Aus­tralian Con­sumer Law trumps Choice of Law Clause

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.