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The recent decision of the Full Court of the Federal Court in ACCC v Lux is unsurprising in so far as it confirms that the issue of whether conduct is unconscionable under the Australian Consumer Law (ACL) will depend on an assessment of all of the surrounding circumstances.
The critical issue is how that assessment is undertaken and by whom.
The ACCC v Lux case demonstrates that while one court may find that conduct is unconscionable under the ACL, another court may consider that the same set of facts constitutes conduct that is nothing but a sharp and legitimate business practice. Judges' views may reasonably differ on the relative bargaining strengths of the parties, whether conduct is reasonably necessary to protect legitimate commercial interests, the extent of unfair tactics, the implications of breaching other statutory provisions and a party's good faith.
Further, the issue of whether unconscionable conduct requires a degree of "moral tainting" has also been questioned. The decision in ACCC v Lux suggests that such a requirement may be unnecessary - potentially broadening the scope of the prohibition.
As part of its usual business practice, Lux telephoned a number of elderly women (who were existing customers) to offer them an in-home "free maintenance check" of their existing vacuum cleaners.
While the primary purpose of undertaking the maintenance check was to be in a position to sell the women a new vacuum cleaner, this was not disclosed to them on the telephone.
On attending the homes of the elderly women, Lux conducted a check of their existing vacuum cleaners and then suggested that a new vacuum cleaner would operate better. The "in home" visits took about 1.5 hours and each of the women ultimately purchased a new vacuum cleaner for $1999 or more.
The trial judge (Justice Jessup) found that Lux's conduct was, on the whole, "quite benign" and did not possess sufficient "moral tainting" to amount to unconscionable conduct.
His Honour was influenced by the following factors:
In a starkly different judgment, the Full Court of the Federal Court (Chief Justice Allsop and Justices Jacobson and Gordon) unanimously held that Lux's conduct was unconscionable in contravention of the ACL.
The Full Court held (on the same set of facts):
The Full Court considered that according to acceptable community values of honesty and fairness in dealing with consumers, Lux's conduct, in all the circumstances, constituted unconscionable conduct. It did not require a degree of moral tainting in making this finding.
To the extent that your company potentially engages in any sharp business practices, you should:
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