The Australian Consumer Law (ACL) has been very influential on how consumer focused industries operate. It not only applies within Australia but also in an extra territorial fashion in certain circumstances. This is relevant both to your business’ obligations to consumers and in some circumstances you businesses rights as a consumer. We will explore some of these interactions and implications with overseas trading here.
The way the ACL interacts with overseas operations is based on the principle of comity. This requires that there be a relevant connection of ‘nexus’ between Australia and the activities called into question by the ACL. There are 4 main ways the ACL operates extraterritorially. It applies to companies incorporated in Australia, companies carrying on a business within Australia, Australian citizens, and persons ordinarily residing in Australia.
Definition of a Consumer
This is important as businesses can meet the broad definition of a consumer under the ACL. A consumer includes anyone who acquires:
- Goods or services priced at less than $40,000
- Goods or services ordinarily acquired for personal, domestic or household use or consumption (even if priced above $40,000)
- A vehicle or trailer primarily used to transport goods on public roads
In July 2021, the Treasury Laws Amendment (Acquisition as Consumer – Financial Thresholds) Regulations 2020 will increase the above $40,000 threshold to $100,000 to strengthen the protections and guarantees of the ACL and reflect the reality of consumer activities in modern Australia.
If the goods were acquired to be transformed in trade or commerce or for resupply the purchaser is not a consumer under the ACL.
In essence if you are the end user of the goods or services, you are a consumer. Strong rights are granted to consumers under the ACL and this may be to your advantage, especially when ordering online.
A Company Incorporated in Australia
All companies incorporated in Australia are registered with the Australian Securities and Investment Commission (ASIC). The overseas operations of these companies can fall within the bounds of the ACL. However only activities that occur during incorporation in Australia are relevant. Anything before or after incorporation in Australia ceases will not be caught by the provisions.
Importantly it doesn’t matter where the Australian incorporated company is operating from. For instance the USA, the UK, India, wherever. It also does not matter who the company is targeting its overseas trading activities towards. For instance, operating in the UK and mostly targeting residents of the USA.
Companies Carrying on a Business in Australia
A company is generally carrying on a business if they are performing continuous, systematic and repeated commercial activities for a profit. Though it is not always necessary for the purpose to be for profit. One off transactions usually don’t count. The same applies to a small number of isolated transactions. The importance is that it provides a relevant connection to Australian consumers in relation to overseas trading.
Although the majority of the company’s activities may occur overseas, a company can still be carrying on a business in Australia. The company does not need to have a place of business in Australia or an Australian website to be carrying on a business. It also does not matter that a company may only take payment in a foreign currency.
It does not matter that the company in question no longer exists or no longer carries on a business in Australia. Only the circumstances at the time of the activities in question are relevant.
The following circumstances will contribute to establishing a company is carrying on a business in Australia.
- If the company has many customers in Australia.
- Does the company receive ongoing revenue from its customers in Australia.
- While not critical whether the company has significant property and servers for website located in Australia will tend toward carrying on a business.
- Similarly it is relevant if there are servers in Australia configured by an employee that travelled to Australia.
- Relationships and contracts with third party content providers who provide content in Australia are also relevant.
Operating Through Subsidiaries
A subsidiary can also be sufficient to link a company to Australia. This effectively carrying on a business in Australia indirectly. The overseas parent company must control or direct the actions of subsidiary in Australia. A suspicion of influence by the parent company is not enough, even if financial support is provided. The subsidiary generally should be seen as an agent of the parent. This strong connection is required because the law views corporations as distinct legal entities. The law avoids ‘piercing the corporate veil’ to impose a liability on the parent company as it undermines the limited liability advantages of operating as a corporation. Therefore it will only be done in the interests of justice.
Individuals
Australian Citizens
The ACL will apply to the activities of Australian Citizens whether done in Australia or overseas. Similarly to the previous categories it matters that the person was a citizen at the time of the action in question, not before or after. It will also likely apply to people with dual citizenship.
Persons Who Ordinarily Reside in Australia
The word ordinary is important for this category. Someone who is temporarily staying in Australia but will return home is usually not covered. Conversely an Australian resident who is currently living overseas will usually be included. Ordinary residence in Australia is not as concrete as the other categories and may require more evidence. As a guide, someone is likely to be a resident where they habitually, normally and lawfully reside in a place of their choice in a settled way. This definition doesn’t prevent the person also having a permanent residence in another country.
Final Thoughts
The ACL can have profound interactions with your rights an obligations in running a business or as a consumer. Ensuring your business policies account for these when engaging in overseas trading could save your business a lot of headache, expense and wasted time down the track. It is also important to understand your rights as a consumer when purchasing goods or services from overseas as a business or individual. Knowing these rights can reduce risk in some areas of your operations. If you need further advice on the consumer guarantees of the ACL try reaching out to a Competition Lawyer. If you need advice on conducting business overseas, a Business Lawyer will be able to help you understand what is relevant to your circumstances.
