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No Wiggle room for offshore online retailers selling in Australia

Nigel Morris-Co...

It might not look much but Australia has just thrown a huge spanner in the works of international internet retailers who want to operate in their market. Whether it sets a precedent remains to be seen but, if so, cheap goods sent from overseas might have to be a lot less cheap. At the heart of this is unproven conduct by Wiggle Limited, a UK company, which the Australian Consumer and Competition Commission (ACCC) found to be in breach of Australian law. This is a significant extra-territorial application of domestic law - and it also interferes with the right to include a choice of law and choice of jurisdiction clauses in international contracts. And as if that's not enough, the ripples reach into call-centre operations worldwide.

There are two equally important aspects to this story: first is the rearguard action against foreign businesses selling into Australia through, but not only, the internet.

It all started, surprisingly, with books.See Australia's battle with discounters for background. Warnings about technical standards are also made as are the obvious point that if you send money to, even, a large offshore retailer, your chances of enforcing delivery or quality or refund are diminished purely because they are in a different jurisdiction.

That's why the Wiggle case is so important.

Wiggle Limited is a UK company selling sporting goods over the internet. It has agreed to pay a penalty in Australia after the ACCC alleged that it "likely" (it means "probably") "breached Australian Consumer Law."

That's the strategically important point and we'll come back to it.

The preliminary points are that

a) the case appears to have not reached an a level of proof that would satisfy an evidential burden. Wiggle has entered a Court Enforceable Undertaking" admitting that it "likely breached the law." This is a stronger than the USA orders which say "without admitting or denying liability."

b) as a result, this case may not have legal authority to be used as a precedent if another company decides to fight the ACCC's view of who is subject to Australian law.

The facts will not be a surprise to those who have run into trouble when there's a reason to want to return goods to an overseas supplier. The fact is that the law has not kept up, and probably never will, with a world that is, in the minds of consumers, borderless.

According to the ACCC :

"Wiggle’s customer service staff told some Australian customers who were
trying to obtain a refund for faulty products that:

* Wiggle was not subject to the Australian Consumer Law (ACL) as it is based
in the United Kingdom (UK)
* the consumer needed to contact the manufacturer
* Wiggle would not provide a full refund for a faulty product as the product
had been used."

The ACCC's Deputy Chairman Delia Rickard takes an opposing view.

"Under the Australian Consumer Law, consumers are entitled to a repair, replacement or refund when there has been a major problem with the product. This law applies to all businesses that sell products to consumers in Australia, including overseas based businesses. It does not matter that Wiggle is based overseas or that the consumers had used the goods, the Australian Consumer Law still applies to faulty

It's that latter statement that is the big news. It establishes that, in the eyes of the ACCC, it is the seat of the consumer that defines applicable consumer protection law. Companies beyond the seas must regard themselves bound, ACCC says, by domestic Australian law if they sell to Australian customers.

Rickard went on "Statements by retailers which seek to limit or exclude the Australian consumer guarantees are misleading and likely to contravene the Australian Consumer Law." That, incidentally, is how "likely" should be used. Australian law is similar to UK law in that "limited warranties" are more or less excluded by law and that even the completion of a manufacturer's warranty card does not relieve the retailer of liability (it's all to do with something called "privity of contract" which says that, in principle, the parties to a contract are the only ones that can rely on it and against whom it is enforceable). So, Rickard said, "It’s also misleading for a retailer to tell the customer they must go to the manufacturer for a remedy when a product is faulty. Under the Australian Consumer Law, consumers are entitled to remedies from the business
that sells them a faulty product."

But none of those are the thing that really sets the cat amongst the pigeons. According to the ACCC "Wiggle’s website also contained misleading information that only English and UK law applied to transactions made through the website. Wiggle has since amended this section of its website so it now accurately reflects Australian customers’ rights under the Australian Consumer Law."

This, then, is where the ACCC is breaking new ground. It is interfering with the rights of companies to define what law they operate under. It is usual for contracts to include what is known as "choice of law" and "choice of jurisdiction" clauses. Such clauses define what law applies and where disputes should be heard, both in terms of which country but also in terms of which judicial authority - court, tribunal, arbitration, etc.

As a part of its enforcement agreement, the ACCC required Wiggle to agree "an Australian Consumer Law compliance policy and train its customer service staff in ACL compliance."

This, then, creates a major expense for overseas retailers selling into Australia - especially those that use outsourced call-centres to handle enquiries and complaints from Australian consumers.

There is one material point that has not so far been mentioned and if it material, it's not clear how much. Although in the UK, Wiggle operated a website with the address wiggle.com.au, just as Amazon.co.au was operated for some time before that US company had a physical presence in the country. According to its .au website, Wiggle employs more than 1000 in Portsmouth and Belfast. It also says "You have our absolute commitment as fellow active sports enthusiasts that you will be satisfied with Wiggle." It also says "You can of course also take advantage of our 365 day returns policy." That is subject to policies which include " Faulty items are not included in our 365 day return policy as they can be sent back to us at any time. Items sent back to us will undergo a inspection and It may be necessary to send the item away to the manufacturer to confirm the fault. All goods purchased from Wiggle are covered by a full warranty and, generally speaking, warranties cover manufacturing faults and defects including poor workmanship. If you feel that your purchase has developed a fault, then please contact us with photographs of the issue before returning any goods - we may be able to solve your problem without you incurring any postage costs." In fact, the returns policies at http://www.wiggle.co.uk/h/opti..., which is referenced from the .au site, seem generous, if anything.

It appears that generous policies might not be enough in international sales. The next frontier will, presumably, be on-line broking platforms which act as intermediaries for individual sellers. It is they who set the trading terms in many cases. All those contracts that say that all dealings are subject to Californian, etc. law are suddenly in doubt if the ACCC is successful in a challenge against an online retailer that can afford an expensive court battle and if other countries follow suit.

Further reading: http://www.accc.gov.au/public-...

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