Consumer Law Quarterly

What you need to know

This edition covers some key developments in consumer law in the last quarter:

• We provide a snapshot of recent key matters, including in relation to penalty proceedings, unfair terms in small business contracts, law reform, and the ACCC's market study into new vehicle retailing.
• We consider in detail the recent decision in ACCC v Valve, concerning the consumer guarantees regime under the Australian Consumer Law (ACL) – the Court's conclusion that the ACL applied to online representations by a USA-based company may be unsurprising, but its conclusion that certain contract terms contained false or misleading representations warrants close attention.

We finish by looking at a recent Federal Court decision regarding the unsolicited consumer agreements regime under the ACL, which provides important guidance on when that regime will, and will not, apply.

The Quarter at a Glance

Medibank

The ACCC has commenced proceedings against Medibank Private Limited, alleging that it engaged in misleading and unconscionable conduct, and made false or misleading representations, in connection with its communications regarding a decision to limit benefits for certain pathology and radiology services (in particular, the fact that it did not give existing members advance notice of that decision). The ACCC alleges that several of the surrounding circumstances render the conduct unconscionable, including that (the ACCC alleges) Medibank calculated that publicity about this decision could have negatively affected Medibank's planned listing on the ASX.

Ongoing focus on the word "Free"

The Federal Court recently imposed a $2.75 million penalty on Bet365 for falsely representing that new customers would receive "$200 free bets", when in fact those bets were not, in substance, provided for free, including because customers had to deposit and gamble $200 of their own money before they received the "free" bet. Use of the word "free" attracts ongoing regulatory scrutiny, and this decision illustrates that substantial penalties be imposed when "free" is used in a misleading way.

ACCC appeals Reckitt Benckiser penalty

The ACCC has appealed from the recent Federal Court decision ordering Reckitt Benckiser (Australia) Pty Ltd to pay $1.7 million in penalties for making misleading representations that identical Nurofen products were specifically formulated to treat different types of pain. The appeal has been set down for hearing in November 2016. (While Reckitt Benckiser admitted liability, it did not agree on a proposed penalty; the ACCC sought at least $6 million, Reckitt Benckiser proposed $1.1 million.) Interestingly, the Court noted that the relevant Nurofen products had been criticised in mainstream print and television media on bases similar to those later challenged by the ACCC, but Reckitt Benckiser claimed not to have been aware of these early alarm bells.

Unfair terms

Small business contracts are receiving increased regulatory attention ahead of the extension of the unfair terms regime to those contracts from November 2016. We are seeing activity in and beyond the key focus areas of independent contracting, franchising, retail leasing, telecommunications and advertising.

Another market study

The new car retailing industry is the focus of the ACCC's latest market study, which will examine issues such as compliance with consumer guarantees, misleading practices (including in relation to performance, emissions, and fuel efficiency and consumption) and access to data; an issues paper will be released later this year, with a draft report to follow in the first quarter of 2017.

Review of the Australian Consumer Law

Submissions on the issues paper released by Consumer Affairs Australia and New Zealand (CAANZ) were due at the end of May, but are not publicly available. CAANZ's interim report will be released by the end of the year, and there will be a further call for submissions (an important opportunity to comment on the feasibility and practicality of any reform proposals), before CAANZ's final report in March 2017.

The Decision in ACCC v Valve

When does the ACL apply to overseas businesses and when might bare contractual terms contravene the prohibition on false or misleading representations?

Key points

1. In ACCC v Valve Corporation (No 3) [2016] FCA 196 (Edelman J), the Federal Court rejected an argument by Valve, a software business predominantly located outside Australia, that the ACL did not apply to Valve's conduct regarding online software sales to consumers in Australia. The decision sheds light on how the ACL applies to businesses which do not have a storefront presence in Australia, and confirms that businesses cannot avoid the application of the ACL by nominating a governing law or jurisdiction outside Australia, or by arguing that the proper law of the contract is the law of another country.
2. The decision is particularly striking for its conclusion that a number of Valve's contractual terms contravened the ACL prohibition on false or misleading representations, because they appeared to exclude rights that were available to the consumer under the ACL. This conclusion was drawn despite Valve's use of phrases such as "to the maximum extent permitted by applicable law" in some of the relevant terms. This decision also highlights the risks with using consumer-facing materials (eg global terms and conditions) which are not tailored for Australia.
3. The decision also confirms that, for the purpose of the ACL, the supply of a licence to use software constitutes supply of a "good" rather than a "service". In this case, this meant that the statutory guarantee that goods will be of "acceptable quality" applied to software supplied by way of licence.

Background facts

• Valve is a USA-based company which sells software to customers in Australia and elsewhere using the "Steam" website and online game distribution network, an online video game delivery platform called "Steam Client" and an online support service called "Steam Support".
• Valve made various statements that it would not refund fees paid for its software. These statements were made in Subscriber Agreements, a Refund Policy and online chats with Steam Support representatives.
• The ACCC alleged that a number of statements were misleading or deceptive (in contravention of ACL s 18) and contained false or misleading representations (in contravention of ACL s 29(1)(m)), because they wrongly represented that consumers in Australia could not obtain a refund from Valve, when in fact consumers had a right to a refund for software that did not comply with the statutory guarantee of "acceptable quality" under the ACL.

The jurisdictional issues – did the ACL apply to Valve?

Was Valve engaged in conduct, or carrying on business, in Australia?

Valve argued that the ACL did not apply to it, because its business did not trigger either of two important jurisdictional thresholds under the ACL: it said it was not engaged in "conduct", and was not "carrying on business", in Australia.

In making these arguments, Valve pointed to the fact that it is a foreign corporation; its business premises and staff are located outside Australia; it holds no real estate in Australia; its website is hosted outside Australia; and payment for subscriptions to Valve's products are made in US dollars and processed in Washington State. However, Justice Edelman observed that Valve nevertheless had several significant connections with Australia, including its ownership of servers in Australia. It also had over 2.2 million Subscriber accounts in Australia (from which it generated significant revenue), and it incurred expenses payable to service providers in Australia.

Justice Edelman found that the making of statements on Valve's website (including in its Refund Policy), in Subscriber Agreements and in online conversations through "Steam Support" was conduct in Australia, on the following bases:

• Statements in the Subscriber Agreements were made to consumers in Australia who had downloaded Steam Client (the delivery platform), and in doing so had accepted the terms of a Licence Agreement and the Subscriber Agreement. This established a direct relationship between Valve and each consumer. In circumstances where the relevant consumers were in Australia, and Valve had servers and content delivery networks in Australia, this meant that the statements involved conduct in Australia. (Justice Edelman also noted that consumers would have identified that they were from Australia during the purchasing process, but this was not critical to this conclusion).
• Statements on Valve's website, relevantly in its Refund Policy, were made in Australia, even though the website was hosted outside of Australia. Justice Edelman noted that Valve had a relationship with the relevant consumer by the time they had made a purchase or downloaded a product from Valve, and that this meant that Valve's statements to these clients involved conduct in Australia. Justice Edelman also noted that customers had to select a box in order to indicate their agreement to the Subscriber Agreement, and identify their location as Australia, and that Valve priced some games differently in Australia, and sometimes communicated specific information to customers in Australia (eg that a particular item was unavailable in their region). However, the decision does not specifically identify whether the bare publication of information accessed in Australia would, without these additional factors, constitute conduct in Australia.
• The statements made through Valve's online chat log were specifically made to individual consumers in Australia (even though they were made online, by a person not physically present in Australia), and so involved conduct in Australia.
  In relation to Valve's submission that it was not "carrying on business" in Australia, Justice Edelman rejected the argument that the mere supply of goods or services to persons in Australia does not of itself constitute "carrying on business" in Australia. Justice Edelman concluded that Valve's significant connections with Australia (eg its subscriber accounts, assets and expenses in Australia, as outlined above) meant that it "undoubtedly" carried on a business in Australia.

Did the "proper law" of Valve's contracts, or the choice of law clauses in those contracts, affect the application of the ACL?

Valve argued that the law of Washington State was the proper law of its Subscriber Agreements, and therefore that the ACL did not apply to supply under those agreements. This argument was based on section 67 of the ACL, which relevantly provides that the ACL statutory guarantees regime will apply to a supply made under a contract for the supply of goods to a consumer:

• if the proper law of the contract would be the law of Australia (or part of Australia), but for a term of the contract that provides otherwise (eg that nominates the law of another jurisdiction); or
• if the contract contains a term that purports to substitute or has the effect of substituting the law of another country, or of an Australian State or Territory, for the provisions of the ACL statutory guarantees regime (ie the statutory guarantees will apply, despite that term).

Justice Edelman applied established principles to determine that, as argued by Valve, the proper law of the Subscriber Agreements was the law of Washington State (even when disregarding the choice of law and jurisdiction clauses which nominated the law of Washington State, as required by the first limb of section 67).

However, Justice Edelman accepted the ACCC's argument that the choice of law and jurisdiction clauses had purported to substitute, or had the effect of substituting, the law of Washington State for the provisions of the ACL statutory guarantees regime, within the meaning of the second limb of section 67. This involved rejecting Valve's argument that the second limb only applied where the proper law of the contract is the law of Australia (or part of it) but the contract nominates an alternative law in order to exclude the statutory guarantees regime. Justice Edelman rejected this argument as a matter of statutory construction, and in doing so had regard to the ACL's policy intention that the consumer guarantees regime not be able to be excluded by contract. As a result, Justice Edelman concluded that the ACL statutory guarantees regime would apply to supply under the Subscriber Agreements.

Is supply of a licence to use a good the supply of a "good", or a "service" under the ACL?

Valve argued that even if the ACL applied to it, statements by Valve that it would not provide refunds to consumers who purchased its software were not misleading. Valve reasoned as follows:

• A statement that Valve would not provide refunds could only be misleading if consumers did in fact have a right to obtain a refund from Valve (because in that situation, Valve would be representing that consumers could not obtain a refund from it, when in fact they could, if they exercised that right).
• A consumer would have a right to a refund from Valve if the software Valve supplied to the consumer did not comply with the ACL statutory guarantee that "goods" supplied to a consumer would be of "acceptable quality" (Consumer's ACL Rights).
• The Consumer's ACL Rights did not apply here, because Valve was not supplying "goods". Although software is specifically included in the ACL definition of "good", Valve argued that a licence to use its software involved the supply of a "service" (the right to use software), and not a "good" (the software itself).
• Since Valve was not supplying "goods", the guarantee of "acceptable quality" (and associated refund rights) did not apply.

• Accordingly, Valve could not have misled consumers: consumers did not have the refund rights that the ACCC claimed they had, so it was not misleading for Valve to make statements that it would not provide refunds.

Justice Edelman rejected Valve's argument. Importantly, he found that Valve's submission was inconsistent with the definition of "supply" in the ACL, since that definition non-exhaustively includes "supply by way of sale, exchange, lease, hire or hire-purchase", and Valve's contractual licences effectively involved a form of hire without bailment, such as to fall within this definition. Justice Edelman also considered that Valve's submission would give rise to undesirable inconsistencies in the application of the ACL, since it would mean that hired goods, but not licensed goods, would need to comply with the statutory guarantee of acceptable quality.

The alleged false or misleading representations

Having satisfied the Court that the ACL applied to Valve, the ACCC alleged that a number of statements by Valve, including statements in the terms of its Subscriber Agreements, were or contained false or misleading representations.

In each case, the ACCC alleged that the relevant representation was false or misleading because it represented that the consumer had no entitlement to obtain a refund from Valve, or appeared to exclude or limit a consumer's right to obtain a refund from Valve under the Consumer's ACL Rights.

Justice Edelman found that some, but not all, of the alleged contraventions were made out, as described below.

Terms in Valve's Subscriber Agreement and Refund Policy

Here are five terms that were alleged to contain false or misleading representations:

1. A term of the Subscriber Agreement stated that fees "ARE NOT REFUNDABLE IN WHOLE OR IN PART".
In some versions of the Subscriber Agreement this was followed by the words "except as expressly set forth in this agreement".
A later term of the Subscriber Agreement, headed "Miscellaneous", stated that if a provision was found to be unenforceable, the provision would be enforced to the fullest extent possible, and the Subscriber Agreement would remain in force.

Legal analysis: The statement that fees "are not refundable" was a misleading representation, since a consumer would understand it to mean that they were not entitled to a refund (whereas they would be, under the Consumer's ACL Rights). Justice Edelman found that the representation was also false in the version of the Subscriber Agreement that did not contain the words "except as expressly set forth in this agreement" and the additional wording described in row 2.

It was wrong to suggest (as Valve had) that a consumer would reasonably understand this statement to mean that fees were not refundable under the contract (as distinct from under other avenues – eg the Consumer's ACL Rights). In particular, the Subscriber Agreement terms did not support this interpretation (eg they did not refer to any other avenues relevant to Australian consumers, whereas some versions indicated that EU customers did have other rights).

It is unlikely that a consumer, looking to ascertain whether they had a right to a refund, would "consider the general, uncapitalised, miscellaneous clause in the final paragraph … as an exception 'expressly set forth' in this agreement", or would understand this later clause to suggest that that early clause may not be enforceable. (Justice Edelman also noted that a consumer would "take more notice of" the parts of the Agreement that were in capital letters.)

2. In addition to the wording outlined in row 1 above, in some versions of the Subscriber Agreement the "miscellaneous" clause contained an additional statement that Valve's obligations under the Agreement were subject to existing laws and legal processes, and that Valve may comply with "law enforcement or regulatory requests or requirements notwithstanding any contrary term".

Legal analysis: The statement that fees "are not refundable" (see row 1) contained the misleading representation outlined in row 1 even when this additional wording was taken into account.

It is unlikely that a reasonable consumer would read these words as qualifying the dominant message that no refunds were available (subject to the exception for EU customers which was noted in some versions).

"It is too much of a strain for the reasonable Australian consumer of Valve games to read the dominant message to be subject to an implied qualification to be found in clause 15 that the clause also permitted refunds for Australian customers under the conditions permitted by their local laws."

3. The Subscriber Agreements contained limitation of liability clauses that disclaimed liability associated with the software, including under common law and implied warranties. Some of these clauses were stated to "APPLY TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW".

Legal analysis: The limitation of liability clauses contained a misleading representation, because they represented that they had excluded, or restricted or modified, the Consumer's ACL Rights.

The qualification "to the extent permitted by law" was expressed "in general terms at the conclusion of a strong and broadly worded exclusion", and only impliedly made some (not all) of the terms limiting liability subject to other laws, while also stating that these exclusions would be applied to the maximum extent possible.

The reasonable consumer would not know whether "applicable law" included a relevant Australian law.

"Although the qualification might, as a matter of legal construction, have had the effect, by implication, that the representations were not false as a matter of strict legal construction" the representations conveyed were misleading.

4: Valve's Refund Policy stated that "We do not offer refunds for purchases", and referred customers to the clauses of the Subscriber Agreement that stated that Valve would not provide refunds (described in the rows above).

Legal analysis: This statement contained a misleading representation that Valve was not required to provide a refund, and that the consumer had no entitlement to a refund, when in fact these propositions were not correct having regard to the Consumer's ACL Rights.

Contrary to Valve's argument, this statement would not be understood by a customer to relate solely to Valve's "practice", as distinct from a consumer's rights.

Although the statement was misleading, it was not false, since it was literally true that Valve did not offer refunds, subject to the terms of the Subscription Agreement (to which the Refund Policy referred).

5. A version of the Refund Policy stated that "unless required by local law, we do not offer refunds or exchanges ...". "Local law" was not defined, and there was no express reference to the ACL.

Legal analysis: A reasonable consumer would have understood that Valve's games were provided worldwide, that Valve's website was worldwide, and that "local laws" was a reference to the laws governing the consumer in their own location.

The words "unless required by local law" meant the following statement that "we do not offer refunds" did not contain a misleading representation. (Justice Edelman noted these words were in the same clause, typeface and font as the other text in this clause.)

Statements by support staff in online chats with individual customers

The ACCC alleged that particular statements made to three individual customers in the course of online "chat log" discussions between Valve representatives and customers contained implied representations that a customer was not entitled to a refund (so that the Consumer's ACL Rights did not apply):

• at all; or
• unless the customer first attempted troubleshooting with a third party game developer; or
• if they had already used the relevant game.

In each case, the statements had included words by which the Valve representative advised that they would not be providing a refund (either at all, or on one of the conditions noted above). Justice Edelman found that the statements did not contain false or misleading representations. Critically, the three particular customers to whom the representations were made were not misled or likely to be misled by them because they all had sufficient awareness of their ACL rights to a refund as to insist on it in their dealings with Valve. Justice Edelman also considered that the statements the ACCC relied on simply did not, when read in the context of the conversation in which they were made, contain the representations suggested by the ACCC.

Current status

The Federal Court has made findings on liability consistent with the findings outlined above, but has not yet determined what penalties or other orders may be appropriate in this case. We are not aware of any appeals in relation to the Court's decision on liability.

What does this mean for your contracts?

The decision in Valve highlights that contractual terms can breach the prohibition on false or misleading representations when they purport to exclude non-excludable rights, or do not make sufficiently clear that they are not excluding non-excludable rights. It points to the following:

• When reviewing a contract for ACL compliance, the review should include consideration of whether any terms contain false or misleading representations (in relation to a consumer's rights under the ACL statutory guarantees regime, or otherwise).
• A contract which does not, as a matter of law, exclude a consumer's rights under the ACL statutory guarantees regime may nonetheless contravene the prohibition on misleading or deceptive conduct if its terms would reasonably (albeit wrongly) be understood by a consumer as having that effect.
• Assessing whether the terms of a contract or policy are false or misleading requires assessing the contract as a whole, as it would reasonably be understood by the other party to that contract – this involves having regard to factors such as headings, whether particular terms are capitalised, and proximity of relevant terms.
• Phrases such as "to the maximum extent permitted by applicable law" may not prevent a term from conveying an otherwise misleading representation, particularly if the contract does not explain the meaning of "applicable law". Phrases such as "local law" may be preferable.
• If seeking to distinguish between rights under a contract and other rights (including statutory rights such as rights under the ACL), it may be prudent to do so expressly, and to identify the source of the other rights, in order to prevent the consumer being misled.

Unsolicited consumer agreements

Federal Court decision provides useful clarity on types of agreements that will, and will not, be covered by the "unsolicited consumer agreements" regime

The ACL regime for "unsolicited consumer agreements" (Regime) governs unsolicited sales practices such as door-to-door sales and "cold call" telephone sales. Like much of the ACL, it is highly prescriptive, and can create compliance challenges. The recent Federal Court decision in ACCC v ACN 099 814 749 Pty Ltd [2016] FCA 403 (Reeves J) provides important clarity on when the Regime will, and will not, apply.

Factual background

The ACCC brought proceedings against a travelling tax agent, Mr Wayne Wright, regarding his supply of services to assist customers to complete and lodge a tax return. It specifically concerned his supply of these tax return services to 191 consumers in 22 remote Aboriginal communities in the Northern Territory and Western Australia. It did not appear to be disputed that Mr Wright's customers were consumers within the meaning of the Regime. The ACCC alleged that the agreements by which Mr Wright supplied these services were "unsolicited consumer agreements" (UCAs), and that Mr Wright's conduct in relation to those agreements had contravened the Regime.

The consumers to whom Mr Wright supplied services had not "invited" Mr Wright to the relevant communities, although in many cases he was so invited by a person local to the community, or otherwise visited without an invitation in order to supply existing clients. Before visiting, Mr Wright would generally send a flyer in advance, to be posted on a local notice board, and once he arrived he would establish a temporary office in a government office, or a kiosk in or near a main service area in the community. Sometimes he also erected an A-frame sign to advertise. Having set up, he would wait to be approached by potential customers – for example, people who may have seen his office or kiosk, or the flyer or A frame, or recognised his vehicle, or heard through word of mouth that he was in the community. Customers paid either in cash or, often, by setting up automatic deductions from their Centrelink payments. Mr Wright did not otherwise solicit business, and did not knock on doors, visit homes or call on people uninvited.

What is an "unsolicited consumer agreement"?

An agreement is a UCA if it satisfies each of the following elements (see ACL s 69) (UCA Definition):

• It is for the supply, in trade or commerce, of goods or services to a consumer.
• It is made as a result of negotiations between a dealer and consumer either by telephone or in each other's presence at a place other than the business or trade premises of the supplier of the goods or services (regardless of whether they are the only negotiations that precede the making of the agreement). ("Dealer" is defined as a person who enters into negotiations with a consumer with a view to making an agreement for the supply of goods or services to the consumer, or who calls on, or telephones, a consumer for that purpose; it includes both the supplier of a good or service who negotiates directly with consumers, and a sales agent or other person acting on behalf of the supplier.)
• The consumer did not invite the dealer to come to that place, or to make a telephone call, for the purposes of entering into negotiations relating to the supply of those goods or services (regardless of whether the consumer made such an invitation in relation to a different supply).
• The total price paid or payable under the agreement is more than $100 or was not able to be ascertained when the agreement was made (this element was not determinative to the analysis here, and is not considered further below).

Importantly, an agreement that is alleged to be a UCA is presumed to be a UCA (ACL s 70), which means the onus falls on the party denying that an agreement is a UCA – in this case, Mr Wright – to rebut this presumption.

The ACCC's case against Mr Wright

The ACCC argued that Mr Wright's agreements with the 191 consumers were UCAs. It submitted that:

• The Regime is deliberately cast in broad terms to provide the greatest possible range of protection to consumers, and it should be given the broadest construction available to achieve that purpose, using a remedial or beneficial approach to construction. The Regime is deliberately not confined to particular sales practices, and its scope is only limited by the specific provisions of the ACL that provide for regulations made under the ACL to identify particular kinds of agreements that are, or are not, UCAs.
• Mr Wright's practice of setting up temporary kiosks or offices in public areas in remote communities was akin to door-to-door selling; his practice of sending a flyer in advance, displaying signs and "interacting" with consumers constituted "negotiations" for the purpose of the UCA definition.
• Mr Wright's temporary kiosks and offices were set up away from his usual place of business or trade, at a "place" to which he was not invited by any of the 191 consumers.
• The Regime was designed to protect Aboriginal consumers in remote communities from such sales activities; the fact that English was not the first language of many of the consumers, such that they were vulnerable to Mr Wright's sales activities, was relevant to determining that Mr Wright's agreements were UCAs, and hence that the Regime applied in this case.

Application of the "unsolicited consumer agreements" regime to Mr Wright's agreements

A "serious affront to the operation of the rule of law in this country": rejection of the ACCC's broad interpretation

Justice Reeves dismissed the ACCC's submissions that the Regime should be given "the broadest construction available", and the associated, implicit notion that the UCA Definition encompassed all sales practices which take place in a non-retail context except those specifically excluded by regulations made under the ACL. He noted that the ACCC had "essentially taken the approach [of] … assuming that whatever furthers the consumer protection objectives of the UCA provisions must be the law", while, in doing so, ignoring or waving away "any other competing purposes that must be in play". He considered that a consequence of the ACCC's approach was that the Regime could apply, without limitation, to "essentially any trader who employs an ambulatory approach to their trading"; he further considered that the ACCC's interpretation "impinges upon the freedom of the citizens of this country to engage in legitimate trading and commercial activities … that has been recognised by the common law for more than three centuries", and that the ACCC's approach "would present a serious affront to the operation of the rule of law in this country".

Justice Reeves held that the Regime should be "construed so as to provide the fullest measure of protection to the consumer that a fair meaning of their text will allow". He identified that the Regime establishes a "specific protection", rather than a "general protection", measure (for example, it specifically regulates matters such as the time and days on which UCAs may be negotiated, and cooling off and termination periods for UCAs, rather than providing a broader, overarching prohibition). He emphasised that the text of the Regime "is of critical importance", and should be interpreted having regard to the particular practices targeted by the Regime, and the fact that the Regime seeks to balance competing purposes and interests (such as the interest of ensuring that "the fullest protection is provided to the consumer in the circumstances addressed by" the Regime and the interest of "restricting to the least extent the freedom of people in this country to engage in trade and commerce.")

It was particularly relevant to this analysis that the Regime uses very specific wording regarding the persons, circumstances, location and nature of dealings to which it applies, and as such, "necessarily excludes a broad range of agreements" from its application. In particular, Justice Reeves considered that the following types of agreements would not be covered by the Regime:

• agreements for the supply of services that are substantially sought or requested by the consumer, such that they cannot therefore be characterised as unsolicited or unrequested;
• agreements which do not result from any prior negotiations, because negotiations are unnecessary in the circumstances of the agreement – for example agreements which arise in circumstances where the (i) supplier has previously informed potential consumers of their services, prices and other conditions (eg through advertising), and a consumer is willing to transact on those conditions "without further ado"; or (ii) consumer is an existing customer of the supplier, and therefore aware of the terms of supply.

Justice Reeves rejected the ACCC's argument that consumers' language vulnerabilities were relevant to the interpretation of the Regime, but specifically acknowledged that they would be relevant to applying some other prohibitions under the ACL, such as the prohibition on unconscionable conduct (which was not in issue here).

Mr Wright's agreements were not "unsolicited consumer agreements": the meaning of "negotiations" and "place"

Justice Reeves found that Mr Wright's agreements were not UCAs within the meaning of the UCA Definition, because they were not made as a result of "negotiations" which occurred "at a place other than the business or trade premises of the supplier of the goods or services".

"Negotiations"

The ACL provides that the word "negotiations", when used in the UCA Definition, includes any "discussion or dealing" that is "directed towards the making of the agreement or proposed agreement", regardless of whether the terms of the agreement are open to negotiation (ACL s 72). Justice Reeves considered that the meaning of "negotiations" was further limited by the fact that the UCA Definition requires that the negotiations occur between a dealer and a consumer, and (as noted above) a "dealer" is someone who "enters into negotiations with a consumer with a view to making an agreement" for the relevant supply. Justice Reeves interpreted these words as incorporating a positive requirement that the UCA Definition is only satisfied where the dealer initiates the negotiations.

Justice Reeves concluded that, adopting this interpretation, Mr Wright's dealings with consumers did not involve "negotiations" within the meaning of the UCA Definition. In particular, it was the consumers who approached Mr Wright, and they "substantially sought" his services; Mr Wright did not initiate the dealings with individual consumers. Justice Reeves considered that Mr Wright's practices of sending out flyers, erecting billboards or of establishing a temporary office or kiosk waiting for customers to approach did not constitute "negotiations" initiated by Mr Wright. Accordingly, Mr Wright's agreements to supply tax return services to the relevant consumers did not result from negotiations initiated by Mr Wright, and so did not fall within the UCA Definition, and were not subject to the Regime.

"Place"

The UCA Definition tests whether negotiations occur at a place “other than the business or trade premises of the supplier of the goods or services”. Justice Reeves considered that the places from which Mr Wright supplied services (ie temporary kiosks or offices in public places) did not satisfy this requirement.

"Place" is not specifically defined in the ACL, but Justice Reeve considered that its meaning is affected by the UCA Definition, particularly the words "the consumer did not invite the dealer to come to that place for the purposes of entering into negotiations relating to the supply of those ... services". Justice Reeves noted that these words affect the meaning of "place" in two ways.

First, they identify that the place must be "a location where such an invitation would ordinarily be necessary before a dealer could properly enter it"; he noted that this meant that a consumer's home would be a "place", but that the following locations would not be a "place" (such that negotiations in these places would not be subject to the Regime):

• "any area in a city, town or community in Australia to which the general public has access";
• "an area which one does not require an invitation to enter"; or
• "a kiosk or stall in a shopping centre or other place within those areas from which a dealer is conducting his or her business or trade, even if temporarily".

Secondly, they identify that if a party seeks to rely on the issuing of an invitation to come to a place to argue that a resulting agreement is not a UCA, the invitation must be for the particular purpose of negotiations regarding supply of the particular good or service that is the subject of the resulting agreement (an invitation issued for another purpose would not prevent the Regime from applying).

Justice Reeves found that "place" could not be interpreted to apply generally to the communities Mr Wright visited (since he did not need an invitation from a consumer to attend those communities), and did not apply to the public places in those communities from which Mr Wright operated his kiosk or temporary office (because he did not require an invitation from a consumer before offering his services from those places). He noted that private residences within those communities would have been a "place" for the purpose of the UCA Regime, but Mr Wright had not operated from such private residences.

Outcome

As a result of the analysis outlined above, Justice Reeves found that Mr Wright had successfully rebutted the presumption that his agreements with the relevant consumers were UCAs, and so dismissed the ACCC's proceedings.

The ACCC has not filed an appeal in this case.

What to take away?

Businesses which need to comply with the "unsolicited consumer agreements" regime have faced a number of challenges in understanding when and how the regime will apply to their businesses. This case provides some important guidance:

• The Regime will be interpreted having regard to the very specific protections it establishes, "so as to provide the fullest measure of protection to the consumer that a fair meaning of their text will allow", and having regard to the fact that the Regime seeks to balance competing purposes and interests, which include but are not limited to consumer protection.
• Based on the interpretation in this case, it appears that the Regime will not apply to agreements:
  (i) for the supply of goods or services that have been substantively sought or requested by the consumer; (ii) that arise from negotiations that were not initiated by the dealer; or (iii) that do not result from any prior negotiations, such as where prior advertising or dealing means that a consumer can transact "without further ado".
• It will also not apply to agreements where negotiations leading to an agreement occur in:
  (i) a public place; (ii) a place a dealer may enter without an invitation from the relevant consumer; or (iii) a kiosk or stall in a shopping centre or other place within those areas from which a dealer is conducting his or her business or trade, even if temporarily.