If you run a bakery in Australia that provides goods or services, you are required to comply with the Australian Consumer Law (‘ACL’). The aim of the ACL is to protect consumers. If you fail to comply, you may have to provide a remedy or in some circumstances, pay a fine. Therefore, it is important that you understand your obligations as a bakery business, concerning the ACL. This article will explain three key areas of the ACL that your bakery must comply with and the possible consequences for failing to do so.
1. Unfair contract terms
The ACL offers protection to consumers and small businesses from ‘unfair contract terms’. Unfair contract terms are terms in a contract that, when considered within the context of the entire contract:
- cause a significant imbalance in the rights and obligations of the parties;
- are not reasonably necessary to protect the legitimate interests of the party that is benefited; and
- cause a financial or non-financial detriment to the other party.
For example, suppose a contract term prevents customers from asking for replacement of faulty goods. This is likely to be an unfair contract term. In the alternative, if a contract term states that there is a $100 limit on the cost of replacing the faulty goods, this is more likely to be accepted as a term that is fair.
You should be careful to ensure that your contracts do not include any terms that could be considered unfair. If you are unsure, it is best to seek the advice of a lawyer.
2. Misleading or deceptive conduct
The ACL provides that businesses must not engage in misleading or deceptive conduct or conduct that is likely to mislead or deceive. The term ‘misleading’ refers to conduct that leads a party into error. On the other hand, the term ‘deceptive’ refers to conduct that deliberately leads a party into error. The ACL prohibits both types of conduct. However, due to its deliberate nature, your bakery is more likely to face harsher consequences for deceptive conduct.
Types of situations that may constitute ‘conduct’ include:
- statements or representations made to consumers;
- advertising of products or services;
- product packaging and labelling;
- written or oral contracts; and
- negotiations.
An example of conduct that may be misleading or deceptive is a food product’s labelling stating that it is ‘healthy’, where in reality, it includes a high amount of sugar and has a low health rating. Having the ingredients listed in fine print on the packaging may not be enough to prevent average consumers from being misled or deceived into believing that the product is a healthy choice.
You should always be truthful and unambiguous in your business activities to prevent claims of misleading or deceptive conduct. This is especially important in relation to conduct concerning the pricing of goods or services. You should make it clear to customers what your pricing is, as well as any additional fees that may be included in the price. This will help to avoid a claim of misleading and deceptive conduct against your bakery.
3. The consumer guarantees
Another key protection afforded to consumers by the ACL is the consumer guarantees. These guarantees are legal promises that automatically apply to all goods and services you sell to ‘consumers’. You should ensure that you are aware of these guarantees and take steps to prevent the possibility of a breach.
Definition of consumer
A consumer for the purpose of the ACL is a person or business who purchases:
- goods or services costing less than $100,000;
- goods or services costing more than $100,000, but that are ordinarily used for domestic, household or personal use or consumption; or
- goods that are commercial road vehicles or trailers used primarily for transporting goods on public roads.
Consumer guarantees applying to goods
As a bakery, you are a supplier of goods. Therefore, the consumer guarantees stipulate that the goods:
- are of acceptable quality;
- have an accurate description;
- are reasonably fit for their specified purpose;
- match any sample or demonstration model;
- are free from hidden securities or charges;
- comply with express warranties provided; and
- satisfy any additional promises made.
Note: Consumers can also make a claim against manufacturers and importers of goods in some circumstances.
Consumer guarantees applying to services
On the other hand, if you are supplying services, the consumer guarantees assume that they are:
- provided with due care and skill;
- reasonably fit for their specified purpose; and
- delivered within a reasonable time (if a timeframe is not specified).
Failure to comply
If your bakery fails to comply with the consumer guarantees, you will have to provide a remedy. For instance, depending on the type of breach, you might have to provide a:
- replacement;
- repair; or
- refund.
Further, in some circumstances, a court might require you to provide compensation for any loss that the consumer has suffered.
What are the consequences of non-compliance with the ACL?
The Australian Competition and Consumer Commission (‘ACCC’) is the body responsible for regulating compliance with the ACL. They have the power to fine businesses up to $10 million for non-compliance. Some common ways that businesses breach the ACL is by:
- issuing contracts that include unfair contract terms;
- misleading consumers about the goods or services they are providing; and
- providing goods or services that fail to meet the consumer guarantees.
Importantly, it is irrelevant if the breach occurred by accident or due to a lack of knowledge regarding the law. Therefore, it is critical that you are aware of your responsibilities under the ACL to avoid a possible breach and the subsequent consequences.
Key takeaways
As your bakery provides goods or services, you must be aware of your obligations and responsibilities under the ACL. Some key areas of the ACL to comply with include the laws concerning:
- unfair contract terms;
- misleading and deceptive conduct; and
- the consumer guarantees.
It is a good idea to create a plan to help ensure compliance with the laws and avoid the often serious consequences that occur due to breaching the ACL. If you are unsure whether your bakery is in breach of the ACL or someone has made a claim against you, you should seek legal advice.
Written by Laini Bennett from Legal Vision