The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court of Australia against CLA Trading Pty Ltd, trading as Europcar Australia (Europcar), alleging that a number of terms in Europcar’s vehicle rental contracts are unfair, and that Europcar has engaged in misleading or deceptive conduct and made false or misleading representations regarding the liability cover provided to car hire customers.
In Australia, Europcar has around 125 offices and a rental fleet that includes passenger vehicles, trucks and specialty vehicles. Europcar is part of the global Europcar vehicle rental business that has around 13,000 rental stations in approximately 150 countries worldwide.
The ACCC alleges that the following terms in Europcar’s standard vehicle rental contract are unfair and should be declared void:
- terms requiring consumers to pay Europcar a “Damage Liability Fee" (currently up to $3,650) if the rental vehicle is damaged or stolen, or if there is third party loss, irrespective of fault; and
- terms making the consumer fully liable to Europcar if the rental vehicle is damaged or stolen, or if there is third party loss, where a consumer breaches the rental contract, no matter how trivial the breach and regardless of whether the breach caused the damage or loss.
The ACCC also alleges that Europcar engaged in misleading or deceptive conduct and made false or misleading representations on its website (www.europcar.com.au) regarding the maximum amount that a customer would be liable for if there was loss or damage to the rental vehicle or third party loss. The ACCC alleges that these representations were misleading because in addition to the amounts specified, a customer would also be liable for loss or damage to an unlimited amount in some circumstances.
“Vehicle rental contracts are complex in nature and are often entered into during time-sensitive situations, such as airport departures. Consumers have little time to properly assess their rights and obligations under these rental agreements, and no opportunity to negotiate,” ACCC Chairman Rod Sims said.
“The ACCC is concerned that Europcar’s standard consumer contracts contain terms that, if applied, impose unlimited liability on consumers in certain situations which the ACCC alleges is unfair.”
The ACCC seeks the following orders:
- declarations that certain terms in Europcar’s rental contract are unfair and therefore void; and
- declarations, injunctions, pecuniary penalties, orders for the publication of corrective notices and compliance program orders.
This matter is listed for a Directions Hearing on 5 February 2015 in the Federal Court, Perth.
Background
The ACCC’s Enforcement and Compliance Policy identified the use of unfair contract terms as one of the ACCC’s enforcement priorities in 2014. The ACCC has conducted a wide-ranging review of standard form consumer contracts across a range of industries, including the airline, telecommunications, travel agent, fitness and vehicle rental industries. This review followed the introduction of the new unfair contract terms laws within the Australian Consumer Law in 2010.
On 15 March 2013, the ACCC released the report Unfair Contract Terms Industry Review Outcomes, which identified a number of concerns under both the unfair contract terms provisions and the prohibitions against misleading and deceptive conduct under the ACL.
Following the release of the report, the ACCC approached several businesses raising concerns about potentially problematic terms in their consumer contracts. In a majority of cases, businesses voluntarily agreed to amend or remove these terms to resolve the ACCC’s concerns.
In certain instances, the ACCC has also taken enforcement action. These include:
- Bytecard Pty Ltd - On 30 July 2013 the Federal Court declared by consent that four terms in Bytecard’s standard form consumer contract were unfair. This was the ACCC’s first action based exclusively on the unfair contract terms provisions of the ACL.
- Medion Australia Pty Ltd - On 6 March 2014 Medion provided a court enforceable undertaking to the ACCC to refrain from promoting its ALDIMobile service as “Unlimited” when significant restrictions applied.
What is an unfair contract term?
The ACL provides that a court may determine that a term of a standard form consumer contract is unfair and therefore void (meaning that the contract is treated as if the term never existed). A term is considered unfair if:
- it would cause a significant imbalance in the parties’ rights and obligations under the contract;
- it is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term; and
- it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied upon.
If a term is declared void, the remainder of the contract continues to bind the parties to the extent that it can operate without the unfair term.