ACCC and AER annual report 2013-14

Significant outcomes 2013–14

• Received payment for 23 infringement notices across eight matters.
• Received an additional $2.65 million against three companies in respect of door-to-door energy sector.
• Successfully appealed a Federal Court decision, resulting in the High Court reinstating a $2 million penalty against TPG Internet regarding its misleading unlimited ADSL2+ advertising campaign.
• Encouraged greater compliance and sent strong deterrence messages securing over $12 million in penalties and other remedies, under the Australian Consumer Law.
• Secured a $3 million penalty against Hewlett-Packard for misleading consumers on their consumer guarantee rights.
• The Full Federal Court found that Lux Distributors had engaged in unconscionable conduct in relation to the sale of vacuum cleaners to three elderly consumers in their homes.
• Actively administered over 260 product safety recalls.
• Increased overall consumer awareness of the dangers associated with coin-sized lithium batteries from 27 per cent in 2011 to 72 per cent in 2013.
• Released a revised edition of the Country of origin claims and the Australian Consumer Law guide.
• Recorded 1.48 million unique visitors to the SCAMwatch website, issued 20 SCAMwatch radar alerts on current scams to over 26 000 subscribers as part of our free alert service and served nearly 44 000 contacts via the hotline.
• Issued guides for industry and consumers on fake online reviews and successfully prosecuted Euro Solar for publishing fake testimonials.

Our role in consumer protection

The ACCC’s purpose is making markets work for consumers now and in the future. Protecting the interests and safety of consumers and supporting fair trading is central to our work. The Act under which we operate includes the Australian Consumer Law (ACL), which is designed to protect consumers and ensure fair trading. As a single national law it ensures that, across Australia, consumers have the same protections, and businesses have the same obligations and responsibilities.

Our role is to inform businesses and consumers of their rights and obligations under the Act, monitor markets and emerging markets for unfair practices, and address harmful conduct, including by taking action against businesses and individuals that break the law.

We gather intelligence to identify market failures and take action to fix the problems, using our regulatory powers to address breaches and, when possible, gain remedies for consumers who have suffered.

We cannot pursue all complaints received and rarely become involved in resolving individual consumer or small business disputes. While the ACCC carefully considers all complaints, we focus on business conduct that affects competition or causes widespread consumer detriment.

To assist with this prioritisation, we seek to focus on conduct involving one or more of these factors:

• significant public interest or concern
• substantial detriment for consumers (including to small business)
• unconscionable conduct, particularly by large national companies or traders
• blatant disregard for the law
• national or international significance
• detriment to disadvantaged and vulnerable consumer groups
• concentrated markets that impact on small business and consumers
• significant new or emerging market issues.
• industry-wide conduct, or conduct likely to become industry-wide unless we intervene
• where ACCC action is likely to have a significantly educative or deterrent effect
• the business, person or industry has a history of breaking competition and consumer or fair trading laws.

The ACCC works closely with state and territory counterparts in monitoring and enforcing compliance with the Australian Consumer Law under a one law, multi-regulator model. Cooperation includes joint projects aimed at widespread harm or cross-industry issues, and intelligence sharing on specific matters.

In 2013–14, we continued to work with industry-sponsored ombudsmen schemes, such as the Private Health Insurance Industry Ombudsman, Financial Ombudsman Service and the Telecommunications Industry Ombudsman.

In addition, the ACCC undertakes a range of consumer protection work in infrastructure industries which it regulates, for example, reviewing speed claims in the telecommunications industry and energy sales practices. These activities are discussed further in Goal 3 and Goal 4.

Our compliance and enforcement tools

The ACCC has a range of tools to encourage and enforce compliance with the Act, as detailed in the Compliance and Enforcement Policy on our website. We use the policy to decide which matters to prioritise for investigation and action. The ACCC can seek various solutions in the courts, including injunctions and penalties. Outside the courts, we can also use remedies through such means as enforceable undertakings. Our compliance activities include trader and industry engagement, as well as broader education and communication programs to inform businesses and consumers about what constitutes anti-competitive or unfair trading conduct and how to make informed choices.

Court cases

In 2013–14, the ACCC was involved in 53 proceedings relating to consumer protection enforcement.

Enforceable undertakings

To protect consumers and resolve a matter under investigation, we are able to accept undertakings provided under s. 87B of the Act where a breach, or a potential breach, might otherwise justify litigation. In these public undertakings, companies or individuals generally agree to:

• remedy the harm caused by the conduct
• accept responsibility for their actions
• establish or review and improve their compliance programs and culture.

Examples of the type of redress sought by the ACCC in previous matters include:

• corrective advertising in the print and electronic media
• refunds to affected customers
• community service remedies
• industry-wide education programs funded by the company providing the undertaking.

In 2013–14, the ACCC accepted 14 consumer protection-related undertakings.

Infringement notices

We can issue an infringement notice where we believe a breach of the Act requires a more formal sanction than an administrative resolution, but where we consider resolution possible without going to court.

In 2013–14, the ACCC received payment for 23 infringement notices from nine traders, with penalties totalling over $220 000.

Administrative resolutions

In some cases, for example, where we assess the potential risk as low, we may accept an administrative resolution. Depending on the circumstances, administrative resolutions can range from a commitment by a trader in a letter to a signed agreement between the ACCC and a trader setting out detailed conditions.

Administrative resolutions generally involve the trader agreeing to stop the offending conduct, compensate those adversely affected, and take other measures necessary to ensure that the conduct does not recur. Where a trader re-offends after an administrative resolution, we are likely to resolve the new matter differently.

In 2014, we put the fitness industry on notice for using the phrase ‘No Contracts’ in advertising, where they required consumers to sign membership contracts with conditions for termination and payment of the membership. We consider this advertising to be misleading. In response to our concerns, several gyms agreed to stop using the term. We will continue to monitor gyms on this issue and will contact gyms identified as engaging in potentially misleading advertising of its membership contracts.

Voluntary industry self-regulation codes and schemes

The ACCC encourages and assists genuine voluntary compliance by individual businesses and industry sectors. Initiatives may range from individual trader compliance programs to sector-wide initiatives, including charters and voluntary codes of conduct tailored for individual industries.

Education and advice

The ACCC uses educational campaigns to ensure consumers and small businesses are fully aware of both their rights and responsibilities under the Act, and to encourage compliance by businesses with the Act. We firmly believe that preventing a breach is better than acting after one has occurred.

The ACCC’s educational campaigns also support consumers to navigate complex or difficult consumer choices to help them make smart choices.

We distribute targeted and general information, including tips and tools, to help consumers and small business via a wide range of channels. We liaise extensively with business, consumer and government agencies about the Act and our role in its administration.

As well as guiding consumers and small businesses, we also seek to maximise the effect of enforcement actions. A penalty and reputational damage following a court judgment are powerful deterrents to other traders, encouraging compliance. Court cases can also highlight to consumers how they can use their rights.