Large Australian fashion retailer, Mosaic Brands Pty Ltd (Mosaic), is presently involved in a dispute with the Australian Competition and Consumer Commission (ACCC) concerning allegations that it misled consumers about expected or likely delivery times for goods ordered on its various websites, failed to deliver goods within advertised times, wrongfully accepted payments for goods, and provided consumers with information that was inconsistent with their rights under the Australian Consumer Law (ACL). The case is interesting because it considers how an unexpected event (such as COVID-19) and the use of third-party delivery and logistics providers can impact assurances given by a business to its customers concerning delivery times.

Background

In March 2024, the ACCC initiated proceedings against Mosaic in the Federal Court, alleging multiple contraventions of the ACL. Mosaic, known for fashion brands like Millers, Noni B, and Rivers, is one of Australia’s largest specialty retailers offering consumers a range of fashion clothing and footwear online. The ACCC has alleged that Mosaic represented to consumers that goods purchased online would be delivered to consumers within a specified period of time.

The ACCC alleges these various statements were false or misleading in several respects:

1. Across almost all of Mosaic’s websites, Mosaic represented that goods would be dispatched and delivered to consumers within 2 to 14 business days (Delivery Time Representations). The ACCC alleges that Mosaic did not have reasonable grounds for the Delivery Time Representations because of the orders dispatched by Mosaic (through the Logistics Companies) many were delivered the majority of their packages were delivered more than 20 days after the order date and, in some instances, were not delivered at all. In particular, the ACCC alleges that:

1.1 at least 26% were delivered to consumers at least 20 days after the order date;

1.2 at least 15% were at least 30 late;

1.3 at least 9% were over 40 days; and

1.4 some packages were not delivered at all.

2. Mosaic published disclaimers across the various web pages for its online businesses concerning its delivery times and that it was experiencing shipment delays due to higher-than-normal order volumes caused by COVID-19. Further, Mosaic included statements on its website that deliveries might might take “a few more days” than the standard time frames. The ACCC alleges that these disclaimers were insufficient to dispel the understanding created by the Delivery Time Representations.

3. Finally, the ACCC alleges that Mosaic wrongfully accepted payment for the goods by accepting payment from consumers and failing to dispatch the products ordered within the advertised delivery times or within a reasonable time (or, at times, not delivering products at all).

Mosaic’s Response

Significantly, under Mosaic’s distribution model, it engages and actively manages third-party warehousing and logistics companies to receive, warehouse, and dispatch products to consumers (Logistics Companies). Mosaic has defended the ACCC's allegations on the following grounds.

1. Mosaic delivered its goods to consumers within a reasonable time in the circumstances, including the COVID-19 pandemic. Mosaic’s failure to deliver some of the products within the represented times (or within a reasonable time period) was due to matters beyond their control – namely, the actions of the Logistics Companies or the disruptive effects of the COVID-19 pandemic.

2. Mosaic took reasonable steps to update the websites to include a COVID-19 warning so that consumers were made aware of the impact of COVID-19 on delivery time frames for goods purchased on its websites. As such, it made consumers expressly aware of the possibility that products ordered might not be dispatched or delivered within the represented time and consumers understood that their expectations as to ordinary delivery time frames no longer applied due to the impact of the COVID-19 pandemic.

3. Mosaic also adopted reasonable precautions to avoid any failure by the Logistics Companies and to limit the impact of COVID-19 on delivery times by communicating with consumers about the delays caused by the COVID-19 pandemic through its disclaimers and warnings, changing certain business operations to increase logistical efficiency and minimise back-log, and increasing the customer care and support teams available for communicating with customers.

Key legal issues

Future Representations

A representation regarding a future event or conduct (such as the Delivery Time Representation) is not necessarily misleading or deceptive merely because the event or conduct does not ultimately prove to be true. The test under the ACL is (relevantly) whether (at the time that it was made) the maker of the representation had reasonable grounds for making it, believed it to be true and was unaware of any matter that might make it unlikely to occur. In that regard, we expect that the ACCC will argue that, given a significant percentage of its orders were received by consumers very late (20 days or more), Mosaic did not have reasonable grounds for continuing to claim that goods ordered from it would be delivered within 2-14 days.

Impact of disclaimers on representations

Mosaic’s key defence to the claims that it misled consumers is that the Delivery Time Representations did not actually arise – due to the effect of its various disclaimers displayed across Mosaic’s various websites. In short, Mosaic will assert that it made consumers expressly aware of the possibility that products might not be delivered within the anticipated 2-14 day delivery time stated on its websites. The Court will need to determine whether the disclaimers warning of “a few days” delay were sufficiently clear, proximate and prominent to the primary claims to dispel any misunderstanding by the consumer. In that regard, it is clear that Mosaic used a variety of disclaimers throughout its websites to alert the consumer that its products may not be delivered in the times represented; however, in our view, the problem for Mosaic is that the disclaimers themselves were also likely misleading given the actual delivery time for the majority of products.

Failure to deliver

Assuming that Mosaic did not deliver products within the represented times, Mosaic will now need to show that the products were delivered within a reasonable time. A business wrongfully accepts payment when the goods are not supplied within the advertised delivery times or within a reasonable time. We expect that Mosaic will assert that, given the circumstances and impact of the COVID-19 pandemic, they delivered the products in a reasonable time. In making this argument, Mosaic will have to address various impacts of the pandemic on their business, including an increase in demand for consumer goods from online stores, the increased demand for parcel delivery services, and various disruptions to the business operations of Mosaic and the Logistics Companies. as well as international and domestic product delivery and logistics networks. The Court will need to determine if Mosaic’s delivery delays were reasonable given the COVID-19 circumstances impacting its business or if the delays were so unnecessarily long that accepting payment was unreasonable.

Wrongful payment defence

If Mosaic is found to have failed to deliver the products within the advertised times or a reasonable time, Mosaic will then need to argue that the failure was due to an act or omission of another person or due to another cause beyond its control. Mosaic appears to rely on both possible defences, asserting that any failure to deliver the products as required was due to the actions of the Logistics Companies, as well as the impact of COVID-19 on normal business operations. In asserting this defence, Mosaic will also need to argue that they took reasonable precautions and exercised due diligence to avoid any failures. In that regard, Mosaic assert that they undertook due diligence of the Logistics Companies to assess their capabilities to provide services, as well as requiring the Logistic Companies to meet certain metrics and performance standards. In our view, the key issues will be what the Court finds is a reasonable delivery time (given the Delivery Time Representations and the disclaimers), whether Mosaic’s due diligence was sufficient at the time the Logistic Companies were appointed and also whether Mosaic continued to adequately monitor their performance to ensure reasonable delivery times.

Key Takeaways

This ongoing matter highlights the importance for businesses in honestly, fairly and transparently managing consumer expectations, especially in circumstances where an unexpected event impacts usual business operations. Businesses should consider the following factors when reflecting on the preliminary stages of this matter:

• Active management of advertising: Businesses need to be aware of all active representations made to consumers. As demonstrated in this matter, an unexpected event can impact the currency and precision of advertisements made to consumers. If left unattended or without a comprehensive disclaimer, businesses can expose themselves to liability and the risk of misleading consumers.

• Management of third parties: Businesses need to actively manage and understand contracted third-party companies. In all circumstances, a business should understand how their third party contractors can impact their business, and should actively manage the parties when circumstances change. More specifically, businesses involved in delivering packages or otherwise engaged in the process need to be aware of what is a reasonable delivery time for consumers. This timeframe will vary across industries, requiring businesses to consider contextual factors and their own operational capabilities to mitigate liability risks.

• When to use disclaimers: Businesses need to be wary of any disclaimers or qualifying statements used when giving their customers a strong and important assurance about their goods and services. Any qualifying statements must be clear, proximate and prominent to the primary claim. Businesses must also recognise that some qualifying statements and disclaimers may not effectively negate the prescribed effect of the main representation. In such cases, businesses must consider whether the main representation should be altered or removed altogether.

Mosaic Brands is defending the proceedings. We expect the matter to be listed for trial in early 2025 unless the matter settles prior.