The recent government webinar – getting your business ready for the 2016/2017 financial year

Just in case you missed the recent webinar held by representatives from the ATO, ACCC, ASIC and Fair Work Ombudsman, here is the list of important links shown as part of the above webinar:

Question

Fair Work Ombudsman:

Australian Competition & Consumer Commission: B2B UCT (Business To Business Unfair Contract Terms)

Excessive card surcharging

Scams

Australian Securities & Investments Commission:

Australian Taxation Office:

New country of origin food labelling from 1 July

Businesses that sell food in retail stores in Australia need to know about the new country of origin food labelling laws which will apply from 1 July 2016.

The new requirements regarding country of origin food labelling will vary depending on:

  • the type of food product and
  • whether it was grown, produced, made or packed in Australia or another country.

Even though the new laws come into effect from 1 July, there is a period of 2 years within which businesses will have the time to implement the changes – so products that are packaged up until 1 July 2018 will still be able to contain labelling that complies with the previous legal requirements under the Food Standards Code (administered by Food Standards Australia New Zealand).

What businesses (and consumers!) need to knowMade in Australia

  • All food that currently needs to be labelled with a country of origin will continue to do so.
  • Most food that is made, produced or grown in Australia will need to carry a label that also includes a kangaroo symbol, as well as text and a bar chart indicating the percentage of Australian ingredients.
  • Labels for most products packed in Australia that contain imported foods which have undergone no or only minor processing in Australia will carry a ‘packed’ statement, as well as text and a bar chart indicating the percentage of Australian ingredients. They will not carry the kangaroo symbol.
  • Imported food will continue to show where it was grown, produced, made. If the food was not grown, produced or made in a single country it will need to indicate where it was packed and that it is of multiple origins or comprises imported ingredients.

What other businesses need to know this information?

As well as the actual manufacturers, importers, distributors and retailers of the food products, this information is crucial for anyone involved in the package design and marketing of the products (such as graphic designers and marketing).

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Contact the team at Shire Legal on 95263444 or info@shirelegal.com.au if you have any questions about the new requirements, or any other aspect of consumer laws.

Smaller businesses are not immune from the ACCC

So, as a smaller business, do you think you are immune from the wrath of the ACCC?  Think again.

In recent months, the ACCC has been successful with the following enforcement action:

  • Omniblend Pty Ltd – an online retailer of kitchen applicances – found guilty of resale price maintenance in the Federal Court (penalty of $17,500)
  • Conroys Pty Ltd – a bacon supplier – given an infringement notice for making a false and misleading representation regarding the country of origin of its bacon products (labelled as a product of Australia, when it was in fact made from imported pig meat) ($10,200)
  • Kailis Bros Pty Ltd – manufacturer of frozen prawn meat – were issued with an infringement notice alleging false and misleading conduct by suggesting that the prawns were caught, processed and packaged in Australia, when they were in fact packed and processed in Thailand ($10,800)
  • A Whistle & Co (1979) Pty Ltd – an Electrodry franchisor – engaged in false and misleading conduct by publishing false testimonials on its website (total penalties of $215,000)
  • Clews Holdings Pty Ltd and D Burnz Investments Pty Ltd – retailers of adjustable beds and mobility products – were both issued infringement notices alleging false and misleading representations, by suggesting that the products were approved by the Therapeutic Goods Administration (when they were not) and that they complied with the relevant Australian Standard (when no such standard exists) (penalty of $20,400 each)
  • Clinica Internationale Pty Ltd and Mr Radovan Montague – offered programs for migrants seeking permanent residency – found guilty of false and misleading representations and unconscionable conduct (penalties totalling $1,025,000)
  • Derodi Pty Ltd and Holland Farms Pty Ltd (trading as Free Range Egg Farms) – found guilty of false and misleading representations regarding its claims of its eggs being “free range” (penalty of $300,000)

So if you are concerned that your packaging and/or marketing material may convey a false or misleading representation about your product/service, or if you are concerned about the sales tactics used to sell your product/service, contact Melissa Lammers at Shire Legal to discuss your concerns.

What does it mean to be proactive, rather than reactive?

We have all heard of the saying – “be proactive, rather than reactive” – but what does that actually mean, particularly when you are talking in the context of a legal firm? It means taking steps sooner rather than later to avoid issues arising, rather than only taking steps once the issue has arisen – which usually takes more time, money and worry. In the legal context, this can best be demonstrated by looking at some of the issues we have dealt with in recent years, issues which could have been avoided if the client had their legal affairs in order at the start:

Situation 1OTP An employer was in dispute with an employee as to what the employee’s entitlements were.  The employee claimed that ….  How could this have been avoided?  By having a customised employment agreement drawn up and signed off by both parties at the time that the employee commenced. Commercial

Situation 2 After operating her business successfully for a period of years, a client allowed her sister to start working in the business as well, and after a short time, transferred ownership of the business name to her sister, and also allowed her to operate the bank account.  The client had a falling out with her sister, following which her sister proceeded to operate her own business under the same trading name, took some of the business’ core equipment, and continued to draw monies out of the bank account.  Neither the client nor the sister knew how to resolve the dispute between them.  How could this have been avoided?  By having a partnership agreement drawn up between them, they could set out the circumstances within which the partnership would come to an end, and what steps would need to be taken to those circumstances.

Situation 3ACCC A client was challenged by the ACCC about the labelling on its product.  How could this have been avoided?  By having a specialist lawyer review and approve the proposed labelling before it went into production.  The review would ensure compliance with labelling requirements regarding:

CommercialSituation 4 At the end of the fixed term of the franchise agreement, the franchisee was unsure as to whether or not they should renew the franchise agreement for a further term.  In the meantime, the franchisee continued to operate the franchised business, giving the franchisor the impression that the franchise had been renewed (although documents had not been signed).  When the franchisee decided to exit the franchise, the franchisor attempted to bind the franchisee to the terms of the franchise agreement, and sought damages.  How could this have been avoided? By approaching a specialist franchise lawyer at the end of the fixed period, the franchisee could have been guided as to what to do and not to do, to preserve their rights regarding the agreement, and to avoid creating the impression that the franchise agreement was continuing.

Situation 5 A client entered into negotiations with a prospective purchaser of its business, and subsequently signed off on a 1 page document by which the client agreed to sell the business to the purchaser for a fixed price.  This created a number of issues – the real asset to be sold was not the business as such, but the client’s shares in a Pty Ltd company which owned the business.  The lease was in the company’s name, and any change in control of the company lessee required the landlord’s approval.  Some of the business assets were under lease, and not owned by the company as such.  Although the client and the purchaser had negotiated to settle the deal within a matter of days, the matter eventually settled after a number of months because of the numerous issues to be dealt with.  How could this have been avoided?  By contacting lawyers at first instance, the 1 page document could have been drafted with the correct details and with the correct procedures, ensuring that the deal was negotiated and settled within a reasonable time frame and with correct documentation in place.

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Statements like “I don’t need a lawyer” or “I haven’t got the time/energy/money to get a lawyer involved in this” could end up costing you more time/energy/money in the long run.

Please contact the team at Shire Legal to discuss your situation and see how we can help you to minimise the time/energy/money spent in resolving any issues you may have.

Have you lay-byed a Christmas hamper from Chrisco?

GavelThe Australian Competition & Consumer Commission (ACCC) commenced proceedings against Chrisco Hampers Australia Ltd (Chrisco) in the Federal Court almost 12 months ago, alleging that the lay-by agreement for its Christmas hampers was unfair.

The Federal Court has just handed down its decision – and agreed that the lay-by agreement used in 2014 contained an unfair contract term relating to the “HeadStart Plan”, which allowed Chrisco to continue to take payments by direct debit after the customer had fully paid for their order.  The direct debits would only stop if the customer took the required steps to “opt out” of the payment plan.

The Court noted that the term caused a significant imbalance in the rights and obligations between Chrisco and its customers.

The Court also held that Chrisco made a false or misleading representation by stating to customers that they could not cancel their lay-by agreement after making the final payment – when in fact the law provides that a lay-by agreement can be cancelled at any time prior to delivery of the goods.

The ACCC also alleged that Chrisco breached the lay-by laws that require any termination charges imposed on the customer must be reasonable, and certainly no more than the reasonable costs incurred by the supplier.  The Court held that the ACCC did not prove this point.

Further information about your rights with lay-by agreements is available on the ACCC’s website.

Have you entered into an unfair contract?

Have you ever entered into a business contract which you think is unfair? Was it a standard form contract which offered plenty of protection for one party but not the other? Smaller businesses now have protection from unfair contracts under laws which were introduced on 12 November 2015.

Which contracts will the law apply to?

The laws will apply to standard form contracts (that is, where the terms and conditions are set by one party with no negotiation) entered into or renewed on or after 12 November 2016 where:

  • at least one of the businesses employs less than 20 people,
  • the price of the contract is no more than $300 000, or $1 million if the contract is for more than 12 months, and
  • the contract relates to the supply of goods or services (including financial goods or services), or the sale or grant of an interest in land.

It does not matter whether the smaller business is the customer or the supplier – the laws apply equally.

The ACCC, Australian Securities and Investments Commission, and state and territory offices of fair trading will enforce this law.

Which contracts will the law specifically NOT apply to?

The laws will not apply to the following types of contracts:

  • contract of marine salvage or towing
  • charterparty of a ship
  • contract for the carriage of goods by ship
  • constitution of a company, managed investment scheme or other kind of body
  • small business contract that is covered by Commonwealth, state or territory law that is prescribed by the regulations.

 How do I know if a contract is unfair? 

Ask yourself:

  • does the contract allow one business, but not the other, to change or cancel the contract, or to limit or avoid their obligations
  • does the contract penalise one business, but not the other, for breaching the contract?
  • are there terms within the contract that are not reasonably necessary to protect the stronger business?

If so, then it may be considered an unfair contract.

But we have plenty of standard form contracts which we give to all of our customers and suppliers!

We suggest that you:

  • know your customers/suppliers – so you know whether they fall within the definition of smaller business. Ask questions!
  •  review your contracts with smaller businesses as a matter of priority, so that you can ensure that your contracts are fair, and you avoid investigation by ACCC, ASIC and/or Fair Trading. If your contracts do contain terms that may be considered unfair, then consider how important the terms in that contract are to your business and whether the terms protect your legitimate business interests.
  • consider structuring the value of the contract so that you exceed the monetary threshold
  • consider developing a separate set of contracts for smaller business clients, and another set of contracts for other business clients – if you are in the transport industry, develop a separate set of contracts for shipping contracts (being an excluded contract).

The law will only apply to contracts entered into or renewed from 12 November 2016, so there is approximately 12 months for you to review and amend your standard form contracts if required.

What can we do if we believe that our small business has entered into an unfair contract?

Whilst having an unfair term in a contract is not an offence (meaning that no pecuniary penalties apply), the smaller business has the right to commence court proceedings against the other business to apply for orders that part of the contract is set aside (that is, declared void) or varied (that is, changed so that it is fair).

If the other business attempts to enforce the unfair term(s) against the smaller business, then the smaller business could seek compensation from the Court.

Of course, it is always our recommendation that if you believe that you have rights against another party, obtain legal advice first, then attempt to negotiate a resolution to the issue without rushing off to Court.

Alleged misrepresentations and unconscionability in the training industry

The ACCC has commenced proceedings in the Federal Court against a training college which offered VET FEE-HELP Diploma courses,costing from $18,000 to $21,000 per course.ACCC

It is alleged that:

False or misleading representations

  • between January and October 2015, Phoenix Institute of Australia Pty Ltd and Community Training Initiatives Pty Ltd (through the trading name “Mytime Learning“) enrolled more than 9,000 students in 17,000 courses and received in excess of $100 million from the Commonwealth for those enrolments.
  • Phoenix represented to prospective students that:
    • they would receive a free laptop; and
    • the course(s) were free – or free if the student did not earn approximately more than $50,000 per annum.

In fact:

  • the laptop was received on loan; and
  • the course(s) incurred a VET FEE-HELP debt payable to the Commonwealth Government, with repayment commencing once the student earned more than a particular amount ($54,126 in the 2014-2015 income year).

Unconscionable conduct

  • The enrolment process targeted vulnerable groups, such as consumers from low-socioeconomic background and consumers with intellectual disabilities
  • The courses were online, requiring a computer and ability to email, something which was difficult for many of the enrolled students to comply with.

The ACCC is seeking orders cancelling the VET FEE-HELP debts and pecuniary penalties.  The ACCC and the Commonwealth are seeking:

  • declarations,
  • injunctions,
  • orders for the repayment of course fees paid by the Commonwealth to Phoenix
  • corrective notices
  • orders requiring the implementation of a consumer law compliance program
  • costs.

The matter will be first heard in the Federal Court on 15 December 2015.