Bills Digest no. 187 2009–10
Trade Practices Amendment (Australian Consumer Law) Bill
(No. 2) 2010
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Concluding comments
Contact officer & copyright details
Passage history
Trade Practices
Amendment (Australian Consumer Law) Bill (No. 2) 2010
Date introduced: 17
March 2010
House: House of
Representatives
Portfolio: Treasury
Commencement: There are various commencing dates as set out in the
table in clause 2.
Links: The
links to the Bill, its Explanatory Memorandum and second
reading speech can be found on the Bills page, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The primary purpose of the Bill is to:
- incorporate the fair trading and consumer protection provisions
of the Trade Practices Act 1974 (TPA) into the Australian Consumer
Law
- create a national legislative scheme for statutory consumer
guarantees
- create a national legislative scheme for consumer product
safety
- create an infringement notice regime that will apply to
specified provisions of the Australian Consumer Law, and
- change the name of the TPA to the Competition and Consumer
Act 2010 (CCA).
The CCA will allow for two separate operations. The
provisions about competition which existed in the TPA will remain
in the main body of the CCA. The provisions about consumer
protection will lie in Schedule 2 of the CCA. Each of these
will have its own definitions.
Due to the broad scope of the Bill and the number of amendments,
this Digest will concentrate on key issues arising from the
proposed changes rather than dealing with each and every proposed
provision. In addition, in discussing specific provisions, it
is not possible to note all conditions, qualifications or
exceptions that might apply to a particular provision. Thus the
practical effect of a provision may vary from circumstance to
circumstance, according to whether any condition, qualification, or
exception applies.
On 15 August 2008, Ministerial Council on Consumer Affairs
(MCCA) agreed to the following operational objectives to support
its national consumer policy:
- to ensure that consumers are sufficiently well-informed to
benefit from and stimulate effective competition
- to ensure that goods and services are safe and fit for the
purposes for which they were sold
- to prevent practices that are unfair
- to meet the needs of those consumers who are most vulnerable or
are at the greatest disadvantage
- to provide accessible and timely redress where consumer
detriment has occurred, and
- to promote proportionate, risk-based enforcement.[1]
This agreement provides the basis for the development of the
Australia Consumer Law which is to be created in two separate
steps. The first step is contained in the Trade Practices
Amendment (Australian Consumer Law) Act (No.1) 2010
(Australian Consumer Law Act No. 1) which establishes the new
Australian Consumer Law within the existing TPA.[2] The commencement date for
the new consumer law has been proclaimed as 1 July 2010.
On 2 July 2009 the Council of Australian Governments (COAG)
entered into a formal Intergovernmental Agreement on National
Consumer Law (IGA).[3] The IGA specifies how the Australian Consumer Law
will be implemented. First, the Commonwealth will introduce
into the Australian Parliament a Bill or Bills to:
- enact the text of the Australian Consumer Law as a Schedule to
the TPA
- amend relevant provisions of the TPA to ensure that they are
consistent with the Australian Consumer Law, and
- enact changes to the investor protection provisions of the
Australian Securities and Investments Commission Act 2001
and the Corporations Act 2001 to ensure that they are
consistent with the Australian Consumer Law.
Secondly, each State and Territory government will introduce
into its Parliament a Bill or Bills to enact application Acts no
later than 31 December 2010 (or a later date which is agreed) which
will apply the Australian Consumer Law in its jurisdiction.
Thirdly, each Party, including the Commonwealth, will use best
endeavours to have its Parliament repeal, amend or modify any
legislation that is inconsistent with, or alters the effect of, the
Australian Consumer Law.
Fourthly, a Party will not submit a Bill to its legislature
which would be inconsistent with, or alter the effect of, the
Australian Consumer Law.[4]
On 4 December 2009, the MCCA agreed to amendments to the
existing TPA, fair trading and consumer protection provisions
including:
- a new national product safety legislative and regulatory
framework
- a new national consumer guarantees law, which will replace the
provisions in 15 existing national, state and territory laws about
implied warranties and conditions in consumer contracts for goods
and services, and
- reforms, drawing on best practice in State and Territory laws,
which will make the Australian Consumer Law reflective of national
consumer policy and which both enhances its effectiveness, and
minimises business compliance costs. [5]
The Bill was referred to the Senate Economics Committee (the
Senate Committee) for inquiry and report.[6] The Senate Committee
recommended that the Senate pass the Bill, preferably adopting a
further eight recommendations in the report.[7] The Senate Committee report
contains additional comments by Coalition Senators including
specific drafting amendments to some sections. These comments
and the formal recommendations in the report will be addressed in
the body of this Digest.
According to the Explanatory Memorandum, ‘the Bill has no
significant financial impact on Commonwealth expenditure or revenue
at this time’.[8]
However, in the 2009 Budget, the Government announced that the
Australian Competition and Consumer Commission (ACCC) would be
provided with $24.8 million over five years to help it
implement reforms to Australia’s consumer product safety
framework.[9]
Chapter 1 of Schedule 1 to the Bill contains a number of new
definitions. Of these the most contentious is the definition
of ‘consumer’ which is
contained in proposed section 3. The
definition operates by having regard to the purpose for which goods
or services are to be used so that a person acquires goods as a
‘consumer’ if the goods were
of a kind ‘ordinarily acquired’ for personal, domestic
or household use or consumption or if the goods consisted of a
vehicle or trailer acquired for use principally in the transport of
goods on public roads.
The existing definition of
‘consumer’ in section 4B of
the TPA is in different terms. Under that section a person
has acquired goods as a
‘consumer’:
- if the price of the goods is less than $40 000, the goods or
services can be of any kind (that is, ordinarily of a domestic,
household, personal or business nature)
- if the price of the goods is more than $40 000, the goods or
services must be of a kind ordinarily acquired for personal,
domestic or household use or consumption (unless it is a commercial
road vehicle).
The Australian Consumer Law does not apply to goods which were
acquired for re-supply or for the purpose of using them up or
transforming them, in trade or commerce, in the course of a process
of production or manufacture or of repairing or treating other
goods or fixtures on land.
The Commonwealth Consumer Affairs Advisory Council supports
removing the monetary threshold from the definition of
‘consumer’ on the grounds that:
The threshold is—by necessity—set
at an arbitrary level, which is subject to change over time...
there is no meaningful distinction to be made between a person who
pays $40,000 for goods or services and a person who pays
$40,001.[10]
The submission by Freehills to the Senate Committee argues that
the Bill ‘fails to unify the concept of
‘consumer’ for the purposes of the ACL’.[11] By way of
example, Freehills cites the following:
- the definition of
‘consumer’ in section 3 which
refers to whether the goods or services were ‘of a kind
ordinarily acquired for personal, domestic or household use or
consumption’
- the definition of ‘consumer
contract’ in section 23 (for the purpose of the
unfair terms provisions) means a contract for a supply of goods or
services …. ‘to an individual whose acquisition is
wholly or predominantly for personal, domestic or household use or
consumption’
- the definition of ‘consumer
goods’ in section 2 (for the purposes of the
product safety provisions) refers to ‘goods that are intended
to be used, or are of a kind likely to be used, for personal,
domestic or household use or consumption, and includes any such
goods that have become fixtures since the time they were supplied
if the subject of a recall notice or voluntary call’ and
- in sections 21 and 22 the words
‘consumer’ and
‘business consumer’ are used
for the purposes of the unconscionable conduct provisions.[12]
There was also some concern that existing protections will be
lost. The submission on behalf of the Queensland Newsagents
Federation and the NSW and ACT Newsagents Association states:
Implications for small business are obvious,
for instance purchasing IT equipment that is clearly for business
use only and is below $40,000 is no longer covered. A household
type fridge is still covered but a cooling display cabinet under
$40,000 is not. There can be many more examples, shop fittings
under $40,000 are currently covered but will not be in
future.[13]
Their additional comments, the Coalition Senators noted that the
effect of the amendments was that there will no longer be a class
of ‘consumer’ which encompasses small business
stating that ‘this is of grave concern, particularly given
that small business is the largest employer of people in
Australia’.[14]
The Senate Committee considered that ‘the Government
should aim to arrive at a single definition of
‘consumer’ throughout the provisions of the Bill in
future consultations and amendments to the
legislation’.[15]
The additional comments by the Coalition Senators recommended
that the term ‘consumer good’
be redrafted to include goods which do not exceed a specified
value—being $40 000.[16]
Proposed section 18 provides a general
prohibition that a person must not, in trade or commerce, engage in
conduct that is misleading or deceptive, or is likely to mislead or
deceive. This provision is different from the prohibition in
existing section 52 of the TPA which refers to a
‘corporation’ rather than a ‘person’.
This is a universal change which occurs throughout the Bill and is
based on the IGA.
Proposed section 19 operates in the same way
that subsections 65A(1) and (2) (which will be repealed by
item 49 of Schedule 5 to the Bill) of the TPA
currently operate.[17] It exempts ‘information
providers’ from the general prohibition against
misleading or deceptive conduct. An
‘information provider’ is
defined in proposed subsection 19(5) as a person
who carries on a business of providing information and
proposed subsection 19(6) provides the examples of
various broadcasters, including the Australian Broadcasting
Corporation (ABC) and the Special Broadcasting Service Corporation
(SBS) as being information providers. Importantly,
proposed subsection 19(4) is specifically directed
at the publication of matter in connection with the sale, possible
sale or promotion of a sale of a grant in land. Those
publications will not be covered by the exemptions. As a
result, real estate agents will not be protected should they
publish information about a prospective property which is found to
be misleading or deceptive.
Discontent in the franchising sector has been the primary
catalyst for change to the laws about unconscionable
conduct.[18]
That discontent was aired in a number of enquiries and subsequent
reports.[19]
In particular, the Senate Standing Committee on Economics published
a report on its inquiry into the statutory definition of
‘unconscionable conduct’ in December 2008.[20] That report
recommended:
an amendment to section 51AC of the Trade
Practices Act which states that the prohibited conduct in the
supply and acquisition of goods or services relates to the terms or
progress of a contract.[21]
The unconscionable conduct provisions are contained in
proposed sections 20–22 of the Bill.
Although proposed paragraphs 22(2)(j) and
22(3)(j) of the Bill go some way towards this by
referring to ‘any conduct that the supplier or the business
consumer engaged in, in connection with their commercial
relationship, after they entered into the contract’ it does
not go as far as that recommendation. Rather, item 4 of the
Competition and Consumer Amendment Bill 2010 which was introduced
into the House of Representatives on 27 May 2010 will, when
enacted, repeal and substitute sections 21 and 22 of this Bill to
deliver on the recommendation.[22]
Also in December 2008, the Parliamentary Joint Committee on
Corporations and Financial Services (Joint Committee) tabled its
report Opportunity not opportunism: improving conduct in
Australian franchising. The Joint Committee made 11
recommendations including that the TPA be amended to provide for
pecuniary penalties in relation to breaches of the unconscionable
conduct provisions.[23] Item 1 in the table contained in
proposed subsection 224(3) provides for penalties
of up to $1.1 million for corporations and up to $200 000 for
individuals engaging in unconscionable conduct.
The unfair contract terms were part of the first tranche of the
Australian Consumer Law. As enacted the unfair contract terms
comprised sections 2–8 of Schedule 2 of the TPA. This
Bill renumbers the unfair contract provisions as proposed
sections 23–28 of the Australian Consumer Law.
The text of the provisions in the Bill is not the same as the text
as enacted, because of amendments which were made to the original
provisions by the Parliament. However, it is not proposed to
discuss these provisions further in this Digest. The ACCC has
published a guide to unfair contract.[24]
Proposed sections 29–38 contain the
provisions relating to false and misleading representations.
In particular, proposed section 29 contains the
general prohibition on the making of false or misleading
representations. Whilst it is similar to existing section 53
of the TPA it is not the same. In particular:
- it prohibits a person from making a false or misleading
representation in trade or commerce, rather than the current
prohibition of ‘falsely representing’. The reason
is that there is some confusion about the meaning of ‘falsely
representing’.[25] For example in Murphy v Farmer (1988)
165 CLR 19, a case involving importation of a motor vehicle in
which the importer made an incorrect but not deliberately incorrect
customs declaration, the High Court was inclined to interpret
‘false’ to mean ‘purposely untrue’.
However in Sternberg v The Queen (1953) 88 CLR 646 and in
Davidson v Watson (1953) 28 ALJ 63, the High Court
interpreted false to mean contrary to fact. That seems to be the
prevailing view on what the term means, and
- inserts proposed paragraph 29(1)(n) which is a
prohibition about making false or misleading representations
concerning a requirement to pay for a contractual right which is
wholly or partly equivalent to any condition, warranty, guarantee,
right or remedy that a person has under Part 3-2.
According to the Law Council of Australia, the role of
proposed paragraphs 29(1)(m) and
29(1)(n) are ‘not sufficiently
distinct’.[26] The submission to the Senate Committee by the Law
Council of Australia states:
Under section 29(1)(m), a person must not make
a false or misleading representation ‘concerning the
existence, exclusion or effect of any condition, warranty,
guarantee, right or remedy’. Section 29(1)(n) relates
to false or misleading representations concerning a
‘requirement to pay for a contractual right that … is
wholly or partly equivalent to any condition, warranty, guarantee,
right or remedy … [and under written law]’.
In the Committee’s view, these two
provisions are functionally similar (if not identical) ... The
Committee submits that section 29(1)(n) should be deleted.[27]
However, these additional prohibitions were recommended by the
Commonwealth Consumer Affairs Advisory Committee in its report
Consumer rights: Reforming statutory implied conditions and
warranties. There is no recommendation by the Senate
Committee to delete either of them.[28]
Item 2 in the table contained in
proposed subsection 224(3) provides for civil
penalties of up to $1.1 million for corporations and up to
$200 000 for individuals for a breach of sections 29–46
and 48–50.
Proposed sections 47–48 relate to
pricing. Specifically, proposed section 47
provides that a person must not, in trade or commerce, supply goods
if the goods have more than one ‘displayed
price’ and the supply takes place for a price
that is not the lower, or lowest, of the displayed prices.[29] It is intended,
in part, as a response to a series of cases about catalogues
advertising ‘was/now’ prices where the price comparison
was misleading.[30]
‘Supply’ is defined in
proposed section 2 as a supply or re-supply of
goods by way of sale, exchange, lease, hire or hire-purchase; or
the provision, grant or conferring of services.
‘Supplied’ and
‘supplier’ have corresponding
meanings.
The submission by Coles to the Senate Committee was to the
effect that proposed section 47:
should be expanded to include the additional
information stated in the Explanatory Memorandum ... that
businesses are under no obligation to sell goods to which multiple
prices (or single prices) attach, and that businesses are entitled
to withdraw the goods from sale and correct any pricing errors if
they occur.[31]
However, the Treasury submission disagreed with the need for
such an amendment, stating that:
section 47 does not have the effect of
requiring the goods to be sold. Rather, it requires that
goods should not be sold for more than the lowest of the displayed
prices for that good, where two or more prices are displayed for
the same item.[32]
Nevertheless, proposed subsection
47(5) does provide that a
‘displayed price’ is no
longer the price for goods if it has been retracted, and the
retraction is published in a manner that has at least a similar
circulation or audience as the catalogue or advertisement in which
it originally appeared.
Item
3 in the table contained in proposed subsection
224(3) provides for penalties of up to $5000 for
corporations and up to $1000 for individuals who breach the
multiple pricing provision in proposed
section 47.
In 2008, the Productivity Commission published a report of its
review of Australia’s consumer policy framework.[33] That report
noted, amongst other things that:
While Australia’s consumer policy
framework has considerable strengths, parts of it require an
overhaul.
The current division of responsibility for the
framework between the Australian and State and Territory
Governments leads to variable outcomes for consumers, added costs
for businesses and a lack of responsiveness in policy making.
There are gaps and inconsistencies in the
policy and enforcement tool kit and weaknesses in redress
mechanisms for consumers.
These problems will make it increasingly
difficult to respond to rapidly changing consumer markets, meaning
that the associated costs for consumers and the community will
continue to grow.[34]
There are three types of ‘warranty’ that consumers
can rely on to protect themselves if they have a problem with the
goods or services they buy. These are a manufacturer’s
voluntary warranty, an extended warranty and a statutory
warranty.[35]
Manufacturers often provide a ‘voluntary’ warranty
to their customers setting out the terms and conditions under which
the manufacturer agrees to repair or replace the product, or refund
the purchase price. As a manufacturer’s warranty is
voluntary, its terms and conditions are not prescribed by
law.[36]
However, if such a warranty is provided, a buyer has the right to
take legal action against the seller if the warranty is not
honoured.[37]
Some businesses also offer consumers the option of purchasing an
extended warranty in the form of service or insurance contracts
which cover the costs of product repairs or replacement for a set
period beyond the expiration of any voluntary warranty offered by
the manufacturer.[38]
Regardless of whether a voluntary or extended warranty is
available, the TPA, State and Territory Fair Trading Acts or Sale
of Goods Acts protects consumers when they buy goods and services.
They do so by implying certain rights and
obligations into all consumer contracts. These are:
- ‘conditions’— essential terms that, if
breached, will allow a consumer to cancel the contract and seek a
refund as well as seek compensation for loss or damage, and
- ‘warranties’ —secondary terms that, if
breached, will generally allow consumers to seek damages, but will
not allow consumers to terminate the contract.
In contracts for the supply of goods, the statutory
conditions in the TPA require that:
- goods must be of ‘merchantable quality’—they
must meet a level of quality and performance that would be
reasonable to expect, given their price and description[39]
- goods must be fit for their intended purpose—they should
be suitable for any particular purpose the buyer made known to the
seller[40]
- the goods must match the description given to the consumer, or
the sample shown,[41] and
- a consumer must receive clear title to the goods —that
is, the seller must be entitled to sell the goods and consumers can
expect to own the goods outright.
The statutory warranties in the TPA
require that:
- the consumer will enjoy quiet possession of the goods, and
- the goods are free from any charge or encumbrance not disclosed
to the consumer.[42]
All contracts for services contain a number of statutory
warranties. Existing section 74 of
the TPA requires that:
- any service must be carried out with due care and skill
- any materials supplied in connection with the service must be
reasonably fit for the purpose for which they are supplied,
and
- the service, and any materials supplied in connection with the
service, should be reasonably fit for any particular purpose the
consumer made known to the seller.
If goods or services do not satisfy any one of these warranties
(the manufacturer’s warranty, an extended warranty or a
statutory warranty) or conditions, it is a breach of the contract
between the seller and the consumer, and the consumer is entitled
to a remedy from the seller. The type of remedy depends on
the circumstances but may include repair or replacement of goods,
compensation for loss or damage, a refund, or having a service
performed again.[43]
The discussion about the definition of
‘consumer’ above makes clear
that small business is not a ‘consumer’ for the
purposes of the Australian Consumer Law. That being the case,
if a small business is experiencing difficulty which respect to a
product which it has purchased, for example a refrigerator, it will
have to rely on the common law warranties and conditions which are
set out above.
The Standing Committee of Consumer Affairs’ National
Education and Information Taskforce report provides valuable
information about the extent of the problems faced by both business
and consumers in relation to the existing laws:
- consumers mostly experienced faults (64 per cent of problems)
rather than total product failure (10 per cent)
- problems typically occurred early in product life, within the
first three to four months after purchase
- 70 per cent of products were still under warranty (primarily
the standard manufacturer’s warranty, and generally for 12
months duration) when the problem occurred
- in seven out of 10 cases, consumers first approached either the
retailer or the manufacturer, although one in five consumers simply
disposed of the product or did nothing because it was out of
warranty
- most consumers wanted either a replacement product (46 per
cent) or repairs (40 per cent). Only eight per cent wanted a
refund of the purchase price. For more than half of the problems
experienced (57 per cent), consumers got everything they wanted,
but more than a third got nothing at all
- when consumers do not get what they are seeking, the key
problems are unsatisfactory repairs, time delays, red tape, and a
mismatch with what traders are prepared to offer
- both retailers and manufacturers/importers are more likely to
offer repairs (50-60 per cent) than replacements (30-40 per cent).
They claim to be offering what consumers are seeking, but the
research shows consumers are more likely to want a replacement
product than a repair
- while a quarter of problems were resolved on the spot (by
replacement, repair, or refund) and many others led to proactive
moves by traders, almost one in five consumers were ‘fobbed
off’—told to contact the manufacturer, send the product
off, or told there was nothing wrong or to sort it out
themselves
- only one in six consumers sought advice when things
didn’t turn out as hoped, and this was mostly from personal
or technical sources—family, friends, colleagues, repairers,
manufacturers or product websites. Only three per cent of consumers
not receiving full redress contacted government fair
trading/consumer affairs agencies
- most problems were sorted out within about a week, but about
one in seven took more than a month to resolve.[44]
Similarly, Consumer Affairs Victoria reports:
It is estimated that over half of total
consumer detriment (around $3.3 billion for the 12 months to July
2008) is attributable to problems that relate to warranties and
refunds, such as faulty or damaged goods or services, services not
performed or below standard, or repairs not carried out
effectively.[45]
On 30 October 2009 the Commonwealth Consumer Affairs Advisory
Council presented the Minister for Competition Policy and Consumer
Affairs, the Hon Dr Craig Emerson MP, with its final
report.[46]
That report recommended a raft of changes to improve the legal
framework for consumer rights that apply to the acquisition of
goods and services. Those recommendations are the basis for
the proposed amendments.
Proposed sections 51–59 formally codify
the rights of consumers in relation to the goods they buy.
The most contentious of these is proposed section
54—a guarantee of ‘acceptable
quality’. This is a significant change from the
existing requirement that goods be of ‘merchantable
quality’. Proposed subsections 54(2)
and (3) provide that goods will be of
‘acceptable quality’ if they satisfy all of the
following criteria:
- fitness for all the purposes for which goods of that kind are
commonly supplied
- acceptable in appearance and finish
- free from defects
- safe, and
- durable.
The test to be applied is that of a reasonable consumer, fully
acquainted with the state and condition of the goods (including any
hidden defects of the goods), having regard to:
- the nature of the goods
- the price of the goods (if relevant)
- any statements made about the goods on any packaging or label
on the goods
- any representation made about the goods by the supplier or
manufacturer of the goods, and
- any other relevant circumstances relating to the supply of the
goods.
However, proposed subsections
54(6)–(7) provide that goods will not fail the
‘acceptable quality’ test in circumstances where the
consumer misuses or damages the goods or where the consumer
examined the goods prior to purchase, and that examination ought
reasonably to have revealed that the goods were not of acceptable
quality.
Proposed subsection 59(1) contains a guarantee
that where a manufacturer provides an express warranty[47] in relation to goods,
the manufacturer will comply with the warranty, provided that the
supply to the consumer was not by way of auction.
Proposed subsection 59(2) imposes a similar
requirement upon the supplier of goods if the supplier provided an
express warranty in relation to the goods.
Proposed sections 60–63 formally codify
the guarantees relating to the supply of services. In
particular, proposed section 60 creates a broad
requirement that where a person supplies services to a consumer,
they will be rendered with ‘due care’ and skill.
Proposed section 63 excludes contracts of
insurance, and contracts for the transportation or storage of goods
for the purposes of a business, trade, profession or occupation
from the guarantees referred to in proposed sections
60–62.
The submission from Stephen Corones, Professor of Law,
Queensland University of Technology questions the use of the term
‘due care’ in proposed section 60:
... and whether it is intended to reflect the
common law standard of ‘reasonable care’ or to impose a
more stringent standard, in the same way the new standard of
‘acceptable quality’ in relation to goods is more
stringent than the current standard of ‘merchantable
quality’.[48]
He has suggested that:
... the standard required by the guarantee in
section 60 of the ACL should be that the supplier must exercise
such care and skill as is necessary to complete the contract in an
acceptable way. It should mirror the standard of acceptable
quality imposed in relation to goods.[49]
The Senate Committee noted the low rate of Australian
consumers’ awareness of their statutory rights when
purchasing goods and services, particularly in relation to
warranties. It recommended that:
the Government introduce a programme to educate
Australian consumers about their statutory rights ... particularly
... about the guarantee that goods must be of ‘acceptable
quality’, which may offer protection above that included in
manufacturers or extended warranty contracts.[50]
Existing subsection 74(2) of the TPA essentially exempts
professional services provided by a qualified architect or engineer
from the requirement that the services they render are ‘fit
for the purpose’. Importantly, the exemption for
architects and engineers is not replicated in the Bill.
Submissions to the Senate Committee from both Engineers
Australia and the Australian Institute of Architects strongly
argued that the exemption should be retained on the grounds that
the services they provide are affected by both builders and the
construction materials that are utilised. [51] Both cited concerns that it may
not be possible to obtain sufficient and relevant insurance
coverage in response to the proposed legislative requirements.
The additional comments by the Coalition Senators included a
recommendation that the exemption for engineers and architects be
retained in the Australian Consumer Law.[52]
The recently published report entitled ‘Shutting the
gates’ provides valuable insight into the on-going
problem of in-home selling as follows:
Consumer groups and policy makers have concerns
about the high pressure selling techniques used in some in-home
sales (IHS).
IHS differs [from door-to-door selling] in that
a consumer makes an appointment, and therefore a practical and
psychological commitment, for a salesperson to visit their home.
The invitation is most often orchestrated by the seller of the
product, for example through a competition entry or by soliciting
names at a shopping centre or home-show. The consumer
‘invites’ the salesperson into their home environment
to provide what many consumers believe to be an educational
assessment. The salesperson then undertakes an extended and
highly contrived sales process to convince the consumer of the need
for the educational software. During this sales process, a number
of key psychological and social processes are activated or employed
to increase the likelihood that certain consumers will sign up to
contracts for educational software (often with related finance)
that can result in financial stress.[53]
Proposed sections 69–95 relate to
unsolicited consumer agreements. In particular,
proposed section 69 sets out the characteristics
of an ‘unsolicited consumer
agreement’ as:
- an agreement for the supply of goods or services to a
consumer
- made as a result of negotiations between a dealer and the
consumer at a place other than the business or trade
premises of the supplier of the goods or services,
or by telephone
- the consumer did not invite the dealer to come
to that place, or to make a telephone call,
and
- the total price paid or payable by the consumer under the
agreement is not ascertainable at the time the agreement is made,
or if it is ascertainable at that time, the price is more than
$100, or another amount prescribed by the regulations.
In addition, the Bill contains the following consumer
protections:
- the hours during which an unsolicited consumer agreement may be negotiated
are specified: proposed section 73
- any dealer who seeks to enter into an unsolicited consumer
agreement with a person must advise the person of their purpose and
their identity, and must tell the person that the dealer must leave
the premises on request: proposed section 74
- a dealer who has been asked to leave premises must not contact
the prospective consumer again for at least 30 days:
proposed section 75
- a person must be informed by the dealer that they have the
right to terminate an unsolicited consumer agreement, and how to do
so: proposed section 76
- the termination period (‘cooling off’) is 10
business days starting on the first business day after the an
unsolicited consumer agreement was made: proposed section
82
- where an unsolicited consumer agreement is terminated, it is
taken to be rescinded and any related contract or instrument (such
as a finance contract) is void: proposed section
83
- the supplier under an unsolicited consumer agreement is
prohibited from supplying the goods to the consumer or accepting
any payment during the ‘cooling off’ period:
proposed section 86.
According to the Senate Committee four key issues were
highlighted by submitters to the inquiry:
- the definition of ‘unsolicited consumer agreements’
and concerns that this may be too narrow to protect vulnerable
consumers from ‘solicited’ door-to-door selling
- the restriction on the hours during which an unsolicited
consumer agreement can be negotiated
- the proposed 10 business day cooling off period, and
- the prohibition of supplies to the consumer during the cooling
off period.[54]
The Explanatory Memorandum makes it clear that the section is
intended to capture the circumstances set out in the
‘Shutting the gates’ report.[55] However, having regard to
the vulnerability of some consumers to the marketing techniques of
in-home traders, and in response to the submissions from Legal Aid
Queensland[56] and
the Consumer Action Law Centre[57], the Senate Committee recommended that:
the bill defines an ‘unsolicited consumer
agreement’ to include circumstances in which consumers are
contacted (and contact dealers) through indirect means. This should
include circumstances where a consumer is contacted in relation to
the supply of goods or services after providing his or her name or
contact details to a person, and the predominant purpose for
providing those details was not to supply those goods or services,
and where a consumer contacts a dealer in response to a
‘missed call’.[58]
In their additional comments, the Coalition Senators stated that
they agreed that the definition of ‘unsolicited consumer
agreement’ should contain those matters dealt with in the
recommendation.[59]
The Senate Committee considered the submissions in relation to
the other three issues raised, but did not recommend any changes to
the Bill in relation to those matters.
Item 5 in the table contained in
proposed subsection 224(3) provides for civil
penalties of up to $50 000 for corporations and up to $10 000
for individuals who breach the provisions of proposed sections
74–76, 78–81, 84 and 87–90 which contain the
provisions about unsolicited consumer agreements.
It should also be noted that proposed sections
278–286 relate to liability of suppliers and credit
providers. In essence these provisions makes suppliers of
goods and services and a person providing certain types of
connected finance jointly liable for certain breaches of contract
in relation to either the contract of sale or the linked credit
contract.
Proposed sections 96–99 relate to lay-by
agreements. There are no comparable provisions in the TPA, as
the existing laws about lay-by are state-based. Lay-by
agreements are defined in proposed subsection
96(3) as an agreement between the supplier of consumer
goods and a consumer by which the consumer pays for the goods by
(three or more) instalments and the consumer goods remain in the
possession of the supplier until the final instalment is paid.
‘Lay-by provides a means for consumers to afford
a more expensive purchase through paying by instalments without
having to become a borrower’.[60]
The Consumer Law Action Centre sets out the problems with
lay-by, in the absence of specific regulation, as follows:
... both consumers and suppliers were often
confused about the specific terms and conditions of their lay-by
agreement because there were no minimum standards and thus terms
relating to cancellation and refund rights for both consumers and
suppliers varied greatly from supplier to supplier. Traders faced
problems in dealing with customer defaults and extra administration
costs. Consumers also faced a range of problems, including being
unable to obtain a refund and thus losing deposit and instalment
payments, suppliers going into liquidation and contracts being
cancelled without notice. Consumers who experienced financial
hardship and thus became unable to complete payment of remaining
instalments could also be left unfairly stuck—between being
unable to complete the agreement and unable to cancel and obtain a
refund of payments already made.[61]
The Bill contains the following consumer protections:
- where a lay-by agreement is terminated by either party to the
agreement before the goods are delivered to the consumer, the
supplier must refund all the amounts already paid by the consumer:
proposed section 99.
- where the consumer terminates the lay-by agreement—the
consumer may be required to pay a ‘termination
charge’ only if, the written lay-by agreement
sets out the requirement for a termination charge, and the supplier
has not breached the lay-by agreement: proposed
subsection 97(2). In addition, the amount of
the termination charge must be no more than the supplier’s
reasonable costs in relation to the agreement: proposed
subsection 97(3)
- a supplier must not terminate a lay-by agreement unless:
- the consumer has
breached a term of the agreement, or
- the supplier is
no longer engaged in trade or commerce, or
- the consumer
goods to which the agreement relates are no longer available:
proposed section 98.
Whilst the intention is that a consumer is entitled to a refund
of monies paid in the event that the agreement is terminated, the
consumer is not a secured creditor or entitled to any priority in
the case of bankruptcy or insolvency.
Item 6 in the table contained in
proposed subsection 224(3) provides for penalties
of up to $30 000 for corporations and up to $6000 for individuals
who breach the lay-by provisions.
When the review of statutory warranties and conditions was
announced, Chris Bowen MP stated that:
The review will also examine the need for a
‘lemon law’ in Australia and whether or not they would
provide an effective mechanism for consumers to seek the
appropriate redress when purchasing motor vehicles that fail to
meet their reasonable expectations.
This review will explore the issue of whether
or not ‘lemon laws’ are the best way to help consumers
respond to motor vehicles they may have purchased, that repeatedly
fail to meet expected standards of performance and quality.[62]
According to the Commonwealth Consumer Affairs Advisory Council
The idea of the ‘lemon’ as an
undesirable or unsatisfactory thing has been in common use for at
least one hundred years, particularly in the United States... In
its colloquial use, a lemon is considered to be something that is
completely useless or without value. It is something that will not
function as intended and, when bought, returns to its owner more
grief than utility.[63]
A lemon law in respect of a motor vehicle would protect
motorists who purchase vehicles that suffer repeated repairs on the
same component, or endure a vehicle which is susceptible to the
failure of numerous components over a set period of time. A
problem must occur within a set time frame from purchase, with the
overall aim being to limit the chance of a manufacturer repairing
the vehicle repeatedly until the end of the warranty period, by
which time the repair costs are then payable by the owner. In
the United States the Magnuson-Moss Warranty Act protects
citizens of all states and covers anything mechanical.
The Commonwealth Consumer Affairs Advisory Council did not
consider that a law, specific to the purchase of motor vehicles was
necessary. Instead the Bill contains generic provisions which
dictate whether a failure is ‘major’ or
‘minor’ as a precondition for a consumer rejecting
goods.
The remedies which are available to a consumer, when consumer
guarantees are not complied with, are set out in proposed
sections 259–266 of the Bill. The Bill refers
to failures to comply with consumer guarantees in respect of goods
as either major or minor failures. The applicable remedy
depends on which guarantee has not been complied with, and whether
the failure to comply is of a major or minor nature.
Where the failure is not a major failure, and can be remedied,
the consumer may require the supplier to remedy the failure within
a reasonable time. Proposed section 261
provides that where a supplier is required to remedy a minor
failure, the supplier may comply with that requirement as
follows:
- if the failure relates to title—by curing any defect in
title
- if the failure does not relate to title—by repairing the
goods
- by replacing the goods with goods of an identical type, or
- by refunding any money paid by the consumer for the goods and
an amount that is equal to the value of any other consideration
provided by the consumer for the goods.
If the supplier does not comply with the requirement, or does
not comply within a reasonable time, the consumer may either:
- have the failure remedied and then take action against the
supplier to recover the reasonable costs he or she has incurred,
or
- under some limited circumstances the consumer may notify the
supplier that he or she rejects the goods.
Those limited circumstances are set out in proposed
section 262 which provides that a consumer is not entitled
to reject goods if:
- the ‘rejection period’
for the goods has ended[64]
- the goods have been lost, destroyed or disposed of by the
consumer
- the goods were damaged after being delivered to the consumer
for reasons not related to their state or condition at the
time of supply, or
- the goods have been attached to, or incorporated in, any real
or personal property and they cannot be detached or isolated
without damaging them.
Under proposed section 260, a
‘major failure’ applies to
goods if:
- the goods would not have been acquired by a reasonable consumer
fully acquainted with the nature and
extent of the failure
- the goods depart, in one or more significant
respects, from the description, or any sample or
demonstration model on which the supply of the goods was based
- the goods are substantially unfit for a purpose for which goods
of the same kind are commonly supplied and they cannot, easily and
within a reasonable time, be remedied to make them fit for such a
purpose
- the goods are unfit for a disclosed purpose that was made known
to the supplier and they cannot, easily and within a reasonable
time, be remedied to make them fit for such a purpose; or
- the goods are not of acceptable quality because they are
unsafe.
In the case of a major failure, the consumer may, under
proposed subsection 259(3), either reject the
goods (in the same circumstances as above) or in the alternative,
take action against the supplier to:
- recover compensation for any reduction in the value of the
goods below the price paid, or
- recover damages for any loss or damage suffered by the consumer
because of the failure to comply with the guarantee if it was
reasonably foreseeable that the consumer would suffer such loss or
damage as a result of such a failure.
The submission from Telstra considered there should be
‘greater clarity of new and unfamiliar terms (such as major
failure)’ on the grounds that:
... it is defined by use of terms that are new
and in respect of which there is no jurisprudence. For example,
when would a consumer be ‘fully acquainted’ with the
nature and extent of the failure? When does a good ‘depart
significantly’ from its description? The [Explanatory
Memorandum] gives the example of a red bicycle, stating that a red
bicycle might depart significantly from a green bicycle. Is
the fact the bicycle actually works properly not relevant to
whether there is a ‘significant departure’ or not? If a
handset includes all major functions (for example you can make
calls and SMS) but is missing an ancillary function that is
referred to in the technical specification for the handset, such as
a news or weather shortcut or application, would that be a
‘significant departure’? In whose view does there need
to be a ‘significant departure’? Is the assessment
quantitative or qualitative? Questions such as these need to
be clarified and are of critical importance so that consumers and
businesses are able to readily assess whether a failure is major or
not major, as it will dictate the appropriate remedies and
redress.[65]
In response to these valid concerns, the Senate Committee
recommended that the ACCC and consumer regulators should issue
national guidance in relation to the new consumer guarantees to
ensure regulators, consumers and businesses have a consistent
understanding of their new rights and responsibilities.[66]
Where a consumer opts to reject goods, proposed section
263 requires two things:
- the consumer—must return the goods to the supplier unless
the goods have already been returned, or the consumer cannot return
the goods without significant cost because of matters such as the
size or height, or method of attachment, of the goods
- the supplier—must, depending on what the consumer elects,
either:
-
refund any money paid by the consumer for the
goods as well as any amount that is equal to the value of any other
consideration provided by the consumer for the goods, or
-
replace the rejected goods with goods of the same
type, and of similar value, if such goods are reasonably available
to the supplier: proposed subsection 263(4).
Importantly, proposed section 265 covers those
circumstances where a supplier of goods also supplies services
connected with those goods—for example, a supplier of a
mobile phone handset may also provide mobile telephone services
under a separate contract. In that case, where a consumer
notifies the supplier that he or she rejects goods, and the
supplier is required to give the consumer a refund, then the
consumer is taken to have terminated the contract for the supply of
the services at the time the consumer elects that the refund be
given.
Proposed sections 267–270 operate in
similar terms for a failure of a guarantee in respect of
services.
Proposed sections 271–273 give an
‘affected person’[67] the right to take
action against a manufacturer of goods to recover damages in
respect of the following guarantees:
- that the goods supplied are of acceptable quality—section
54
- that goods supplied by description comply with the
description—section 56
- that a manufacturer of goods will take reasonable action to
ensure that facilities for the repair of goods and parts for the
goods are reasonably available for a reasonable period after the
goods are supplied—section 58, and
- that the manufacturer of goods will comply with any express
warranty given or made by the manufacturer in relation to the
goods—section 59.
Manufacturers are required to indemnify suppliers in respect of
the costs of complying with the guarantee obligations related to
acceptable quality, descriptions applied to goods by manufacturers
and fitness for a purpose that a consumer makes known to a
manufacturer: proposed section 274.
Proposed section 277 authorises the regulator
to take action in relation to remedies for consumer guarantees, on
behalf of one or more persons.
Prior to August 2004, the Standing Committee of Officials of
Consumer Affairs (SCOCA) identified two major areas for improvement
in Australia’s consumer product safety regulatory system.
Firstly, the system needed to be able to deal
with potential safety hazards more swiftly, with a greater emphasis
on the prevention of problems, rather than on reacting once
consumers suffered harm.
The second set of problems concern the impact
of the system on the efficient trade in consumer products
throughout Australia and the efficient use of government regulatory
resources. Many of these problems relate to the fragmentation
of product safety regulation amongst the different jurisdictions in
Australia, accompanied by a lack of uniformity in product safety
legislation and its administration.[68]
To further inform the debate on how best to bring about these
improvements, the Ministerial Council on Consumer Affairs issued a
discussion paper in August 2004. Following on from the
responses to the discussion paper, an options paper was circulated
in August 2005.[69]
In March 2005, the then Coalition Government asked the
Productivity Commission to undertake a research study into
Australia’s consumer product safety laws and to examine the
various reform options raised in the discussion paper of August
2004.
The Productivity Commission subsequently made a number of
findings, including that there were a number of ways governments
could make the regulation of consumer product safety more
efficient, effective and responsive, the priorities being:
- addressing fragmented policy making, administration and
enforcement through a much stronger national approach
- addressing significant data and information gaps
- improving the responsiveness of government regulation to
existing and emerging product-related hazards
- focusing more strongly on hazard identification, risk
assessment and risk management
- improving the standards-making process
- ensuring the regulation of consumer product safety is
adequately resourced, and
- clarifying boundaries and areas of responsibility between the
general consumer product safety system and the specific safety
regimes.[70]
In another report, on its Review of Australia's Consumer Policy
Framework, the Productivity Commission reiterated its earlier
comments that
... the Australian Government, through the
Australian Competition and Consumer Commission (ACCC), should be
responsible for enforcing the product safety provisions nationally,
though possibly with scope for states and territories to implement,
time limited, interim product safety bans.[71]
On 3
July 2008, COAG announced that it had
taken:
... a significant step in streamlining the
processes associated with ensuring the safety of consumer products.
COAG has agreed that the Commonwealth will assume responsibility
for the making of permanent product bans and standards under the
Trade Practices Act 1974. States will retain powers to
issue interim product bans.[72]
Proposed sections 104–108 provide for the
making of, and compliance with, safety standards. In
particular, proposed subsection 104(1)
empowers the Commonwealth Minister to make a safety standard for
consumer goods of a particular kind and/or product related
services[73] of a
particular kind. Any such standard must be published on the
internet.[74]
Under
proposed subsection 104(2) a safety standard
for consumer goods of a particular kind
may consist of requirements about the following matters which are
reasonably necessary to prevent or reduce risk of injury to a
person:
- the performance, composition, contents, methods of manufacture
or processing, design, construction, finish or packaging of
the consumer goods
- the testing of consumer goods of that kind during, or after the
completion of, manufacture or processing
- the form and content of markings, warnings or instructions to
accompany the consumer goods.
Under proposed subsection 104(3) a safety
standard for a product related service of
a particular kind may consist of requirements about the following
matters which are reasonably necessary to prevent or reduce risk of
injury to a person:
- the manner in which services of that kind are supplied
(including, but not limited to, the method of supply)
- the skills or qualifications of persons who supply such
services
- the materials used in supplying such services
- the testing of the services, and
- the form and content of warnings, instructions or other
information about the services.
In addition, the Commonwealth Minister may declare, by written
notice published on the internet, that an existing standard, such
as one prepared and approved by Standards Australia to be a
‘safety standard’.
Proposed subsection 106(1) prohibits a person from
supplying consumer goods that do not comply with a safety standard
once that standard is in force. Further,
proposed subsection 106(3) prohibits a person from
manufacturing, possessing or having control of consumer goods, if
the supply of those goods is prohibited under subsection
106(1). The export of goods which are the subject of
the prohibition in subsection 106(1) will be strictly
controlled. A person wishing to export such goods must first
seek the written approval of the Minister.[75] Where approval is given the
Minister must make a statement setting out the particulars of the
approval to be tabled in each House of the Parliament within seven
sitting days of the date that the approval is given.
Proposed section 107 contains a similar
prohibition on the supply of product related services if a safety
standard is in force, and the services do not comply with the
standard.
Item 9 in
the table contained in proposed
subsection 224(3) provides for penalties of up to
$1.1 million for corporations and up to $220 000 for
individuals who breach the prohibition against supplying goods that
do not comply with safety standards.
Proposed sections 109–121 set out the
rules related to bans of certain goods and services. There
are two types of bans—interim and permanent.
An interim ban may be imposed on consumer goods where it appears
to the ‘responsible Minister’ that consumer goods of a
particular kind may, or will, cause injury to a person, or a
reasonably foreseeable use, or misuse, of
the consumer goods may, or will, cause injury to a person.[76] The responsible
Minister may also impose an interim ban on product related services
if it appears that as a result of the supply of the services,
consumer goods may, or will, cause injury to a person, or that the
use or misuse of such consumer goods may, or will, cause injury to
a person. The interim ban must take the form of a written
notice, published on the internet: proposed subsections
109(1)–(2).[77]
An interim ban imposed by the Commonwealth Minister applies in
all States and Territories. However an interim ban imposed by
a responsible Minister who is a Minister of a State or a Territory
applies only in that State or Territory: proposed section
110.
The period of an interim ban is initially 60 days.
However, before the ban period has ended the responsible Minister
may extend the ban period for a further 30 days.[78] If the original ban was
not imposed by the Commonwealth Minister, then, before the 30 day
extension has elapsed, the responsible Minister may request the
Commonwealth Minister to extend the interim ban by a further 30
days. If the Commonwealth Minister has not made a decision by
the time that the extension period has elapsed, the Commonwealth
Minister is deemed to have made a decision that the ban will extend
for a further 30 days—taking the period of the interim ban to
a maximum of 120 days: proposed section 111.
The Commonwealth Minister may, by written notice published on
the internet, impose a permanent ban on consumer goods or product
related services where it appears that the consumer goods may, or
will cause, injury to a person or that the reasonable use or misuse
of the goods may, or will cause, injury to a person:
proposed section 114.[79] Once a permanent ban is
imposed, it applies in all States and Territories. Just as
the Commonwealth Minister has the power to impose a permanent ban,
so too, the Commonwealth Minister has the power to revoke such a
ban. In that case the Commonwealth Minister must publish a
written notice on the internet revoking the ban.[80]
A person must not supply consumer goods: proposed
section 118, or product related services: proposed
section 119 which are covered by a ban.
The Law Council of Australia submitted that ‘it is not
clear on the face of the legislation what is meant by
‘reasonably foreseeable use’ and in particular,
‘misuse’.[81] In particular it was concerned that:
... the legislature intends for the concept of
‘reasonably foreseeable use’ to capture not only
unintended misuse by a user (for example, due to some design
defect), but also any deliberate use of a good in an unintended
manner.[82]
Treasury responded to this criticism by stating that the
Minister needed to take action where common uses of a good may pose
a safety risk stating that the provision:
... is not intended to cover situations where a
consumer has unreasonably used a product, after taking into account
the ordinary use which a product of that kind is safely put to and
the presence of any warning or other information. Nor is it
intended to cover a deliberate misuse of a good where such use
cannot reasonably be foreseen.[83]
Item 9 in the table contained in
proposed subsection 224(3) provides for penalties
of up to $1.1 million for corporations and up to $220 000 for
individuals who breach the prohibition against supplying goods or
services that are subject to a ban.
Recall of consumer
goods
Proposed sections 122–128 set out the
process for the recall of consumer goods. In particular
proposed section 122 provides that the responsible
Minister may issue a notice for the compulsory recall of consumer
goods of a particular kind[84] where, amongst other things:
- it appears to the responsible Minister that the goods will or
may cause injury to any person
- it appears to the responsible Minister that a reasonably
foreseeable use (including a misuse) of such goods will or may
cause injury to any person
- a safety standard for such goods is in force and the goods do
not comply with the standard
- an interim ban, or a permanent ban, on such goods is in
force.
The required contents of a recall notice are set out in
proposed section 123. Under proposed
paragraph 123(1)(c) a recall notice directed to a supplier
may require the supplier to inform the public, or a class of
persons specified in the notice, that the supplier undertakes to
repair the goods, replace the goods or refund the purchase price of
the goods to the supplier. However, if the identity of the
supplier or suppliers is not known, the recall notice may direct
the regulator to take action.
Where a supplier is given a notice under paragraph 123(1)(c),
the cost of any repair or replacement of the goods, and any
transport costs incurred, must be paid by the supplier:
proposed section 124. If a recall
notice for consumer goods is in force, a person must comply with
the notice and must not supply those goods to a person:
proposed section 127.
Proposed section 128 contemplates that a person
may take voluntary action to recall consumer goods in circumstances
where:
- the consumer goods may cause injury to another person
- a safety standard is in force for the consumer goods and the
consumer goods do not comply, or it is likely that they do not
comply with the standard, or
- an interim ban or a permanent ban on the consumer goods is in
force.
Where a person does voluntarily recall consumer goods, the
person must, within two days give the Commonwealth Minister a
written notice in the form prescribed in proposed
subsection 128(7) setting out the reasons for the
voluntary recall. Upon receipt of that notice the
Commonwealth Minister may publish a copy of the notice on the
internet.[85]
Item 11 in the table contained in
proposed subsection 224(3) provides for penalties
of up to $1.1 million for corporations and up to $220 000 for
individuals who fail to comply with a recall notice as required by
proposed section 127.
Item 12 in the table contained in
proposed subsection 224(3) provides for penalties
of up to $16 500 for corporations and up to $3 300 for individuals
who fail to comply with the requirement to notify the Commonwealth
Minister of voluntary recall action within the relevant time
frame.
The Productivity Commission report describes the problems with
the existing system for identifying significant hazards which
should be removed from the market as follows:
- there is little direct integration of injury data and
regulatory action—emerging problems with products tend to be
identified informally by regulators, sometimes including informal
input from coroners and injury surveillance units
- the system often appears to be driven excessively by pressure
to deal with the latest ‘problem product’, rather than
by an objective and even-handed assessment of all the hazards
associated with a generic product and the costs and benefits of
government intervention, and
- duplication of hazard evaluation occurs as jurisdictions may
undertake separate assessments of the risks attached to a product
and, in some cases, may not share the results for considerable
periods of time.[86]
Proposed section 131 requires a
‘supplier’ who becomes aware
that consumer goods of ‘a particular
kind’ have been ‘associated
with’ the death or serious
injury or illness of a person to give the Commonwealth Minister
a notice to that effect within two days.[87] Similarly proposed
section 132 imposes the same requirement on a supplier of
product related services where consumer goods to which those
services relate have been associated with the death or serious
injury or illness of a person.
It is appropriate to revisit the definition of
‘supply’ here. As
already stated, a supply of goods is a sale, exchange, lease, hire
or hire-purchase, whilst a supply of services is to provide, grant
or confer services. This means that a manufacturer is also a
supplier of goods and so must comply with these reporting
requirements.
Of concern to many of the submitters to the Senate Committee
inquiry was the requirement to report an injury, illness or death
‘associated with’ the supply of a good or
service. Freehills argues that:
in ordinary parlance, the term
‘associated with’ may have a very general connotation
of ‘being involved with’ or ‘having some
connection with’. The phrase does not necessarily
connote a causative relationship.
The use of the phrase in the Bill means that
the reporting obligation will be enlivened if a supplier becomes
aware that the consumer goods in question were in some way involved
with or connected with a death or serious injury of illness.
This will be so even if there is no suggestion or possibility that
the goods caused or contributed in (in a legal sense) the death or
serious illness or injury.[88]
Hasbro Australia Limited complains of the burden on industry in
that ‘not only the manufacturer of the good involved with the
incident but all other suppliers in the supply chain would have to
report the same incident’.[89]
The Senate Committee noted the cautionary comment by Associate
Professor Luke Nottage from the Faculty of Law, University of
Sydney, ‘that reporting duties must be supported by adequate
information systems with government to ensure consumers benefit
from the policy’.[90] Importantly the Bill does not give any indication
of how or where these notifications will be held. However the
Senate Committee has stated that:
On 15 April 2010, Consumer Affairs Minister Dr
Craig Emerson launched a new clearing house government website,
www.productsafety.gov.au, for the publication of information
garnered through product safety information collected voluntarily
or under duties provisions in the bill. The website will be
administered by the ACCC and will be the main vehicle for
information to be conveyed to the public.[91]
Item 12 in the table contained in
proposed subsection 224(3) provides for penalties
of up to $16 500 for corporations and up to $3 300 for individuals
who fail to serve the required notice within the two day time
limit.
Proposed sections 134–137 contain
provisions about information standards. In particular,
proposed subsections 134(1) and 135(1) empower the
Commonwealth Minister, by written notice published on the internet,
to make an ‘information
standard’ for goods and/or services of a
particular kind.[92] Proposed subsection 134(2)
provides that an information standard may:
- make provision in relation to the content of information about
goods or services of that kind
- require the provision of specified information about goods or
services of that kind
- provide for the manner or form in which such information is to
be provided
- provide that such information is not to be provided in a
specified manner or form
- provide that information of a specified kind is not to be
provided about goods or services of that kind, or
- assign a meaning to specified information about goods or
services.
In addition, Commonwealth Minister may declare, by written
notice published on the internet, that an existing standard, such
as one prepared and approved by Standards Australia is an
‘information standard’.
Proposed sections 136 and 137
impose prohibitions on the supply of good and/or services if an
information standard is in force and the goods and/or services do
not comply with the information standard.
Item 13 in the table contained in
proposed subsection 224(3) provides for penalties
of up to $1.1 million for corporations and up to $220 000 for
individuals who supply goods and/or services which do not comply
with the information standard where one is in force.
Proposed sections 138–150 set out the
liability of manufacturers of goods with safety defects. In
effect, a manufacturer who supplies goods which have a safety
defect is liable to compensate a person for the loss or damage
caused by the defect, for:
- personal injury—including death—to an individual to
whom the defective goods were supplied
- personal injury—including death—to an individual
other than the person to whom the defective goods were
supplied
- property damaged or destroyed where the property was of a kind
that is ordinarily acquired for personal, domestic or household use
or consumption and the person used or intended to use the goods for
that purpose
- damage or destruction of land, buildings or fixtures which are
of a kind ordinarily acquired for private use and the person used
or intended to use the land, buildings or fixtures for that
purpose
Proposed section 142 sets out the various
defences on which a manufacturer may rely. In particular,
proposed paragraph 142(b) includes the
circumstances where the goods had that safety defect only because
there was compliance with a mandatory standard for them. Under
proposed section 143, a person who wishes to
commence a defective goods action must do so within three years of
the time the person became aware of all of the
following:
- the alleged loss or damage
- the safety defect of the goods, and
- the identity of the person who manufactured the goods.
However proposed subsection 143(2) provides
that a defective goods action must be commenced
within ten years of the supply by the manufacturer of the goods to
which the action relates.
Where, in a defective goods action, the manufacturer relies on
the defence that the goods had a safety defect only because there
was compliance with a Commonwealth mandatory standard for them, the
manufacturer must give formal notice to the Commonwealth of the
action and defence. In that case the Commonwealth will become
a defendant in the action: proposed section
148. The ACCC may, by application, commence a
defective goods action on behalf of one or more persons as long as
those persons have given their written consent:
proposed section 149.
Where a person who wishes to bring a defective goods action
against a manufacturer does not know the identity of the
manufacturer, proposed section 147 authorises the
person to give a written notice to the supplier who supplied the
defective goods or to any other supplier of the defective goods,
requesting the particulars of the manufacturer.
If, after 30 days, the person who made the request for
information still does not know who manufactured the goods, then
every supplier to which a written request for information was made,
and who did not comply with the request, will be deemed to be the
manufacturer of the goods. According to the Explanatory
Memorandum, ‘this deeming provision provides an incentive to
encourage suppliers to respond, and in a timely manner, to request
for identifying information for the purposes of bringing a safety
defective goods action’.[93]
In any event the content of proposed section
147 is in the same terms as existing section 75AJ of
the TPA and is not a new concept.
The Senate Committee recommended that:
the provisions of the legislation relating to
product safety be reviewed within three years of implementation,
particularly with regard to the costs of compliance versus the
benefits obtained, the integrity of confidentiality of reports and
any requirement to review definitions of product safety and risk in
mandatory reporting.[94]
In addition to civil pecuniary penalties, the Bill creates
strict liability criminal offences in respect of breaches of the
specific protections in Chapter 3. A ‘strict
liability’ offence is one which does not require proof of
‘mens rea’ (a guilty mind) but to which the common law
defence of honest and reasonable mistake of fact applies.[95] The offences are
broadly as follows:
- proposed sections 151–168 create
offences in relation to unfair practices although proposed
section 160 provides an exemption for prescribed
information providers in respect of certain types of false or
misleading representations or conduct which is consistent with the
terms of proposed section 19
- proposed sections 169–193 create
offences in relation to consumer transactions
- proposed sections 194–202 create
offences in relation to safety of consumer goods and product
related services
- proposed sections 203–204 create
offences in relation to information standards, and
- proposed sections 205–206 create
offences in relation to substantiation notices.
These criminal offences mirror the terms of the
duties and obligations set out in the relevant provisions of
Chapter 3. In particular, the financial penalties in respect
of the criminal offences and the civil pecuniary penalties for the
breaches of the provisions of Chapter 3 are the same.
Chapter 4 contains the following defences:
- where the defendant proves that the contravention was caused by
a reasonable mistake of fact, including a mistake of fact caused by
reasonable reliance on information supplied by another person:
proposed section 207
- where the defendant proves that the contravention is due to an
act or default of another person or some other cause which was
beyond the defendant’s control and the defendant took
reasonable precautions and exercised due diligence to avoid the
contravention: proposed section 208
- in a prosecution for publication of advertisements by a person
whose business it is to publish and arrange the publication of
advertisements, if the defendant proves that he or she did not
know, and had no reason to suspect, that a contravention would
result from the publication: proposed section
209
- in a prosecution of supply of goods or services that do not
comply with safety standards and information standards, in certain
circumstances, if the defendant proves that the goods were acquired
for re-supply: proposed sections 210 and 211.
Generally the onus of proof lies with the
plaintiff in a criminal prosecution. However under
proposed section 151(2), in a proceeding
concerning a representation about a testimonial[96] that is alleged to be false and
misleading, the representation is assumed to be false or misleading
unless evidence is adduced to the contrary. However,
proposed subsection 151(3) provides, for the
avoidance of doubt, that this assumption does not have the effect
of placing on any person an onus of proving that the representation
is not false or misleading.
According to the Law Council of Australia:
It is not appropriate for onuses of proof to be
reversed in the absence of clear evidence that consumers require
the benefit of the reversal in order to enforce the protection
accorded to them by the Bill... the [Law Council of Australia] does
not support the ... reversal of the evidentiary burden in relation
to the criminal offences, as in proposed s 151(2). Although
the imposition of an evidentiary burden stops short of a true
reversal of onus, the finding of a criminal contravention is a
serious matter and should require all elements of the offence to be
proved against the accused.[97]
On the other hand Treasury states that:
Reversals or partial reversals of the onus of
proof have been included in the ACL in situations where:
- it would be impossible or unreasonable to expect a consumer or
a regulator to meet the conventional standard of proof; and
- the supplier would easily be able to meet the standard of
proof.
All provisions of the ACL have been developed
in accordance with the Commonwealth Attorney General’s
Department’s A Guide to Framing Commonwealth Offences, Civil
Penalties and Enforcement Powers.[98]
The Senate Committee acknowledged that various submitters
expressed a concern about the apparent reversal or partial reversal
of the onus of proof. However it argued that:
... this has only been done where it is
impossible or unreasonable to expect a regulator to meet the
conventional standard of proof. In the case of solicited
contracts, it is not unreasonable to expect that the supplier has
evidence of the contact, rather than the consumer.[99]
The Bill provides that the regulator may take the following
enforcement actions:
- enforceable undertakings
- substantiation notices, and
- public warning notices.
The regulator may accept a written undertaking given by a person
in connection with a matter in relation to which the regulator has
a power or function under the Australian Consumer Law. If the
regulator subsequently considers that the person has breached the
terms of the undertaking, the regulator may apply to the court for
an order. In that case, the court may order any of the
following:
- the person is directed to comply with that term of the
undertaking
- the person is directed to pay to the Commonwealth, or to a
State or Territory, an amount up to the amount of any financial
benefit that the person has obtained directly or indirectly and
that is reasonably attributable to the breach
- the person is directed to do anything that the court considers
appropriate to compensate any other person who has suffered loss or
damage as a result of the breach, and
- any other order that the court considers appropriate:
proposed section 218.
Substantiation notices were introduced in the Australian
Consumer Law Act No. 1. Under proposed section
219, the regulator may give the person who made a claim or
representation a written notice requiring the person to give
information and/or produce documents to substantiate or support the
claim or representation, within 21 days after the notice is given
to the person.
A person who has been given the substantiation notice may apply
to the regulator within the 21 day time limit for an extension of
the period for complying with the notice: proposed section
220. A person may refuse or fail to provide
information or produce a document in compliance with a
substantiation notice if the information or document might tend to
incriminate the person or to expose the person to a penalty:
proposed subsection 221(3).
Public warning notices were introduced in the Australian
Consumer Law Act No. 1. Proposed section 223
empowers the regulator to issue a written notice to the public
containing a warning about the conduct of a person where there are
reasonable grounds to suspect that the conduct may constitute a
contravention of the Australian Consumer Law, that one or more
other persons has suffered, or is likely to suffer, detriment due
to the conduct; and the regulator is satisfied that it is in the
public interest to issue the notice.
Chapter 5 contains a number of remedies which are available to a
person where there has been conduct in contravention of the
Australian Consumer Law. The remedies include injunctions,
order for damages, pecuniary penalties and compensation orders and
orders for non-party consumers. Orders for non-party
consumers were included in the TPA by the Australian Consumer Law
Act No. 1.
The pecuniary penalties in respect of the contravention of a
provision of the Australian Consumer Law are contained in
proposed section 224 and are outlined under
separate headings above. Proceedings for an order that a
person pay a pecuniary penalty in relation to a consumer protection
breach are stayed if criminal proceedings are started or have
already been started against the person for an offence which is
constituted by conduct that is substantially the same as the
conduct alleged to constitute the consumer protection breach:
proposed section 225.
The TPA currently provides for country of origin representations
as follows:
- paragraph 53(a) contains a broad prohibition against making a
false representation that goods, among other things, have a
particular history. Importantly, a representation about the
country of origin of goods is a representation of the history of
those particular goods
- paragraph 53(eb) provides a specific prohibition against making
a false or misleading representation about the place of origin of
goods
- section 55 prohibits a person from engaging in conduct which is
liable to mislead the public as to the nature, manufacturing
process, the characteristics, suitability for their purpose or the
quantity of any goods. A representation about country of origin may
be a representation about the nature, manufacturing process or the
characteristics of particular goods
- a breach of any of the above may give rise to either criminal
or civil action.
However, the TPA also contains defences to an action about
country of origin representations as follows:
- the words ‘Product of Australia’ may be used if all
the significant ingredients are Australian, and all, or virtually
all, of the processing occurred in Australia[100]
- the words ‘Made in Australia’ apply where the
product has been substantially
transformed in Australia and where 50 percent or more
of production costs have been incurred in Australia[101]
- goods are 'substantially transformed'
in a country if they undergo a fundamental change in form,
appearance or nature such that the goods existing after the change
are new and different goods from those existing before the
change[102]
- in addition, the ACCC encourages qualified country of origin
representations, provided the qualification provides more complete
information to consumers, for example ‘Made in Australia from
local and imported ingredients’ where the product is made
predominantly from local ingredients or ‘Made in Australia
from imported and local ingredients’ (predominantly imported
ingredients).[103]
The debate in the Senate on the Trade Practices (Country of
Origin Representations) Bill 1998 contains pertinent comments about
the test relating to whether goods are entitled to be labelled
‘Made in Australia’. Those comments are as
relevant today as they were in 1998. Senator Brown
stated:
The Greens are saying ‘Made in
Australia’ should mean ‘Made in
Australia’… I give the example of a bottle of
cordial. It is entirely possible under this legislation,
because the manufacturing costs are a major component, that you
could have Tasmanian raspberries going into one bottle of cordial
and being put on the shelf and a mixture of raspberries from Chile
and South Africa and maybe some from Australia going into a second
bottle and being put on the shelf, and both of them will have
‘Made in Australia’. The consumer will not be able to
know which is the real homemade produce through and through and
which is the fake.
The people walking down the supermarket lanes
with their trolleys who look for the ‘Made in
Australia’ label, believing it means ‘Made in
Australia’, are going to be hoodwinked under this
legislation. As the Australian Consumers Association points
out, a series of studies in recent years has made it quite clear
that, when Australians see ‘Made in Australia’ on an
item, they think that means two things: firstly, it has been
manufactured and packaged in this country and, secondly, that the
ingredients have come from this country.
What the government is saying is that for that
category we will allow the words ‘Product of Australia’
or ‘Australian Produced’. The problem is that
Australian consumers do not differentiate between the terms
‘Product of Australia’ and ‘Made in
Australia’. They are taken to mean the same
thing.[104]
The Greens proposed amendments to the legislation which:
… will stick with the concept of
‘Product of Australia’ meaning 100 per cent manufacture
and ingredients, but it will mean that goods that are manufactured
in Australia of less than 100 per cent Australian content can have
the ‘Made in Australia’ label provided they also
stipulate that the ingredients come from elsewhere.[105]
The proposed amendments were not passed.
Proposed sections 254–258 deal with
country of origin representations. Essentially,
proposed section 254 makes clear that a person
does not contravene the provisions of section 18 (about misleading
and deceptive conduct) or section 29 (about false or misleading
representations) merely by making a ‘country of origin’
representation about certain goods.
Proposed section 255 contains a table which
sets out the requirements to be met by a person in relation to the
following country of origin representations. There has been
no change to the existing provisions relating to:
- the ‘country of origin’ of goods
- the ‘produce’ of a particular country
- country of origin of goods by means of a logo specified in the
regulations.
The Bill does contain two, new ‘country of origin’
representations, being:
- goods were ‘grown in’ a particular country, or
- ‘ingredients’ or ‘components’ of goods
were grown in a particular country.
These are set out as items 4 and 5 in the table. The
amendments are made as a result of a promise made by the Australian
Labor Party in the 2007 election.[106]
Proposed subsection 255(7) provides that goods,
or ingredients or components of goods, are
grown in a country if they:
- are materially increased in size or materially altered in
substance in that country by natural development
- germinated or otherwise arose in, or issued in, that country,
or
- are harvested, extracted or otherwise derived from an organism
that has been materially increased in size, or materially altered
in substance, in that country by natural development.
In addition proposed subsection 255(8)
specifies that packaging materials are not treated as ingredients
or components of the goods and that the weight of packaging
materials is to be disregarded in working out the weight of the
goods.
Where an ingredient or component that has been dried or
concentrated by the evaporation of water, has had water added to
return the water content of the ingredient or component to no more
than its natural level, that water is treated as having the same
origin as the ingredient or component, regardless of its actual
origin: proposed subsection 255(9).
As already stated, the Australian Consumer Law is established in
accordance with the IGA.
The purpose of Schedule 2 of the Bill is threefold. First,
it amends the TPA so that the Australian Consumer Law applies as a
law of the Commonwealth. Secondly, it inserts certain
provisions into Part XI of the TPA ‘that are either relevant
only at the Commonwealth level, or are not compatible with State
and Territory legal systems and are not able to be included in the
Australian Consumer Law’.[107] Thirdly, it inserts Part XIAA to
facilitate the application of the Australian Consumer Law in
participating jurisdictions—that is, in the States and
Territories which are parties to the IGA.
The Australian Consumer Law Act No. 1 established the first part
of the Australian Consumer Law within the existing TPA by inserting
a new Part XI into the TPA. Schedule 2 to
this Bill repeals the whole of Part XI and substitutes a new Part
XI which sets out the application of the Australian Consumer Law as
a law of the Commonwealth. The new Part XI contains relevant
definitions in proposed section 130.
As the Australian Consumer Law refers to ‘persons’,
rather than ‘corporations’, proposed section
131 operates so that contraventions of the general
protections in Chapter 2 of the Australian Consumer Law, the
specific protections in Chapter 3 of the Australian Consumer Law
and the offences contained in Chapter 4 of the Australian Consumer
Law will apply to corporations. Proposed section
131A clarifies that financial services are excluded from
the operation of the Australian Consumer Law.
Future references in the Bill and the CCA (Competition and
Consumer Act 2010), when enacted, to ‘Part XI or
Schedule 2’ will be a reference to the Australian Consumer
Law and how it applies.
In relation to the national consumer product safety provisions,
Schedule 2 to the Bill inserts product safety market surveillance
and enforcement powers that may only be exercised by the
responsible Commonwealth Minister or an inspector appointed by the
Chairperson of the ACCC.
The Bill also sets out the protocol to be followed in relation
to bans, whether interim or permanent, and recall notices.[108] Proposed
sections 132–132K set out the procedure as
follows:
- the Commonwealth Minister must issue a
‘proposed ban notice’
- that notice must comply with the form set out in
proposed subsection 132(3)—including that it
is in writing, published on the internet, contains details of the
goods or services which are the subject of the proposed ban and
inviting interested persons to contact the ACCC if they wish the
ACCC to hold a conference about the imposition of the ban
- similarly the Commonwealth Minister must issue a
‘proposed recall notice’
which must comply with the manner and form requirements of
proposed subsection 132A(3)
- a notice under either proposed subsection
132(3) or proposed subsection 132A(3)
must specify the period within which persons may notify the ACCC of
their wish for a conference
- where no person wishes the ACCC to hold a conference about the
imposition of the ban or the issuing of the recall notice the ACCC
will notify the Commonwealth Minister of that fact
- where one or more persons do request that the ACCC hold a
conference, the ACCC must appoint a date, time and place for the
conference and notify those details to the persons and Commonwealth
Minister
- as soon as practicable after the conference is held the ACCC
must give written notice to the Commonwealth Minister that it
recommends the ban or recall be imposed, imposed with modifications
or not imposed at all
- the Commonwealth Minister is not bound by the
recommendation. However, if the Commonwealth Minister makes a
decision which is not in accordance with the ACCC recommendation,
the Commonwealth Minister must publish written reasons for that
decision on the internet: proposed subsection
132D(3).
Proposed section 132K requires that the
Commonwealth Minister must provide a copy of a proposed ban notice
or recall notice to each person who supplies the goods and/or
services to which the notice relates.
Proposed sections 133–133J contain
enforcement provisions which are applicable to the Commonwealth
only. In particular, proposed section 133
provides that the Chairperson of the ACCC may appoint
inspectors. Inspectors will be authorised to enter premises
to which the public has access or to issue a
‘disclosure notice’ for the
production of information or documents in circumstances where the
goods or services themselves may cause an injury to a person or
where a reasonable use or misuse of goods may cause an injury to a
person: proposed sections 133B–133D.[109] In addition,
an inspector may apply to the court for an order authorising one or
more inspectors to:
- enter the premises of the person that are specified in the
order
- search the premises for consumer goods specified in the
order
- seize any such consumer goods found at those premises, or
- destroy or dispose of the consumer goods that are seized.
Proposed subsection 133H(1) provides that the
court will make such an order where it is satisfied that:
- the consumer goods do not comply with a safety standard that is
in force for consumer goods of that kind and the cause of that
non-compliance cannot be remedied
- a permanent ban on consumer goods of that kind is in force,
or
- a recall notice for consumer goods of that kind is in force and
a defect or dangerous characteristic of such consumer goods
identified in the notice cannot be remedied.
The powers of inspectors are further detailed in
proposed sections 135–135Z.
Proposed sections 134–134G contain
provisions relevant to the issuing of infringement notices.
Proposed subsection 134A(2) details the provisions
of the Australian Consumer Law which are
‘infringement notice
provisions’ as follows:
- a provision of Part 2-2—sections 20–22 relating to
unconscionable conduct
- some provisions of Part 3-1—sections 29–50 relating
to unfair practices, other than subsections 32(1), 35(1) or
36(1)–(3), or sections 40 and 43
- subsection 66(2)—relating to display notices
- a provision of Division 2 of Part 3-2—sections
69–95 relating to consumer guarantees, other than section
85
- a provision of Division 3 of Part 3-2—sections
96–99 relating to lay-by, other than subsection 96(2)
- subsection 100(1) or (3), 101(3)–(4), 102(2) or
103(2)
- subsections 106(1)–(3) and (5), subsections
107(1)–(2), subsections 118(1)–(3) and (5), subsections
119(1)–(2), subsection 125(4), subsections 127(1)–(2),
128(2) or (6), 131(1), 132(1), subsections 136(1)–(3) and
subsections 137(1)–(2)
- subsections 221(1) and 222(1).
An infringement notice may be issued by the ACCC for a breach of
any of the above provisions as an alternative to seeking a
pecuniary penalty under proposed section 224 of Schedule 1 to the
Bill. In that case the infringement notice must comply with
all the requirements set out in proposed section
134B. The table in proposed section
134C contains the relevant penalties. The
infringement penalties are substantially lower than the pecuniary
penalty for the same contravention. For example Division 2 of
Part 3-2 (other than section 85) relating to consumer
guarantees:
|
Infringement Penalty—body corporate
|
Pecuniary Penalty—body corporate
|
Infringement Penalty—not body corporate
|
Pecuniary Penalty—not body corporate
|
|
$6600
(60 penalty units)
|
$50 000
|
$1320
(12 penalty units)
|
$10 000
|
Where a person pays the penalty specified in the infringement
notice within the prescribed ‘infringement notice
compliance period’,[110] no proceedings may be started or
continued against the person by, or on behalf of, the person in
relation to the alleged contravention of the infringement notice
provisions or an offence constituted by the same conduct that
constituted the alleged contravention: proposed section
134D. However, where a person does not comply with
an infringement notice by paying the infringement penalty, the
person is liable to proceedings in relation to the alleged
contravention: proposed
section 134E. The ACCC may withdraw an
infringement notice, on application by the person to whom the
infringement notice was given.
According to the Explanatory Memorandum:
Many of the enforcement powers in the
[Australian Consumer Law] had certain limits or qualifications on
those powers when they were in the [TPA], including, but not
limited to, provisions relating to occupational liability,
liability for recreational services, and liability for personal
injury and death. These have not been included in the [Australian
Consumer Law] in recognition of the fact that some of these
requirements, which must apply at the Commonwealth level, may not
be able to be applied within differing State and Territory legal
systems.[111]
Proposed sections 137–137H set out
provisions relating to the access to remedies under the Australian
Consumer Law.
Proposed sections 138–138E set out the
jurisdiction of the Courts in relation to any matter arising under
the Australian Consumer Law, including the various Parts which
apply to the Federal Court of Australia and the Federal Magistrates
Court or to State Courts.
Proposed sections 140–140K facilitate the
application of the Australian Consumer Law in the States and
Territories in the following ways:
- allowing participating jurisdictions to confer functions or
powers, or impose duties, on a Commonwealth entity, for the
purposes of an applied Australian Consumer Law
- conferring original and appellate jurisdiction on the Federal
Court of Australia in relation to a matter arising under the
Australian Consumer Law in a participating Territory’s
law
- providing that there is no doubling-up of liabilities with
respect to a contravention of the Australian Consumer Law as set
out in the TPA, and an applied Australian Consumer Law, and
- confirming that the Australian Consumer Law provisions in the
TPA do not exclude the operation of an application law of a
participating jurisdiction to the extent that they are capable of
operating concurrently.[112]
Items 1–32 of Schedule 3 to the Bill
amend the Australian Securities and Investments Commission Act
2001 (the ASIC Act). As with the Australian Consumer Law
Act No. 1, this Bill amends ‘the consumer protection laws in
the ASIC Act to maintain consistency with the Australian Consumer
Law concerning consumer protection for financial
services’.[113]
Items 33-35 amend the Corporations Act
2001 (the Corporations Act). A new
section 206EA is inserted into the
Corporations Act for the purposes of disqualifying a person from
managing a corporation with respect to a contravention of the
Australian Consumer Law or the Competition and Consumer Act
(formerly TPA). There are consequential amendments to section
1349 of the Corporations Act, which deals with the disqualification
of persons from managing a corporation with respect to
contraventions of the ASIC Act.
Part IVB of the TPA allows the Minister to prescribe industry
codes of conduct (industry codes). Currently, there are four
mandatory industry codes prescribed under Part IVB:
- the Franchising Code of Conduct
- the Horticulture Code of Conduct
- the Oilcode, and
- the Unit Pricing Code.
According to subsection 51ACA(1) of the TPA
‘industry codes’ are codes
that regulate the conduct of participants in an industry towards
other participants in the industry or towards consumers in the
industry. At present non-compliance with a relevant mandatory
code attracts civil remedies under the TPA, including injunctions,
actions for damages, non-punitive orders and other orders.
However, there is no provision which imposes civil pecuniary
penalties on persons whose conduct is in breach of the terms of an
industry code.
In July 2008, the ACCC published a report of its inquiry into
the competitiveness of retail prices for standard
groceries.[114] That report made a number of recommendations
including that the TPA be amended to introduce civil pecuniary
penalties and infringement notices in relation to Part IVB
provisions, such as the Horticulture Code, and introduce random
record audits as an enforcement mechanism available under the
code.[115]
The issue of industry codes was also canvassed by the
Parliamentary Joint Committee on Corporations and Financial
Services in December 2008. [116] That report also recommended that civil
pecuniary penalties be available in respect of breaches of industry
codes[117] and
that the ACCC be given the power to investigate suspected breaches
of industry codes without having to rely on specific complaints
from industry participants.[118]
Schedule 4 to the Bill does not insert the industry code
provisions into the Australian Consumer Law. It inserts the
following enforcement and redress measures for contraventions of
industry codes into the main body of the TPA:
- public warning notices
- orders for non-party redress in proceedings for contraventions
of a relevant industry code, and
- a random audit power.
Item 4 inserts proposed sections
51ADA–51ADG into the TPA. Proposed
section 51ADA empowers the ACCC to issue a written warning
notice to the public about the conduct of a person (‘naming
and shaming’) in circumstances where the ACCC has reasonable
grounds to suspect that the conduct may constitute a contravention
of an industry code.
Proposed sections 51ADB–51ADC relate to
the orders that a court can make to redress the loss or damage
suffered by
‘non-parties’. A
‘non-party’ is a person who is not, or has not been a
party to an enforcement proceeding under Part VI of the TPA.
The provisions operate as follows:
- the ACCC can apply to the court for an order where a person has
engaged in ‘contravening
conduct’—that is, conduct which
constituted a breach of an industry code and that conduct caused,
or is likely to cause, loss or damage to non-parties
- the order of the court must redress the loss or damage, or act
to prevent or reduce the loss or damage suffered by
non-parties
- the types of order the court may make include but not limited
to:
- an order
declaring the whole or any part of a contract made between the
respondent and a non-party to be void
- an order varying
a contract or arrangement
- an order refusing
to enforce any or all of the provisions of a contract or
arrangement.
The ACCC will be authorised to conduct random audits under
proposed sections 51ADD–51ADG. The
ACCC will be allowed to give written notice to a corporation
requiring the corporation to provide information or documents in
relation to an industry code. Where a corporation has been
given such a notice, it must comply within 21 days.
The Queensland Consumers Association submission suggested that
issuing infringement notices for non-compliance with industry
codes—particularly the unit pricing code would be a
benefit.[119]
Similarly, the Consumer Action Law Centre:
... strongly advocates that an infringement
notice regime is required for contraventions of industry codes
under the TPA. Industry code obligations are precisely the
type of provision that might be subject to minor breaches that do
justify a proportionate response but do not necessarily justify
full court action by the regulator.[120]
However, the Treasury submission is not supportive of this
suggestion stating:
The introduction of penalties for breaches of
codes would fundamentally alter their nature, effectively
introducing penalties for what are, in effect, commercial
disagreements and matters of opinion....
... the enhanced enforcement and redress
measures for industry codes in Schedule 4 of the Bill (including a
random audit power, public warning notices and orders for redress
for non-parties to an ACCC action) creates greater disincentives
for breaches of industry codes in keeping with their co-regulatory
nature.[121]
Item 2 of Schedule 5 to the Bill changes the
name of the TPA to the Competition and Consumer Act 2010
(CCA).
As has already been stated, the Australian Consumer Law Act No.
1 essentially set up a new schedule—Schedule 2—to the
TPA which would contain the Australian Consumer Law. When the
Australian Consumer Law Act No. 1 was enacted, the Australian
Consumer Law contained only the unfair contract provisions,
including relevant definitions. The Australian Consumer Law
Act No. 1 also inserted a number of definitions into section 4 of
the TPA which is the interpretation provision.
What Schedule 5 of this Bill does, is make clear that the new
CCA—that is, the existing TPA—will have two very
separate operations. The provisions about competition which
existed in the TPA will remain in the main body of the CCA.
The provisions about consumer protection will lie in Schedule 2 of
the CCA. Each of these will have its own definitions.
In fact, item 22 inserts a new section
4KA which clarifies that sections 4–4K of the CCA do
not affect the meaning of any expression used in Part XI or
Schedule 2, unless the contrary intention appears. This is
one way of signalling the separate natures of the competition and
the consumer protection provisions.
Items 3–21 repeal certain definitions
from subsection 4(1) of the TPA. Those definitions relate to
the Australian Consumer Law and will be located in Schedule 2 of
the CCA, when this Bill is enacted.
Item 49 repeals existing Part IVA (about
unconscionable conduct), Part V (containing the existing consumer
protection provisions), Part VA (about liability of manufacturers
and importers for defective goods) and Part VC (which contains the
offences provisions in relation to unfair practices and product
safety and product information). Following the enactment of
this Bill, these matters will be dealt with under the new
provisions that are to be contained in Schedule 2—the
Australian Consumer Law.
Items 50–100 amend Part VI of the TPA
which contains the enforcement and remedies provisions. The
purpose of the amendments is to repeal those provisions which will
lie in the Australian Consumer Law after the enactment of this
Bill. What will remain, is those enforcement and remedies
provisions which relate to the competition provisions.
The remaining items in Schedule 5 of the Bill are consequential
amendments.
Existing sections 2A, 2B and 2BA of the TPA provide, in essence,
that the TPA applies to the following only in so far as they carry
on a business:
- the Commonwealth and Commonwealth authorities
- the States, the Australian Capital Territory and the Northern
Territory, and
- local government bodies.
There is no proposal to amend these sections. Nor is there
any equivalent provision in the Australian Consumer Law. In
the context of the Commonwealth government this would prevent a
consumer from bringing proceedings for instance, alleging that a
service to a consumer was not provided with due care and
skill.
Items 1–149 contain consequential
amendments to forty-four separate Acts to substitute existing
references to the TPA with references to the Competition and
Consumer Act 2010.
Items 150–191 contain amendments to
seventeen separate Acts to substitute any references to specific
sections of the TPA with the appropriate section or schedule
reference in the CCA.
This Bill which introduces the bulk of the provisions for the
Australian Consumer Law creates a momentous change in consumer law.
However, there is no doubt that it will need further
amendment as judicial interpretation of the various provisions
becomes available. This has been acknowledged by the Senate
Committee in its report.
The biggest loser in terms of the Bill is small business.
No longer does it fall within the definition of
‘consumer’ and so the statutory consumer protections
will not apply, although small business will continue to be
protected by the common law.
The nature of the harm which the Bill is intended to cure is
clearly the loss and damage caused to those members of the
community who are the most vulnerable when they are
‘consumers’. Some of the examples cited in the
Shutting the Gates report make harrowing reading. In that
respect, the provisions of the Bill are an appropriate response to
the needs of disadvantaged consumers.
However, small business may well argue that it also suffers
disadvantage when it is in the position of being a
‘consumer’ and, in that case, is also deserving of
statutory protection.
The Senate Committee has recommended that the provisions of the
legislation relating to product safety should be reviewed within
three years of implementation. That recommendation is
valid.
However it is considered that review of the operation of the
whole of the legislation may be warranted to measure whether small
business is suffering as an unintended consequence of this
Bill.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2434.
Paula Pyburne
22 June 2010
Bills Digest Service
Parliamentary Library
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