ACCC hails ‘unconscionable conduct’ court win

ACCC says new court ruling will open the way for more cases targeting big firms which exploit small businesses or consumers.

ACCC chair Rod Sims says the court ruling is an ‘extremely important decision’ for consumers and businesses. Picture: Sean Davey.

The Australian Competition and Consumer Commission has won a landmark Federal Court ruling on the definition of unconscionable conduct, noting it is the conduct which is the key — not the victim.

The Full Federal Court ruling in the Quantum case follows a High Court ruling in the Lindsay Kobelt case, which was interpreted as suggesting victims need to be under special disadvantage to win a case.

In its ruling, the Full Federal Court upheld an appeal by the ACCC and declared that Quantum Housing Group engaged in an unconscionable system of conduct in its dealings with investors regarding the National Rental Affordability Scheme.

ACCC chair Rod Sims declared it an “extremely important decision” for consumers and businesses.

The decision means the ACCC can launch unconscionable conduct cases where big business exploits small businesses or consumers.

ACCC chief Rod Sims has long said the courts give him a hard time in restrictive trade practices actions but on Monday welcomed the decision by the court led by Chief Justice James Allsop is a welcome victory.

Mr Sims had flagged legislative changes if this decision went against him.

In a statement he said: “The Full Court has made clear that for conduct to be held to be ‘unconscionable’ under the Australian Consumer Law and other similar laws, it is not necessary to establish that the business engaging in the conduct has exploited some disadvantage or vulnerability on the part of the consumers or small businesses affected, although this may often be the case.

“The Full Court has confirmed that the correct approach to assessing statutory unconscionability is to focus on the conduct, and assess whether it is a sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience,” Mr Sims said.

“The Full Court has confirmed that the correct approach to assessing statutory unconscionability is to focus on the conduct, and assess whether it is a sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience.”

Mr Sims added that “because this decision makes it clear that it is not necessary to demonstrate exploitation of vulnerability, it extends the reach of the statutory unconscionable conduct prohibition so that it will protect more consumers and small businesses against egregious conduct by corporations.”

In its proceedings against Quantum, the ACCC alleged that Quantum made false or misleading representations and engaged in systemic unconscionable conduct by pressuring investors in the NRAS to terminate agreements with their existing property managers and engage a property manager approved by Quantum.

Quantum failed to tell investors that it had commercial links with the property managers it recommended.

In June 2020, the Court declared that Quantum had made false or misleading representations, but was not satisfied that its conduct was within the statutory notion of unconscionable conduct because it had not been demonstrated that the investors were at a disadvantage or had some vulnerability which had been exploited by Quantum.