Scams & the law
From 1 January 2011, the national Australian Consumer Law (ACL) replaced previous Commonwealth, state and territory consumer protection legislation. It is contained in a schedule to the Competition and Consumer Act 2010.
The ACL applies to traders carrying on business in Australia. The consumer protection provisions under the ACL that are directly relevant to scams include:
It is unlawful for traders to engaging in conduct which is misleading or deceptive, or which is likely to mislead or deceive. This covers conduct that is likely to create a misleading overall impression among the audience about, for example, the price, value or quality of goods or services.
It is unlawful for a trader to make false or misleading representations about goods or services when supplying, offering to supply or promoting goods or services. It is also unlawful to make or use false or misleading testimonials. This includes claims about the age, quality, sponsorship, approval, price or benefits of the goods or services. For instance, many scams trying to sell ‘miracle cures’ may make false representations about the benefits of their product. This is likely to breach the ACL.
Wrongly accepting payments for goods or services
Traders are prohibited from accepting payment for goods or services they do not intend to supply. Scams are likely to be captured by this provision include classifieds and online scams where scammers offer cut price goods that they have no intention to supply.
Offering rebates, gifts, prizes and other free items
When promoting goods or services, it is unlawful to offer gifts, prizes or other free items if the trader does not intend to, or does not, provide them as offered. For example, many scams start with the scammer falsely telling a consumer that they have won a prize to elicit an upfront payment or their personal information.
Representations about business activities
It is unlawful to make false or misleading representations about the availability, nature or the terms and conditions of employment or the profitability, risk or other material aspect of any business activity that requires work or investment by others. For example, work from home scams, may mislead consumers about the profits or risks of home-operated businesses. Many of the ‘work from home’ scams or ‘business opportunity’ scams may be misleading by guaranteeing an impossible income, or by misleading you about what is involved in the ‘job’.
Misleading representations with respect to future matters
It is a breach of the ACL for traders to make a representation about a future matter with no reasonable grounds for making the representation. This covers certain scams, such as prize or merchandise offers, online auction scams, ‘free’ offers on the internet, betting scams and some office supply scams. For instance, a betting scam that offers you guaranteed winnings may be misleading as it is not possible to accurately predict the outcome of an event that is based on chance.
It is unlawful for businesses to request payment for goods or services that you have not ordered or for unauthorised entries or advertisements. For example, a company cannot demand payment for advertising or a directory listing that you did not request (false billing).
It is illegal for a corporation to promote or participate in a pyramid selling scheme.
Unconscionable conduct is prohibited under the ACL. Unconscionable conduct can include serious misconduct or something clearly unfair or unreasonable, conduct which ignores conscience or conduct that is not right or reasonable. Conduct can also be unconscionable in relation to the bargaining power of the parties involved in a transaction, or if someone is clearly under a "special disadvantage" (which has included a disability, a lack of English skills, a chronic illness or poor literacy and numeracy skills).
Many scams, if tested in court, may be breaches of the above laws. However, due to the ‘fly by night’ nature of many scammers, it is extremely difficult to track them down and take action against them. Though it depends on the circumstances of each case, the ACCC may not be able to take action or enforce Australian Court orders against the many scammers that are based outside of Australia.
Penalties for breaching the ACL
Find out how to report scams to SCAMwatch.