Chrisco’s lay-by terms breach consumer law


Posted By on 18/12/15 at 1:10 PM

In the last quarter of 2015, the ACCC has capped off a busy compliance year by securing judgments, and issuing infringement notices, against several big name brands in relation to various breaches of the Australian Consumer Law. This blog is the first in a series covering these cases, including highlighting the key take away messages. The first one is quite topical, in the lead up to the Festive Season – Chrisco felt some ACCC heat over unfair terms in its lay-by contracts. Enjoy.

Chrisco is well known for its Christmas hampers, with many taking advantage of its lay-by arrangements to help manage the financial impact of the Festive Season.

However, Chrisco came under fire for a condition in its ‘HeadStart Plan’ lay-by terms which stated that customers must ‘opt-out’ to avoid having payments deducted from their accounts after they’d finished paying for their purchase. The terms stated that any excess payments made by a customer would be held and applied towards that customer’s purchase the next year – despite the fact that the customer had not placed such an order. The Indigenous Consumer Assistance Network made the ACCC aware of the practice.

Edelman J concluded, after reviewing the terms of the lay-by contract as a whole, that this particular term was unfair and caused a significant imbalance in the rights and obligations between Chrisco and its customers.

The Court also found that Chrisco breached s97 of the Australian Consumer Law (ACL) by making false or misleading representations to consumers that they could not cancel their lay-by after the final payment had been made. Under the ACL, customers are free to cancel their lay-bys any time prior to delivery. The ACCC further alleged that Chrisco’s termination fees were higher than necessary to meet their reasonable costs, however the court determined that the ACCC was unable to prove this allegation. It was subsequently dismissed.

Nevertheless, this decision is an important reminder that businesses must ensure their contract terms are fair and compliant with the ACL.

ACCC Commissioner, Sara Court, stated “The Court’s findings send a strong message to traders that they must comply with all of their obligations under the Australian Consumer Law, including the unfair contract terms laws that are in place to protect consumers from unfair terms in standard form consumer contracts. Purchasing goods by way of a lay-by agreement is a convenient way to shop for many Australian consumers, particularly in the lead up to Christmas. Businesses that use lay-by as a method of sale need to ensure that they are meeting their ACL obligations to their customers”.

A hearing to determine penalties will likely take place early in the New Year.

UPDATE: On 3 March 2016, the Federal Court ordered Chrisco to pay pecuniary penalties of $200,000.

Paralegal

Naomi is a paralegal in the Competition Law & Regulatory Compliance team, focusing on marketing activations, advertising review and trade promotions compliance.  She joined KHQ after having spent... Read More