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Australian civil and criminal convictions for online travel insurance products: is your website at risk?28 September 2022

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In June 2022, Allianz Australia Insurance Limited (“Allianz”) and AWP Australia Pty Ltd (“AWP”) pleaded guilty to seven criminal charges of misleading and deceptive conduct. The two companies were fined approximately US$1.02m by the Australian courts which convicted them for:
  • misleading and deceptive conduct; and
  • failure to provide financial services efficiently, honestly and fairly.

"Not an isolated or unusual outcome and may represent an increasing trend towards civil and criminal investigation, prosecution and conviction of local and offshore online platforms."

Sentencing for the criminal convictions will be in May 2023. The penalty for each offence is at least approximately US$5.5m, 10% of annual turnover or three times the value of the benefit obtained.

The convictions relate to insurance products offered by Allianz to Australian consumers on the Expedia Group websites www.expedia.com.au, www.lastminute.com.au, and www.wotif.com.au. The products offered a cancellation-only policy for costs resulting from cancellation of travel arrangements and an essentials policy, which enhanced the cancellation-only policy to include medical or hospital expenses.

In addition, Allianz and AWP were previously ordered to make restitution payments to Expedia customers totalling AU$10m (approximately US$6.9m).

This is not an isolated or unusual outcome and may represent an increasing trend towards civil and criminal investigation, prosecution and conviction of local and offshore online platforms.

Lessons from the convictions

Out of (h)arm’s reach?

While these breaches relate to specific insurance products, the misleading and deceptive conduct convictions are not limited to such products and focus on the conduct of the company rather than the products and services which it offers or sells to Australian consumers. The breaches and their consequences apply broadly, expansively and generally to products and services offered to Australian consumers.

The Australian authorities, primarily the Australian Consumer and Competition Commission (“the ACCC”), will investigate and prosecute companies offering products or services to consumers in Australia, regardless of whether the company is Australian or international and the products or services are offered online or in physical stores. The trigger is primarily that these companies are doing business in Australia.

"E-commerce and online platforms which offer products and services to Australian consumers without a physical presence in Australia, should assess the extent to which they could be prosecuted for breaches of Australian law."

Doing business in Australia is broadly defined and does not necessarily require a physical presence in the country. In the context of e-commerce and online platforms offering products and services to Australian consumers, the approach of the Australian courts appears expansive, with the objective of protecting them regardless of whether the e-commerce and online platforms have a physical presence in Australia. Whilst Allianz and AWP were Australian subsidiaries of Allianz SE, their prosecution and its outcome are unlikely to have been any different if they were overseas companies.

This approach is demonstrated by the following:

  • in 2020, the Federal Court imposed a five-year injunction and fines of approximately US$ 4.8m on Viagogo AG for misleading and deceptive conduct towards Australian consumers. The court had no difficulty in ordering these penalties notwithstanding that Viagogo had no physical presence in Australia;
  • in 2020, Trivago was fined approximately US$30.8m for misleading and deceptive conduct by falsely representing that their platform would ‘quickly and easily’ display the cheapest price by comparing rates for standard and luxury rooms to misrepresent the savings. This was notwithstanding that the platform and its servers were not operated in or from Australia; and
  • in 2022, Facebook was found to be doing business in Australia without a physical presence by installing and managing cookies on the devices of its Australian users and by providing login functionality to Australian users of the Graph API, notwithstanding that the API was not operated in or from Australia.

E-commerce and online platforms which offer products and services to Australian consumers without a physical presence in Australia, should assess the extent to which they could be prosecuted for breaches of Australian law, particularly Australian consumer and privacy laws.

"Platforms that do not provide terms and conditions specific to Australian law requirements should assess the commercial, legal and reputational risks of relying of their standard or uniform terms and conditions"

A key starting point is the terms and conditions under which a platform offers its products and services. The use of standardised or uniform terms and conditions can provide platforms with a measure of certainty and consistency in dealing with claims and disputes across a range of jurisdictions in which they offer products and services. This does not always ensure that such terms and conditions will be valid and/or enforced in each jurisdiction.

Terms and conditions that seek to exclude or limit liability for such conduct are unlikely to be enforced by an Australian court. Platforms that do not provide terms and conditions specific to Australian law requirements should assess the commercial, legal and reputational risks of relying of their standard or uniform terms and conditions. This is particularly the case in relation to their potential liability exposure if clauses limiting or excluding liability are declared null and void or not enforced by an Australian court.

In dealing with statutory duties and obligations, such as those set out above, Australian courts have not and are unlikely to give effect to foreign law and jurisdiction/forum clauses to deal with claims in respect of breaches of these duties and obligations. While Australian courts will give effect to and honour arbitration clauses, it is unlikely that all claims and disputes in relation to breaches of Australian statutory duties and obligations will fall within the scope of an arbitration clause.

A platform facing claims and proceedings from Australian consumers will seek to rely on its choice of law and jurisdiction/forum clauses in seeking to have such proceedings dismissed, stayed or removed from an Australian court on forum non conveniens grounds. Although Australian courts will typically give effect to such clauses, they will typically not give effect to the choice of foreign law or for proceedings for breaches of statutory duties. As a result, prosecution of the platform by the ACCC in the Australian courts can serve to complicate a forum non conveniens application.

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