The Collapse of Dick Smith and the Problem of Gift Cards

Abstract

Gift cards are a multi-billion dollar industry in Australia. The convenience and flexibility they provide has made them highly successful. However, when a gift card seller becomes insolvent and is unable to or refuses to honour gift cards, consumers are left in an often hopeless position. The collapse of electronics giant Dick Smith in January 2016 highlighted the vulnerability of gift card holders when the receiver refused to honour gift cards worth around $2.5 million. This article explores the gift card industry in Australia and the collapse of Dick Smith. It briefly explores current protective measures for creditors in the event of insolvency and laments the lack of particular protection for gift card holders. The authors argue that gift card holders are in many ways different to other unsecured creditors and that perhaps additional protective measures are necessary. The authors analyse protective measures in other jurisdictions and provide some suggestions for protection in Australia.