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Can you be banned from your job? ACCC granted new powers by Federal Government!

Date Published
 04 May 2010
 Joe Lederman

By Joe Lederman and Charles Fisher
FoodLegal Lawyers and Consultants
© Lawmedia Pty Ltd, May 2010

On 14 April 2010 the Trade Practices Amendment (Australian Consumer Law) Bill 2009 became law. This Bill creates a series of new laws, penalties and enforcement options in the event of a breach of the Trade Practices Act. One of these new enforcement options is a disqualification order which could allow the Australian Competition and Consumer Commission to seek to have a person disqualified from ever managing a business. This article examines the circumstances in which a disqualification order can be sought, as well as a general overview of the new “Australian Consumer Law”.

What is “Australian Consumer Law”?

“Australian Consumer Law” is the name given by the Federal Parliament to the wealth of amendments made in April 2010 to the Trade Practices Act 1974 (Cth) and the Australian Securities and Investments Act 2001. These amendments grant a series of further powers to the government enforcement agencies responsible for those Acts, namely the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC).

Unfair consumer contracts

While these amendments are centred on expanding the powers of the abovementioned agencies, they do also create a new regime for protecting consumers from “unfair terms” in “consumer contracts”. The Trade Practices Act already contains a number of ways of protecting businesses from entering into contracts with unfair provisions such as creating legal actions for purchase of unsuitable goods (Section 74B), goods of unmerchanteable quality (Section 74D), etc. However, the new provisions and rules act in strict isolation from business-to-business agreements.

A “consumer contract” is defined in the Bill as a contract for goods, services or land which is “wholly or predominantly for personal, domestic or household use or consumption.”

Any term deemed to be “unfair” in such a contract is deemed to be void. While the definition of “unfair” is broad, the Bill provides several examples, such as a provision which only allows one party to determine whether the contract has been breached or a term that limits the right of one party to sue another. These amendments could have a serious affect on business practices that have primarily relied on disclaimers and warnings to reduce exposure to legal liability.

New enforcement powers of the ACCC

While all businesses that engage in contracts with consumers for goods or services for “domestic use” ought to reassess their business practices in light of the new laws, of equal concern to food businesses may be the new enforcement powers and penalties available to the ACCC.

The new powers granted to the ACCC include:

  • Seeking civil penalties for consumer loss on top of criminal fines;
  • Issuing substantiation notices to businesses requiring them to provide evidence as to the truth of their marketing claims (failure for which may result in the ACCC using its new powers);
  • Issuing infringement notices, akin to parking fines, allowing the ACCC to punish for breach of the Trade Practices Act without first proving it in Court;
  • Issuing public warnings to consumers in relation to companies breaching the Trade Practices Act; and
  • The power to disqualify a person from managing a business.

Disqualification orders

Disqualification orders already exist in relation to when directors or managers of corporations breach a civil penalty provision in the Corporations Act 2001. ASIC can seek such an order from a court, which determines the length of the “ban” as the court deems appropriate. Under the new laws, either the ACCC or ASIC will be able to seek that a person be disqualified from managing a business for breach of certain nominated sections of the Trade Practices Act or ASIC Act.

Now included in the nominated sections are Sections 53 and 55 of the Trade Practices Act which prohibit companies from making false or misleading representations in trade and commerce. Therefore, where a food company makes a representation that it cannot substantiate and the ACCC decides to pursue the action to court, any manager of that company could now be liable to be disqualified.

In relation to the already existing disqualification orders for breaches of the Corporations Act 2001, when determining the period of disqualification, the Courts have considered the nature of the breach (i.e. whether the breach was intentional or dishonest), the severity of it (the scope of the loss or damage caused by the breach) and the likelihood of similar behaviour occurring in the future.

This new disqualification procedure could especially impact companies that have been found to breach the Trade Practices Act on multiple occasions in a short space of time. The new law also stipulates that any disqualification can be permanent.

While the majority of ACCC enforcement actions end in enforceable undertakings (i.e. without court intervention) where disqualification would be unlikely to be sought, the ACCC has previously taken actions to the Federal Court – despite such companies being willing to enter into undertakings. The necessity and seemingly arbitrary nature of the ACCC’s enforcement policy was discussed in our FoodLegal Bulletin articles “ACCC publishes new food labelling update – but is the policy supported by Court case law?” and “ACCC responds to FoodLegal Bulletin”.

FoodLegal training available

FoodLegal is available to train personnel of food companies in relation to the new provisions of the Trade Practices Act, how they can affect marketing and business practice as well as how to reduce exposure to legal liability for breach of the Trade Practices Act. For more information, please click here.