IT HAS NOW BEEN CONFIRMED THAT COUNCILS ARE BOUND BY THE COMPETITION & CONSUMER ACT

Contrary to common belief, local councils and officers acting on their behalf are subject to the provisions of the Competition & Consumer Act 2010 (Cth), just like any other entity engaged in trade or commerce.

The 2010 case of Fabcot Pty Ltd v Port Macquarie-Hastings Council [2010] NSWSC 726 clearly articulates the reasoning and dispels any notion that councils and their officers are not engaged in trade or commerce and therefore are not subject to the provisions of the Competition & Consumer Act.

Background

The Fabcot case focused on the conduct of the Port Macquarie-Hastings Council in its negotiations with the two supermarket giants, Woolworths and Coles. Beginning in 2005, Council sought expressions of interest regarding the development of Council land. Both supermarkets expressed an interest, with Woolworths successful with its proposal to Council.

Notwithstanding Woolworths’ success, Council subsequently began negotiations with Coles. Council again sought expressions of interest in 2007 and, again, Woolworths was initially successful. However in 2009, without the knowledge of Woolworths, Council recommenced negotiations with Coles and ultimately agreed to Coles’ offer to purchase the land.

Court Action

Woolworths commenced legal action against Council, with the court determining that Council had:

• engaged in misleading or deceptive conduct in its dealings with Woolworths; and
  

• conducted itself in a manner that fell short of commercial fair dealing and the standards that a commercial party was entitled to expect when dealing with a council.

Lessons

Like individuals and other entities engaged in trade or commerce, councils and their officers must ensure that their commercial dealings are honest and comply with the requirements of the Competition & Consumer Act. This is of course in addition to their obligations under the Local Government Act.

Contravention of the Competition & Consumer Act exposes council to prosecution and the imposition of pecuniary penalties by the courts, the imposition of penalties by the ACCC, and the varying or setting aside of contractual agreements.

Further, a council officer may be found to be personally liable to the extent that they assisted the council in its contravention of the Competition & Consumer Act.

If you would like more information regarding council and officer compliance with the Act, please contact:

Joanne D’Andrea
Principal
Harwood Andrews
T: 03 5226 8567
E: jdandrea@harwoodandrews.com.au

Alasdair Woodford
Lawyer
Harwood Andrews
T: 03 5225 5217
E: awoodford@harwoodandrews.com.au