INSIGHT

Multiple Federal Court rulings on unconscionable conduct and false and misleading representations; and other developments

By Jacqueline Downes
ACCC Consumer law Infrastructure Technology Telecommunications

Latest in competition and consumer law 7 min read

Brownes Dairy paid penalties for milk supply agreements which failed to comply with the Dairy Code.

The Federal Court has found that Captain Cook College engaged in systematic unconscionable conduct and made false or misleading representations in relation to online diploma courses.

Nine has paid nearly $160,000 in penalties and will pay $450,000 in consumer redress for charging excessive payment surcharges to subscribers and advertisers.

The ACCC has proposed to authorise Country Press Australia's collective bargaining agreement with Google and Facebook.

The Federal Court has ordered energy retailer, Sumo Power, to pay $1.2 million in penalties for making false or misleading representations.

The Federal Court has dismissed an appeal by the former director and franchise manager of Geowash.

Brownes Dairy pays the price for non-compliance with Dairy Code

Brownes Dairy has paid two infringement notices issued by the ACCC totalling $22,200 for publishing two standard form milk supply agreements online which allegedly failed to comply with the Dairy Code. The agreements failed to specify a definite end date of the supply period, allowed Brownes Dairy to unilaterally reduce the minimum price of milk and allowed Brownes Dairy to vary the agreement in circumstances not specified by the code, without the variations being in writing. In addition to the payment, Brownes Dairy has advised farmers it will only exercise its contractual rights under existing agreements to the extent they are consistent with the code.

The Dairy Code is an industry code regulating dealings between farmers and milk processors. It aims to improve transparency in milk trading arrangements after the ACCC's 2018 dairy inquiry found significant power imbalances at various levels of the dairy supply chain. The ACCC is responsible for enforcing the Dairy Code and has indicated that ensuring compliance with it remains an ACCC priority.

Federal Court finding: Captain Cook College acted unconscionably and misled students

The Federal Court found that Captain Cook College (CCC) engaged in unconscionable conduct and made false or misleading representations in relation to online diploma courses.

Students who enrolled in CCC's online diploma courses were able to fund their courses through loans under the Federal Government's High Education Loan Program (HELP). However, students would only incur the HELP debt if they remained enrolled in their course at the relevant census date.

The ACCC's concern was that CCC had modified its enrolment processes in a manner that increased the risk of vulnerable students being enrolled in courses which were not suitable for them or where the student did not fully understand their obligations about the HELP debt they would incur.

First, CCC used third party course advisors to market courses and assist students to enrol. CCC had previously conducted quality assurance checks within 48 hours of enrolment by calling students to check they had completed pre-enrolment testing themselves, were enrolled in an appropriate course, that they understood their obligations and that third party course advisors had not improperly pressured or induced students to enrol. CCC subsequently modified this quality assurance process so that it was shorter and took place in the presence of the relevant third party course advisor.

Second, CCC had previously monitored student attendance rates prior to the relevant census date and, where students had not attended classes or otherwise engaged in their course, took steps to initiate a withdrawal process prior to the census date to ensure the student would not incur the HELP debt in respect of a course they were not attending. CCC subsequently removed college-initiated withdrawals with the result that all withdrawals needed to be initiated by the student.

The court accepted the ACCC's case that the removal of these safeguards was intended to, and did result in, substantially increased revenues and enrolments to the college. This is because they resulted in significantly higher numbers of students proceeding with the enrolment process past the relevant census date. In the relevant period, CCC claimed over $50 million under the VET FEE-HELP program for 6000 consumers, over 90% of whom did not complete any part of their online course. The court found that CCC knew its increased profits were largely derived from VET FEE-HELP revenue from students who were victims of the misconduct, were unsuitable for enrolment, would gain no benefit from enrolment and would incur large debts to the Government due to their enrolment.

The court also made findings CCC engaged in unconscionable conduct, made false or misleading representations and failed to comply with the requirements for unsolicited agreements in its dealings with five consumers. CCC's parent company and its former CEO were also found to be knowingly concerned in the unconscionable conduct.

Penalties and other orders are to be determined at a later date.

That's entertainment: Nine Entertainment Co pays penalties

Six subsidiaries of Nine Entertainment Co (Nine) have paid 12 infringement notices issued by the ACCC totalling $159,840 for excessive payment surcharges charged to subscribers and advertisers. Nine will also provide approximately $450,000 in consumer redress.

The surcharges, which applied to digital and home delivery subscription services, radio, publishing, TV and digital advertising, became a concern for the ACCC following the merger of Nine and Fairfax Media in 2018. The ACCC alleged that Nine issued surcharges between 0.9 and 1.55% for payments made with MasterCard and Visa credit and debit cards between August and December 2020. However, these surcharges were allegedly in excess of the actual cost to Nine of processing the payments, by between 0.09 and 0.84%.

Payment surcharges which exceed the costs to the business of processing the payment are in breach of the law. The infringement notices issued to Nine are part of a number of infringement notices issued for excessive payment surcharges by the ACCC, and the ACCC has indicated it will continue to investigate complaints of excessive payment surcharges by businesses.

 

Don't stop the presses: proposed ACCC authorisation of Country Press Australia collective bargaining agreement

The ACCC has issued a draft determination proposing to authorise Country Press Australia (CPA) and its members to collectively negotiate with Google and Facebook in relation to payment for use of CPA news content, to make and give effect to agreements arising from negotiations and to engage in discussions and exchange information in relation to those negotiations.

The ACCC proposes to grant authorisation for 10 years and considers the collective bargaining conduct is likely to result in public benefits through reduced transaction costs, improved input into negotiations and contribution to the sustainability of Australian news businesses while the conduct is unlikely to result in any significant public detriments.

Authorisation will allow CPA to collectively bargain without breaching competition law. Ultimately such conduct may be exempt from the Competition and Consumer Act under the News Media and Digital Platforms Mandatory Bargaining Code which includes an exemption for registered news businesses to collectively bargain with designated digital platforms. Legislation enacting the Code commenced in March this year, however many operative provisions are yet to come into effect.

Sumo Power takes a hit: Federal Court orders $1.2 million penalty

The Federal Court has found that energy retailer Sumo Power engaged in misleading and deceptive conduct and made false or misleading representations when promoting its 'pay on time' discount electricity plans through the following conduct:

  • The retailer advertised low rates and large 'pay on time' discounts to get consumers to switch energy providers, when in reality Sumo Power intended to, and did in practice, substantially increase prices in the near future, effectively eroding or eliminating the discounts;
  • Sumo Power represented to consumers that the price increases were solely attributable to generation costs when these were in fact due to Sumo Power's planned rate increases.
  • The retailer represented that its marketing agents were independent and offering a comparison service when the agents had actually been engaged by Sumo Power and were not providing independent pricing comparisons.

ACCC Chair Rod Sims stressed the ACCC is 'extremely concerned by such behaviour'. The court ordered Sumo Power to pay $1.2 million in penalties and ordered Sumo Power to provide redress to affected customers, estimated at $800,000.

Federal Court cleans out Geowash appeal

The Full Federal Court has dismissed an appeal by Ms Ali (former director) and Mr Cameron (franchising manager) of carwash franchise Geowash Pty Ltd (Geowash). In 2019, the Federal Court found that Geowash:

  • made false or misleading representations about prospective revenue and profits franchisees could make and commercial relationships or affiliations Geowash had (when in fact Geowash had no basis for the profit claims and did not have those relationships); and
  • engaged in unconscionable conduct when it charged franchisees for the establishment and fit-out of franchise sites at prices well above cost with amounts charged going to commission payments rather than the fit-out.

This conduct was also held to breach the good faith obligation in the Franchising Code and, in 2020, the court imposed penalties of $4.2 million and ordered the former director and franchising manager pay $1 million as partial redress to franchisees. Ms Ali and Mr Cameron appealed the court's finding that they were knowingly concerned in Geowash's unconscionable conduct and breaches of the Franchising Code and the court ordered penalties, redress and bans on their management of corporations.

The Full Federal Court dismissed the appeal entirely, upholding the findings of the primary Judge.