How Australian Consumer Law applies to call centres and complaints divisions

On 5 June 2020, the Federal Court in ACCC v Sony Interactive Entertainment Network Europe Limited (Sony) [2020] FCA 787 ordered Sony to pay $3.5 million in pecuniary penalties because, amongst other conduct, its call centres made misleading representations to five consumers about their rights to obtain a refund in relation to digital game purchases.

What you need to know

This case (and a spate of recent similar decisions) reinforces a critical issue for companies that have call centres or complaints divisions – do they know what they can and cannot say under the Australian Consumer Law (ACL)?  One false or misleading statement to even one consumer could result in ACCC action, penalties and costly compliance programs.

As consumers increasingly interact with companies online or via chat or telephone (especially in light of the current health pandemic), compliance training and legally approved scripts for call centres and complaints divisions are crucial to minimise risk.  This is particularly the case given the significant penalties for saying the wrong thing about consumer rights, the high turnover rate of call centre teams and the ACCC’s continued preparedness to take these cases to court without requiring evidence of loss or damage.

The Sony decision

Sony admitted to making the following false or misleading representations to consumers in respect of their rights under the ACL:

1. via the Terms of Service for accessing the PlayStation Network (PSN), that PSN users did not have certain guarantees for purchased digital games  – when under the ACL, certain guarantees are implied into consumer transactions;
2. via a statement made at the time of purchase in an email to customers, that PSN users could not obtain a refund of money added to their PSN virtual wallet (used to purchase products from the PlayStation Store) – when under the ACL, consumers have rights to refunds in certain circumstances; and
3. via verbal statements made by PlayStation Support Centre staff, that:
   1. refunds for faulty games could only be made if the customer obtained authorisation for the refund from the game publisher or developer;
   2. Sony was not required to provide refunds for faulty games after 14 days of purchase or if the game had been downloaded; and
   3. Sony was not required to provide refunds for faulty games in any form other than a credit to the customer’s PSN wallet,

when under the ACL, consumers are entitled to a refund directly from Sony, there is no 14-day limit for refunds, and consumers have rights to refunds in certain circumstances.          

Evidence of the number of times that each of the written representations were made was neither provided nor required.  In terms of the call centre representations, some of these were only made to one customer throughout its dealings with, presumably, one staff member. 

In addition to the $3.5 million pecuniary penalty, the Court ordered that Sony pay $100,000 towards the ACCC’s costs and publish an Australian consumer rights notice on its website.

Earlier decisions 

ACCC v LG Electronics Australia Pty Ltd [2018] FCAFC 96

In 2015, the ACCC brought proceedings against LG for making various false or misleading representations to consumers, retailers and repairers as to their rights under the ACL.  Although the ACCC was initially unsuccessful, on appeal, the Full Court found that LG’s customer call centre made two false representations that the consumer guarantees did not exist for televisions which became faulty outside of the LG warranty period.  LG falsely represented to two customers that there was nothing LG could do in respect of the fault, adding in one instance, that the customer had to pay for the repairs themselves.  Under the ACL however, consumers had rights to certain remedies in certain circumstances.

Such representations were made to two customers by four call centre representatives, which were described as “low-level customer service agents”.  However, there was no evidence that either of the two customers were misled (in fact, they were aware of their rights under the ACL) and neither customer suffered any loss or damage, as LG paid for the repairs in both instances.

The Court ordered LG to pay $160,000 in pecuniary penalties and 40% of the ACCC’s costs.

ACCC v Valve Corporation (No 3) [2016] FCA 196

In 2014, the ACCC commenced proceedings against Valve Corporation, the operator of popular online computer game platform, ‘Steam’, for making nine misleading representations about consumer guarantees.  The ACCC alleged that the representations were made via the Steam Subscriber Agreement, the Steam Refund Policies shown on the website, and separate online chat communications between Steam support staff and three consumers.  Broadly, the representations related to customers not being able to obtain refunds for digitally downloaded video games purchased from Stream and the exclusion of certain statutory guarantees. 

The Court found that Valve Corporation had made misleading representations in contravention of the ACL.  While there was no evidence of any loss or damage or consumers being misled, it was conceived that a loss might have arisen if a consumer was deterred from seeking a refund, despite being entitled to do so.

The Court ordered Valve Corporation to pay $3 million in pecuniary penalties and 75% of the ACCC’s costs, and to publish an Australian consumer rights notice on its website.      

What you should do now

• Ensure your ACL compliance training materials are comprehensive and up to date especially in relation to consumer rights under the ACL;
• Ensure all phone and online chat scripts, email templates and other guidance for staff relating to customer complaints strictly comply with the ACL; and
• Ensure arrangements are in place to train new starters about compliance on induction.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).