'How to Buy a House for $1' – record $18 million penalties for misleading conduct; Treasury gets down to business on unfair contract terms regime; Punters wins the clearance race.

By Jacqueline Downes
Consumer law

8 min read

'How to Buy a House for $1' – record $18 million penalties for misleading conduct

The Federal Court has imposed record penalties for contraventions of the Australian Consumer Law – $12 million for We Buy Houses Pty Ltd and $6 million for its sole director Rick Otton – for making false or misleading representations concerning real estate investment strategies. The Federal Court found that We Buy Houses and Mr Otton made false or misleading representations in the course of providing real estate investment advice: eg by claiming that people could 'buy a house for $1' without needing a deposit, a bank loan or real estate experience, and could build a property portfolio without any of their own money invested.

The Federal Court also banned Mr Otton from managing corporations for 10 years in Australia, and permanently restrained both We Buy Houses and Mr Otton from supplying real estate investment advice.

ACCC Chair Rod Sims said that '[t]his outcome… reflects a recent trend of higher penalties for Australian Consumer Law breaches. We can expect this to continue following recent law changes to increase maximum financial penalties under consumer law.'

Treasury gets down to business on unfair contract terms regime

The Treasury has released a discussion paper inviting interested parties to provide feedback on the effectiveness of the unfair contract term (UCT) regime for small businesses under the Australian Consumer Law. The UCT regime was extended to apply to standard form contracts with small businesses on 12 November 2016.

The discussion paper seeks feedback from stakeholders on the impact of the extension of the UCT regime to small business and whether the objectives of the reform have been achieved, including:

  • the appropriateness of the employee headcount and contract value thresholds that apply to the UCT regime;
  • whether additional guidance is needed on what constitutes a 'standard form contract'; and
  • whether the current exemptions from the UCT regime continue to be appropriate.

Submissions are due by 21 December 2018.

Punters wins the clearance race

The ACCC announced that it would not oppose the acquisition of Racing Internet Services Pty Ltd by Punters Paradise Pty Limited. Punters (a subsidiary of News Corp Australia) and Racenet both provide racing news and information to consumers through their websites, apps and social media. The parties also earn revenue by acting as betting affiliates, referring new customers to corporate bookmakers.

The ACCC concluded that the proposed acquisition was unlikely to substantially lessen competition in any market. First, it considered that there were numerous sources of online racing news and information in addition to Punters and Racenet. Second, it found that corporate bookmakers use a variety of channels to acquire new customers, of which betting-affiliate services (such as Punters and Racenet) are just one.

Sweet relief for Capilano as honey investigation concludes

The ACCC has concluded its investigation into allegations that Capilano Honey Ltd contravened the Australian Consumer Law by representing that its 'Allowrie' honey product range was 'pure' and '100% honey'.

The allegations were based on results of a testing process called Nuclear Magnetic Resonance (NMR) testing, which has recently emerged as a method to detect adulterated honey. The NMR results revealed that the majority of Allowrie honey samples tested were adulterated with sugar syrup. The current method for testing honey (known as the C4 test) failed to detect adulteration in the Allowrie range.

The ACCC ceased its investigation, based on advice that NMR testing is not, as yet, reliable enough to determine whether honey is adulterated, and should not be used as a basis to support legal action. Also, the ACCC did not uncover any other evidence that supported the allegations. It has urged the honey industry and the Department of Agriculture to develop an agreed approach to testing, to provide greater certainty about the integrity of honey products.

ACCC seeks input on new electricity powers

On 20 August 2018, the Treasurer directed the ACCC to hold a public inquiry that will monitor the prices, margins and profits in the supply of electricity in the National Electricity Market until 2025, and to report on its findings biannually. The ACCC has commenced a consultation process seeking stakeholder input on the approach it should take in carrying out its new monitoring and reporting functions.

Broadly, the ACCC is seeking views in relation to three key areas:

  • the analytical framework and measures the ACCC should adopt for monitoring, including its expectations of market outcomes and market participant behaviour, the retail pricing data it should use, how it should measure the relationship between wholesale and retail prices, and how it should assess profitability;
  • the policy developments that are likely to impact on the functioning of the National Electricity Market, and the methodological approaches the ACCC could use to monitor any impacts from those policy developments; and
  • the process and timing for collecting information, including how the proposed biannual schedule may affect industry participants.

Submissions are due by 19 December 2018. The ACCC is due to provide its first report to the Treasurer on 31 March 2019.

ACCC makes the call to extend Telstra's fixed line services declaration

The ACCC has released its final decision in the fixed line telecommunications services declaration inquiry, extending the declaration of Telstra's six fixed line telecommunications services until 30 June 2024. The six declared services are the unconditioned local loop service, line sharing service, wholesale line rental, local carriage service and fixed originating and terminating access services. Where a service is declared, the network owner must provide access seekers with access to the service upon request. If the network owner and access seeker cannot reach a commercial agreement, price and non-price terms determined by the ACCC will apply.

The ACCC considered that continuing the fixed line service declarations would help improve certainty for consumers during the transition to the NBN. ACCC Chair Rod Sims stated that continuing regulation during this period will ensure that providers can use Telstra's copper network on reasonable terms and prices, encouraging competition in the retail market, and better prices, service quality and options for end-users.

The ACCC will now conduct a separate inquiry to determine access terms and prices for the six fixed line services. Its Final Access Determination is due to be published in June 2019.