Read it and weep – Booktopia’s $6 million penalty!

The recent decision of the Federal Court of Australia in the New South Wales Registry has ordered that Booktopia Pty Ltd (Booktopia), one of Australia’s largest online book retailers, pay $6 million in penalties for making false or misleading representations about consumer guarantee rights within its terms and conditions and its direct dealings with consumers.

What happened?

In December 2021, the Australian Competition and Consumer Commission (ACCC) instituted proceedings against Booktopia alleging that the following representations on Booktopia’s terms of business (Terms of Business), website and customer service centres were a breach of the Australian Consumer Laws (ACL):

1. consumers were required to notify Booktopia of a faulty, damaged or incorrect product within two days from the time the delivery was made to have any right to a refund or other remedy (Two Business Days Term);
2. consumers had no right to refunds on certain products, including eBooks, digital content or bulk orders where special pricing were provided as non-refundable, under any circumstances (No Return and No Refund Term); and
3. Booktopia’s customer service staff made direct representations to consumers that they did not have an obligation to remedy where those consumers had failed to contact Booktopia within two days of delivery, even where the product was not of acceptable quality or fit for purpose (No Obligation to Remedy Representations).

The ACCC sought relief which included declarations, pecuniary penalties, a publication order, compliance orders and costs.

Booktopia’s consumer representations

During the period between 10 January 2020 to 2 November 2021, by publishing the Two Business Day Term and the No Return and No Refund Term, Booktopia represented to its consumers that such strict procedures were required to be followed in order for a consumer to have a right to a remedy. The ACCC argued that consumers had a right to a remedy beyond those two business days from delivery and may have had a right to a refund under the ACL. As such, the ACCC alleged that Booktopia could not impose those terms by virtue of the following:

1. sections 54 and 55 of the ACL, which provide consumer guarantees as to acceptable quality and fitness for purpose;
2. with respect to the Two Business Day Term, sections 259 and 263 of the ACL, which provide consumers with rights to a remedy for goods that do not comply with the consumer guarantees;
3. with respect to the No Return and No Refund Term, sections 259(2) and 259(3) of the ACL, which provide consumers with the right to obtain a refund pursuant to section 263(4) of the ACL as against Booktopia (in some circumstances) as a supplier;
4. having regard to sections 64 and 276 of the ACL, Booktopia could not exclude, restrict or modify the availability of the consumer guarantees or a consumer’s entitlement to exercise the rights to a remedy for goods that do not comply with the consumer guarantees; and
5. with respect to the Two Business Day Term, the requisite of two business days from delivery is not, or may not be, a reasonable period within the meaning of that term in sections 262 and 259 of the ACL.

Additionally, during the period of 23 April 2020 to 5 January 2021, the ACCC identified 19 consumer interactions where Booktopia’s customer service centres made No Obligation to Remedy Representations. In those consumer interactions, Booktopia represented that it was not obliged to provide a remedy because the consumer had failed to contact Booktopia within two business days of delivery. The No Obligation to Remedy Representations were made irrespective of whether the product was of acceptable quality¹ or fit for purpose.² As a result of Booktopia’s conduct with consumers seeking relief, the No Obligation to Remedy Representation likely constituted a false or misleading statement and misleading or deceptive conduct.

Decision

On 10 March 2023, the Court ordered Booktopia to comply with the following penalties:

1. pay a pecuniary penalty in the amount of $6 million;
2. publish a corrective notice on the Booktopia website homepage acknowledging the misleading statements by Booktopia and the consumers who may seek a remedy as a result of Booktopia’s conduct;
3. establish, within ninety days of the date of the order, a Consumer Law Compliance Program which is to be maintained for three years from the date of establishment; and
4. pay the ACCC’s costs of, and incidental to, the proceeding, fixed in the amount of $75,000.

ACL breaches

The grounds under which the ACCC sought relief in the court action were under sections 18 and 29(1)(m) of the ACL. According to the ACCC’s concise statement:

“On each occasion of making each of the Two Business Days Representations, No Refund Representations and No Obligation to Remedy Representations, Booktopia;

(a) engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of section 18(1); and

(b) made a false or misleading representation concerning the existence or effect of consumers’ rights, in contravention of section 29(1)(m) of the ACL.”³

Importantly, the ACCC argued these grounds even though Booktopia’s Terms of Business had an overarching clause in them, that the terms “included rights that the consumer was entitled to under the Australian Consumer Law” (ACL Statement).

Important take-aways

The ACL is responsible for protecting consumers’ right to remedies, particularly where the goods do not meet consumer guarantees, including acceptable quality⁴ and fitness for purpose.⁵ These rights should not and cannot be excluded, restricted or modified by a business’ terms or conduct and the ACCC is continually monitoring businesses and their compliance with the ACL.

Businesses should also be aware of the risk when specifying a time for advising on a fault before a consumer loses their right to a remedy. It is important that such period is reasonable to expect the relevant fault to become apparent.

The ACCC will not be content with terms and conditions that include a vague or confusing reference to rights that consumers are entitled to under the ACL, particularly when conduct and representations contradict those rights. This is evident in Booktopia’s ACL Statement within their Terms of Business which was not sufficient to displace section 29(1)(m) of the ACL.

Despite the difficulty in quantifying the number of Australian consumers that may have been deterred from exercising their rights under the ACL in this case, the penalties against Booktopia are a reminder that breaches of the ACL are taken seriously and can have severe results, particularly to a business’s reputation and brand.

How can we help?

We have a dedicated contracting and consumer law team that can assist you with the preparation and review of your terms and conditions to ensure that you are complying with your obligations under the ACL. If you would like more information about the services we provide, please contact us.

This article was written by Teresa Torcasio, Partner and Alexandra Youn, Law Graduate.

¹Competition and Consumer Act 2010 (Cth), Schedule 2 (ACL) s54.
²ACL, s55.
³Concise Statement NSD1292/2021 dated 10/12/2021, paragraph 21.
⁴ACL, s54.
⁵ACL, s55.