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Generative AI: A global guide to key IP considerations
Artificial intelligence (AI) raises many intellectual property (IP) issues.
Author:
Australia | Publication | 五月 2021
This article was co-authored with Sundar Odgers and Christy Lee.
The recent Full Federal Court decision of Australian Competition Consumer Commission v Quantum Housing Group Pty Ltd [2021] FCAFC 40 clarified and significantly broadened the scope of statutory unconscionable conduct. Businesses may now be exposed to liability for unconscionable conduct even if their counterparty is not vulnerable or at a special disadvantage.
The decision follows recent action taken by the Australian Competition and Consumer Commission (ACCC) against Telstra and proceedings commenced by the Australian Securities and Investments Commission (ASIC) against a financial institution for alleged unconscionable conduct. This confirms that unconscionable conduct continues to be a priority for both regulators.
Unconscionable conduct has long been prohibited under the general law and, in certain circumstances, by statute.
Generally, unconscionable conduct prohibits one party from knowingly exploiting or taking advantage of a special disadvantage or disability of another party.
Certain statutes such as the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act 2001 (Cth) also prohibit unconscionable conduct in particular contexts (statutory unconscionable conduct). For example, s 21 of the ACL prohibits unconscionable conduct in the supply or acquisition (or possible supply or acquisition) of goods and services.
Breaching the statutory prohibitions potentially exposes parties to significant penalties. The maximum penalties under the ACL are:
Quantum Housing Group Pty Ltd (Quantum) arranged property investments that qualified for incentives under the National Rental Affordability Scheme (NRAS).
The ACCC alleged that Quantum made false or misleading representations and engaged in systemic unconscionable conduct by implementing a plan to pressure investors in the NRAS to terminate agreements with their existing property managers and engage a property manager approved by Quantum.
As part of its plan, it was alleged that Quantum issued misleading correspondence to interfere with the contractual relationships between investors and their property managers, imposed payments on investors who did not transfer property managers, and issued false notices to investors informing them that they were in default under their agreements with Quantum. It was also alleged that Quantum also failed to tell investors that it had commercial links with the property managers it recommended.
In an agreed statement of facts, Quantum admitted to making false and misleading representations and breaching the unconscionable conduct provisions of the ACL.
In relation to the false and misleading representations, the primary judge, Justice Colvin, imposed a penalty of $700,000 on Quantum and $50,000 on its sole director. The sole director was also disqualified from managing a corporation for three years.
However, his Honour did not find that Quantum engaged in statutory unconscionable conduct on the basis that it did not take advantage of or exploit a pre-existing vulnerability, disadvantage or disability of the investors.
The ACCC appealed to the Full Court on the issue of whether exploitation or taking advantage of a pre-existing vulnerability, disability or disadvantage was a necessary element of statutory unconscionable conduct.
The Full Court (Allsop CJ, Besanko and McKerracher JJ) held that while exploitation of a pre-existing vulnerability, disability or disadvantage is often a feature of statutory unconscionable conduct, neither the existence of a vulnerability, disability or disadvantage nor its exploitation is essential.
Rather, the Court found that the proper approach is to assess whether it is a “sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience and so be characterised as unconscionable.”
On the basis of the agreed facts, the Court found Quantum’s conduct to be unconscionable, contrary to s 21 of the ACL. However, it stressed that this was not because Quantum had exploited a vulnerability, disability or disadvantage of the investors. Instead, the Court found that Quantum:
Businesses involved in providing goods or services to other businesses and consumers as well as those operating in the financial products and services industry should pay special attention to this decision.
Now more than ever, such businesses should ensure their conduct falls within acceptable norms of commercial behaviour, even where their counterparty suffers no readily discernible pre-existing vulnerability, disability or disadvantage.
This includes refraining from acting in bad faith, engaging in commercial bullying or pressure, or using a superior bargaining position or significant market power to extract undisclosed benefits. Businesses should also ensure that employees are provided training in relation to unconscionable conduct, particularly if they are involved in sales or customer service.
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