It is common for a business to seek to persuade a consumer to buy goods or services by promising benefits if they help the business supply goods or services to other consumers. The ACL makes such a practice illegal if receipt of the benefit (for example, a rebate or commission) is dependent on the other consumers also acquiring goods or services. The consumer may never receive the benefit in these circumstances, which is why the practice is illegal.
Example: A sales assistant offers a customer 10 free DVDs to go with their new plasma TV on the condition that they give the business the names of five of their friends and that these friends all buy plasma TVs from the business. This type of offer is illegal.
It is not referral selling for a supplier to promise a benefit for simply providing the names of consumers.
Legislation: Australian Consumer Law section 49
A business should not accept payment for goods or services if:
- it does not intend to supply the goods or services at all
- it intends to supply materially different goods or services
- it should have known that it could not provide the goods or services within the specified time or a reasonable time.
Example: A company sells mobile phone plans and accepts payment for mobile telephone services despite knowing it is not able to supply the services as the telecommunications carrier has little or no mobile coverage in the customer’s area. This is likely to be a breach of the ACL.
If you do accept payment in advance, you must supply the goods or services within the time you have specified, or within a reasonable time, if no time is specified.
An agreement is considered to be a lay-by agreement if it is between a supplier and a consumer, where:
- the consumer does not receive the goods until the total price has been paid, and
- the price is paid in at least three instalments or in two instalments if the agreement specifies that it is a lay-by.
Lay-by agreements must be in writing and a copy given to the consumer.
Agreements must also be expressed in plain language, be legible and presented clearly. A consumer can cancel a lay-by agreement but may have to pay a reasonable termination charge. This termination charge must be specified in the agreement.
Example: A customer orders a Christmas hamper in advance and agrees to make regular monthly instalments. This is a lay-by agreement and the supplier must ensure they have met all the lay-by requirements, including providing an agreement in writing to the customer specifying all the terms and conditions and any termination charges that may apply.
Online ‘daily deals’ and group buying websites are channels for consumers to buy goods or services at discount prices. Common complaints about these channels include non-supply and incomplete supply of services, and difficulty in booking services and redeeming vouchers before they expire.
Whether you are providing the platform or the product, the basic principle is that consumers should ‘get what they pay for’.
- consider the potential demand created by advertising services through group buying websites and whether your business can deliver those services on time and in a reasonable manner. For example, you may want to limit the deal offered so it doesn’t restrict your ability to serve both your regular and new customers
- ensure that you can deliver services as advertised and not make any false or misleading claims about the services
- ensure that any terms and conditions of sale are fair and clearly expressed
- ensure any price representations are accurate, in particular, any ‘was/now’ two-price claims used to promote the product or service.
Things that must be made clear include:
- exactly what goods and/or services are being offered and what is not included
- the total price – including any additional compulsory quantifiable charges – see ‘Component pricing’
- all the terms and conditions – such as expiry dates on vouchers and any ‘black-out’ periods (times or circumstances where the offer is not available – for example, particular days of the week)
- what remedies will be available if there are problems and who will be responsible for providing them.
The group buying platforms and the merchants offering the products and services must not ‘oversell’ vouchers – that is, sell more than the merchant can honour.
Example: A group buying platform sells vouchers for customers to get two bunches of flowers for the price of one at a florist. The site specifies a time limit for redeeming the vouchers but does not indicate any limit on how many vouchers the florist will honour. The florist cannot keep up with a late rush of demand in the last days of the validity period and refuses to honour a number of vouchers. The group buying platform, which has the contract with the consumer, in addition to the merchant, is responsible for providing a remedy under the Act which, amongst other remedies, may include a refund.
Related information: Online group buying