This section contains a list of frequently asked questions and answers about the Trade Practices Act (the Act).
This list is designed to give a general overview of the rules, and how they may be relevant to your business. The answers are not definitive advice.
If, after reading these questions and answers, you want to know more about the way the Act or the code apply to your circumstances, you should seek legal advice or contact the ACCC’s small business helpline on 1300 302 021.
When I approached a wholesaler to supply my business, they refused. Can they refuse to supply me?
In general, businesses may decide who they wish to supply or not supply. Under the Act, no one has an absolute right to be supplied. There may be sound commercial reasons—legal ones—why a customer is refused supply of goods or services.
For example, a wholesaler or manufacturer may find it too costly or inconvenient to sell to people who walk in off the street, or may dislike supplying outlets that are located too close to each other. Alternatively, the supplier may believe that a reseller is a bad credit risk, does not promote the goods or services properly or lacks particular skills or expertise relevant to the business.
However, if a business refuses to sell to a particular business for anti-competitive reasons—such as believing that they will sell the products below the recommended retail price against the wholesaler’s wishes—then it may be illegal to refuse supply. If you believe that you have been refused supply for an anti-competitive reason, you may care to seek independent legal advice or contact the ACCC’s small business helpline on 1300 302 021 for further information.
When a consumer returns faulty goods, can I recover the cost from the manufacturer?
Sellers, manufacturers and importers all have obligations to consumers. If there has been a breach of a statutory condition (such as when the product is faulty) the seller is responsible for providing a remedy, which may come in the form of a refund. However, the retailer may have a right to claim compensation from its supplier/manufacturer.
Although the law is in place mainly to protect consumers, it also protects retailers and wholesalers by putting the responsibility for manufacturing or design faults onto manufacturers, or importers and owners of brand names who are not the original manufacturer.
If a refund has been given on goods that have a design or manufacturing fault (for example, a hammer drill fails the first time you use it), the seller can make a claim against the manufacturer or importer. Manufacturers cannot impose misleading conditions on supply terms—for example, attempting to limit warranty claims to the terms of their own voluntary warranties may breach the Act.
Some manufacturers might state that retailers must return goods in the original packaging and cover the cost of freight. These kinds of conditions cannot be imposed if the goods are returned due to a breach of a statutory condition or warranty.
What rights do I have if a manufacturer refuses to repair a faulty product for one of my customers?
Manufacturers and importers have a legal obligation to ensure that repair facilities and spare parts are reasonably available for their products. This obligation is above and beyond any voluntary warranty placed on goods by the manufacturer.
What is ‘reasonably available’ will depend on the particular circumstances, such as the nature of the product and its expected useful life. There is no minimum period for a manufacturer or importer to provide facilities and spare parts for repair. However, a manufacturer or importer will remain liable for damages for up to 10 years if the failure to provide repair facilities and parts is found to be unreasonable.
My supplier advised they will only continue supplying me as long as I don’t discount below a certain price; is this legal?
No, this is called ‘resale price maintenance’ and is illegal under the Act. Suppliers (including manufacturers and wholesalers) may not specify or attempt to enforce a minimum price below which goods or services are not to be resold or advertised for sale.
A supplier may suggest an appropriate price (i.e. a recommended retail price) but cannot force resellers—by refusing or threatening to refuse supply—to stop charging or advertising below that price or from advertising discounts.
However, if the reseller has used the supplier’s products as a ‘loss leader’—a product sold at a discount, simply to attract more business—the supplier may be allowed to withhold supply.
Should the products I sell display the country of origin on their labels?
A country of origin claim is any labelling, packaging, logo or advertising that makes a statement or claim about which country the goods came from, for example, ‘Made in Australia’ or ‘Product of USA’.
Under the Act, there is no requirement to label goods with their country of origin. However, if a business does decide to make claims about the country of origin of goods then those claims must be accurate.
General claims about the country of origin, such as ‘Made in Italy’ and ‘Proudly made in Australia’, have specific requirements attached to them. To apply such a label to goods they must be:
substantially transformed in the country that is the subject of the claim
50 per cent or more of the cost of production or manufacture must have occurred in that country.
More specific claims about the country that goods were produced in, such as ‘Product of Australia’, have more stringent requirements attached. The country claimed in the labelling:
must have been the source for each significant ingredient or component of the goods
virtually all of the manufacturing and transformation procedures must have been carried out in that country.
Failure to follow these requirements could leave a business at risk of breaching the Act.
The terminology used in these requirements, and the requirements themselves, are explained in detail in the Country of origin and the Trade Practices Act publication. While the Trade Practices Act does not require goods to be labelled with their country of origin, you may care to check with:
the Australian Customs Service if you import goods
state or territory fair trading agencies to see if state or territory laws apply
Food Standards Australia New Zealand (FSANZ) for information about specific country of origin requirements under the Food Standards Code.
What can I do if a competitor is defaming the quality of my products to attract customers away from my business? Is this anti-competitive?
The Act outlaws some types of anti-competitive conduct. Some conduct, while it may seem to fit under the general English language definition of ‘anti-competitive’ may not breach the Act.
Therefore, you would be best to seek legal advice. The Act is unlikely to provide a remedy for this type of conduct, as there are no provisions under the Act prohibiting defamation—however, remedies may be available under other laws.
If my competitor asked me to agree to charge set prices for certain products, would it be illegal for me agree to do so?
Because price is a key element of competition between businesses, it is important that competing businesses set their prices independently of each other.
When two or more competing businesses make an agreement that has the purpose or effect of fixing, controlling or maintaining the price of goods or services, this will be considered ‘price fixing’, which is explicitly prohibited under the Act.
To avoid price fixing, always decide on your prices independently. Never agree with your competitors about what price to charge for goods or services.
If you agree to fix prices, you could expose yourself to heavy penalties. If you are approached by a competitor wanting to fix prices, you should consider contacting the ACCC with any information that has been provided to you.
An advertising firm has placed an ad for my business in a business directory and sent me an invoice. I never agreed to place an ad in the directory. Do I have to pay the invoice?
No. The Act specifically prohibits a corporation from asserting a right to payment for unsolicited services, including advertising. Businesses or consumers who did not authorise the advertisement in question are under no obligation to pay the ‘account’.
If an advertisement has been authorised by deception, it may be that the business concerned has breached the misleading or deceptive conduct provisions of the Act.
The Trade Practices Act prohibits unconscionable conduct in commercial dealings under ss. 51AA and 51AC. Section 51AA prohibits unconscionable conduct within the meaning of the general law. The term unconscionable conduct is not specifically defined in the Act, and has come to refer to circumstances in which:
one party to a transaction suffered from a special disability or disadvantage in dealing with the other party
the disability was sufficiently evident to the stronger party
the stronger party took unfair advantage or unconscionable advantage of its superior position or bargaining power to obtain a beneficial bargain.
The essence of special disability is whether or not it seriously affects the ability of the weaker party to judge what is in its best interests. Simply having a disparity in bargaining power would not be considered a special disability. Instances of special disability have included:
ignorance of material facts known to the other party
illiteracy or lack of education
poverty or need of any kind
age, infirmity of body or mind
drunkenness
lack of assistance or explanation when these are necessary—particularly if one party has limited experience in commercial matters.
Section 51AC provides more broadly that a corporation must not, in trade or commerce, engage in conduct that is, in all the circumstances, unconscionable. It provides a non-exhaustive list of factors which courts may take into account, in determining whether conduct is unconscionable. These factors are outlined in the ACCC’s Small business guide to unconscionable conduct.
