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ACCC looks hard at sharing economy ‘reviews’

THE Australian Competition and Consumer Commission (ACCC) is reviewing policies of sharing economy platforms including Uber and Airbnb part of an international initiative. The focus is on endorsements and online reviews.

ACCC’s  review is part of the International Consumer Protection and Enforcement Network (ICPEN)’s annual internet sweep, involving over 50 consumer protection agencies around the world. 

The focus of that sweep this year is in the way online reviews operate in the sharing economy and what impact that has on consumer behaviour and the industries these sharing economy platforms disrupt.

The Australian Consumer Law prohibits businesses from making or inducing false or misleading representations through testimonials or reviews. The ACCC has produced guidance for businesses regarding online reviews and has taken enforcement action against businesses that have done the wrong thing.

“The ACCC has three clear messages for businesses handling online reviews,” ACCC deputy chair Delia Rickard said. “Be transparent about commercial relationships and don’t let these influence the order in which reviews are published; don’t post or publish misleading reviews; and editing or deleting unfavourable reviews may be misleading.”

The ACCC has also looked closely at the consumer law issues involved in the sharing economy, where a platform connects providers and users, both of whom are usually individuals or small businesses. Reviews and ratings can play a large role for both providers and users in the sharing economy.

“The sharing economy is a fantastic development and offers a range of benefits for consumers and businesses. However, operators of sharing economy platforms must make sure that they have appropriate policies to regulate the use of reviews to avoid misleading consumers,” Ms Rickard said.

The ACCC is sweeping through a range of platforms to find out which are properly disclosing their policies for publishing reviews and ensuring that reviews, and the way they are presented, are accurate and do not mislead consumers.

The sweep will provide information to assist the ACCC’s engagement with the sector, including guidance for businesses and individuals involved in the sharing economy. The guidance will be released later this year.

The information will be shared with the ACCC’s ICPEN partners, as well as with Australian state and territory consumer protection agencies.

The ICPEN is an informal network of consumer protection law enforcement authorities representing 58 global economies. ICPEN provides a forum where authorities can cooperatively share information and look to combat consumer problems which arise with cross-border transactions in goods and services, such as e-commerce fraud and international scams.

www.icpen.org

www.accc.gov.au

 

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SMEs beware: bankruptcies on the increase

AUSTRALIAN insolvencies and bankruptcies are expected to rise by about eight percent in 2016 and 2017, according to new research by international debt collection group Atradius.

Atradius Australia and New Zealand managing director Mark Hoppe urged Australian businesses to implement strategies “to avoid being another bankruptcy statistic”. The Atradius insolvency matrix 2016.

“After a sharp increase in Australian business insolvencies between 2008 and 2009, and a steady, historically-high level between 2010 and 2013, insolvencies decreased by almost 20 percent in 2014,” Mr Hoppe said.

He said the commodities slump and the with the challenging situation in China, business insolvencies were estimated to have increased again during 2015 by up to 10 percent.

“This rising insolvency trend appears to be continuing,” Mr Hoppe said.

“From January to May this year, there were 3,634 insolvencies according to ASIC data.  It’s no surprise that the mining, oil and gas, and construction industries make up the majority of businesses facing increasing insolvency rates.

“The mining sector has been experiencing difficulty for some time thanks to the slowdown in China putting pressure on the insolvency landscape, and the continuing slump in the commodities market.”

Between January and May this year, the metals, mining and steel industry saw 167 insolvencies. The construction industry was the hardest hit by insolvencies during the same time period, with 625 insolvencies recorded in Australia.

However, start-ups and small businesses were also feeling the pinch. SMEs with assets under $100, 000 make up 85 percent of collapses in this category.

Insolvencies are being felt across Australia. The Atradius  report showed in Q3 of the 2015-16 financial year (FY15/16), a total of 658 NSW businesses entered into external administration.

This was followed by 594 Victorian businesses, 444 Queensland businesses, 102 in South Australia, and 241 in Western Australia.

Mr Hoppe said these statistics highlighted the need for businesses to actively implement a risk-management plan. This includes thoroughly researching the potential customer and supplier, and the market it operates in, before signing a deal.

“Speaking to an expert is a great way to further understand business risks, and how to protect your products and profit,” Mr Hoppe said. “For example, not fully understanding the impact of import duties on the market value of your product in various countries before you invest in exporting can create huge problems.

“Businesses need to recognise that, with the increase in bankruptcies putting pressure on the entire market, they need to protect themselves. With a clear idea of the potential risks, businesses can begin to plan to minimise their exposure.”

www.atradius.com.au

 

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Personal liability risk under Qld’s new EPA laws

QUEENSLAND-headquartered law firm Cooper Grace Ward is warning company officers, financiers, shareholders and other related people that they can now be personally liable for company breaches under the Environmental Protection Act 1994 (Qld).

On April 22, the Queensland Government passed the Environmental Protection (Chain of Responsibility) Amendment Act 2016 to drastically broaden the application of the Act. 

According to Cooper Grace Ward co-founder David Grace, the amendments were triggered as a consequence of concerns that taxpayers may end up paying for the costs of environmental rectification works at the Queensland Nickel refinery near Townsville, as a result of the Clive Palmer-owned operator of the refinery being placed in administration.

Mr Grace said before the amendments, the Department of Environment and Heritage Protection could generally only issue an environmental protection order to companies or individuals who caused environmental harm or failed to comply with environmental conditions imposed by the Department under the Act.

Under the recent amendments, the Department can now issue an environmental protection order to related bodies corporate, executive officers, secured parties, mortgagees, financiers, shareholders, and ‘related persons’, such as holding companies and landowners.

“This means that parties that had no involvement in causing the environmental harm or failing to comply with environmental obligations can now be required to comply with environmental protection orders,” Mr Grace said. “The costs in complying with these orders, such as rehabilitating affected land, can be significant.”

Mr Grace said as the Department could consider matters arising prior to April 20, 2016, in determining “whether a person constitutes a related person, people who may be at risk should consider whether they have sufficient contractual protection under existing insurances, leases, sale contracts and joint ventures if environmental harm is caused”.

He said ‘at risk’ parties could minimise their exposure through appropriately drafted obligations in leases and other contractual arrangements.

www.cgw.com.au

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Directors not responsible for org. culture? That’s barbaric …

RECENT media statements by senior company directors distancing themselves from ‘toxic’ corporate cultures within the organisations they govern – examples include the 7Eleven staff underpayment inquiry and Commonwealth Bank’s insurance revelations – have come under heavy attack from Australia’s The Ethics Centre.

The Ethics Centre executive director, Simon Longstaff, said the “disgraceful” views of a number of senior company directors, who are excusing themselves and instead attacking the Australian Securities and Investments Commission (ASIC)  for  “suggesting that company directors might, in some circumstances, be held liable if a pernicious corporate culture is directly linked to wrong-doing”. 

“That they should adopt this aggressive stance against responsibility, especially in the wake of a growing number of corporate scandals, is quite remarkable,” Dr Longstaff said.

“After all, shareholders enjoy the privilege of limited liability only because they have delegated, to boards, the power to direct the affairs of companies. If company directors are not ultimately responsible for the most important factor in shaping the conduct of a corporation – culture – then who is?

“Do these few, influential directors want the liability to fall back on shareholders? Or do they think that nobody should be held to account?”

Dr Longstaff pointed out that the character of a corporation’s culture has been a feature of Australia’s criminal law since 1996.

“That is, the concept of corporate culture has been a defined legal term for twenty years. Not once, in all of that time, has a company director expressed public concern,” Dr Longstaff said.

“Indeed, the alarm was only raised after ASIC proposed, in quite general terms, that the ‘culture provisions’ of the Commonwealth Criminal Code Act should be extended to encompass the Corporations Law. Only then did company directors start to pay attention to legal concepts that they had happily ignored (or lived with in blissful ignorance) for two decades.

“ASIC has been accused of trying to specify a blue print for corporate culture. That accusation has no foundation.

“Like APRA has already done, in its risk culture standard CPS220, ASIC was merely flagging its intention that company director should be clear and explicit about the character of the corporate culture that they intend to see established – and that they should monitor and remediate any gaps between the ideal culture (as specified by the board – not ASIC) and the actual culture as ‘lived’ and experienced.”

Dr Longstaff posed the question: Why does this matter so much?

“The ‘culture provisions’ of the 1996 law were enacted for a very good reason,” he said. “Up until then, Australian companies had been able to hide behind formal systems of compliance in which all of the boxes had been ‘ticked’. Meanwhile, the culture would either be indifferent to – or encouraging of – illegal conduct.

“That is when bad things happen – and no amount of regulation and surveillance can prevent the harm that follows.

“The worst of this is that ASIC has not been given the chance to develop its proposals. For example, it is likely that directors would only be held liable if recklessly indifferent to the culture of a corporation or if actively encouraging a culture of non-compliance – as they should be,” Dr Longstaff said.

““This is especially worrying as all of the tools needed for the accurate measurement and assessment of corporate culture are well-developed and in use.

“Fortunately, the Australian Institute of Company Directors (AICD) has recognised the central role that directors must play in setting the foundations for and in monitoring the corporate culture developed by management. Thank heavens for that!”

www.ethics.org.au

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