In a ground-breaking case, the Full Federal Court has deemed a vacuum cleaner business acted “unconscionably” when selling vacuum cleaners to five elderly people, with the decision labelled a win for consumer law.
The case is the first of its kind, as unconscionable conduct cases against salespeople have a history of being struck down – and experts now say businesses need to get their employees up to speed.
Hall and Wilcox partner Ben Hamilton told SmartCompany businesses using sales representatives come across a myriad of consumer law issues they could potentially breach – and the case makes the issue even more urgent.
“You need to implement compliance training programs and make sure everyone in the organisation is aware of the obligations under the Competition and Consumer Act,” he says.
This is the second ruling for the case against Lux Distributors. In February this year, Federal Court Justice Jessop had dismissed the Australian Competition and Consumer Commission’s claims.
Hamilton says the case is the first of its kind, as the court has shown “the norms and standards of today’s business practices need to be recognised”.
“Unconscionablity had been part of the Trade Practices Act and now Australian Consumer Law and it’s been in the act for some time. When it was first brought in it was thought it would be relied on a lot, but cases where it’s been alleged haven’t been successful.”
In a statement from the ACCC, chairman Rod Sims says the court’s decision represents a positive outcome for consumers and a warning to businesses.
“This is a significant decision for the ACCC as it provides important clarity regarding the scope and operation of the unconscionable conduct provisions in the ACL,” Sims says.
The ACCC alleged between 2009 and 2011, Lux representatives acted unconscionably when they called upon five elderly women in their homes under the premise of a free vacuum cleaner maintenance check.
“Each woman was then subjected to unfair and pressuring sales tactics to induce them into purchasing a vacuum cleaner for a price of up to $2280,” a statement from the ACCC says.
In the judgment of the case, the court found: “The norms and standards of today require businesses who wish to gain access to the homes of people for extended selling opportunities to exhibit honesty and openness in what they are doing, and not apply deceptive ruses to gain entry.”
Hamilton says the term “unconscionable conduct” is not actually defined by law, but encompasses a wide array of factors which the courts consider, including “the relative strength of the bargaining decision, whether or not the person understands the nature of the contract, whether undue influence or pressure was used and unfair tactics”.
“The idea is if you took unconscionability aside, the consumers would be bound by a contract, but with the unconscionability aspect this cuts through the contract and says it’s not enforceable, protecting the consumer,” he says.
A spokesperson for Lux told SmartCompany the company is “disappointed by the decision” and it’s considering an appeal.