investigating the structure of the market end of the
nature of competition within it.
Some ways in which the factors can demonstrate a substantial lessening of competition:
(a) The actual and potential level of import competition in the market
Competition may be substantially lessened if a firm can exercise market power by acting
independently of its competitors. Such a firm may raise its prices above the competitive level.
However, if there are significant levels of imported products in the market, a firm of may not be able
to raise its prices because customers could simply by the imported products.
(b) The height of barriers to entry
This refers to the ease with which new firms can enter the market and offer competition and to
existing firms.
(c) The level of concentration within the market
This refers to the number of competitors in the market and the size of for those competitors. If there
are a large number of competitors in the market by then it is unlikely that a firm can exercise market
power.
(d) The degree of countervailing power in the market
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For example, if a firm that is a producer is faced with customers, who possess some market power,
then those customers may be able to constrain the firm from exercising its market power by
attempting to raise prices above the competitive level. If the producer firmer attempted to do this,
the customers could simply source their supply from some other producer.
(e) The likelihood that the acquisition would result in the acquirer being able to significantly and
substantially increase prices or profit margins
If a firm is able to act independently of its competitors by raising prices or profit margins, then it is
able to exercise market power. The ability to exercise market power in this way suggested that
competition in the market has been lessened.
(f) The extent to which substitutes are available in the market or are likely to be available in the
market
This factor is central to market definition. It is the existence of substitution possibilities, both on the
demand and supply side, better determines the extent of the product market. The availability of
such substitutes also can indicate relative market power.
(g) The dynamic characteristics of the market, including growth, innovation and product
differentiation
A market which displays a substantial product differentiation, innovation and progression suggests
that competition is active and not lessened.
(h) The likelihood that the merger would result in the removal from the market of a vigorous and
effective competitor
It is difficult for a firm to exercise market power when it is surrounded by vigorous and effective
competitors which would snap up customers of the firm if it tried to raise its prices.
(i) The nature and extent of vertical integration in the market
Firms which have vertically integrated may be able to exercise market power by denying competitors
access to essential goods or services.
Role of the ACCC
Where the ACCC forms the view that the proposed merger may substantially lessen competition
then it is likely to be challenged.
The ACCC has established its own guidelines to when it feels it should intervene in a merger under
the TPA.
TB p147
Extraterritorial operation
Section 15 is extended to conduct engaged outside Australia by bodies corporate which are
incorporated or carrying on business in Australia, or by Australian its citizens or persons ordinarily
resident in Australia.
s5(1), TPA
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Additionally mergers which occur outside Australia can be assessed For their effect on competition
within Australia.
s50A, TPA
This analysis only applies if s50(1) does not.
TB p149
Merger authorisation
If the commission grants authorisation to a merger, then action cannot be taken by the commission
or a third party to prevent of the merger on the basis of that it offends the TPA.
s88, TPA
Such authorisation will not be granted unless the proposed acquisition would result, or be likely to
result, in such a benefit to the public that the acquisition should be allowed to take place. s90(9), TPA
Some matters which could be regarded as public benefits include:
ACI Operations Pty Ltd (1991)

Economic development through encouragement of exploration, investment and research

Fostering a business deficiency which improves international competitiveness

Expansion of employment or prevention of unemployment

Improvement in the quality and safety of goods and services and expansion of consumer
choice

Supply of better information to consumers and businesses to permit informed choices in
their dealings

Promotion of equitable the dealings in the marketplace

Steps to protect the environment.
The term public benefit should be given the widest possible meaning, and include anything of value
to the community generally, any contribution to the aims pursued by society including as one of its
principal elements, the achievement of the economic goals of efficiency and progress.
Re Queensland Co-operative Milling Association Ltd (1976)
Authorisation procedure
An application for authorisation must be made by the parties to the proposed merger. They must be
made directly to the Australian Competition Tribunal.
The commission must assess the application within 30 days. This period can be extended to 45 days
for complex matters.
s90(11)(a), TPA
The assessment process is a public process and the commission invites a wide range of parties who
may have an interest in the proposed merger to make written submissions.
The commission will only grant authorisation if it is satisfied that the merger would result, or be
likely to result, in such a benefit to the public that the merger should be allowed to proceed.
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Clearance to Merge
A new voluntary formal clearance system has been introduced; an acquirer can apply to the ACCC
for clearance of a proposed acquisition which, on being given the clearance, provides protection to
the acquirer from legal action under s 50.
Powers and remedies
A number of options are available to the commission if it concludes that a merger is likely to
substantially lessen competition in a market:

Injunctions

Divesture

Penalties

Undertakings
Divestiture
Where record has found a contravention of s50 or s50A then it may order divestiture.
ss81(1) & 81(1A), TPA
An order for divestiture may be made within three years after the date on which the contravention
occurred.
s81(2), TPA
An order of the divestiture usually acquires the acquirer to dispose of any or all of the shares
acquired.
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Topic 11 – Authorisation and Notification
Conduct which may be authorised or notified
The TPA allows the ACCC to grant authorisation for the following conduct:

Entering into and giving effect to a contract, arrangement or understanding which
substantially lessons competition, including price-fixing agreements (s45)
s88, TPA

Covenants restricting competition (ss45B, 45C)
s88(1), TPA

Primary boycotts (s45(2))
s88(1), TPA

Secondary boycotts (s45D)
s88(7), TPA

Anti-competitive exclusive dealing (s47(2))
s88(8), TPA

Exclusive dealing in involving third line forcing (s46(6))
s88(8), TPA

Resale price maintenance (s48)

Mergers which would lead to or would likely to lead to a substantial lessening of competition
(s50)
s88(9), TPA
s88(8A), TPA
Note that authorisations cannot be granted for a misuse of market power in contravention of s46(1).
Effect of authorisation and notification
Authorisations provides a party with them with immunity from legal action taken by the commission,
the minister or by third parties.
Where exclusive dealing conduct does not involve third line forcing, notification provides annuity
when the application for notification is lodged.
The conduct which does involve third line forcing, immunity is not granted until the end of a
prescribed period from the time the application for notification lodge with the commission.
This period is 14 days.
The tests for authorisation
The first test
In relation to conduct which restricts dealings, substantially lessons competition or involves exclusive
dealing (except third line enforcing), the commission must be satisfied that the conduct ward, or
would likely to, result in a benefit to the public which would outweigh the detriments to the public
caused by any lessening of competition flowing from the conduct.
s90(6) & (7), TPA
Example:
TB p292
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The second test
In relation to conduct involving primary and secondary boycotts, third line forcing and resale price
maintenance, the test is the commission must be satisfied that there is such a benefit to the public
that the conduct should be allowed.
s90(8), TPA
The third test
In relation to emerge as the commission must be satisfied that not only is there such a benefit to the
public that the merger should be allowed, but it must also have regard to the following in making
this determination:
s90(9) & (9A), TPA
a) a significant increase in the real value of exports;
b) a significant substitution of domestic products for imported goods.
Example:
TB p293
In addition, the commission must take into account any other matters relevant to the international
competitiveness of any Australian industry.
Public benefit in Authorisations
The term public benefit should be given the widest possible meaning, and include anything of value
to the community generally, any contribution to the aims pursued by society including as one of its
principal elements, the achievement of the economic goals of efficiency and progress.
Re Queensland Co-operative Milling Association Ltd (1976)
Some matters which could be regarded as public benefits include:
ACI Operations Pty Ltd (1991)

Economic development through encouragement of exploration, investment and research

Fostering a business deficiency which improves international competitiveness

Expansion of employment or prevention of unemployment

Improvement in the quality and safety of goods and services and expansion of consumer
choice

Supply of better information to consumers and businesses to permit informed choices in
their dealings

Promotion of equitable the dealings in the marketplace

Steps to protect the environment.
Additionally, the commissioner and the tribunal have recognized the following factors as public
benefits:

Fostering business efficiency, especially when this results in improved international
competitiveness
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
Industry rationalisation resulting in more efficient allocation of resources and in lower or
contained unit costs

Expansion of employment or prevention of unemployment in efficient industries or
employment growth in particular regions

Growth in export markets

Promotion of competition in industry

Economic development of natural resources through encouraging exploration, research and
Capital Investment

Assistance to efficient small business, for example guidance on costing and pricing or
marketing initiatives which promote competitiveness

Improvements in the quality and safety of goods and services and expansion of consumer
choice
Public detriment in Authorisations
Detriment to the public also has a wide ambit, such as, any impairment to the community generally,
any harm or damage to the aims pursued by the society including as one of its principal elements the
achievement of the goal of economic efficiency, in the sense we have adopted.
Re 7-Eleven Stores Pty Ltd (1994)
The commission notes that detriments take the form of:

A reduction in the number of efficient competitors – buyers and sellers

Increased restrictions on entry

Constraints on competition by market participants affecting their ability to innovate
effectively and conduct their affairs efficiently and independently.
Authorisations process
TB p296 – 298
Notifications process
TB p299 – 302
Revocation and alteration of Authorisations
Should the public benefit coming from an authorisation be reduced or removed entirely the
authorisation can be altered or revoked accordingly.
The commission has the power to review and revoke an authorisation if:
(a) It was granted on the basis of false or materially misleading information
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(b) A condition which was attached to the authorisation has not been complied with
(c) There has been a material change in circumstances which affect competition or public
benefit since the authorisation was granted.
In fact, most Authorisations contained in-built review processes to enable the commission to assess
whether in changed markets, the anti-competitive affects of authorised conduct is still outweighed
by the public benefits flowing from the conduct.
A material change in circumstances includes a change of circumstances which has a significant
impact upon the benefits to the public or upon the detriments, including anti-competitive
detriments, arising out of the conduct or the provisions in question.
Re Media Council of Australia (1996)
In determining this change in public benefit and detriment, we should compare the position which
would or would be likely to exist in the future, on the one hand if the authorisation were to
continue, and on the other hand, if it were absent.
Re Media Council of Australia (1996)
The Australian Competition Tribunal
A person dissatisfied with a determination by the Commission in relation to an application for, or in
relation to the revocation of, an authorisation may appeal to the ACT.
s101, TPA
Same goes for a notification.
s101A, TPA
If the hearing is a review of an authorisation in respect of a merger, the Tribunal must make its
determination within 60 days of receiving the application for review. If the merger is complex, the
Tribunal may extend this period accordingly.
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Topic 12 – Consumer Protection Provisions
An overview of the consumer protection provisions, what they protect, and what sections they are
founded in:
TB p165
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Topic 13 – Misleading or Deceptive Conduct
Section 52
(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive
or is likely to mislead or deceive.
(2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the
generality of subsection (1).
s52, TPA
The elements of the section are:
(a) The defendant must be a corporation
(b) The defendant must have engaged in conduct
(c) Such conduct must have occurred in trade or commerce
(d) The conduct was misleading and deceptive all likely to mislead or deceive
Is the conduct misleading or deceptive or likely to mislead or
deceive?
The term mislead means conduct which is inconsistent the truth or which leads or is likely to lead
the person to whom it is directed into error.
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988)
The term deceptive has been said to carry the connotation of craft or overreaching.
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982)
The issue is whether the impugned conduct, of its nature, constitutes misleading or deceptive
conduct.
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988)
However, it does not need to be shown that the conduct actually misled anyone.
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982)
Conduct which is likely to mislead or to save requires the real, or not remote, chance or possibility of
the conduct having the effect regardless of whether that chance is more or less than 50 per cent.
Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979)
Intention is not necessary or requisite.
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978)
Proof of intention has powerful evidentiary value and maybe a determining factor.
Telmark Teleproducts (Aust) Pty Ltd v Coles Myer Ltd (1989)
A court may also be more willing to find the breach in circumstances where there was such an
intention or the conduct was particularly reckless.
Krakowski v Eurolynx Properties Ltd (1992)
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Where a statement is untrue, that statement will almost certainly be regarded as being misleading
or deceptive.
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978)
The mere puff on the other hand, will not be regarded as misleading or deceptive.
The most important aspect in identifying the path is that the exaggeration should be self evident.
Where the representation is one of hard physical that be determined by objective criteria it will
clearly be outside attention of the classification is a mere puff.
John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993)
A half truth may be misleading or deceptive due to what was left unsaid.
Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987)
If a person makes a representation which is true at the time was made but which subsequently
becomes false to the makers knowledge, the maker of the statement is bound to disclose the change
in circumstance to the other party.
Davies v London and Provincial Marine Insurance Co (1868)
Section 52 will be of relevance where the failure by the maker of the original statement to inform of
the change in circumstances renders the situation misleading or deceptive.
Tiplady v Gold Coast Carlton Pty Ltd (1984)
If a person attempting to avoid to their obligations by perverting to contract out of statutorily
implied terms and conditions may also be engaging in misleading or deceptive conduct.
TPC v Radio World Pty Ltd (1989)
If it is not clear on any of the above points, follow the below:
Considerations
The following steps are useful in determining if there has been misleading or deceptive conduct:
Taco Co of Australia Inc v Taco Bell Ltd (1982)
Identify the relevant sections the public who are likely to be misled or deceived
This particular section of the public could range from the public at large are quite a select group,
even possibly one person. Consideration has to be given to the class of consumers likely to have
been affected by the conduct.
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982)
Test the matter by reference to all who fall within that class
Look within the identifier class and determine with reference to the members of that class whether
the conduct was misleading or deceptive.
The issue should be dealt with by reference to all persons who come within the relevant section of
the public including the astute and the gullible, the intelligent and the not so intelligent, the well
educated and the poorly educated, men and women of various ages pursuing a variety of vocations.
Taco Co of Australia Inc v Taco Bell Ltd (1982)
Evidence of actual erroneous conclusion is not necessary
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It is for the Court to determine whether the relevant conduct infringes the section through an
objective termination of the facts. Indeed, the fact that some person has been misled is insufficient
to establish the conduct was misleading or deceptive. Taco Co of Australia Inc v Taco Bell Ltd (1982)
Although it can be relevant, persuasive and will impact on any award of damages.
The fact that persons who have been actually misled have not been called as witnesses will not
adversely affect the applicant’s case.
Glorie v WA Chip and Pulp Co Pty Ltd (1981)
Has the misconception been caused by the behaviour in question?
Section 52 does not purport create liability rather establishes a norm of conduct.
Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Pty Ltd (1993)
It must be established that the misleading conduct actually caused the loss or damage.
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978)
The relevant time to examine whether a representation is misleading or deceptive is the time the
representation was made, not with the assistance of hindsight.
Cedric Constructions Pty Ltd v Elders Finance and Investment Co Ltd (1988)
If the reason the plaintiff was misled was really through an erroneous assumption, confusion or the
conduct was not relied upon, breach of section 52 to will not been made out.
An erroneous assumption arises where consumer does or is likely to draw the wrong conclusions
from a set of circumstances.
If a person is misled as a result their own erroneous belief the section will not be breached.
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978)
Conduct causing confusion or uncertainty is not necessarily conclusive of misleading or deceptive
conduct.
Equity Access Pty Ltd v Westpac Banking Corp (1989)
Confusion can involve a different state of mind from that of being misled or deceived.
Section 52 and Intellectual Property
Business Names
Section 52 maybe contravened where the corporation seeks to utilise the name or reputation of
another business or that other businesses product.
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982)
Simply choosing a name which generally describes a type of business is unlikely to amount to
misleading or deceptive conduct.
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978)
However, a different conclusion may be reached where in the eyes of the public the particular words
have taken on a secondary meaning is distinctive of the particular goods or services.
Opals Australia Pty Ltd v Opal Australiana Pty Ltd (1993)
The court will apply an objective test to determine whether in the circumstances of the use of a
particular term is likely to mislead customers into believing there is an association with the
aggrieved business.
Chase Manhattan Overseas Corp v Chase Corp Ltd (1985)
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Characteristics and Appearance
Where a product has a distinctive feature appearance, and another corporation copies or otherwise
represents there is a connection between the latter corporation and the product, there may be a
contravention. Again an objective assessment is used.
Freeman Cosmetic Corp v Jenola Trial Pty Ltd (1993)
Trademarks, designs and copyright
In circumstances where a party has a validly registered trademark sufficient reputation will usually
have attached to the product ground and action under section 52.
Merv Brown Pty Ltd v David Jones (Aust) Pty Ltd (1987)
Similarly for registered designs.
Chris Ford Enterprises Pty Ltd v BH & JR Badenhop Pty Ltd (1985)
And breaches of copyright.
Hutchence v South Sea Bubble Co Pty Ltd (1986)
Advertisements
TB p177
Comparisons
Comparisons between similar products must fair and accurate.
Hoover (Aust) Pty Ltd v Email Ltd (1991)
Where section 52 is contravened through the use of comparative advertising, corrective advertising
may be ordered.
s80A, TPA;
Hospitals Contribution Fund of Australia Ltd v Switzerland Australia Health Fund Pty Ltd (1988)
Character merchandising
Misleading or deceptive conduct may occur aware the offending party claims endorsements for
affiliations by a particular person or organisation.
The court must make an objective determination in relation To whether a significant section of the
public would be misled into believing there was an arrangement between the person purportedly
endorsing the product and the offending party.
Apand Pty Ltd v Kettle Chip Co Ltd (1994)
Section 52 and Passing on Information
Being a mere conduit of information will not result in an actionable representation unless the
representation is conveyed in circumstances in which the carrier would be regarded by the relevant
section of the public as adopting the representation.
Saints Gallery Pty Ltd v Plummer (1988)
A finding that information has simply been passed on may be found where the intermediary really
has no or little knowledge of the matter, for example the accuracy of a local government search.
Argy v Blunt (1990)
However, where information is added to the information purported to be passed on it is hard to
argue it is being passed on ‘for what it is worth’.
Morey v Transurban City Link Ltd (1997)
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Section 52 and Silence
Section 52 covers conduct which consists of refraining, otherwise than inadvertently, from doing an
act or making it known that the act will not be done.
s4(2), TPA
This means that science can be regarded as misleading and deceptive conduct, as long as on the
surrounding circumstances, but the silence can be regarded as misleading are deceptive.
s52, TPA
Remedies

Injunction

Damages
s82, TPA

Other orders
s87, TPA
s80(1), TPA
Disclaimers
An agreement may contain a disclaimer or exclusion clause relating to the truthfulness or otherwise
of a person’s representation.
It is arguable that such provisions may break the causal connection between conduct and loss.
Kewside Pty Ltd v Warman International Ltd (1990)
Thus protecting the maker from liability.
The Fair Trading Acts
TB p183
Examples
TB p181-182
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Topic 14 – Future Matters
TB p190-198
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Topic 15 – False and Misleading Representations
A corporation in trade or commerce is prohibited, in connection with the supply of possible supply of
goods or services or in connection with the promotion by means of the supply of goods or services,
from engaging in false or misleading Representations.
s53, TPA
This does not require mental element, therefore intention need not be shown on the part of the
person making the representation.
Given v CV Holland (Holdings) Pty Ltd (1977)
Section 53 is similar to section 52, however it only covers representations not conduct as a whole.
Keep in mind that section 53 does not require intention.
However section 53 needs to be proved beyond a reasonable doubt.
Ballard v Sperry Rand Australia Ltd (1975)
Section 53 – False Representations
A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of
goods or services or in connexion with the promotion by any means of the supply or use of goods or
services:
(a) falsely represent that goods are of a particular standard, quality, value, grade, composition, style
or model or have had a particular history or particular previous use;
(aa) falsely represent that services are of a particular standard, quality, value or grade;
(b) falsely represent that goods are new;
(bb) falsely represent that a particular person has agreed to acquire goods or services;
(c) represent that goods or services have sponsorship, approval, performance characteristics,
accessories, uses or benefits they do not have;
(d) represent that the corporation has a sponsorship, approval or affiliation it does not have;
(e) make a false or misleading representation with respect to the price of goods or services;
(ea) make a false or misleading representation concerning the availability of facilities for the repair of
goods or of spare parts for goods;
(eb) make a false or misleading representation concerning the place of origin of goods;
(f) make a false or misleading representation concerning the need for any goods or services; or
(g) make a false or misleading representation concerning the existence, exclusion or effect of any
condition, warranty, guarantee, right or remedy.
s53, TPA
(a) falsely represent that goods are of a particular standard, quality, value, grade, composition,
style or model or have had a particular history or particular previous use;
By the word false means contrary to fact or purposely untrue.
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The representation is complete wants of the subject matter is disseminated so that it is intended to
reach the desired target.
Thompson v Riley Mckay Pty Ltd (1980)
This will occur in the case of goods on display when the consumer becomes aware of the
representation.
Barton v Croner Trading Pty Ltd (1984)
The representation does not have to be directed at any particular person.
Thompson v Riley Mckay Pty Ltd (1980)
A false representation that goods comply with certain recognised safety standards, for example
Australian product safety standards and fire safety standards, will contravener the section.
Hartnell v Sharp Corp of Australia Pty Ltd (1975)
A representation as to an attribute of goods which turns out to be false will contravene the section.
The term of quality and should be given its natural meaning rather than the link it with the term of
merchantable quality. That is, an attribute, property, special feature, the nature, kind or character of
something.
Given v CV Holland (Holdings) Pty Ltd (1977)
The term can include the quality of the goods themselves or the way they are described.
Wise v Greenslade & CLM Holdings Pty Ltd (1977)
Composition refers to false representations as to of the components of goods.
Such is where goods were falsely advertised as being made up of particular metals, etc.
TB p205;
Thompson v Magnamail Pty Ltd (No 1) (1977)
The term of particular history of previous use can refer to the history of goods to determine whether
they are in fact new or whether claims about that history are true.
Claims of such as those involving odometers and country of origin.
Korczynski v Wes Lofts (Aust) Pty Ltd (1985)
(aa) falsely represent that services are of a particular standard, quality, value or grade;
This subsection largely mirrors the previous but deals with service is instead of goods.
(b) falsely represent that goods are new;
TB p206
(bb)falsely represent that a particular person has agreed to acquire goods or services;
This subsection deals are circumstances where a right to payment for goods or services is asserted
for goods or services which have not been ordered.
Such is where a scheme exists where businesses are telephoned by persons claiming that other
persons in the business made orders.
O’Conner v Stevenson (1989)
(c) represent that goods or services have sponsorship, approval, performance characteristics,
accessories, uses or benefits they do not have;
The terms sponsorship includes statement which represent the goods are a particular standard, for
example meeting Australian safety standards.
Hartnell v Sharp Corp of Australia Pty Ltd (1975)
Or the fact that products were endorsed by well known organisations or personalities.
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The term approval involves the action of approving and sanctioning.
TB p207
‘Performance characteristics’ involves products meeting efficiency tests and meeting acceptable or
claimed standards.
Gilmour v Bannister Nominees Pty Ltd (1982)
Corporations are prohibited from advertising that products have accessories they do not have.
Ducret v Nissan Motor Co (Aust) Pty Ltd (1979)
Where a particular use is associated with a certain product, if the product does not perform the
assumed function this should be made clear.
Thompson v Riley McKay Pty Ltd (No 3) (1980)
(d) represent that the corporation has a sponsorship, approval or affiliation it does not have;
It is an offence for a corporation to represent that it has some sponsorship approval or affiliation
which it does not in fact have.
Such a representation may be in the name of the corporation itself.
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978)
Or a business or trade name under which it conducts its business or a name it assigns to its products.
McDonald’s Systems of Australia Pty Ltd v McWilliam’s Wines Pty Ltd (No 2) (1979)
(e) make a false or misleading representation with respect to the price of goods or services;
This can include a representation made in an advertisement, sales brochure or near goods at a
display point.
TB p208
(ea) make a false or misleading representation concerning the availability of facilities for the repair
of goods or of spare parts for goods;
This section prohibits the making of false or misleading representations concerning the availability of
facilities for repair or of spare parts for goods.
(eb) make a false or misleading representation concerning the place of origin of goods;
This provision aims to strike against traders who may use the country of origin as an inducement, for
instance the ‘Buy Australian’ campaign.
(f) make a false or misleading representation concerning the need for any goods or services;
This provision deals are situations where an advertisement or sales material represents that
consumers need particular goods or services when this is not the case.
TB p208
Such as where safety regulations require something which they do not. Given v Snuffa Pty Ltd (1978)
(g) make a false or misleading representation concerning the existence, exclusion or effect of any
condition, warranty, guarantee, right or remedy.
This section deals with circumstances where there are representations as to certain rights associated
with the purchase of goods.
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The provision has been particularly utilised in circumstances where ‘No Refund’ signs have been
used in Retail Stores and in relation to insurance sales. Miller v Fiona’s Clothes Horse Pty Ltd (1989);
TB p209
Country of origin claims
False representations as to the country of origin of goods may infringe ss52, 53(a) and/or 53(eb).
See:
TB p210
Section 53A
This section applies only where the representation is made in relation to transactions involving the
sale of interests in particular parcels of land.
(1) A corporation shall not, in trade or commerce, in connexion with the sale or grant, or the possible
sale or grant, of an interest in land or in connexion with the promotion by any means of the sale
or grant of an interest in land:
(a) represent that the corporation has a sponsorship, approval or affiliation it does not have;
(b) make a false or misleading representation concerning the nature of the interest in the
land, the price payable for the land, the location of the land, the characteristics of the
land, the use to which the land is capable of being put or may lawfully be put or the
existence or availability of facilities associated with the land; or
(c) offer gifts, prizes or other free items with the intention of not providing them or of not
providing them as offered.
(2) A corporation shall not use physical force or undue harassment or coercion in connection with the
sale or grant, or the possible sale or grant, of an interest in land or the payment for an interest in
land.
s53A, TPA
This section has been used in circumstances involving the zoning of land.
Given v Pryor (1979)
The location of land.
Smolonogov v O’Brien (1982)
And the existence of facilities and utilities (such as electricity) associated with the land.
Videon v Beneficial Finance Corp Ltd (1981)
Sections 53B and 53C
The promotion of employment opportunities which are misleading in relation to the availability,
nature, terms or conditions of, or any matter related to, employment are prohibited.
s53B, TPA
The cash price for goods must be stated in certain circumstances.
s53C, TPA
Therefore a used car dealer may contravene the section by advertising a deposit sum and/or
payments but not the cash price.
TPC v Autoways Pty Ltd (1990)
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Section 54
In connection with the promotional supply of goods or services, a corporation in trade or commerce
is prohibited from offering gifts, prizes or other free items unless the corporation intends to provide
the goods is offered.
s54, TPA
Intention is not an element of this section.
ACCC v Nationwide News Pty Ltd (1996)
Section 55
A person in trade or commerce is prohibited from engage in conduct which is liable to mislead the
public heirs to the nature, the manufacturing, the characteristics, the suitability for that purpose, or
the quantity of any goods.
s55, TPA
Such conduct is also prohibited in relation to services, but only in the case of a corporation.
s55A, TPA
Section 56 - Bait Advertising
Corporations are prohibited from advertising goods or services at a specified price in circumstances
where the corporation is or ought to have been aware that the corporation will not be able to supply
those goods or services at that price or in such quantities that are reasonable having regard to the
nature of the market in which the corporation carries on business and the nature of the
advertisement.
s56(1), TPA
Corporations are also obliged to ensure that goods advertised at a specified price be available for
reasonable period and in recent quantities.
s56(2), TPA
Section 57
A corporation in trade or commerce is prohibited from inducing a consumer from acquiring goods or
services by representing that the consumer will, after a contract for the acquisition of services is
made, receive a rebate, commission or other benefit in return for having given the corporation the
names of prospective customers or otherwise assist the corporation to supply goods or services to
other consumers.
s57, TPA
Section 58
Corporation is prohibited from accepting payment for goods or services that the intention or ability
to supply.
s58, TPA
The time of assessment is when payment is accepted.
Despite the use of the word intends, it is not necessary to prove intent.
Barton v Westpac Banking Corp (1983)
Section 59
The corporation is prohibited from making a representation that is false or misleading in a material
particular concerning profitability or risk or any other material aspect of any business activity that
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the corporation has represented as one that can be, or to a considerable extent, carried on from or
at a person’s place of residence.
s59, TPA
A similar prohibition applies to invitations through an advertisement or otherwise to engage in
business activity and the investment of monies.
Jones v Glen Houn Holdings Pty Ltd (in liq) (1985)
Section 60 - Harassment
A corporation is prohibited from using physical force or undue harassment in conjunction with the
supply or possible supply of goods or services to consumer or the payment for goods or services by
consumer.
s60, TPA
Pyramid Selling
TB p214
Sections 63A, 64 & 65 – Unsolicited Goods
Corporations are prohibited from sending unsolicited credit cards.
s63A, TPA
They also prohibited from asserting a right to payment for unsolicited goods or services.
s64, TPA;
ACCC v Optell Pty Ltd (1998)
There are also certain responsibilities placed on persons who receive unsolicited goods.
Such is not wilfully damaging them.
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Topic 16 – Unconscionable Conduct
Unconscionability in Equity
In equity there is a necessity to establish a special disability or disadvantage that is knowingly
exploited by the other party.
Examples include illness, ignorance, inexperience, impaired faculties, financial need or other
circumstances affecting the party’s ability and conserve their own interests. Blomley v Ryan (1956)
While these categories are not closed, courts have indicated their reluctance to extend the
operation to new categories.
Louth v Diprose (1992)
To determine whether the conduct in question is unconscionable it is necessary to demonstrate that
the so called weaker party is at a special disadvantage in relation to a stronger party and that the
stronger party knowingly took unconscientious advantage of the weaker party. The burden then falls
on the stronger party to establish that the transaction was fair, just and reasonable and should be
upheld.
Commercial Band of Australia Ltd v Amadio (1983)
Unconscionability in equity is hard to make out in commercial transactions – most of the categories
can only really apply to natural persons.
Unconscionable conduct under the TPA in consumer transactions
A corporation shall not in trade or commerce in connection with the supplier or possible supply of
goods or services to a person engage in conduct that is in all the circumstances unconscionable.
s51AB, TPA
This section only applies to consumer transactions.
TB p222, [14.3.3]
There are several factors which court may take into account when determining such a matter:
s51AB(2), TPA
(a) The relative strengths of the bargaining positions of the corporation and the consumer.
This includes the equitable categories (see above).
And possibly circumstances where the relative strength of the corporation is greater because it has
more information available to it than the consumer.
George T Collings (Aust) Pty Ltd v HF Stevenson (Aust) Pty Ltd (1991)
(b) Whether the corporation require the consumer to comply with conditions that were not
reasonably necessary for the protection of the legitimate interests of the corporation.
(c) Whether the consumer was able to understand any documents relating to the supply or
possible supply of goods or services.
Whether any undue influence or pressure was exerted or any unfair tactics were used.
In determining whether there was undue influence reference should be made to the equitable
doctrine.
Bank of New South Wales v Rogers (1941)
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The use of the term pressures seems to suggest a broader category of conduct than duress although
this type of conduct would naturally be included. Corporations should take care to avoid direct,
coercive forms of conduct such as physical or economic threats, compulsion or depriving the weaker
party of any real choice. Corporations are also advised to avoid unfair tactics in the negotiation,
content and operation of the transaction which are likely to affect the ability of a weaker party.
(d) The amount for which they and the circumstances under which the consumer could have
acquired the identical or equivalent goods other than from the corporation.
If the consumer was aware of the availability of goods or services elsewhere will be difficult to
establish he or she was forced to enter into the transaction on unfavourable terms.
Other matters
The fact that legal proceedings have been an issue that by the corporation or the matter submitted
for arbitration does not in itself amount to unconscionable conduct.
s51AB(3);
Zoneff v Elcom Credit Union Ltd (1990)
The court should not have regard to any circumstances which were not reasonably foreseeable at
the time of the alleged contravention.
s51AB(4)(a), TPA
The Court may have regard to conduct engaged in or circumstances existing before the
commencement of the section.
s51AB(4)(b), TPA
Unconscionable conduct under the TPA in commercial transaction
A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the
meaning of the unwritten law, from time to time of the states and character.
s51AA, TPA
This section applies only to commercial transactions.
s51AA(1), TPA
There has been little in the way of cases on this section, despite the fact that the relies so heavily on
common law.
TB p223, [14.4.5]
Section 51AC
Corporations in trade or commerce in connection with the supply or possible supply of goods or
services to a person are prohibited from engaging in conduct that is in all the circumstances
unconscionable.
s51AC(1), TPA
The same applies to a person.
s51AC(2), TPA
This section is limited to transactions not exceeding one million dollars.
s51AC(7), TPA
Publicly listed corporations will be unable to institute proceedings under this section. s51AC(1), TPA
The fact is used in finding unconscionable conduct are the same as those in s51AB (see above) with
the addition of:
s51AC(3), TPA
(f) the extent to which the supplier’s conduct towards the business consumer was consistent with
the supplier’s conduct in similar transactions between the supplier and other likely business
consumers.
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However all business consumers need not be treated alike. Some consideration can be given to
longstanding relationships or creditworthiness.
(g, h) industry codes
The court can take into account the requirements of any applicable industry code. s51AC(3)(g), TPA
Or the requirements of any other industry code if the business consumer acted on the reasonable
belief that the supplier would comply with that code.
s51AC(3)(h), TPA
(i) disclosure
A court may examine whether the supplier unreasonably failed to disclose to the business consumer
any intended conduct of the supplier that might affect the interests of the business consumer and
any risks to the business consumer arising from the supplier’s intended conduct.
(j) willingness to negotiate
Another consideration is the extent to which the supplier was willing to negotiate the terms and
conditions of any contract to supply of the goods or services with the business consumer. Clearly, a
reluctance to negotiate will not be regarded favourably.
(k) good faith
The court may examine the extent to which the supplier and the business consumer acted in good
faith.
Other matters
Where there has been a representation as to the future matter the onus will fall on the person
making the statement that in all the circumstances the statement was reasonable.
s51A, TPA
Remedies and limitations
Under equity:

Have the transaction set aside

Have first transaction partially nullified

Resist an action for specific performance
Under the TPA:

Injunctions
s80, TPA

Other orders
s87, TPA

In some cases, damages
TBp226, [14.6.2]
Financial Services
The unconscionable conduct provisions of ss 51AA, 51AB of the Trade Practices Act and the unfair
practices provisions of Pt V do not apply in relation to financial services (ss 51AAB, 51AF). The reason
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is that extensive provision for consumer protection in relation to financial services is contained in
the Australian Securities and Investments Commission Act 2001, Pt 2, Div 2. The latter division is
headed “Unconscionable conduct and consumer protection in relation to financial services”.
A financial service is a service that consists of providing a financial product or is otherwise supplied
in relation to a financial product: s 12BA. A financial product is a deposit account, security, futures
contract, insurance contract, retirement savings account or a superannuation interest. A foreign
exchange contact is not a financial product: s 12BA.
The consumer protection provisions are similar to those in the Trade Practices Act. For example,
various provisions in the Australian Securities and Investments Commission Act 2001 prohibit
unconscionable conduct, misleading or deceptive conduct in relation to financial services: ss 12CB,
12CC, 12CA, 12DA. Other provisions prohibit, inter alia, false or misleading representations, bait
advertising, referral selling, harassment and coercion, and pyramid selling of securities: ss 12DB,
12DG, 12DH, 12DJ, 12DK. Provision is also made regarding unsolicited debit cards that allow access
to a financial product: s 12DL. Certain conditions and warranties apply to consumer transactions
relating to financial services: ss 12EB-12ED.
Notably, in a prosecution in relation to a contravention of ss 12DA-12DN, it is a defence for the
defendant to establish that:
(a) the contravention was due to the act or default of some other person, to an accident or to some
other cause beyond the defendant’s control; and
(b) the defendant took reasonable precautions and exercised due diligence to avoid the contravention:
s 12GI.
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Topic 17 – Product Safety and Product Information
There is provision in the act for the relevant minister, presently the Attorney-General to:
Div 1A, Part V, TPA

Publish warning notices concerning goods which are being investigated as being potentially
dangerous

Imposed and review temporary and permanent bans on the supply of good regarded as
unsafe

Impose mandatory product safety and product information standards

Regulate the procedure for the compulsory and voluntary recall of goods

Initiates conferences with regard to goods which are, or are potentially, hazardous.
These provisions can apply to an importer of goods, the manufacturer, a distributor or a retailer.
Warning notices
The Attorney-General may publish in the gazette two types of warnings in relation particular goods:
s65B, TPA

A statement that the goods are under investigation to determine whether the goods will or
may cause injury to any person
s65B(1)(a), TPA

A warning of possible risks involved in the use of the goods.
s65B(1)(b), TPA
In circumstances where a warning notices published a notice to this effect must be published in the
gazette and in appropriate newspapers within a stipulated timeframe. Copies must also be sent to all
known suppliers of a good.
s65S(1), TPA
Failure to comply with this will not invalidate the notice.
s65S(2), TPA
Product safety standards and unsafe goods
It is an offence for a corporation in trade or commerce to supply goods that are intended to be used
or of a kinds likely to be used by a consumer if they are goods of a kind:
s65C(1), TPA
(a) In respect of which there is a prescribed consumer a product safety standard and which do
not comply with that standard
(b) In respect of which there is enforce a notice under this section declaring goods to be unsafe
goods
(c) In respect of which there is in force a notice under this section imposing a permanent ban on
those goods
Persons who have suffered loss or damage as a result of the supply of goods in contravention of
s65C(1)(a)-(c) are deemed to have suffered loss or damage by the supplying of the goods and may
bring an action for damages under s82.
s65C(8)-(9), TPA
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Examples:
TB p233, [15.3.3]
It is an offence for a corporation to supply goods which do not comply with the prescribed consumer
safety standard it relates to those goods.
s65C(1)(a), TPA
The regulations may prescribe a consumer product safety standard deals with matters such as:
s65C(2), TPA

The performance, composition, contents, methods of manufacturer or processing, design,
construction, finish or packaging of the goods

Testing of the goods during or after completion of manufacturer or processing

The form and content of markings, warnings or instructions to accompany the goods.
The consumer product safety standard may be based on a Standards Association of Australia
standard or a standard approved by any other prescribed body or association.
s65E(1), TPA
The Attorney-General may declare goods to be unsafe.
s65C(5), TPA
Unless revoked, a noticed declaring goods to be unsafe remains in force for 18 months after the date
of publication of the notice in the gazette. After the expiration of this period the notice will lapse
unless a consumer product safety standards has not been prescribed in relation to the goods or a
permanent ban is imposed.
It is an offence to supply goods which are subject of a notice stating that they are unsafe.
s65C(1)(b), TPA
A notice may be issued placing a permanent ban on goods.
It is an offence to supply goods which are subjects of such a prohibition.
s65C(7), TPA
s66C(1)(c), TPA
The corporation is prohibited from exporting goods for supply of which would be in Australia
prohibited by s65C(1), unless they obtain a ministerial approval.
s65C(3), TPA
In granting such approval of the Attorney-General must explain their actions by making a statement
before parliament setting out the particulars of the approval within seven days of the approval being
given.
s65C(4), TPA
Product information standards
It is an offence for a corporation in trade or commerce to supply goods which are the subject of a
consumer product information standard to a consumer unless that a corporation has complied with
that standard in relation to those goods.
s65D(1), TPA
Persons who have suffered loss or damage as a result of the supply of goods in contravention of
s65C(1)(a)-(c) are deemed to have suffered loss or damage by the supplying of the goods and may
bring an action for damages under s82.
s65D(7), TPA
The regulations to the act may describe the consumer product information standard in relation to
certain goods. Such standards can include matters which include information such errors:
s65D(2), TPA
(a) The disclosure of information relating to various features of the goods
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(b) Performance
(c) Composition
(d) Contents
(e) Methods of manufacture or processing
(f) Design construction
(g) Finish or packaging of the goods
(h) The form and manner in which the information is to be disclosed on or with the goods as are
reasonably necessary to give persons using the goods information as to the quantity, quality,
nature or value of the goods.
A consumer product information standard may be based on a Standards Association standard or a
standard approved by a prescribed body.
s65E(1), TPA
Examples:
TB p235, [15.4.4]
Section 65D(1) does not apply to goods which are to be exported.
s65D(3), TPA
Recalls
Goods may be the subject of a compulsory recall in circumstances where the Attorney-General is of
the view that the goods may cause injury, that the goods do not comply with the prescribed
consumer safety standard applicable, or there is an unsafe goods order or permanent banning order
in relation to the goods.
Alternatively, or in combination with the recall, the supplier may be required to disclose to the
public or to a particular class of persons identified in the notice the nature of the defect or a
dangerous characteristic of the goods and the circumstances in which the goods may be dangerous.
Also, the supplier may be required to undertake to repair or replace the goods or refund the price.
It is an offence to continue supplying goods which are the subject of a recall order which have not
had the defect rectified.
s65G, TPA
Corporations who voluntarily recall goods on safety grounds must notify the minister within two
days of the recall.
s65R, TPA
Where the goods have been sold overseas notice must be given to the overseas purchaser.
s65F(7), TPA
And proof of such notification must be provided to the Attorney-General within 10 days.
s65F(8), TPA
The conference procedure
TB p236-237
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Power to obtain information and documents
Certain individuals are given power to obtain information, documents and other evidence in relation
to the administration of this division. A corporation is required to provide information whether
corporation supplies goods likely to be used by consumers which may cause injury and there is
reason to believe that the corporation is capable of producing information or giving evidence
relating to those goods.
s65Q(1), TPA
Non-compliance
Noncompliance with provisions of Pt V, TPA (except for ss52, 65Q, 65R or 65F(9)) is:

an offence punishable on conviction to a fine
s79, TPA

an injunction to prohibit such conduct is available
s80, TPA

Persons who have suffered loss or damage as a result of the supply of goods in
contravention of s65C(1)(a)-(c) are deemed to have suffered loss or damage by the supplying
of the goods and may bring an action for damages under s82.
s65C(8)-(9), TPA
Defences
Where a prosecution relates to the noncompliance of products with the consumer product safety or
information standard a defence may be available in circumstances where the defendant can
establish:
s85(4), TPA
(a) That the goods were acquired by the defendant for the purpose of resupply from a supplier
with the destroyer who is not the agent of an overseas supplier
(b) The defendant did not know and could not with reasonable diligence have ascertained that
the goods did not comply with the standard or relied in good faith on information from the
supplier that there was compliance.
To rely on this defence the defendant must serve a notice identifying the person from whom the
defendant acquired the goods.
TB p238, [15.8.2]
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Topic 18 – Terms Implied into Contracts for the
Supply of Goods or Services
Part V, Div 2, TPA implies a certain conditions and warranties into contracts for the supply of goods
or services from a corporation to a consumer.
For the purposes of this division:
In determining whether a contract is one of goods or services the court will apply a substance of the
contract approach, that is was the substance of the contract for the production of something to be
sold (goods) or an exercise of skill and labour (services).
Toby Constructions Products Pty Ltd v Computer Bar (Sales) Pty Ltd [1983]
The term consumer is limited so that the division only applies where the transaction involves:
(a) The acquisition of goods of any kind for less than a prescribed amount.
Which is currently $40,000.
s4B(1)(a)(i), TPA
s4B(2)(a), TPA
(b) The acquisition of goods in a sum greater than $40,000 in circumstances where those goods
or services are of a kind ordinarily acquired for personal, domestic or household use or
consumption, consist of a commercial road vehicle.
s4B(1)(a)(ii), TPA
In deciding whether the goods or services are consumer goods or services or commercial goods or
services, it is necessary to look at the use to which the goods or services are ordinarily put rather
than the fact the goods or services are being used for commercial purpose or that their value
exceeds the prescribed amount.
Crawford v Mayne Nickless Ltd (1992);
Carpet Call Pty Ltd v Chan (1987)
The provision does not extend to the re-supply of goods.
Re-supply means for the purpose of using them up or transforming them, in trade or commerce, in
the course of a process of production or manufacture or of repairing or treating other goods or
fixtures on land.
s4B(1)(a), TPA
The goods or services supplied must be supplied in the course of a business.
Therefore the provisions will not extend to private transactions.
With the exception of s69, the provisions of Part V, TPA do not apply to auction sales.
Terms implied into contracts for the sale of goods or services
Undertakings as to title
Various conditions and warranties are implied into contracts for the supply of goods by corporation
to a consumer.
s69, TPA
One condition is that the supplier has a right to sell the goods.
s69(1), TPA
In the case of an agreement to sell or a hire-purchase agreement, there is an implied condition that
the seller must have title to the goods at the time the property in the goods is to pass a the
purchaser. A breach of condition will entitle the consumer to terminate the contract.
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An implied warranty is that the consumer will enjoy quiet possession of the goods except where
such possession may be lawfully disturbed by the supplier or by another person, to the consumer’s
prior knowledge, is entitled to the benefit of any charge or encumbrance.
s69(1)(b), TPA
The only available remedy for a breach of this warranty is damages.
Similarly there is an implied warranty that, with the exception of certain provisions in relation to
floating charges, the goods are free from any undisclosed charges or encumbrances. s69(1)(c), TPA
Where only limited title is to pass, there is an implied warranty that all charges and encumbrances
have been disclosed to the consumer before the contract is made and that the consumers’ quiet
possession of the goods will not be disturbed.
s69(3), TPA
Supplied by description
Where corporation sells goods to consumer in the course of a business by description there is an
implied condition that the goods will correspond with the description in the contract.
s70(1), TPA
If the supply is by sample as well as description it is not sufficient that the bulk of the goods
corresponds with the sample if the goods do not also correspond with the description.
In any case where a contract is made by the purchaser has not seen the goods the sale will be one by
description.
Taylor v Combined Buyers Ltd [1924]
A sale by description can also extend to circumstances where goods were personally selected by the
purchaser from the seller’s display or range.
Australian Knitting Mills Ltd v Grant (1933)
References to the quality of the goods will really form part of their description.
Ashington Piggeries Ltd v Christopher Hill Ltd [1972]
Merchantable quality
Whether the condition to be implied is one of fitness for purpose or one of merchantable quality will
depend upon whether the consumer makes it known to the supplier are expressly or by implication
the purpose for which the goods are to be used.
If not, it will be assessed whether the goods are of merchantable quality generally.
A condition that the goods will be of merchantable quality is implied into contracts of sale by
corporation to consumer in the course of a business.
s71(1), TPA
The necessity for a contract
The contract must be in existence before the condition as to merchantable quality can be implied.
E v Australian Red Cross Society (1991)
Merchantable quality
The common law standard is the quality expected by reasonable purchaser, in possession of all the
facts.
Australian Knitting Mills Ltd v Grant (1933)
However, the TPA states that goods are of merchantable quality within the meaning of the division if
they are as fit for the purpose or purposes for which goods of that type are commonly bought as is
reasonable to expect having regard to any description applied to them, the price (if relevant) and all
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other relevant circumstances.
Reference to the quality of goods includes a reference to their state or condition.
s66(2), TPA
s66(1)(a), TPA
Exceptions
There are exceptions in circumstances where:

Defects have been specifically drawn to the attention of the customer before the contract is
made
s71(1)(a), TPA

The consumer has examined the goods prior to the contract being made and as regards
defects which such inspection should reveal.
s71(1)(b), TPA
An inspection which partially reveals that the facts may be sufficient to attract the second exception.
Jones v West Star Motors Pty Ltd (1995)
Fitness for purpose
Whether the condition to be implied is one of fitness for purpose or one of merchantable quality will
depend upon whether the consumer makes it known to the supplier are expressly or by implication
the purpose for which the goods are to be used.
If they do, fitness for purpose shall apply.
Where goods are supplied in circumstances where the consumer expressly or by implication makes
known the purpose for which the goods are being acquired there is an implied condition that the
goods supplied are reasonably fit for that purpose.
s71(2), TPA
This applies in circumstances where the stipulated purpose is not the normal purpose for goods of
that kind.
The purpose may be made to known directly to the corporation or through a person involved in
antecedent negotiations.
In some circumstances the mere disclosure by the buyer of the particular purpose may in itself be
enough to show reliance on the skill and judgment of the seller. Nevertheless, the consumer must, in
all the circumstances, make the purpose for which the goods are to be acquired sufficiently clear.
Carpet Call Pty Ltd v Chan (1987)
Exceptions
There is an exception to the section where:

An auction sale is involved

The consumer did not rely on the skill or judgment of the supplier in question, or that it was
unreasonable for the consumer to do so.
It should be noted that the courts do not expect suppliers to be psychic, consumers need to be more
precise when their request may be one which is ambiguous. If a consumer just asks for a prime
mover, and gets one, it cannot necessarily be expected that the supplier knows precisely what it is
for.
Golden Fleece Petroleum Ltd v Avis Rent a Car System Pty Ltd (1983)
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Supply by sample
Where there is an express or implied term in the contract of sale from a corporation to consumer in
the course of a business to the effect that the goods are being supplied by reference to a sample
there is an implied condition that:
s72
(a) The bulk will correspond with the sample in quality
(b) The consumer will have the reasonable opportunity of comparing the bulk with the sample
(c) The goods will be free from any defect rendering them a merchantable that would not be
apparent on reasonable inspection of the sample.
Quality includes a reference to the state or condition of goods.
s66(1)(a), TPA
Services
In a contract for the supply of services from a corporation to a consumer in the course of a business
a warranties implied that the services will be rendered with due care and skill and that for any
materials supplied in connection with those services will be reasonably fit for the purpose for which
they are supplied.
s74(1), TPA
Where the services are supplied there is an implied warranty those services will be reasonably fit for
the purpose made known to the supplier as being required by the consumer or might reasonably be
expected to achieve the result that the consumer has indicated.
s74(1), TPA
Exceptions
There are certain exceptions to this section:

Where the services are of a professional nature (a qualified architect or engineer)
s74(2), TPA

Where the consumer does not rely or that it was unreasonable for the consumer to rely on
the skill and judgment of the corporation
s74(2), TPA;
Pondicil Pty Ltd v Tropical Reef Shipyard Pty Ltd (1994)

Contracts of transportation

Contracts of insurance
s74(3)(a), TPA;
Dillon v Baltic Shipping Co (Mikhail Lermontov) (1989)
s74(3)(b), TPA
Limitation of liability
A relevant term in any contract, including a collateral contract term, attempts to exclude, restricting
or modify the application of the division is void.
s68(1), TPA
The term of the contract will not be taken to exclude, restrict or modify a provision unless the term
does so expressly or is inconsistent with the provision or section.
s68(2), TPA;
Aravco Ltd v Qantas Airways Ltd (1996)
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There is avenue for some limitation of liability, a contractual term may limit liability where the goods
are not have the kind ordinarily acquired for personal, domestic or household use or consumption.
s68A, TPA
It is necessary for the limitation to be fair and reasonable and allow for certain types of recovery.
TB p251, [16.5.2]
In circumstances where the limitation will be permitted, liability will be limited to:

The replacement, equivalent supply, repair of goods or the cost of any of these
s68A(1)(b), TPA

The re-supply all the cost of a re-supply or services
s68A(1)(b), TPA
Remedies
The general law of contract in relation to the assessment of damages is appropriate.
Therefore the common law remedies for breach of the condition or warranty are available despite
the fact the cause of action arises under the TPA.
Thus the actions are to be commenced in the relevant state court.
Arturi v Zupps Motors Pty Ltd (1980)
In addition to the contractual remedies precision is available in circumstances where one of the
implied conditions has been breached.
s75A, TPA
The consumer is entitled to recover the amount of any consideration paid or provided from the
corporation as a debt.
s75A(3), TPA
A consumer may rescind in to circumstances:

First, the consumer may rescind by serving assigns a notice on the corporation dealing
particulars of the breach

Alternatively, the consumer may return the goods together with particulars of the breach
If the latter courses taken the goods must be returned in a reasonable time after the consumer has
had a reasonable opportunity to inspect the goods.
s75A(2)(a), TPA
The rescission will not be effective if the goods were disposed of, lost or destroyed (otherwise than
by reason of the defect) or if the consumer caused or unreasonably allowed the goods to become a
on merchantable between the time of delivery and the serving of the rescission notice.
s75A(2)(b), TPA
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Topic 19 – The Liability of Manufacturers and
Importers of Goods
A limitation on the operation of Part V, Div 2, TPA (see last topic) is that the consumer may only
proceed against the supplier – the consumer cannot proceed against the manufacturer or importer
of the goods even in circumstances where the goods are faulty.
In order to alleviate this problem Part V, Div 2A, TPA was inserted into the legislation.
Who can claim
Div 2A permits a consumer who acquires goods from another person, for example of a retailer, to
recover loss or damage from the manufacturer or importer.
For Sections 74B and 74C the right to commence an action against the manufacturer is limited to the
first retail purchaser.
For Sections 74D and 74E any person who obtains title to the goods may commence an action.
Determining the manufacturer
A corporation will be regarded as being the manufacturer of particular goods for the purpose of Div
2A, TPA whether corporation actually manufactures the goods, or holds itself out to the public as the
manufacturer.
s74A(3)(a), TPA
Or uses its own brand name in relation to the goods.
s74A(3)(b), TPA
This will be the case even where the label on the product states of the corporation was not the
manufacturer of the goods.
ACCC v Glendale Chemical Products (1998)
A corporation will also be regarded as the manufacturer of goods whether corporation permits
another person to promote the goods manufactured by the corporation.
s74A(3)(c), TPA
Or where the corporation, not being the actual manufacturer, imports the goods into Australia and
the actual manufacturer has no place of business in Australia.
s74A(4) & (7), TPA
The term manufactured includes grown, extracted, produced, processed and assembled.
s74A(1), TPA
Terms implied
Section 74B – Fitness for purpose
This section deals with fitness for purpose. The provision gives a consumer or right of action against
a manufacturer of goods where those goods are found not to be fit for the purpose for which they
were acquired.
The right to commence an action against the manufacturer is limited to the first retail purchaser.
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Just as with Div 2 (see Topic 19) the consumer must let it be known expressly or impliedly the
purpose for which the goods are purchased. If this is the case for manufacture will be liable even in
circumstances where the use of the articles were unusual.
s74B, TPA
However, the manufacturer will not be liable where:

The purpose was not made known to the manufacturer by the consumer

The goods are not reasonably fit for the purpose because of an act or default of any person
other than an agent or servant of the corporation or a cause independent of human control
which occurred after the goods have left control of the manufacturer
s74B(2)(a), TPA

The circumstances show that the consumer did not rely on, or it would be unreasonable for
the consumer to rely on the skill or judgment of the manufacturer
s74B(2)(b), TPA

The goods were sold at an auction
s74B(1)(c), TPA
Section 74C – Purchase by description
A consumer has a right of action against a manufacturer of goods in circumstances where the goods
are purchased by description and those goods do not correspond with that description. s74C(1), TPA
The right to commence an action against the manufacturer is limited to the first retail purchaser.
A consumer will not be entitled to compensation unless a the description was applied to the goods
by or on behalf of the manufacturer.
s74C(3)(a), TPA
Or with that express or implied consent.
S74C(3)(b), TPA
Exceptions to the operation of the section are where the goods do not comply with the description
in the contract by reason of:

An act or default of a person other than the manufacturer or servant or agent of the
manufacturer
s74C(2)(a), TPA

A cause independent of human control which occurred after the goods left of the
manufacturer
s74C(2)(b), TPA

The goods are sold at auction
Section 74D – Merchantable quality
Consumers, and any person who to rise title through a consumer, have a right of action against the
manufacturer in circumstances where the goods are not of merchantable quality.
s74D, TPA
Goods of any kind are of merchantable quality within the meaning of the section if they are fit for
the purpose or purposes for which goods of that kind of commonly bought as is reasonable to expect
having regard to:
s74D(3), TPA
(a) Any description applied to the goods by the corporation
(b) A price received by the corporation for the goods (if relevant)
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(c) And all the other circumstances
It is only necessary to lock to the common law definitions of merchantable quality in exceptional
circumstance.
Rasell v Cavalier Marketing (Aust) Pty Ltd [1991]
There are exceptions through which the manufacturer can avoid liability in circumstances where:

The goods were not of merchantable quality because of the act or default of any person not
being the manufacturer or a servant or agent of the manufacturer
s74D(2)(a)(i), TPA

The goods were not of merchantable quality through a cause independent of human controls
74D(2)(a)(ii), TPA

The defects were specifically drawn to the consumers’ attention before making the contract s
74D(2)(b)

The consumer examined the goods before the contract was made and the defects were such
that they should have been apparent
s74D(2)(c), TPA

The goods were sold at an auction
Section 74E – Supply by sample
There is a direct right of action against the manufacturer of goods which do not comply with the
sample provided by the manufacturer.
s74E ,TPA
The failure to correspond may be due to a difference in quality or maybe a defect rendering the
goods unmerchantable it would not be apparent on reasonable examination of the sample.
s74E(1)(d), TPA
There is no requirement that it term of the contract to be that it is a sale by sample.
There are a number of exceptions:

Where the sample was not supplied by the manufacturer

Where the sample was not supplied with the manufacturer’s express or implied concurrences
74E(2)(b), TPA

Where the defect is due to the act or default of any person not being the servant or agent of
the corporation or a cause independent of the manufacturers control after the goods have
left the manufacturers control
s74E(2)(c)(i), TPA

Where the case involves situations which were beyond the control of the manufacturer and
would not have been foreseeable
s74E(2)(c)(ii), TPA

Where the sale is by auction
s74E(2)(a), TPA
Note that the common law meaning of unmerchantable is to be applied to the section.
Rasell v Cavalier Marketing (Aust) Pty Ltd [1991]
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Section 74F - Repairs and parts
Manufacturers are obliged provide repair facilities for goods purchased by consumers. s74F(1), TPA
In circumstances where the goods require repair after the purchase point the manufacture will incur
liability where the manufacturer acted unreasonably by failing to ensure that either spare parts or
repair facilities were available.
In order to succeed under this section of the consumer would need to establish:
Panasonic Australia Pty Ltd v Burstyner (1993)
(a) The spare part is required to affect or repair or repairs to consumer goods
(b) That such a part is not reasonably available
(c) That the manufacturer acted unreasonably in often during such availability; and
(d) That the consumer thereby suffered loss
The test is not whether it is reasonable for the consumer but whether it is reasonable for the
manufacture to place the consumer in a position in which repairs or spare parts were not available.
The age of the product in question, and the expected reasonable lifecycle of the product will be
important in assessing the reasonableness of the manufacturer’s actions.
Panasonic Australia Pty Ltd v Burstyner (1993)
The manufacturer will not be liable in circumstances where:

The manufacturer takes reasonable action to ensure that the consumer buying the goods
would be given notice at all before the time of sale that either repair facilities will not be
available
s74F(2)(a), TPA
Or that they will not be available after a certain period of time
s74F(2)(b), TPA

The goods are sold at auction
Section 74G – Non-compliance with express warranties
A consumer obtains a right faction in relation to loss or damage suffered as a result of goods which
failed to comply with an express warranty.
s74G, TPA
An express warranty is defined as to includes references to:
s74A, TPA
(a) The quality, performance or characteristics of goods
s74A(1)(a), TPA
(b) The provisions of services that are or may at any time be required in respect of goodss74A(1)(b), TPA
(c) The supply of parts that are or may at any time be required for the goods
s74A(1)(c), TPA
(d) The future availability of identical goods or of goods constituting or forming part of the set of
which the subject goods form part
s74A(1)(d), TPA
Where an assertion is relied on in relation to an action by consumer against a manufacturer and that
assertion, if it had been made by the manufacturer or a person acting on the manufacturer’s behalf
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would have constituted an express warranty, the assertion will be presumed to have been made by
or on behalf of the manufacturer unless the manufacturer proves otherwise.
s74G(2), TPA
Limitation of liability
The parties cannot contract out of the provisions contained within this division, and the implied
terms of the contract cannot be modified.
Any contractual term which attempts to exclude, modify or restrict the division will be void.
s74K, TPA
Where a consumer proceeds against the seller under Div 2 that seller has a right to proceed against
the manufacturer or importer in circumstances where the manufacturer would have also been liable
if the goods had been of a kind ordinarily acquired for personal or domestic or household use or
consumption.
Re Fibreglass Pool Works (Manufactoring) Pty Ltd v ICI Australia (Operations) Pty Ltd [1998]
Remedies
Part V, Div 2A confides for the recovery of loss or damage suffered.
Loss or damage includes damage in respect of an injury.
s4K, TPA
Statute of limitations
Proceedings must be commenced within three years of the date upon which the consumer first
became aware that the goods were not fit for the purpose.
s74J(1), TPA
Any action also needs to be commenced within 10 years of the date on which the retail sale of the
goods place.
s74J, TPA
Jurisdiction
Actions must be commenced in the relevant state court.
The Federal Court has no jurisdiction to entertain actions under Div 2A.
Arturi v Zupps Motors Pty Ltd (1980)
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Topic 20 – Liability for Defective Goods
Part VA imposes a strict liability regime on manufacturers of goods and gives legal rights to persons
who suffer injury or property damage as a result of defective products.
Injured parties now have a right to compensation against the manufacturer of defective goods
without being constrained by the limitations of the common law and statute.
However, the operation of Part VA does not constrain liability under the common law or statute.
s74AR, TPA
As such, these previous actions remain open and it is advisable to use them as the primary means of
liability, with Part VA, TPA being used in the alternative.
These other areas include:
TB p268

Contract

Negligence

The Sales of Goods Acts

Other provisions of the Trade Practices Act
Part VA
Keep in mind this Part only applies to goods supplied by the manufacturer on or after 9 July 1992.
Strict liability
Part VA imposes a strict liability regime. The injured party has only to prove that the product at the
defect. The standard is an objective one.
Liability
Liability is imposed on manufacturers for injuries caused by defects in their products.
An individual who has suffered loss can commence action in circumstances where:
(a) A corporation in trade or commerce supplies goods manufactured by it
(b) The goods have the defect; and
(c) Because of that defect:
i.
An individual suffers injury
s75AD, TPA
ii.
A person other than the individual suffers loss because of the injuries because of the
death of the individual from those injuries
s75AE, TPA
iii.
Personal, household or domestic goods are destroyed or damaged
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Land, buildings or fixtures, ordinarily acquired for private use and so used are
destroyed or damaged
s75AG, TPA
The parties cannot contract out of Part VA.
s75AP, TPA
What is a defect?
Goods are defective if the level of safety is not such that persons are generally entitled to expect.
s75AC(1), TPA
We need to ask what is the public generally, as distinct from any particular individual, entitled to
expect by safety?
ACCC v Glendale Chemical Products Pty Ltd (1998)
This does not require goods to be absolutely risk free.
Several factors to be taken into account when determining the safety of goods:
s75AC(2), TPA
(a) How the goods are marketed
(b) Their packaging
(c) The use of any market in relation to them
(d) Any instructions or warnings which accompany the goods
(e) What might reasonably be expected to be done with or in relation to the goods
(f) The time there were supplied by the manufacturer
Further, to determine the safety of goods, the court can consider whether the goods are marketed
towards particular groups, for example children, trade or professional groups or the general public.
A court may also examine the packaging and presentation of the product, the adequacy of any
instructions or warnings, and the use to which the goods were appalled by the injured party.
In circumstances where any information required by statute was insufficient, the manufacturer or
supplier should provide additional information to attempt to ensure any inadequacies are
addressed.
ACCC v Glendale Chemical Products Pty Ltd (1998)
That is, where it is reasonably foreseeable that the product could be used improperly or in another
way and where such use may pose a danger it appears the manufacturer is under an obligation to
warn persons of this risk.
The relevant time in which to consider these factors is the time the goods were released into
circulation by the manufacturer.
s75AC(2)(f), TPA
Inferences
If after the initial supply safer goods have the same kind were supplied this is not to be taken as an
inference that the earlier goods had a defect.
s74AC(3), TPA
Also there should be no inference that the goods had the defect where the goods complied with a
Commonwealth mandatory standard but the standard was not the safest possible standard with
regard to the latest state of scientific or technical knowledge when supplied by the manufacturer.
s74AC(3), TPA
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Who is the manufacturer?
A corporation will be regarded as being the manufacturer of particular goods for the purpose of Part
VA, TPA whether corporation actually manufactures the goods, or holds itself out to the public as
the manufacturer.
s74A(3)(a), TPA
Or uses its own brand name in relation to the goods.
s74A(3)(b), TPA
This will be the case even where the label on the product states of the corporation was not the
manufacturer of the goods.
ACCC v Glendale Chemical Products (1998)
A corporation will also be regarded as the manufacturer of goods whether corporation permits
another person to promote the goods manufactured by the corporation.
s74A(3)(c), TPA
Or where the corporation, not being the actual manufacturer, imports the goods into Australia and
the actual manufacturer has no place of business in Australia.
s74A(4) & (7), TPA
The term manufactured includes grown, extracted, produced, processed and assembled.
s74A(1), TPA
Where two or more corporations are liable for the same loss they are jointly and severally liable.
s75AM, TPA
Indeterminate manufacturer
Where a person who suffers loss or damage is uncertain who manufactured the goods, the notice
may be served on each known supplier of the goods which seeks particulars identifying: s75AJ, TPA
(i) The corporation which manufactured the goods, or
(ii) The person who supplied the goods to the supplier.
If a supplier has not provided the information within 30 days than that supplier will be taken to be
the manufacturer of the goods.
s75AJ, TPA
Actions
One of these actions must be satisfied in order to establish liability under Part VA.
Section 75AD
This section imposes liability other manufacturers goods which have a defect if because of that
defect any individual suffers death or injury.
s75AD ,TPA
The manufacturer will be liable to compensate the individual for the amount of loss suffered.
Loss includes damage.
s75AA, TPA
Where an individual dies because of the injuries, the law of the relevant state or territory shell
applied to the claim.
Note that only natural persons can be compensated under the section.
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Section 75AE
This section imposes liability on a manufacturer of goods which have a defect in circumstances
where any person other than the individual suffers loss because an individual is killed or injured as a
result of the defect.
s75AE, TPA
The manufacturer must compensate the person for the loss suffered as a result of the death or
injury to the individual.
This section allows persons dependent on the injured person to be compensated for their loss. This
would include a dependent spouse and children and may extends to other dependants, for example
elderly parents.
There is an exception whether relationship is between persons in a business or commercial
relationship.
Section 75AF
This section deals of manufacturers of defective goods which, as a result of that defect, other goods
are destroyed or damaged.
s75AF, TPA
In circumstances where a person who used or intended to use the goods suffers resultant loss or
damage to the manufacturer must compensate that person.
However, the goods damaged must be of a kind ordinarily acquired for personal, household or
domestic use or consumption.
Section 75AG
This section imposes liability on a manufacturer of goods in circumstances where the defect in goods
produced by the manufacturer caused damage to land, buildings and fixtures which are ordinarily
acquired for private use.
s75AG, TPA
Where a person who used or intended to use the land, buildings or fixtures suffers loss or damage as
a result of the defect the manufacturer must compensate that person.
Defences
There are a number of limited defences available:
s75AK; TB p273-274
(a) The defect did not exist when the goods were supplied
(b) The goods had the defect only because of compliance with the mandatory standard
(c) The state of scientific or technical knowledge was not such as to enable the defect to be
discovered
(d) Where the defect is contained in goods referred to as finished goods and the defect is
attributable only to the design of the finished goods, the markings on or accompanying
those goods or the instructions or warnings given by the manufacturer of those finished
goods
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Contributory negligence will reduce the amount of loss that must be compensated for ss75AE, 75AF
& 75AG, TPA.
s75AN, TPA
Statute of Limitations
An action may be commenced at any time within three years after the time a person became aware
or ought reasonably become aware of:
s75AO, TPA
(i) The alleged loss or defect, and
(ii) The identity of the person who manufactured the goods
The liability action must be commenced within 10 years from the date of supply.
Representative actions by the ACCC
The ACCC may commence the liability action on behalf of one or more persons in circumstances
where the ACCC have obtained the written consent of the person or each of the persons on behalf of
the application is being made.
s75AQ, TPA
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Topic 21 – Enforcement, Remedies and Defences
Liability under the TPA
NOTE: Amendments have removed the criminal sanctions from Pt V and inserted Pt VC which, in
effect, repeated the old offence provisions of Pt V in Pt VC and amended s 79 to apply to the
latter.
Therefore, references to Part V should be read as references to Part VC – but the principles remain
the same.
The personal business can be principally liable where it actually engaged in the conduct in
contravention of the TPA.
If there are only in some way concerned with the contravention then they will only be liable under
ancillary liability.
Ancillary liability
These provisions on ancillary liability applied to both contravention so of Part IV and Part V.
A person will be held to be ancillary liable if a person has:
s75B(1), TPA
(a) Aided, abetted, counselled or procured the contravention
In order for this to be proven, the person must have been aware what should have been
aware of the facts that give rise to the contravention. Proof of intent is not required.
Yorke v Lucas (1985)
(b) Induced, whether by threats or promises or otherwise, the contravention
This requires some act of compulsion by force or threat of force or some act of persuasion
aimed at ensuring that a contravention is committed. This requires intent based on
knowledge.
Yorke v Lucas (1985)
(c) Been in any way, directly or indirectly, knowingly concerned in, or party to, the
contravention; or
A person can only be knowingly concerned in, or party to a contravention if that person has
knowledge of the essential facts of the contravention.
Yorke v Lucas (1985)
(d) Has conspired with others to effect a contravention.
Principle liability under Part IV
A contravention of Part IV is not a criminal offence.
s78, TPA
A court may impose a pecuniary penalty if it is satisfied that a person is contravened a provision of
Part IV, or where that person:
s76(1), TPA
(a) Has attempted to contravener such a provision
(b) Has aided, abetted, counselled or procured a person to contravene such a provision
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(c) Has induced, or attempted to induce, a person, whether by threats or promises or
otherwise, to contravene such a provision
(d) Has been in any way, directly or indirectly, knowingly concerned in, or party to, the
contravention by a person of such a provision
(e) Has conspired with others to contravener such a provision
Such a penalty may be up to $10,000,000 for each contravention by a corporation, or up to $500,000
for each contravention by a natural person.
s76(1A), TPA
The ACCC may institute proceedings for the recovery of such pecuniary penalties.
But it needs to do so within six years after the contravention.
s77, TPA
s77(2), TPA
Principles in assessing penalties for Part IV
For penalties imposed under civil liability (ie. For a contravention of Part IV), the court will take into
account:
TPC v CSR Ltd (1991)
(1) The nature and extent of the contravening conduct
(2) The amount of loss or damage caused
(3) The circumstances in which the conduct took place
(4) The size of the contravening company
(5) The degree of power it has, as evidenced by its market share and ease of entry into the
market
(6) The deliberateness of the contravention and the period over which extended
(7) Whether the contravention arising out of the conduct of senior management or at a lower
level
(8) Whether the company as a corporate culture conducive to compliance with the TPA, as
evidenced by educational programmes and disciplinary or other corrective measures in
response to an acknowledged contravention
(9) Whether the company had shown a disposition to cooperate with the authorities
responsible for the enforcement of the TPA in relation to the contravention.
It has become common for a party to a contravention to admit its part in the contravention and, in
cooperation with the ACCC, present a joint submission to the court setting out what the parties
believed to be an appropriate penalty.
This approach has been accepted a number of times.
TPC v TNT Australia Pty Ltd (1995)
Defences for Part IV
Where the defendant is a natural person and is being prosecuted for an attempted contravention of
Part IV or for aiding and abetting, inducing or being knowingly concerned in a contravention of Part
IV, that the person acted honestly and reasonably and ought to be fairly excused.
s85(6), TPA
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Principal liability under Part V
A contravention of Part V is a criminal offence.
s79, TPA
A person is liable where in respect of a provision of Part V (except for ss52, 65Q & 65F(9), TPA)
where that person:
s79(1), TPA
(a) Contravenes the provision
(b) Has aided, abetted, counselled or procured a person to contravene such a provision
(c) Has induced, or attempted to induce, a person, whether by threats or promises or
otherwise, to contravene such a provision
(d) Has been in any way, directly or indirectly, knowingly concerned in, or party to, the
contravention by a person of such a provision
(e) Has conspired with others to contravener such a provision
Such a person upon conviction will be liable for:

A fine not exceeding $40,000 (for a natural person)
s79(1)(f), TPA

A fine not exceeding $200,000 (for a corporation)
s79(1)(g), TPA
Principles in assessing fines for Part V
The court may impose a fine if it is satisfied that the person is contravened the provision of Part V
(except for ss52, 65Q & 65F(9), TPA).
s79, TPA
In determining the level of fines, the court will have regard to the following factors:
(a) The objectives of the legislation and in particular its policy of consumer protection
(b) The absence or presence of fraudulent conduct or dishonest intent and of deliberation on
the part of the defendant
(c) The degree of negligence in the defendant’s conduct
(d) The extent of carelessness in the defendant’s conduct
(e) The extent to which the defendant’s conduct has or is likely to have prejudiced consumers
(f) The efforts which the defendant has made to correct the situation, and
(g) The deterrent effect of a conviction and fine.
Defences to Part V
A number of defences are available to corporations which are found to have breached a provision of
Part V.
These defences are:
s85, TPA
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
That the contravention was due to a reasonable mistake

That the contravention was due to reasonable reliance on information supplied by a another
person
s85(1)(b), TPA

That the contravention was due to the act or default of another person, to an accident or to
some other cause beyond the defendant’s control and the defendant talk reasonable
precautions and exercised due diligence to avoid a contravention
s85(1)(c), TPA

Whether contravention arises from an advertisement, that the defendant publisher or
advertising agent received the advertisement in the ordinary course of business and neither
knew nor had reason to suspect that the advertisement was incorrect
s85(3), TPA
s85(1)(a), TPA
However there are a number of important points to note:

The defences can only be invoked in a prosecution matters, and cannot be invoked in civil
actions (such errors and action for damages, or for an injunction)

The defences cannot be invoked where the ACCC is seeking an injunction

Each of the defences operate independently, so that some or all of them can be relied upon

The defendant relying on one of these defences must establish the defence on a civil
standard of proof.
s85(5), TPA
Public enforcement of the TPA
It is the role of the ACCC to act as the public enforcement body of the TPA.
Apart from taking action under the above sections, the ACCC can seek such civil remedies as
injunctions, interim injunctions, mandatory injunctions, information disclosure orders, divestiture,
enforceable undertakings, and other orders.
TB p312-317
Private remedies under the TPA
Private parties have a range of remedies available if loss or damage is suffered as a result of a
contravention of the TPA:

Injunctions

Damages

Declarations, and

Other orders (under s87)
Injunctions
Private parties are able to seek the various forms of injunction, including interlocutory injunctions,
mandatory injunctions and final injunctions.
s80, TPA
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The normal considerations apply when deciding upon whether an injunction should be awarded or
not.
TB p312-314
Other orders
Other orders which may be awarded include:
s87, TPA
(i) An order varying the provisions of the contract or arrangement
(ii) An order refusing to enforce the provisions of a contract
s87(2)(a) & (b), TPA
s87(2)(ba), TPA
(iii) An order directing the refund of money or the return of property
s87(2)(c), TPA
(iv) An order for the payment of damages by way of compensation
s87(2)(d), TPA
(v) An order for the repair of goods or the supply of parts
s87(2)(e), TPA
(vi) An order for the supply of services
s87(2)(f), TPA
(vii) An order varying an interest in, or terminating the effect of, an instrument creating or
transferring an interest in land
s7(2)(g), TPA
There are few points to note about the operation of s87:

The court cannot make orders in relation to allegations of unconscionable conduct involving
insurance contracts to which the Insurance Contracts Act 1984 applies
s87(1E), TPA

An application for an order must be made within three years after the date on which the
cause of action accrued.
s87(1CA), TPA
However, in the case of an alleged contravention of the unconscionable conduct provisions,
an application must be made within two years after the date on which of the cause of action
accrued

Orders can be sold by private parties and the ACCC.
Some examples
The contract for the supply of machinery was declared void because the machinery was not fit for its
purpose.
Bonney Forge Pty Ltd v Shear Machinery Pty Ltd (1988)
The court ordered the supplier of a BMW Motor car to make a number of minor repairs because the
purchaser had specifically ordered a mint condition vehicle. Tompkin v Nossida (No 1) Pty Ltd (1986)
Damages were awarded and a lease was varied in favour of a purchaser of a motel because the
vendor misrepresented the use to which certain facilities at the hotel could be put.
Kizbeau Pty Ltd v W G & B Pty Ltd (1995)
Declarations
The court has the power to grant declaratory relief.
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Such an award is a declaration in relation to the operation or effect of any provision of the TPA or in
relation to the validity of being done, proposed to be done or purporting to have been done under
the TPA.
s163A, TPA
Any person can apply for such a declaration, however it cannot be used again a court to declare that
certain conduct is in breach or of the TPA. Westpac Banking Corp v Northern Metals Pty Ltd (1989)
Damages
The person who has suffered loss or damage by conduct of another person that was done in
contravention of the provision of Part IV or Part V may recover the amount of the loss or damage by
action against that another person or against any person involved in the contravention.
s82, TPA
This provides the civil basis for liability for a contravention of Parts IV & V.
Damages can be recovered not only against the person whose conduct cause loss, but against any
person involved in the contravention.
s75B, TPA
Loss or damage that includes bodily injury.
s4K, TPA
There are two elements to an action for damages:
s82, TPA
(a) A contravention of a provision of Part IV or Part V, and
(b) Loss or damage suffered as a result of that contravention
The cause of action accrues when loss or damage is actually suffered. It follows that if there has
been a breach and yet no damage suffered, and applicant will not have a cause of action.
Arcadi v Colonial Mutual Life Assurance Society Ltd (1984)
A number of principles are relevant in assessing damages:

The method by which damages are to be calculated is not provided. Traditionally, courts
have assessed damage is using a tortious principles.
Gates v City Mutual Life Assurance Society Ltd (1986)
However it is now felt that once a connection is established, the damages that may be
recovered are not limited by analogy with the measure of damages in either contract or tort
law.
Marks v GIO Australian Holdings Ltd (1998)

And applicant can only recover damages for actual loss or damage suffered a not for
potential all likely loss.
Wardley Australia Ltd v Western Australia (1995)

It is necessary to show an nexus between the loss and damage suffered and the conduct
alleged to be in breach of the TPA such that it can be said that the loss and damage was
caused by the conduct.
Wardley Australia Ltd v Western Australia (1995)

The court is not relieved from estimating damage is just because it would be difficult to do
so.
Commonwealth v Amann Aviation Pty Ltd (1991)
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
Generally, the problem measure of damages is the difference between the real value of
nothing acquired as at the date of the acquisition and the price paid for it.
Kizbeau Pty Ltd v W G & B Pty Ltd (1995)

Damages are available for the loss of a commercial opportunity because of a breach of s52
and should be assessed by reference to the court’s assessment of success of that
opportunity had it been pursued.
Sellars v Adelaide Petroleum NL (1994)

The court is not allowed to award interest on damages under s82, but may still do so in
reliance of its inherent powers at statute.
s51A, Federal Court of Australia Act 1976 (Cth)

In cases, damages for mental distress may be awarded.

An action for damages must be commenced within three years of the date on which the
cause of action accrued.
s82(2), TPA
However, provided loss or damage has actually been suffered, an action may be commenced
after three years have elapsed and if the respondent does not raise the time bar in its
defence, the ability to plead for the time buyer is lost and the action remains good.
Wardley Australia Ltd v Western Australia (1995)

In assessing the damages payable, the court will consider the extent to which those damages
might have been reasonably mitigated by the claimant. Haynes v Top Slice Deli Pty Ltd (1995)
Argy v Blunt (1990)
Inducing intention for corporations
If a servant or agent of the corporation intentionally engages in conduct in breach of s46 or Part V
and that conduct is within the scope of that persons actual or apparent authority, then the
corporation is deemed to have the intent of that person.
s84(1), TPA
Any conduct engaged in on behalf of a body corporate by director, servant or agent within the scope
of the persons actual or apparent authority shall be deemed to have been engaged in by the body
corporate.
s84(2), TPA
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