January 17, 2017

Online Traders And Australian Consumer Law With Rouse Lawyers

Consumer Law

Australian Consumer Law: Valve Gets Steamed By ACCC In ‘No Refunds’ Case

The Federal Court of Australia has handed an A$3million fine to Valve Corporation for breaches of the Australian Consumer Law (ACL).

Valve operates Steam, which is a popular platform for online distribution of computer games. The case involved the issue of consumer rights when it comes to obtaining refunds for ‘faulty’ software purchased on the platform.

Breaches of the Australian Consumer Law

Customers are required to accept a Steam Subscriber Agreement to use Steam. Valve’s agreement contained provisions attempting to exclude:any warranty as to the merchantability of the software games it supplied; and
the right to any refunds or compensation even if the software was faulty.
The ACCC commenced proceedings against Valve, alleging those provisions and other representations by Valve regarding consumer rights breached the ACL.

However, Valve argued that the ACL did not apply because:it was a foreign entity and did not conduct business in Australia;the law of Washington State applied to the Steam Subscriber Agreement; and
the mere issue of software licences did not constitute a ‘supply of goods’.

The Court dismissed Valve’s arguments, finding that:supplying a software download was a ‘supply of goods’ under the ACL;the ACL continued to apply despite the ‘choice of law’ provision in the Steam Subscriber Agreement;
the relevant customer relationships and transactions occurred in Australia;
Valve did in fact conduct business in Australia, as it had cached copies of the software on Australian servers and engaged Australian agents in its supply chain;
the statutory consumer guarantees under the ACL (including the guarantees that goods must be ‘fit for purpose’ and ‘of acceptable quality’ and the entitlement to refunds and replacements where goods fail those guarantees) cannot be excluded or avoided by contract; and
Valve breached the ACL by purporting to refuse refunds and exclude consumer guarantees.

Faulty software and consumer rights: the ACCC Statement

In a press statement announcing the decision, ACCC Acting Chair Dr Michael Schaper said:

“These proceedings, and the significant penalties imposed, should send a strong message to all online traders operating overseas that they must comply with the Australian Consumer Law when they sell to Australian consumers.”

“Under the Australian Consumer Law, all goods or services supplied to consumers come with automatic consumer guarantees that they are of acceptable quality and fit for the purpose for which they were sold. If they’re not, consumers have a right to a remedy. These consumer rights cannot be excluded, restricted or modified.”

“We will continue to take action to ensure Australian consumers benefit from these Australian Consumer Law guarantees, regardless of whether the business which supplies them is based in Australia or overseas.”

In addition to the fine, the Court ordered that Valve pay 75% of the ACCC’s legal costs. The Court also required Valve to publish Consumer Rights Notices regarding Australian consumers’ rights and undertake a compliance program.

Overseas traders and the ACL

The case is yet another reminder that statutory guarantees under the ACL are almost unavoidable, even by foreign traders dealing with Australian consumers. The Court noted the lack of research or advice on Australian law undertaken by Valve in that regard.

Suppliers of goods and services to Australian consumers must be mindful of the statutory guarantees and take advice to ensure that their contractual terms correctly reflect consumers’ rights under the ACL.

The Australian Consumer Law – Further Reading

Federal Court of Australia Judgments on principal liability ([2016] FCA 196), corrective orders ([2016] FCA 1553) and costs ([2016] FCA 1584).
ACCC Media Release.

Need further information about this case, the Australian Consumer Law or other aspects of commercial law? Contact the experts at Rouse Lawyers today on 07 3667 9696.