Contracts

Some businesses may claim to carry on no operations in Australia whilst simultaneously providing goods and services to Australian consumers. Such businesses often make provisions in contracts with consumers declaring the applicable law to be that of another country. However, as was highlighted in the case of ACCC v Valve Corporation (No 3) [2016] FCA 196 in the Federal Court, such clauses may be ineffective to displace the legislative protections afforded to Australian buyers under the Australian Consumer Law (ACL).

A. Facts of ACCC v Valve Corporation

Valve is an American software company that runs the digital computer game marketplace known as Steam. Through its Steam Terms and Conditions, as well as its Refund Policy, Valve claimed that it offered no refunds under any circumstances. The ACCC alleged that the statutory requirement that goods be of “acceptable quality” applied to Valve and further, that Valve had made “misleading and deceptive” statements regarding its consumer law obligations in contravention of the ACL. Valve argued in response that it did not carry on business in Australia and furthermore, even if it did, it had excluded the operation of the ACL via a provision in its Terms and Conditions stating that any disputes were governed by the laws of Washington State. Valve also argued that it simply granted a license to users to use its software and as such, did not “supply” goods.

B. Relevant Provisions Under the Australian Consumer Law

Section 29(1)(m) of the Australian Consumer Law prohibits misleading or deceptive conduct with regard to “the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy”. Section 54 outlines the requirement that goods supplied in trade or commerce will be of “acceptable quality”. Subsection 2 lists the features of goods that are of acceptable quality. Section 67 states that where a contract for the supply of goods or services to a consumer contains a clause that purports to substitute the law of another country for the provisions of the laws of Australia, the ACL remains applicable. Section 131(1) of the Competition and Consumer Act (the Act that contains the ACL) states that the ACL applies to corporate “conduct”.

C. Judgement in ACCC v Valve Corporation

The Court held in favour of the ACCC on most points, only finding in favour of Valve that its customer service representatives did not engage in misleading or deceptive conduct by repeating the claims made in the Terms of Service and Refund Policy.

The Court decided that Valve was involved in supplying software and by extension, goods to Australian consumers. The significant involvement Valve had in the Australian market (including business and property links) demonstrated that Valve was carrying on business in Australia. Notably, the Court determined that Valve’s attempt to displace the operation of the ACL was ineffective due to the operation of the ACL’s section 67. This has important implications for companies based overseas that provide goods and services to Australian consumers. The consumer guarantees under the ACL cannot be excluded so long as there is enough for a court to find that the supplier is engaged in conduct in the Australian marketplace sufficient to enforce the statutory provisions. That the court was willing to construe a license to use computer gaming software as a supply of goods demonstrates the importance for companies to maintain a steadfast commitment to meeting their obligations under the ACL. Goods supplied in the Australian market must be of acceptable quality and sellers must not engage in misleading or deceptive conduct as to the remedies available to consumers whose products are not of such quality.

The ACCC v Valve Corporation (No 3) serves as a cautionary tale to companies that sell to Australian buyers to meet two criteria – firstly, to be clear on whether or not they are doing business in Australia for the purposes of the ACL and secondly, if they are, to remain in compliance with their obligations at all times.

For more Competition and Consumer Law check out our articles on the Flight Centre Case, the NYK Case and the Tort of Passing Off.

This article was authorised by Warwick Heeson.

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