Financial management

Consumer protection law: an introduction

- September 8, 2011 2 MIN READ

As a business owner, it’s incredibly important that you understand the legal rights of your customers, and your obligations to them. Here is a helpful introduction to consumer protection law.

Many moons ago, I was fortunate enough to snag a position with a high profile multi-national sporting goods manufacturer. I was 17 years old, and eager to demonstrate my worth to the company in my role as a junior sales representative. 

Unfortunately, youth and exuberance cannot replace wisdom. In hindsight, I now know that I inadvertently engaged in some dubious activities! And they were all for the mighty sale. 

For instance, certain tactics that seemed harmless to me at the time were in reality contravening the Trade Practices Act 1974. 

As an example, I clearly recall encouraging one of my retail clients to promote a new footwear line using the old ‘Was $24.95. Now $14.95’ pricing tactic. My recommendation was to advertise the price as a red-hot special. But it wasn’t a reduced price at all; it was simply the normal suggested retail price. 

Without being aware, I had engaged in false, misleading and deceptive conduct – a serious offence. It’s lucky that I avoided the attention of the Australian Competition and Consumer Commission (ACCC). Had I been caught, the penalties would have seriously damaged the financial position of my employer, and my personal liability could have been in the vicinity of $100,000. That would have crippled me. 

Other practices that are strictly prohibited under consumer protection law include price fixing, which involves artificially inflating prices by colluding with other manufacturers or suppliers, and resale price maintenance, which involves stipulating that resellers must sell your goods at a specified price point. (It’s okay to suggest recommended retail prices, but enforcing them is deemed to be an anti-competitive practice). 

Contravention of industry codes, exclusive dealings, mergers, acquisitions and unfair (unconscionable) contracts are also vigorously regulated by the ACCC. 

While business owners are not expected to be lawyers, they must make themselves aware of practices that are prohibited under consumer protection legislation. 

On 1 December 2010, the Trade Practices Act was replaced by the Australian Competition and Consumer Act 2010. The new Act was designed to enhance the welfare of Australians through the promotion of competition and fair trading, and also makes provision for consumer protection. It’s worth referring to whenever you’re considering product, packaging, pricing, promotional or distribution strategies. If you’re ever in doubt though, it’s prudent to seek specialist legal advice. 

Have you ever accidentally engaged in dodgy practices that didn’t comply with consumer protection law? ‘Fess up below, so we can all learn from your mistakes.

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  • Andrew Caska

    Caska IP Patent Attorneys

    'Flying Solo opened up so many doors for us - I honestly don't know where I'd be without it"