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Is Australia’s Consumer Legislation Girt by Sea?

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The question of whether the Australian Consumer Law (“ACL“) and Competition and Consumer Act 2010 (Cth) (“Act“) is enforceable against foreign companies will soon be answered by the Federal Court of Australia.

In August 2014, the Australian Competition and Consumer Commission (“ACCC“) issued proceedings in the Federal Court against Valve Corporation (“Valve“) claiming Valve had contravened the ACL by making misleading representations regarding the ACL’s consumer guarantees (largely based around Valve’s refund policy).

Valve is a company incorporated and registered in the state of Washington in the United States of America, with its office located in Seattle. It does not have an office or any physical presence in Australia.

Valve sells an online gaming program known as the “Steam platform” that is used by over 60 million people across the world. The alleged representations were made through this online platform and are alleged to have been made since the introduction of the ACL (i.e. since 1 January 2011).

The ACCC claims:

  1. Valve supplied its customers in Australia with goods (the software);
  2. In supplying the goods to Australian consumers, Valve made misleading representations in contravention of the ACL regarding the applicability of the ACL consumer guarantees to the goods purchased from Valve, and supplied to consumers through downloading the software;
  3. The misleading representations are alleged to have been made in various documents, online screens and in online chats with Valve staff; and
  4. Australian consumers saw the representations on their computer screens or other electronic devices whilst physically located in Australia.

Valve’s position is:

  1. The conduct did not occur in Australia;
  2. Valve has never carried on a business in Australia;
  3. Valve does not supply ‘goods’, instead it supplies access to an online gaming service via a subscription;
  4. In any event, the proper law in respect of any contract between an Australian consumer and Valve is the law of the state of Washington and therefore the ACL consumer guarantee regime has no application.

The 3-day trial is due to commence on 28 July 2015, and this case is likely to be a landmark decision whichever way it is eventually decided.

The judgment will provide foreign corporations with guidance as to whether, and to what extent, it is necessary to implement compliance systems to ensure they are fully compliant with Australia’s consumer legislation.

This case should be of particular interest to foreign franchisors and franchisees with foreign franchisors. Depending on how the court decides, foreign franchisors may become potentially liable for contraventions of the ACL and the Act, and may be sued in Australia by franchisees and/or the ACCC for contraventions.

For more information or to discuss your regulatory and compliance concerns, please contact our Franchising or Corporate Advisory team by email at franchising@mst.com.au or corporate@mst.com.au or by telephone +61 3 8540 0200.