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Foreign businesses and your consumer rights

071ForeignBusinessesAndYourConsumerRightsAustralian consumer law protects people who purchase goods from Australian companies, but what recourse do you have for a refund when you’ve bought something from a foreign business that has little or no physical presence in Australia?

A recent Full Federal Court case has set a precedent for foreign-based businesses to abide by the Australia consumer law in most circumstances.

What are your consumer rights when you purchase something from an overseas business? According to the Full Federal Court case between the Australian Competition and Consumer Commission (ACCC) and Valve Corporation, Australian consumer law applies if a business is carried on in Australia or if the conduct was in Australia. This may be the case even if it is a foreign corporation with little or no physical presence in Australia.

Valve is a US-based company and one of the world’s largest online video game retailers through the “Steam” platform. Its business premises and staff are all located outside of Australia and it holds no real estate in Australia. The only asset it holds in Australia are computer servers. Payments for subscriptions to the “Steam” platform were made in US dollars and processed in the US.

To use the platform to download games, users had to acknowledge subscriber agreements, which contained various representations including no entitlement to refunds, and contractual exclusion of statutory guarantee. Valve sold a catalogue of games to users from various game developers. Some of those games did not appear to be finished or had game-breaking bugs, which caused the games to be either unplayable or not of acceptable quality. When several users attempted to obtain refunds for those games, Valve asserted that as per their subscriber agreement, they do not offer refunds or exchanges on their software products.

The original case was kick-started by ACCC after complaints from some gamers who used the “Steam” platform to buy games that were not of acceptable quality and were subsequently refused a refund. In the original case, which was heard before the Federal Court, Valve lost when the Court found that they had engaged in misleading or deceptive conduct and made false or misleading representations. The Court had further imposed a penalty totalling $3 million.

Valve appealed the judgment and lost again in the Full Federal Court, which upheld the Federal Court’s initial findings and the penalty imposed. Whilst the arguments and judgments involved in this case are technical and complex, the outcome is clear. If you purchase goods (it does not matter whether they are physical goods or digital goods) from a company that carries on business in Australia, the seller is bound by the Australian consumer law in its dealings with you.

ACCC chairman Rod Sims said:

“[t]his case sets an important precedent that overseas-based companies that sell to Australians must abide by our law. All goods come with automatic consumer guarantees that they are of acceptable quality and fit for the purpose for which they were sold, even if the business is based overseas”.

Whilst Valve has more than two million Australian subscriber accounts, this ruling applies equally to any online goods seller that isn’t based in Australia, regardless of their size. So, if you or someone you know has in the past been refused a refund for a purchase made online that was not of acceptable quality, you now have the full weight of the law behind your claim.