ACCC v Chrisco Hampers Australia Ltd [2016] FCA 144: Chrisco Fined for Making False or Misleading Representations

Friday 4 March 2016 @ 11.04 a.m. | Trade & Commerce

In a recent judgment handed down by the Federal Court, Chrisco Hampers Australia Ltd (Chrisco) has been ordered to pay a pecuniary penalty of $200,000 for making a false or misleading representation that customers could not cancel a lay-by agreement after making their final payment, in proceedings brought by the Australian Competition and Consumer Commission (ACCC).

Background

The Federal Court has penalised Chrisco for contraventions of the Australian Consumer Law (ACL) [Sch 2 to the Competition and Consumer Act 2010 (Cth)] by making the false or misleading representations to consumers between January 2011 and December 2013.

Protection for Consumers

The ACL provides that consumers have a right to cancel a lay-by agreement at any time prior to delivery of the goods, including after paying their final lay-by instalment.

Findings of the Court

The Court has also found that Chrisco’s 2014 lay-by agreement contained an unfair contract term. The term related to Chrisco’s “HeadStart Plan”, and allowed Chrisco to continue to take payments by direct debit after the consumer had fully paid for their lay-by order. Consumers were required to “opt out” in order to avoid having further payments automatically deducted by Chrisco after their lay-by had been fully paid.

In concluding that this was an unfair contract term, Justice Edelman considered the agreement as a whole, the transparency of the term, and whether the term caused a significant imbalance in the rights and obligations between Chrisco and its customers arising from the agreement.

Co-operation with the ACCC Noted

In his judgment, His Honour also noted Chrisco’s co-operation with the ACCC [para 45]:

Chrisco's co-operation mitigates penalty on its own account as well as being evidence of contrition. There was some dispute about the extent of Chrisco's co-operation. The matters in dispute do not substantially affect penalty. Although Chrisco's co-operation was not absolute, it was still significant.

Reaction from the ACCC

Commenting on the decision in a recent ACCC Media Release, the ACCC Chairman Rod Sims said:

“We understand that making purchases by lay-by agreement is a convenient way for many Australians to shop, particularly for products such as Christmas hampers and presents. The Australian Consumer Law provides that lay-by agreements must be in writing and transparent. Consumers have termination rights at any time before the delivery of the goods, subject to a reasonable termination charge in some circumstances. The importance of the penalty imposed by the Court against Chrisco is that it sends a strong message to businesses using lay-by as a method of sale that they must meet all of their ACL obligations, and do not mislead consumers about their rights.”

Comment from Chrisco

Chrisco's lawyers argued that a $600,000 fine was well in excess of any profit made from the offending behaviour. Chrisco supplies goods to consumers in most areas of Australia, including regional areas and remote Indigenous communities. The ACCC became aware of concerns regarding Chrisco’s lay-by agreements during a meeting with the Indigenous Consumer Assistance Network on North Queensland’s Palm Island, as part of the ACCC’s Indigenous consumer protection and outreach work.

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Sources:

ACCC v Chrisco Hampers Australia Limited [2016] FCA 144 (1 March 2016)

Christmas hamper company Chrisco fined $200,000 for consumer law breach – abc.net.au

Chrisco ordered to pay $200,000 penalty for making a false or misleading lay-by representation – ACCC Release MR 24/16 

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