Applying Australian Consumer Law – when is government carrying on a business?

Most competition and consumer laws apply to a government entity only when that entity carries on a business. To determine how these laws apply to a government entity, the first question to consider is usually: Is the entity acting in the course of carrying on a business?

The Supreme Court of Victoria recently considered this question in Murphy v State of Victoria [2014] VSC 404. Mr Murphy commenced proceedings against the State of Victoria and Linking Melbourne Authority, alleging that certain statements they made about the East West Link Project in Melbourne constituted misleading or deceptive conduct in trade or commerce in breach of section 18 of the Australian Consumer Law in schedule 2 of the Competition and Consumer Act 2010 (Cth).

The East West Link Project is for the construction of an 18km toll road in Melbourne. The Linking Melbourne Authority is a Victorian Government authority responsible for facilitating development, construction and operation of road transport projects. Part of the Authority’s functions includes engaging with stakeholders.

Mr Murphy alleged that there were misrepresentations in the Executive Summary of the Short Form Business Case for the first stage of the project. He also alleged there were misrepresentations in the Comprehensive Impact Statement and the Transport Summary Report, also for the first stage of the project. The documents included the types of statements often found in these kinds of documents, such as projections about usage numbers and toll revenues.

Under Victorian fair trading legislation, the Australian Consumer Law only applies to that State so far as it carries on a business, either directly or through its authorities. The relevant provision is almost identical to section 24 of the Fair Trading Act 1989 (Qld). A similar test also applies for the application of competition laws under section 2B of the Competition and Consumer Act 2010 (Cth) and section 13 of the Competition Policy Reform (Queensland) Act 1996 (Qld). Justice Croft of the Supreme Court of Victoria said that while the ‘carries on a business’ provision is cast in general and non-technical terms, there are three important limitations that are inherent in it.

The first limitation is that the alleged conduct must be engaged in while in the course of carrying on the business. For example, in JS MacMillan Pty Ltd v Commonwealth of Australia (1997) 77 FCR 337, the Commonwealth issued a request for tender for the sale of certain operations of the Australian Government Printing Service. The fact that the printing service carried on a publishing business did not mean that the Commonwealth’s tender was part of the carrying on of that business.

The second limitation is that it is not sufficient that the representations are made in connection with a business to be conducted at some time in the future. Justice Croft held that activities preparing to establish a business do not constitute the commencement of, or the carrying on of, a business.

The third limitation is that the term ‘business’ is not unlimited or at large. The cases that have considered this issue establish various propositions, including that:

  • the activity must take place in a business context and itself bear a business character
  • ‘carrying on a business’ signifies a succession of acts that occur with regularity and not a solitary transaction; however, repetitiveness by itself is insufficient to constitute a business
  • there is a distinction between those functions of government that are purely governmental or regulatory and those that entail carrying on a business. The carrying out of a function of government in the interests of the community, such as the performance of a statutory function, is not the carrying on of a business.

In the case of the East West Link Project, the Court found that the Executive Summary of the Short Form Business Case was not addressed to investors or business people and appeared to be a form of intergovernmental communication for the purpose of attracting Commonwealth government funding.

The Comprehensive Impact Statement was published in accordance with a requirement under the Victorian major transport project legislation, and the public were entitled to make submissions about the statement under that legislation.

The Transport Summary Report also was not a promotional document and its nature and contents accorded with Linking Melbourne Authority’s stakeholder engagement obligations.

The Court held that the conduct of the State of Victoria and Linking Melbourne Authority was not engaged in as part of carrying on any business. Justice Croft considered that State’s attempt to inform and engage with the community was consistent with the ordinary functions of government and devoid of any business or trading character. He also said that substantial, long-term infrastructure planning and development, which included the exercise of statutory powers of a regulatory kind, is a distinctly governmental activity.

Therefore, the competition and consumer laws had no application to the content of the documents and they could not be false and misleading in breach of the Australian Consumer Law.

The information in this publication is provided for general purposes only. It is not to be relied on as a substitute for legal advice. Crown Law and the Department of Justice and Attorney-General accept no liability for losses caused by reliance on the material in this publication. Formal legal advice should be obtained for particular matters.

Published: 3 February 2015

Author: Chris Maxwell