Pricing and Selling of Essential Services, Greenwashing, Unfair Contract Terms, Among the ACCC's 2023-24 Compliance and Enforcement Priorities

The Australian Competition and Consumer Commission (ACCC) Chair, Gina Cass-Gottlieb, has outlined the Commission's ambitious compliance and enforcement priorities for 2023-24.

IN BRIEF

Ms. Cass-Gottlieb highlighted that cost of living pressures, including claims around the pricing of essential services, were among some of the key factors informing the priorities. Also informing the Commission's priorities were the integrity of environmental and sustainability claims and harms from manipulative marketing practices in the digital economy, among other things.

Many of the priorities were continuing from the previous year's focus. However, Ms. Cass-Gottlieb made particular mention of:

• Ensuring compliance with competition and consumer laws in the pricing and selling of essential services (gas, electricity, and telecommunications), including compliance with the price cap order and other legal obligations for wholesale gas markets;
• Unfair contract terms in consumer and small business contracts;
• Environmental and sustainability claims (greenwashing); and
• Scam detection and disruption, supporting the implementation of the National Anti-Scam Centre.

Ms. Cass-Gottlieb also reaffirmed the Commission's enduring priorities, including the detection and enforcement of cartel and other anticompetitive conduct, protecting consumers - particularly the more vulnerable - from a safety and consumer guarantee perspective, and what will become an enduring priority, competition and consumer issues relating to digital platforms.

The key takeaways for business are to:

• Strengthen their processes and documents - to ensure their claims can be substantiated and their contracts are not unfair.
• Train their staff (and empower them to ask and speak-up), to ensure they have an understanding of their obligations in the statements that they make and their conduct, to limit risk of anticompetitive conduct or breaches of the Australian Consumer Law.

ANNOUNCEMENT OF THE ACCC'S PRIORITIES

Ms. Cass-Gottlieb provided additional detail about a number of enforcement areas including:

Environmental Claims and Sustainability

Ms. Cass-Gottlieb:

• Stated that the ACCC would play a role in the economy-wide transition to greater sustainability "by ensuring businesses tell the truth about the environmental impacts of the goods and services they supply."
• Highlighted the findings of the recent greenwashing internet sweep, again reiterating the importance of being able to substantiate environmental and sustainability claims with robust evidence. Read our insight on the sweep here.
• Stated that the greenwashing report was just the beginning of the Commission's work, and drew attention to the fact that the Commission is updating its economy-wide guidance material and education activities following on from the sweep. She also highlighted that the Commission was already investigating alleged greenwashing and that the investigations may grow as more targeted assessments into the claims identified by the sweep are carried out.
• Announced that the ACCC has established a new internal sustainability taskforce that "will examine and seek to influence a range of issues where environmental and sustainability issues intersect with the application of competition and consumer law, including product safety."

Key Takeaway

Examine your product claims and forward-looking claims and ensure your claims can be substantiated, and that you evidence the steps you propose to take and are taking to achieve your sustainable future strategy.

Unfair Contract Terms

Ms. Cass-Gottlieb:

• Drew attention to:
  • The fact that use of, or reliance upon unfair contract terms in standard form contracts with consumers and small businesses will attract penalties from November this year; and
  • The expanded coverage of the unfair contract terms regime to more small businesses - being those with fewer than 100 employees or an annual turnover under AU$10 million.
• Stated that "for too long….many businesses have failed to take the unfair contract provisions seriously," and that while the Commission will be prioritising compliance with the unfair contract terms regime, it will take enforcement action for penalties where appropriate.
• Urged businesses to review and update their standard form contracts before the penalties come into force and that "in anticipation of the new provisions, [the Commission is] undertaking a review of business terms and conditions across a number of different sectors... [which] will be used as the basis for future enforcement cases."

Key Takeaway

Get your 'house in order.' Review your standard form contracts and either amend and remove terms that may be alleged to be unfair or evidence that such terms 'do no more' than to protect your legitimate business interests.

Essential Services and Gas Markets

Ms. Cass-Gottlieb:

• Outlined that the Commission would focus on "Consumer and fair trading issues arising from the pricing and selling of essential services, with a focus on energy and telecommunications."
• Highlighted that misleading sales representations regarding price, features, or benefits of essential services were of particular concern. She stressed the importance of consumers and businesses being able to make informed decisions about the right services for them in light of cost of living pressures.
• Specifically noted the Commission's priority of "Competition and pricing issues in gas markets, including compliance with the price cap order and other legal obligations for wholesale gas markets." She also stated that the Commission will prioritise compliance with the price cap on the sale of wholesale gas by producers, introduced by the Federal Government. Further, Ms. Cass-Gottlieb stated that the ACCC is working with government to develop a gas producer mandatory code of conduct, and that the Commission would also prioritise compliance with the code once developed.
• Noted the Commission's successful enforcement outcomes in the past year and that a number of matters in the essential services sector were still under investigation.

Digital Economy and Digital Platforms

Ms. Cass-Gottlieb:

• Reaffirmed that the Commission's priorities regarding consumer and fair trading issues regarding advertising and marketing practices in the digital economy, and competition and consumer issues relating to digital platforms, were unchanged.
• Explicitly 'called out' manipulative and deceptive practices in the digital economy affecting consumers, such as 'dark patterns,' manipulation of online reviews and search results, and comparison websites and influencers that do not disclose their commercial relationships. She drew attention to the Commission's recent sweep to identify misleading social media influencer testimonials and endorsements. Ms. Cass-Gottlieb stated the findings from the sweep will inform the Commission's compliance and education initiatives, and enforcement investigations where the Commission considers consumers are at risk of being misled.
• Highlighted the Commission's recent release of its fifth interim report for the Digital Platform Services Inquiry. She noted the report's recommendation for introduction of a range of new measures, positing that many existing consumer protection and fair trading laws need updating to effectively regulate the sector and its new technologies. Ms. Cass-Gottlieb expressed that the report "reinforces the Commission's support for an economy-wide ban on unfair trading practices."
• Other conduct in the digital platforms sector called out included subscription traps, platforms impeding customer switching, and otherwise tying customers to or favouring their own services. Ms. Cass-Gottlieb noted the report's recommendation that new service-specific mandatory codes of conduct for designated platforms be introduced, which would regulate such conduct of concern. Ultimately, implementation of the Commission's recommendations now rest with the Australian Government.

Other Matters - Inquiries, Enforcement, and Law Reform

Ms. Cass-Gottlieb made other wide-ranging comments about other conduct of concern and industry sectors including:

• In relation to consumer guarantees, she commented that "given the number of complaints we receive about non-compliance…we believe that there is a strong case for law reform (the introduction of penalties for non-compliance) on this issue."
• In the financial services sector, she noted the Commission's ongoing range of market study, enforcement, compliance and engagement activity to promote competition. She highlighted the Commission's recent commencement of an inquiry into retail deposit markets, with a focus on how banks set interest rates for deposit products (with reference to how they set rates for credit products) as well as the role of deposits in banks' funding.
• Stated that enforcement in relation to exclusive arrangements that impact competition is a key priority for the ACCC. She highlighted that the Commission was particularly concerned about traders in a position of market power using exclusive arrangements that result in increased barriers to entry or cause anti-competitive foreclosure of rivals.
• Noted that the ACCC was closely monitoring industry codes of conduct in the franchising, dairy, and horticulture sectors, and would enforce them to protect small businesses when necessary. She also reiterated the importance of penalties being sufficiently high to have a deterrent effect, noting the Commission's recent success in seeking an increased penalty in this space.
• In relation to cartels, she noted that the Commission was proactively screening "data relating to markets to identify sectors with likely cartels and analysing markets to identify those with high risk factors which may result in anti-competitive conduct." She also highlighted the Commission's recent success in enforcement actions, having secured criminal sentences in respect of individuals, and its active pursuit of both criminal prosecutions and civil actions against cartels.
• Reiterated that the Commission is committed to supporting the community in the fight against scams, both by keeping consumers informed so they can "spot a scammer when contacted," and to lend the Commission's expertise to prepare for the establishment of the Government's National Anti-Scams Center.
• Finally, she noted that the Commission would announce its full suite of product safety priorities for 2023-24 at the National Consumer Congress in June. She highlighted a particular focus on "products containing button batteries, products designed for and used when young children are sleeping, children's toys, and household hazards including toppling furniture."

OVERVIEW OF WHAT BUSINESSES SHOULD DO

In light of these priorities, businesses should:

• As stated above:
  • Carefully monitor environmental and sustainability claims they are making, and ensure they can be substantiated with robust evidence; and
  • Review their standard form contracts with consumers and small businesses for unfair contract terms so as not to fall foul of the new penalty regime, particularly in light of the expanded coverage of the unfair contract terms regime to more small businesses;
• Ensure their sales representations are accurate and balanced, so as not to be misleading, particularly if they are in essential services;
• In respect of the digital economy, be careful to ensure their advertising and marketing practices are not manipulative, deceptive or misleading (e.g. that they are not employing 'dark patterns', or manipulating search results or online reviews);
• In respect of digital platforms, ensure that customers are not being trapped, tied, or otherwise unduly pushed into use of that business's services over others;
• Review exclusive arrangements which could impact on competition;
• Review consumer guarantees processes, instructions, and policies; and
• Ensure that their staff are provided with 'refresher' training as appropriate to their business to ensure that they assist in mitigating the above risks.

Read Ms. Cass-Gottlieb's speech here, the ACCC's 2023-24 compliance and enforcement priorities here and the ACCC's summary of its priorities here.

Please feel free to reach out to any member of the K&L Gates Competition and Consumer Law team should you have any queries or comments.