Competition and Consumer Law update: Cancellations, suspensions and delays in the time of pandemic — the ACCC weighs in on your rights and obligations

Is your business having difficulty meeting its obligations under your agreements with customers due to COVID-19? Or perhaps you are a customer (whether an individual or company) wanting to get out of (or cancel or delay performance of) agreements with suppliers?

The Australian Competition and Consumer Commission (ACCC) has given new guidance on the rights and obligations of consumers and businesses under the Australian Consumer Law when it comes to cancellations, suspensions and delays in the provision of goods and services during these troubled times.

The ACCC’s guidance covers a number of other issues relating to cancellation of functions and events, supply and pricing issues and country of origin labelling.

While its guidance is limited to ‘consumer agreements’, this is a deceptively wide term, potentially covering any agreements for the supply of goods or services up to a value of $40,000, whether the ‘consumer’ is an individual or company.

Overarching obligations for businesses

The ACCC is encouraging businesses to proactively contact customers to advise them of how they are handling current issues.

It also urges suppliers to be mindful of obligations under the Australian Consumer Law:

• to not mislead customers, including about what they are entitled to under the business’ terms and conditions;
• to not act unconscionably when dealing with their customers; and
• to not seek to rely on ‘unfair terms’ in ‘standard form’ contracts.

While contractual terms are obviously key, ultimately, the strict terms of an agreement may not be enforceable in these times.

Specific questions

Some of the issues the ACCC addresses include:

• Are businesses required to provide refunds for events that are cancelled due to government restrictions on public gatherings? [In a nutshell, in many cases, the answer is probably not, but some accommodations should be made, such as providing a partial refund, a credit note or voucher, or postponing the services until a later date if possible.]
• Is a business entitled to retain a deposit or upfront payment if services are cancelled due to COVID-19? [It depends. In some cases, even if the agreement permits this, the term enabling the business to retain these payments may be considered ‘unfair’ and unenforceable, although the business may be entitled to recover its reasonable costs.]
• If a business is encountering problems with supply of goods, must it give a refund to customers? [Usually, yes.]
• Can a business increase its prices for goods that are in high demand? [Generally, yes, as long as doing so is not ‘unconscionable’, which will only be the case in limited circumstances.]
• Are businesses required to relabel goods to show the new country of origin if that has changed due to supply chain issues? [Businesses must use their best endeavours to communicate to consumers in an effective way when there have been changes in the manufacturing process or supply chain changes for ingredients.]

There can be other factors at play (such as the doctrines of ‘frustration of contract’ and ‘force majeure’) which also need to be taken into account when determining the full legal position.

More information

For more information, or advice on your rights and obligations on contracts with your customers, your suppliers or other businesses during the time of COVID-19 (whether agreements are ‘consumer agreements’ or otherwise), please contact:

Author

This Competition and Consumer Law update was authored by Daniel Kovacs, Principal Lawyer.

Note: This update is a guide only and is not intended to constitute legal advice.