Water brokers and exchanges

ACCC report on water market intermediaries—industry developments and practices

Water market intermediaries is a general term that refers to water brokers and exchanges. Brokers perform a similar function to mortgage brokers, as they investigate trading options on behalf of their clients and arrange the necessary paperwork. Water exchanges operate as a trading platform matching buyers and sellers through an automated process or bulletin board. Water exchanges also organise and submit the necessary paperwork to the relevant trade approval authority(ies).

Water market intermediaries play an important role in the water market by bringing buyers and sellers together, reducing search costs, improving information flows and assisting in obtaining regulatory approvals. However, stakeholders have expressed concerns about water market intermediaries, including about possible future misconduct.

The Water market intermediaries—industry developments and practices report examines water market intermediary industry practices and developments as well as stakeholder concerns about water market intermediaries.


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The ACCC commissioned the Australian Bureau of Agricultural and Resource Economics (ABARE) to survey irrigators about their use, and experiences with, water market intermediaries to inform the development of the Water market intermediaries—industry developments and practices report. The full results of this survey are available below.


ABARE survey of irrigators re water market intermediaries.pdf (257.3 KB)

Guides for water market intermediaries and their customers

The ACCC publishes guides which may assist water market intermediaries and their customers to understand their fair trading obligations under the Competition and Consumer Act 2010.


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Understanding fair trading

Water brokers and exchanges play an important role in the market. The Competition and Consumer Act 2010 includes the Australian Consumer Law (ACL). The ACL commenced on 1 January 2011 and applies nationally and in all states and territories and to all Australian businesses. The ACL states that businesses and individuals—including water brokers and exchanges—must not:

  • engage in misleading or deceptive conduct
  • make false or misleading representations
  • accept payment if they are unable to deliver
  • engage in unconscionable conduct
  • use harassment or coercion.

In some situations, the ACL also gives customers certain guarantees about the quality of services offered by brokers and exchanges.

There are various remedies that may be sought where a water broker or exchange fails to meet their fair trading obligations. These rights and remedies are discussed below.

Misleading or deceptive conduct

It is illegal for a broker or exchange to make a claim that is misleading or deceptive, or is likely to mislead or deceive. A common meaning of 'mislead or deceive' is to 'lead into error'.

Misleading someone may include:

  • lying to them
  • leading them to the wrong conclusion
  • creating a false impression
  • leaving out (or hiding) important information
  • making false or inaccurate claims.

Customers will have different levels of knowledge about water trading, so conduct that would not mislead some customers may mislead others and may still be illegal.

Advertising or marketing claims that are vague, or cannot be easily substantiated, are more likely to be misleading or deceptive. These kinds of claims should be treated with caution.

Example: a broker 'guarantees' a water trade, even though the trade has not yet been approved.

What a broker or exchange does not do or tell a customer may also be considered misleading or deceptive in some circumstances.

Example: a broker does not tell their customer they are buying or selling water on their own behalf, when the customer would want to know this.

False or misleading representations

It is illegal for a broker or exchange to make false representations about themselves, the services they offer or the water that is being traded. In particular, the law prohibits false representations about:

  • the standard, quality, value or grade of the service they are offering or the water itself

Example: a claim that a water entitlement is as reliable as the 'high reliability' water entitlements their customer is familiar with, when it actually has a lower reliability.

  • a particular person agreeing to buy water or use the water or exchange in question

Example: a broker falsely claims to already have someone lined up and ready to trade through the broker.

  • the sponsorship, approval, performance characteristics, accessories, uses or benefits (of the water itself, or the service offered by the water broker or exchange)

Example: a claim by an exchange or broker that they are accredited by a government agency or industry association if they are not.

Example: a claim that a customer's money will be held 'in trust' while the trade is finalised, when the broker does not use a genuine trust account.

  • the price of the service or the water itself

Example: a false claim about the commission a customer will have to pay if a water trade takes place, or the price of the water.

  • the need for the service or the water itself

Example: a claim that a customer has to trade through a particular exchange if this is not the case.

Accepting payment without being able to supply

A broker or exchange must not accept payment (including a deposit) from a customer if they:

  • do not intend to supply the service, or intend to supply a service that is materially different from the one the customer paid for; or
  • should be aware that they will not be able to supply the service within the promised time frame or (if there is no time frame offered) a reasonable time.

Example: a broker requires a customer to pay a deposit when the broker knows that it is unlikely they would be able to arrange a suitable trade within the time they have specified (or if no time has been specified, a reasonable time)

Harassment and coercion

The ACL prohibits brokers or exchanges from using physical force, undue harassment or coercion to make sure a customer uses their services, or to pressure a customer to pay for any services they have provided in certain circumstances. Undue harassment may occur when repeated approaches are made or repeated pressure is applied, going beyond what is acceptable or reasonable.

Example: a broker calls a customer several times a day, or very late at night to demand payment of their fees or to pressure the customer to trade water.

Generally this law will only apply if the amount involved is no greater than $40,000 (for the services of the broker or exchange, not including the cost of the water itself).

While the ACL sets out limited circumstances where a broker or exchange may not harass or coerce a customer, customers may have other rights, even where the ACL does not apply. Irrigators should seek legal advice if they feel they are being harassed by a water broker or exchange.

Unconscionable conduct

Unconscionable conduct occurs when a business engages in unreasonable conduct that goes against good conscience. It may involve conduct that is bullying, oppressive or otherwise lacking in good faith. The ACL prohibits any unconscionable conduct in connection with the supply or acquisition of goods or services.

Unconscionable conduct is not a static concept. The ACL does not define unconscionable but lists a number of factors that the court may take into account when deciding if the conduct is unconscionable:

  • the relative bargaining strength of the parties
  • whether the stronger party imposed conditions that were not necessary to protect their legitimate business interests
  • the use of undue influence, pressure or unfair tactics
  • whether the weaker party could obtain supply on better terms elsewhere
  • whether the stronger party made adequate disclosure to the weaker party
  • the willingness of the stronger party to negotiate
  • the extent to which the each party acted in good faith
  • the requirements of any relevant industry code.

The ACL also gives the court the freedom to take into account any other matter it deems to be relevant.

Remember that the unconscionable conduct provisions will not apply to situations where one party has simply made a poor deal. You should always exercise a high level of care when making important financial or business decisions.

For more information on unconscionable conduct, see the ACCC's Guide to unconscionable conduct.

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Guarantees

In most cases, when a customer engages a broker or exchange, the ACL provides the customer with an automatic guarantee that their service will be both:

  • carried out with 'due care and skill' and
  • 'fit for purpose' - that is, the broker or exchange's service meets the customer's needs.

Example: if a broker mishandles the paperwork for a trade, leading to delays or refusal, they may not be exercising 'due care and skill'.

Example: if a customer confirmed that the broker could arrange all the necessary approvals for a trade, but the broker failed to do so, the service may not be 'fit for purpose'.

These guarantees may not apply to apply if the customer:

  • did not make clear what they wanted done when this was not obvious to the broker or exchange
  • insisted on having the service carried out in a particular way and did not like the result.

These guarantees are implied in every contract between a consumer and a supplier where the value of the service (excluding the cost of the water itself) is less than $40,000. These cannot be cancelled by the broker or exchange or signed away. The guarantees apply whether or not there is a written contract. If a broker/exchange provides their own warranty or guarantee, they must honour it and the ACL guarantees.

The ACCC cannot take action for a breach of a guarantee. Instead, if a broker or exchange does not meet these requirements, you can take action to have the service performed again, and compensation for any related loss or damage. The ACCC can take action if a broker or exchange engages in misleading or deceptive conduct in relation to a guarantee or makes a false impression about a guarantee.

Remedies and penalties

The ACCC can seek injunctions (for example, to stop certain conduct) or other court orders if they believe a breach of the ACL has occurred.

Any person suffering loss or damage as a result of this conduct can seek damages or other orders from a court. A number of penalties may also be available depending on the offence. These include infringement notices of up to $6600 for companies ($66 000 for listed companies) and $1320 for individuals, and civil and criminal penalties of up to $1.1 million for businesses and $220,000 for individuals.

Tips for irrigators

  • Ask around—friends, family and neighbours may be able to recommend a good broker or exchange, or warn you about bad ones.
  • Shop around—try your phone book or the Internet to find about which brokers and exchanges are available.
  • Do your homework—find out exactly what service they can provide to you, what experience or qualifications they have, how long the trade is likely to take and the fees or commission you will be facing.
  • Payment—make sure you know how much and when you need to pay. If you have to pay a deposit or even the full purchase price before a trade is approved, find out what happens if the trade is rejected.
  • Know where you stand—do not assume that a broker will act in your best interests - make sure you know whether or not the a broker is acting on your behalf.
  • Get further advice—ask a lawyer, accountant or other relevant professional to look at any contract you may be asked to sign. For trades of water entitlements, you may wish to engage a lawyer or conveyancer to act on your behalf as well.
  • Get it in writing—make sure you take a note of conversations with the broker or exchange and be sure to get a copy of any contract you sign.
  • Remember—be wary of brokers or exchanges that are difficult to contact, avoid your questions, make promises that sound too good to be true or don't want to put anything in writing.

If you have a problem with a broker or exchange

By knowing your rights under fair trading laws you can approach brokers or exchanges with more confidence. Use the steps set out below.

Step 1. Approach the broker or exchange with your concerns

Contact the broker or exchange to explain the problem and the outcome you want (e.g. cancel the deal or get a refund). Be clear, persistent, calm and polite. Make a note of phone calls and visits with the business, including the name of the person you spoke to. If this does not work, move on to step 2.

Step 2: Make a written complaint

Write to the broker or exchange - address your letter or email to the manager or the company's head office. Set out what you are complaining about and the outcome you want (as in step 1). Ask for a response within 2 weeks, but remember to date letters and include your contact details. Also include copies of any relevant supporting information (such as receipts or advertisements), but keep the originals. Also keep a copy of any letters or emails you send.

Step 3: Contact the ACCC

If steps 1 and 2 do not resolve your complaint, call the ACCC on 1300 302 502.

The ACCC can take legal action against a trade for breaches of the ACL. It particularly targets conduct that is widespread, blatant, occurring in more than one state or involving serious detriment to consumers.

The ACCC can also provide information on your fair trading rights, and the best way to go about resolving your complaints. Where appropriate, the ACCC Infocentre can refer you to the appropriate government department or dispute resolution scheme and provide contact details.

Additional Help

Further information regarding the water market rules and water charge rules is available. If you need copies of ACCC publications or require further help please contact the ACCC: Infocentre 1300 302 502 or email: water@accc.gov.au