Online Trading, Competition
and Consumers: What Smart
Retailers Need To Know
ACCC Deputy Chair Dr Michael Schaper
NORA Retail Deep Dive
Sydney, August 2014
Key Issues for Online Retailers
Refusal to deal
Exclusive dealing
Drip pricing
Fake online reviews
Price comparison websites
Group buying
Consumer guarantees
Price discrimination
Product safety
Resale price maintenance
Outline
The ACCC: What we do
The Australian Consumer Law
Emerging consumer issues
Common competition questions
Further information
1. What We Do
Competition & Consumer Act 2010
Lawful
Competition
Consumer
Protection &
Product Safety
Regulated
Infrastructure
Making Markets Work
The ACCC: What We Do
• National regulator: oversees laws on consumer protection,
equitable competition, product safety, infrastructure access
• Also regulates some specific industries (such as energy,
telecommunications), industry codes (franchising, horticulture)
and price monitoring (airports, postage, stevedoring)
• An independent statutory agency within the Treasury portfolio
• Seven commissioners (statutory appointments), offices in
each state
• Dual educative and enforcement function
• Enforcement agency … does not set policy
2. Australian Consumer Law
• Part of the Competition & Consumer Act 2010 (previously
known as the Trade Practices Act 1974)
• Covers matters such as:
o Unsolicited sales practices
o Misleading & deceptive conduct
o Unfair contract terms
o Consumer guarantees
o Product safety
• Applies to all businesses, regardless of whether products are
sold in a ‘bricks and mortar’ shop or online
• Enforced by both ACCC and state/territory fair trading
agencies…
• ACCC responsible for issues that have a national dimension
Misleading or Deceptive Conduct /
False or Misleading Representations
• To promote honesty & fair dealing, ACL bans businesses from:
– engaging in any form of conduct that is misleading or
deceptive, or is likely to mislead or deceive
– making false or misleading representations (claims,
statements) about goods, services, land, employment
opportunities, or certain businesses activities
• What sort of conduct is likely to mislead or deceive? Need to
consider the overall impression created - is false or
inaccurate?
Penalties:
Misleading or deceptive conduct: injunction, damages, disqualification order
False or misleading misrepresentations: Up to $220,000 – individuals, $1.1 million corporations.
3. Fake Online Reviews
Online reviews increasingly popular
consumer resource
ACCC concerned about increase in
paid for and fake reviews.
Businesses & review platforms need
to ensure consumers are not misled.
Three core principles to abide by:
be transparent about commercial
relationships
don’t post/publish misleading
reviews
omitting negative reviews can be as
misleading as posting fake reviews.



Electrodry Case:
Alleged Fake Online Reviews
• July 2014: ACCC took court action against A Whistle (1979) Pty
Ltd, franchisor of the Electrodry Carpet Cleaning business.
• It is alleged testimonials were written and posted by people
associated with, or contracted to, Electrodry - and not by its
genuine clients (as the testimonials implied).
• ACCC alleges that Electrodry’s conduct
resulted in fake testimonials appearing on
review sites, including Google and True Local.
• It is alleged Electrodry induced (or attempted
to induce) franchisees to make false or
misleading representations by posting
fake testimonials online.
Photo source: SMH Online
What is Drip Pricing?
Process where a headline price is advertised at the beginning of an
online purchasing process … but additional fees and charges
which may be unavoidable are then incrementally disclosed.
Draws consumers into an online purchase process … but fails to
provide sufficient upfront disclosure of the additional fees.
Unfairly impacts on both consumers (misled about total cost) and
honest other firms (who disclose full price upfront).
Drip Pricing Court Action
Against Jetstar & Virgin
• In June 2014, the ACCC instituted separate proceedings in the
Federal Court against Jetstar Airways Pty Ltd and Virgin Australia
Airlines Pty Ltd
• The ACCC alleges each airline engaged in misleading or deceptive
conduct and made false or misleading representations in relation to
particular airfares
• The ACCC alleges ‘booking and
service’ fees applied to the majority
of online bookings – but were not
immediately obvious.
• Should have been disclosed upfront,
prominently within headline
prices.
Photo source: 2GB Online
Price Comparison Websites
Especially are popular in energy, travel and insurance sectors.
Can improve transparency and promote competition; however, can
sometimes mislead consumers in significant ways.
Issues can include market coverage, disclosure of commercial
relationships, frequency of data updates, privacy and accessibility
issues.
ACCC working with industry to improve standards; may also take
enforcement action where appropriate.
Court Action Price Comparison Websites:
ACCC v Energy Watch
• 2012: Federal Court ordered Energy Watch Pty Ltd to pay $1.95m
for misleading advertising. Former CEO ordered to pay $65,000 for
his voiceover role in misleading radio advertisements.
• Misleading advertising related to claims about the firm’s price
comparison service and savings consumers would make by
switching energy retailers.
• Court found the advertising had:
– falsely represented that the Energy Watch service compared the
rates of all or many of the energy providers in a person's area.
– falsely represented the level of $ savings that residential and
business energy users would make if they switched energy
retailer via Energy Watch.
Group Buying
The ACCC and other fair trading agencies were concerned about:
• shoppers being misled about their refund rights
• price and restrictions on a deals not clearly and accurately stated
In December 2013, the Federal Court ordered Scoopon to pay
pecuniary penalties of $1 million for making false or misleading
representations to both businesses and consumers about :
• refund rights, price of some deals
• business costs and risks, and
• the rate of voucher redemptions.
In June 2014, the ACCC took court action against Spreets Pty Ltd.
We allege Spreets engaged in misleading and deceptive conduct and
made false or misleading representations about:
• the price of certain deals
• ability to redeem vouchers
• refund rights.
Product Safety
All businesses who supply products to Australian
consumers must comply with Australian product safety
laws.
Need to ensure online consumers can properly assess
whether the product is safe:
clearly display warnings & product labelling
use good quality product images
provide clear product descriptions, including
recommended usage and age-grading for children’s
products
check the requirements of Australian safety standards
and bans prior to listing a product for sale




Consumer product safety online guide is available at
www.productsafety.gov.au/consumersonline
Selling Safe Products Online:
Are You Aware Of Mandatory Reporting?
• Suppliers must notify the ACCC if they become aware that a
consumer good they supply may have caused death or a serious
injury or illness
• Includes online suppliers
• Reports must be provided within two days
• Is not an admission of liability or responsibility
• Reports must include details (to the extent known) about:
– the product
– the death or injury
– the supplier’s response
www.productsafety.gov.au/mandatoryreporting
4. Imposing Minimum Resale Prices
• Retailers should be free to set their own prices.
• It is illegal for suppliers to:
– put pressure on businesses to charge their RRP or any
other set price (e.g. by threatening to stop supplying to firm)
– stop resellers from advertising, displaying or selling goods
from the supplier below a specified price
• There is nothing wrong with suppliers using a RRP list - as
long as prices on that list are really just recommended (not
enforced!)
Penalties
Individuals – Up to $500,000 per contravention
Corporations – $10 million per contravention OR three times the total value of the
benefits obtained by one or more persons OR 10% of the annual turnover of the
company in the preceding 12 months
Supplier of Aquarium Products
Prevented Online Discounts
• In August 2011, AquaDepot Imports admitted to
engaging in resale price maintenance by ceasing to
supply an online retailer who discounted aquarium
products below a specified price.
Exclusive Dealing
• Exclusive dealing arrangements are a
feature of the Australian retail
environment.
• A common complaint from online
businesses is that suppliers will not
provide them with certain goods
because they sell online.
• Restrictions may be prohibited under
the Act if the restriction results in a
substantial lessening of competition.
Penalties
Individuals – Up to $500,000 per contravention
Corporations – $10 million per contravention OR three times the total value of the
benefits obtained by one or more persons OR 10% of the annual turnover of the
company in the preceding 12 months
www.accc.gov.au
ACCC Infocentre: 1300 302 502
@ACCCgovau