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25 May 2016 AUSTRALIAN CONSUMER LAW TRUMPS CHOICE OF LAW CLAUSE

By Edei Ledet, Senior Associate

In March 2016, the Federal Court found that the refund policy of American on-line gaming company Valve Corporation (Valve) (incorporated in Washington State, having no Australian office or presence) violated the Australian Consumer Law (ACL).  Valve's website stated (in all caps) "ALL STEAM FEES ARE PAYABLE IN ADVANCE AND ARE NOT REFUNDABLE IN WHOLE OR IN PART," which the court found to be (i) misleading and deceptive (in contravention of s 18(a) of the ACL) and (ii) comprised false or misleading representations about the existence or effect of the consumer guarantees (in contravention of s 29(1)(m) of the ACL). 

In Australian Competition and Consumer Commission v Valve Corporation (No. 3) [2016] FCA 196, the court accepted that:

  • the "Steam Subscriber Agreement" (SSA) contractual choice of law was Washington State (US) (set out in the terms and conditions on the Valve website);
  • Washington State law:
    (i) does not prohibit non-refundable subscriber video game content; and
    (ii) permits consumers to enter contracts that disclaim all guarantees for online services or software.
The Court held that, notwithstanding that SSA purported to substitute Washington State law for all (or a portion of) the ACL, the ACL continued to apply in relation to the supply under the contract.  S 276 of the ACL makes a term of a contract void to the extent that it attempts to modify or exclude a remedy for breach of a consumer guarantee.

In summary, the ACL's consumer guarantees apply generally to a supply of goods to an Australian consumer.  Regardless of the limited contact that a foreign company has with Australia, when it sells products to Australian consumers, the foreign company may not obviate the ACL by excluding consumer guarantees with terms and conditions governed by foreign law.  Having determined that the ACL may not be superseded by foreign law, the Court applied the well-settled principle that an incorrect statement of the law (such as a disclaimer stating that fees "are not refundable in whole or in part" despite the ACLs providing a consumer guarantee that "goods are of acceptable quality" and consumer remedies if they are not) can be misleading and deceptive conduct, and held Valve's conduct contravened of s 18(a) and s 29(1)(m) of the ACL. 

Coming up…On-line foreign companies caught by the ACL "doing business in Australia"
In Part 2 of this article we discuss the Valve court's analysis of the "conduct" of a foreign company that comprises "doing business in Australia", notwithstanding that the foreign company has no office, employees or bank accounts in Australia and primarily transacts business on-line or through third-party service providers. 

We will continue to follow Australian Competition and Consumer Commission v Valve Corporation, currently listed for a hearing as to remedies, and any appeals that may follow.

 

Edei Pippin Ledet, Senior Associate  |  Phone: +61 2 9233 5544  |  Email: epl@swaab.com.au

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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