AUSTRALIAN CONSUMER LAW
|Bolt Pty Ltd (hereafter referred to as ‘Bolt’) is an Australian technology company that develops and sells consumer electronics and software. Bolt is running a sale campaign for one of their popular mobile phone models – the Bolt Worldly. The sale advertisement that is currently featured on all promotional material contains the following statements and features in large, bold text:|
‘Was $899 Now $699’
‘Emits 20% less radiation than any other mobile phone on the market!’
‘Made for Australians, by Australians’
However, at the very bottom of the advertisement the words ‘Produced and manufactured in Thailand’ can be seen in very small fine print.
In fact, two days prior to the sale, Bolt had increased the price of the Worldly to $899. At no time, other than the two days prior to the sale, was the Worldly priced at $899. Its everyday regular price is $699. There were also only three Worldly mobiles in stock and available for the price of $699. Further, Bolt had conducted no tests on the radiation and therefore had no basis on which they could make such a claim.
Rosie, an environmentally friendly, health conscious student came across the advertisement in the newspaper and visited a Bolt store the very next day with her friend Hannah. At the store Rosie approached a salesman and told him that she wanted to go ahead and purchase the Worldly at the sale price of $699. The salesman informed her that it had sold out. ‘Unfortunately the Worldly has sold out and is no longer available, however our newest model is now available and you can purchase it for only $1099’, said the salesman.
Meanwhile, Hannah approached a saleswomen named Lily, who was located in the computer section and told her:
‘I need a laptop to take to my university lectures. I have 8 hours’ worth of lectures every Tuesday so the battery needs to last at least 8 continuous hours because I can’t charge it during the lecture. My current laptop only lasts 3 hours and I am missing out on taking down important notes’.
Lily assured her that the new Bolt BP is perfect for her requirements as not only is it lightweight but the battery is designed to last 12 hours without charging. Hannah purchases the laptop for $2000.
The following Tuesday Hannah takes her new BP laptop with her to university. Within 4 hours the battery had died and the computer had turned off. Hannah was infuriated. The next day she returned to the Bolt store and explained to Matthew, the sales manager, what had happened. Unconcerned, he simply pointed to a sign at the front of the counter which read:
The guarantees under the Australian Consumer Law do not apply to electronics sold and distributed by Bolt. Further, Consumers cannot return or exchange Bolt goods purchased from the Bolt store unless, it was otherwise agreed to by Bolt, and at Bolt’s sole discretion.
As the end of financial year was approaching, Bolt wanted to rapidly increase their profit margin. They developed a strategy to increase their earnings by changing the trade agreements that were in place with their external suppliers, specifically Crisco. Crisco is a very small business that has been run by the Crisco family for the last 70 years. Crisco supplies Bolt with the battery devices that are used in all Bolt laptops. This is Crisco’s most valuable contract – it makes up 95% of their total annual profit. Bolt is aware of this. Bolt sent a letter to Crisco which stated:
‘We are in market for a new battery supplier as we believe you are too expensive. However, if you agree to pay a monthly rebate to Bolt we will not only continue our supply relationship with you but we will increase the quantity of our orders by up to 20% annually. This monthly rebate figure will be determined by Bolt solely. Further, should you agree to the above, you also agree that the supply agreement can be terminated at anytime at the sole discretion of Bolt. A decision is required by you within 24 hours’.
There was no basis for imposing the rebate as Bolt did not believe Crisco’s prices were too expensive, nor did they intend to terminate their relationship. Crisco contacted Bolt seeking further information and a chance to negotiate the terms set out in the letter. Bolt refused to provide this information and to negotiate the terms. This left Crisco distressed and so they immediately agreed to the terms. In fact, the new terms are likely to see Crisco unable to sustain their business.
Hannah and Crisco want to bring an action against Bolt under the Australian Consumer Law. Advise whether:
1. The Bolt Worldly advertisement is in contravention of any provisions under the ACL. (500 words)
2. Bolt is in breach of the guarantee provisions under the ACL. What rights or remedies (if any) are available to Hannah?
3. Bolt has engaged in any prohibited conduct under the ACL in relation to their dealings with Crisco?
AUSTRALIAN CONSUMER LAW
The Bolt Worldly advertisement is in contravention of any provisions under the ACL
Bolt’s Worldly advertisement was in violation of various clauses of the Australian Consumer Law, an aspect that makes them liable under law. To start with, Bolt’s advertisement indicates that the price of the Worldly had been reduced from $899 to $699, yet this was the original price of the product and that it had been increased two days before the advertisement and later reduced to the initial price in order to validate their claim of a discount provided on this product. Section 29, subsection 1 part (i) of the Australian consumer law provides that any individual, while engaging in commerce of trade, must not, in the promotion or supply of goods and service make a misleading or false representation with regards to the price of the services or goods in question (Malbon & Nottage, 2013, p. 46). Bolt contravened the law by representing the price of the Worldly as discounted when it is the actual price of the product. Their intention was to establish a false perception of reduced price among the consumers in order to attract them, which provides ground for unfair competition and exploitation of the consumers.
Bolt also contravened the law by claiming that the Worldly phone had 20 percent radiation as compared to any other mobile phone, when this was not the case as there had not been any test conducted to establish the radiation content and quality of the product. According to section 29, subsection 1, part (a) of the Australian Consumer Law ACL, the law provides that any individual engaging in a commerce or trade that involves the supply of goods or services must not make a misleading or false representation of the goods as being of a certain quality, standard, grade, value, style, model, or composition or is of a particular previous use or a particular history (Pearson & Batten, 2010, p. 128). As such, Bolt is expected to provide consumers with the actual information concerning the quality or standard of their goods in order to allow them to make informed decisions on whether they would wish to buy the products or not. Nevertheless, the company chose to offer consumers false information in order to gain a competitive advantage against its competitors and to attract more consumers, owing to the increasing concerns over the radiations emitted by mobile phones.
In the Worldly advertisement, Bolt emphasized that the product had been “made by Australians for Australians”. To meet the requirement for true labelling of the location of the product, they indicated at the bottom of the advertisement in faint and small font that the Worldly was made in Thailand. This is in contradiction with section 29, subsection 1, part (k) of the Australian Consumer Law ACL, which provides that any individual in commerce or trade od certain goods or services must not make a misleading or false representation of the place of origin of the goods (Morandin & Smith, 2011, p. 51). Bolt is thus liable under the law as they provided the consumers with misleading information concerning the origin of the Worldly, implying that it was made in Australia, when it was actually made in Thailand. Such a proclamation was meant to allow the company to gain unfair competitive advantage.
Bolt is in breach of the guarantee provisions under the ACL. What rights or remedies (if any) are available to Hannah?
Bolt is in breach of section 55 of the ACL, which requires any individual that supply goods or services in commerce or trade to guarantee the consumers that the supplied goods are reasonably fit for the purpose that was disclosed by the consumer and the purpose represented by the supplier (ACCC, 2016). This provision requires suppliers to ensure that they understand and address the needs of the consumers without taking advantage of their lack of in-depth knowledge of the products. Hannah explained to Lily, the salesperson, that she was looking for a computer that could last for more than eight hours as she was to use it to take lecture notes. As such, this formed her disclosed purpose, which she expected Lilly to honor, but the latter failed to do so. this is in breach of the guarantee of fitness to the disclosed purpose.
Bolt, through their representative, Lily, also breached the guarantees law under section 56 of ACL, which provides that any person engaging in commerce or trade through the supply of goods or services should guarantee the consumer that such a good or service corresponds the provided description, as long as such a sale does not involve auction (ACCC, 2016). This means to ensure that suppliers provide actual descriptions of products and true information concerning what they supply. Lily described the Bolt BP as being lightweight and having a battery that lasts up to twelve hours without charging. Such a description was meant to meet the requirements of Hannah, but was not the actual information of the product under supply as Hannah later found out that the Bolt BP laptop’s battery only lasted for four hours before requiring charging. As such, Bolt was in breach of the guarantee of supply of goods by description.
Lastly, Bolt was in breach of the ACL’s section 53, which establishes that individuals who supply consumers with goods, and that such a transaction in not of limited title, then it is guaranteed that the supplied goods remain free from any encumbrance, security, or charge given that such commitments were not disclosed to the consumer, prior to the agreement of the supply, in writing, and that consent was not obtained from the consumer before creating such commitments (Latimer, 2011, p. 495). When Hannah realizes that the Bolt BP laptop does not meet her requirements and the description that was presented to her, she returns the computer to the shop but is presented with an encumbrance, which claims that the product cannot be taken back and that she will not be compensated. This is in contravention with the ACL as Bolt had not disclosed the notice to her before she agreed to the purchase of the laptop, and her consent was not obtained prior to the creation of the encumbrance (Latimer, 2011, p. 498). Bolt may be offered an injunction by the court considering their breach of the ACL guarantee laws, or they may be required to pay a pecuniary penalty. Bolt should compensate Hannah for failure to provide her a product that met her disclosed purpose and leading to her failure to take some of the lectures due to the short battery time of the computer she was offered.
Bolt has engaged in any prohibited conduct under the ACL in relation to their dealings with Crisco?
Bolt has brought its relationship with Crisco to a sudden standstill and has communicated its intentions to exit the relationship, maintaining that they can only maintain the relationship if Crisco agrees to their conditions and pays rebates to them. This is in contravention with section 30, subsection 1, part (a) of the ACL, which provides that no person engaged in commerce of trade may offer rebates, prizes, gifts, or any other free items that are aimed at obtaining favor with regards to the potential supply or supply of services or goods (Corones, 2011, p. 213). This is to provide a level ground for all the competitors within the market place to contract and to allow for an effective system through which companies can be able to identify the best suppliers for their input goods and services. Bolt pressurized Crisco to enter into an agreement in which they would give them rebates in order to maintain their business relationship by providing them a short-time to come up with a decision, while well aware that their relationship with Crisco catered for 95 percent of their business and exiting business with them would mean a collapse of Crisco. This is a business malpractice considering the fact that Bolt were exploiting the vulnerability of Crisco in terms of their lack of business outside their relationship.
It is important to note that the rebate is offered
without the intention offering it and that it is out of the pressure that
Crisco has been placed under that they succumb to the demand by Bolt in order
to secure their business. Bolt also fails to honor contractual terms of the
business by establishing contractual conditions that would govern the business relationship,
which they want Crisco to observe and agree to without contesting them or
seeking negotiation. This is a contravention of the law that requires proper
negotiations to be established across the supply chain in order to establish a
fair ground based on which business can be carried out without impeding the
right of one party (Corones, 2011, p. 176). Crisco may seek
legal intervention in the courts by filing a litigation Bolt. Bolt will be held
legally liable under the ACL considering the fact that they solicited rebates
from Crisco in order to continue doing with them business as opposed to looking
for new consumers. This could be considered as a form of bribe that the company
wrongfully receives from Crisco in order to favor it as the supplier of their
goods as compared to the other companies.
ACCC, 2016. Consumer guarantees. [Online]
Available at: https://www.accc.gov.au/consumers/consumer-rights-guarantees/consumer-guarantees
[Accessed 11 May 2016].
Corones, S. G., 2011. The Australian Consumer Law. New South Wales: Thomson Reuters (Professional) Australia.
Latimer, P., 2011. Australian Business Law 2012. 31st ed. Sydney, NSW: Wolters Kluwer.
Malbon, J. & Nottage, L., 2013. Consumer Law and Policy in Australia and New Zealand. Leichhardt NSW: Federation Press.
Morandin, N. & Smith, J. eds., 2011. Australian Competition and Consumer Legislation 2011. Sydney, NSW: Wolters Kluwer.
Pearson, G. & Batten, R., 2010. Understanding Australian Consumer Credit Law. Sydney: Wolters Kluwer.