If NZ consumers took on online giants

Mary Keyes looks at how New Zealand law would protect consumers in cases against foreign companies

The number of New Zealand consumers who regularly buy from online foreign suppliers such as Airbnb and Uber is already large, and growing. But what happens when it all goes wrong?

Working out how consumer protection laws apply across borders is complicated and taxing, even for experienced judges. Legislation rarely provides a clear answer, and the resolution of international consumer disputes tends to be significantly more expensive and difficult than where a consumer has a dispute with a local supplier.

Many situations have yet to be tested in New Zealand courts, but given the similarity between New Zealand and Australian consumer protection law it’s worth looking across the Tasman for guidance.

In January, the Full Court of the Federal Court of Australia published a much-anticipated decision: on an appeal by Valve, the United States-based corporation behind popular online gaming platform Steam. The appeal was against a 2016 decision that found Valve had breached the Australian Consumer Law by misleading Australian consumers about the availability of refunds for the sale of faulty games, and imposed a penalty of A$3 million.

The case is important not only to the many Australian subscribers to Steam – more than 2.2 million, almost 10 percent of the Australian population – but also because of its broader implications for consumers who purchase from foreign suppliers.

The case was brought by the Australian regulator, the Australian Competition and Consumer Commission, following complaints by three Australian gamers after Steam refused to give refunds for faulty games they had purchased. The Australian Consumer Law imposes statutory guarantees protecting consumers, including a guarantee goods must be of ‘acceptable quality’. Consumers are entitled to compensation if this guarantee is breached.

Consumers will assume that when they purchase goods and services their home laws will protect them.

The main issue was whether the Australian Consumer Law applied to Valve, which has no business premises or staff in Australia, although it owns servers worth US$1.2 million in the country. Like many foreign suppliers that conduct business online, Valve requires consumers to agree to its lengthy terms and conditions, in its Steam Subscriber Agreement.

These terms and conditions state that games must be paid for in advance and asserts that such payment is ‘NOT REFUNDABLE IN WHOLE OR IN PART’. They also disclaim any liability for faulty products, stipulate that any claim a consumer has against Valve must be brought in the state of Washington in the US, and that the law of Washington will be applied in resolving such a claim.

Such provisions are often justified on the basis an international business requires the certainty of knowing its home law will regulate its relationship with all its customers, including those from foreign countries, and any claims against it will be litigated in its home jurisdiction.

It has been argued this saves costs, which businesses will pass on to customers in the form of lower prices. On the other hand, consumers will assume that when they purchase goods and services their home laws will protect them. They rarely pursue claims, however, because the expense entailed in doing so invariably exceeds the value of the products in question. The refunds the three Australian gamers sought from Valve were for US$49.99, US$16 and US$13.35.

At the initial trial, the court concluded that the Australian Consumer Law applied to Valve, irrespective of Valve’s terms – which purported to exclude the application of its customers’ home law – and imposed the AUD$3 million penalty for Valve’s misleading conduct, in repeatedly asserting that consumers were not entitled to a refund for faulty products. The Full Court of the Federal Court dismissed Valve’s appeal.

New Zealand law contains similar consumer protections to those in Australian law, including guaranteeing goods are of acceptable quality. To date, there has not been any case brought here against foreign companies such as Valve that provide online products to New Zealand consumers. Would a court here reach the same decision? We’ll have to wait and see.

Mary Keyes is Professor of Law at Griffith University in Australia. She is currently visiting Victoria University of Wellington’s Faculty of Law and will take part in a public discussion on Tuesday 13 February on international perspectives on Brexit.

Newsroom is powered by the generosity of readers like you, who support our mission to produce fearless, independent and provocative journalism.


Newsroom does not allow comments directly on this website. We invite all readers who wish to discuss a story or leave a comment to visit us on Twitter or Facebook. We also welcome your news tips and feedback via email: contact@newsroom.co.nz. Thank you.