INSIGHT

Farmer fact sheet has a crop of false claims; ACCC cleans up contracts; ACCC quick to launch proceedings against internet speed advertising.

By Jacqueline Downes
Consumer law

9 min read

Farmer fact sheet has a crop of false claims

The Federal Court has imposed a $1 million penalty on Landmark Operations Limited, trading as Seednet, for making false, misleading and deceptive claims in a fact sheet prepared for farmers about a new barley variety called 'Compass'.

Seednet claimed that the new barley variety performed better than an older variety of barley. Specifically, it represented in its fact sheet that the new barley was stronger and better able to remain upright than Seednet's older variety of barley, when that was not the case. At certain times, Seednet also falsely represented that the new barley variety had a high resistance to a disease known as leaf rust.

Seednet admitted in the Federal Court that it was, or ought to have been, aware that the performance of the new barley did not support the representations made in its fact sheet.

ACCC Deputy Chair Mick Keogh warned seed companies, and agribusinesses more generally, that 'they must have a proper basis for marketing the qualities of new agricultural varieties and must not misrepresent the properties or performance of new products.'

ACCC cleans up contracts

The ACCC continues its enforcement focus on unfair contract terms, with recent developments in both the waste management industry and the dairy processing industry.

Following a recent ACCC investigation into the use of unfair contract terms in the waste management industry, Visy Paper Pty Ltd (trading as Visy Recycling), Cleanaway Pty Ltd and Suez Recycling & Recovery Pty Ltd have amended price variation and liquidated damages clauses in each of their standard form contracts. In certain circumstances, the terms allowed the waste management providers to unilaterally increase their prices and to penalise customers who wanted to exit their contracts early.

In the dairy industry, processors Brownes Food Operations, Lion Dairy & Drinks, Norco Co-operative Limited, Parmalat Australia and Fonterra Australia have all agreed to amend terms in their milk supply agreements, following engagement with the ACCC as part of its inquiry into the dairy industry. The ACCC worked with dairy processors to address concerns about lengthy notice periods required for farmers to terminate their contracts, one-sided termination rights, broad indemnities, and terms restricting a farmer's ability to lease a farm or sell cattle.

These developments are a timely reminder to businesses of the ACCC's increased focus on unfair contract terms, and the possibility of further legislative reform in this area. ACCC Deputy Chair Mick Keogh took the opportunity to remind businesses that 'the ACCC is calling for legislative change to enable the court to impose penalties and order compensation for customers where large businesses take advantage of unfair terms in dealings with small business and consumers'.

ACCC quick to launch proceedings against internet speed advertising

The ACCC has instituted proceedings in the Federal Court against internet provider Activ8me for allegedly making misleading representations when advertising its internet services.

The ACCC alleges that Activ8me told customers they could access internet speeds of up to 100Mbps on a $59.95 per month plan with no setup fee, when, in fact, that plan only offered speeds up to 12/1Mbps and a $99.95 setup fee for customers that did not sign up to a 12-month plan.

The proceedings follow an ACCC media release late last year in which ACCC Chair Rod Sims put telecommunication companies on notice that they faced court action if they did not ensure that their advertising was clear and transparent. The ACCC has already taken action against Telstra, Optus, Dodo, iPrimus, Commander, MyRepublic, iiNet and Internode in relation to misleading internet speed claims.

Medibank's conduct 'harsh and unfair' but no statutory unconscionability

The Full Federal Court has dismissed an appeal by the ACCC against Medibank Private.

From at least 1 January 2012, Medibank had agreements with pathology and radiology providers whereby it would pay the gap between the providers' bill and the Medicare Benefit Schedule Fee.

From 1 September 2014, Medibank terminated these agreements, shifting the obligation onto members to pay the gap as an out-of-pocket expense.

The ACCC alleged that Medibank made false, misleading or deceptive representations, and engaged in unconscionable conduct by failing to notify members of these decisions.

It argued that 'no gap' statements in promotional materials applied to diagnostic services, but the policy cover summary did not mention diagnostic services. Medibank responded by pointing out that having more than 5000 procedures for which benefits were payable would lead to out-of-pocket expenses under the policy.

The Federal Court held Medibank acted harshly and unfairly but found this did not pass the threshold of statutory unconscionability. The warnings regarding out-of-pocket expenses in the Cover Summaries, the Member Guide and other product documents were deemed sufficient to mitigate such a finding. As for other types of procedures leaving members with out-of-pocket expenses, the warnings in the Cover Summaries, the Member Guide and other product documents were found to be sufficient.

It is as yet unknown whether the ACCC will seek special leave to appeal to the High Court.

ACCC sets the stage in its digital platforms inquiry

The ACCC has released a preliminary report in its digital platforms inquiry. The inquiry commenced on 26 February 2018, and has been tasked with assessing the market power of digital platforms, and the implications of digital platforms for advertisers and consumers.

The preliminary report contains 11 preliminary recommendations and has identified nine areas for further analysis. In particular, the report outlines the ACCC's concerns regarding the market power held by two key platforms, Google and Facebook.

The ACCC's preliminary recommendations include:

  • proposed amendments to section 50(3) of the CCA, to make it clearer that removal of potential competition and access to data are relevant when assessing the likely competitive effects of a merger or acquisition;
  • the establishment of a regulatory authority with the role of monitoring, investigating and reporting on the ranking of news and journalistic content by digital platforms' algorithms, as well as whether vertically integrated digital platforms are engaging in discriminatory conduct by favouring their own business interests above those of advertisers;
  • proposed amendments to the Privacy Act 1988 (Cth) to better enable consumers to make informed decisions in relation to, and have greater control over, privacy and the collection of personal information; and
  • proposed amendments to the Australian Consumer Law, so that the use of unfair contract terms is prohibited and subject to civil pecuniary penalties.

The ACCC is seeking feedback on its preliminary recommendations, and the nine proposed areas for further analysis, by 15 February 2019.

Final report on mortgage pricing

The ACCC has released its final report in the Residential Mortgage Price Inquiry. The report analysed the prices charged by the four major banks and Macquarie, and examined whether pricing has been adjusted in response to the Federal Government's major bank levy. The report explicitly carved out all other banks from the scope of its inquiry.

The final report has found there is no evidence that the banks changed prices specifically to recover the cost of the Federal Government's major bank levy, either in part or in full. In addition, the final report found that:

  • the big four banks and Macquarie took an 'accommodative' approach to pricing, with prices being similar across the banks;
  • opaque mortgage pricing reduced price competition during the price monitoring period;
  • APRA's interest-only benchmark had the effect of lessening price competition for interest-only lending; and
  • new borrowers tended to pay lower interest rates than existing borrowers.

The ACCC noted the Productivity Commission's recommendation, from its recent review of the Australian Financial System, that an online calculator that reports on median interest rates for home loans, according to different borrower characteristics, be developed. The ACCC also noted that the Consumer Data Right (which comes into effect for residential mortgages for the major banks from 1 February 2020) will assist consumers to make more informed decisions about residential mortgages.