Katrina Chambers

Foreign corporation ordered to pay penalty of $3 million for breaches of the Australian Consumer Law

Katrina Chambers

29 March 2017

Competition and Consumer Law Uncategorized

As a result of an action commenced by the Australian Competition and Consumer Commission, the Federal Court of Australia recently ordered Valve Corporation (Valve), a foreign corporation, to pay a pecuniary penalty of AUD$3 million for breaching the Australian Consumer Law in the course of conducting its online business.

Valve ran an online games software platform from the State of Washington in the United States of America and had no physical presence in Australia.  The Court nonetheless found that Valve had “carried on business in Australia” and directed representations to Australian consumers.  Valve had approximately 2.2 million Australian subscriber accounts, servers located in Australia and incurred ongoing expenses in Australia with respect to its online business.  The Court also noted that Valve’s registration process required Australian subscribers to specify their location as Australia, and that some differential pricing was used for Australia.

The breaches stemmed from Valve taking the position that it had no obligation to offer a refund to Australian consumers for downloaded games.  This was reflected in the Valve refund policy and the provisions of Valve’s “worldwide generalised” subscriber agreement which purported to exclude liability.

Under the Australian Consumer Law statutory guarantees, including in this case the guarantee of acceptable quality, cannot be contractually excluded, restricted or modified.

The Court held that by purporting to exclude the statutory guarantee of acceptable quality, Valve had made misleading representations concerning the existence, exclusion or effect of a consumer guarantee and had engaged in misleading and deceptive conduct.

In addition to the pecuniary penalty, the Court made an order restraining Valve from making further misleading representations to Australian consumers and an order requiring the publication of a consumer notice for Australian consumers who logged on to Valve’s website.  Valve was also ordered to establish and implement an Australian Consumer Law compliance program.

In assessing the appropriateness of the penalty order, the Court assessed Valve’s “culture of compliance”.  The Court considered Valve’s culture to be “very poor” and pointed to the fact that until the Australian Competition and Consumer Commission became involved, Valve had not obtained any legal advice about its position under Australian law.  The Court also noted that it would not have been difficult to modify its “worldwide” agreement to reflect the application of the Australian Consumer Law.

If you have any queries about the application of the Australian Consumer Law to your business, or your website terms and conditions, please contact us.