Bills Digest No. 34,
2018–19
PDF version [499KB]
David Markham
Law and Bills Digest Section
17 October 2018
Contents
Purpose of
the Bill
Background
Committee
consideration
Policy
position of non-government parties/independents
Position of
major interest groups
Financial
implications
Statement of
Compatibility with Human Rights
Key issues
and provisions
Other
provisions
Concluding
comments
Date introduced: 20 September
2018
House: House of
Representatives
Portfolio: Treasury
Commencement: The day
following Royal Assent.
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent, they
become Acts, which can be found at the Federal
Register of Legislation website.
All hyperlinks in this Bills Digest are correct as at
October 2018.
Purpose of
the Bill
The purpose of the Treasury
Laws Amendment (Gift Cards) Bill 2018 (the Bill) is to amend the Competition and
Consumer Act 2010 (the CCA), and specifically the Australian
Consumer Law (ACL) which is contained in Schedule 2 to the CCA, to introduce
provisions relating to gift cards.
Background
Gift cards, gift certificates or similar have been in
existence for a considerable period of time. Electronic gift cards, with
information stored on a magnetic strip, have been popular in Australia since at
least the 1990s and are the type of cards towards which this legislation is generally
aimed. While it is difficult to quantify accurately, the gift card market is
believed to have a value of at least $1.5 billion each year.[1]
The purpose of a gift card is essentially for a person to
be able to give another person a financial credit which the receiver can spend
in a store or other business. For example, person A gives store X $50, which
person B can then spend in the store. As a record of their ability to spend
this amount, person B receives a card which they can use to obtain goods to the
face value of the card. Normally, the value of the card can only be traded for
goods. Cards cannot be converted to a cash value.
If a card is not used, or if only some of the credit on
the card is used, within a period of time currently set by the issuing
business, the business retains the rest of the funds (this is referred to as
‘breakage’) and the consumer has no right to a refund.
Up to this point in time, no specific legislation has been
passed in respect of gift cards by the Australian Parliament. However, stores and
other businesses which provide gift cards have been covered by general
provisions under either the ACL, if the cards are not considered a financial
product, or similar provisions in the Australian
Securities and Investments Commission Act 2001, if they are considered
a financial product.[2]
A meeting of the Ministerial Council of Consumer Affairs (the
MCCA) on 3 June 2011 considered concerns about gift cards – particularly in
relation to expiry dates, but also more broadly. The MCCA commissioned a review
of gift cards which was conducted by the Commonwealth Consumer Affairs Advisory
Council (CCAAC), which in its turn issued its final report on 6 July 2012.[3]
As part of its process, the CCAAC took public submissions.
The CCAAC’s Report noted:
CCAAC found that there is a level of actual consumer
detriment associated with the gift card market in relation to the terms and
conditions of gift cards, particularly in relation to the expiration of gift
cards and to a lesser extent some other terms and conditions.
One factor that contributes to the detriment is that the
consumer who purchases the gift card is usually not the consumer who will use
the card. Issuers need to ensure that they have done as much as possible so
that the end user of the gift card is aware of any limitations on its use
(including the expiry date). [4]
While the CCAAC remained unconvinced that an expiry period
as long as three years would benefit many consumers—generally speaking its view
seemed to be that if a recipient did not use the card within 12 months they
were unlikely to use it at all—they recognised the value of standardisation in
assisting the end user to understand the general terms and conditions.
The ACL, into which the Bill proposes to insert the gift
card provisions, is a nation-wide consumer protection regime. The ACL itself
appears in Commonwealth legislation as Schedule 2 of the CCA, and is
reflected in the law of each state and territory through each jurisdiction’s
applied legislation.
Two states have pre-empted these changes to the ACL. New
South Wales has passed the Fair Trading Amendment (Ticket Scalping and Gift
Cards) Act 2017 (NSW), which commenced on 31 March 2018 and
which introduced a minimum three-year expiry for gift cards sold in NSW. South
Australia has introduced a Bill, the Fair Trading (Gift Cards) Amendment Bill 2018,
which has similar provisions.
While it would be possible to leave this issue to the
states and territories, which as can be seen are commencing to act, nationally
standardised provisions may provide more clarity and certainty, and would
ensure consistency throughout Australia. Some gift cards, such as those sold by
major department stores, can be used across Australia and having different conditions
of sale in different jurisdictions would inevitably lead to confusion.
Another major issue that is frequently raised in relation
to gift cards is that they become seemingly worthless in the case of the
relevant business closing or going into receivership. This is not covered in
this Bill; rather, the holder of a gift card in that situation becomes an
unsecured creditor in line with normal rules concerning such matters.[5]
Committee
consideration
Senate Standing Committee for the
Scrutiny of Bills
As at the date of writing, the Committee had not commented
on the Bill.
Policy
position of non-government parties/independents
The Labor Party supports the Bill.[6]
No other comment by non-government parties or independents could be located.
Position of
major interest groups
Many of the submissions to CCAAC in 2012 from consumers
and consumer advocates equated a gift card purchased in cash to cash itself,
and questioned why they should be allowed to expire at all.[7]
On the other hand retailer organisations, such as the
Shopping Centre Council of Australia, submitted that there were sound business
reasons for having expiry dates. The Council was opposed to standardised expiry
dates, commenting that different businesses have different needs.[8]
When New South Wales announced its intention to introduce
similar legislation in 2017, industry group the Association for Data-Driven
Marketing and Advertising was critical of the legislation being introduced
without industry consultation.[9]
However, it did not specifically complain about the content of the legislation.
No comment from major interest groups could be found on
this particular Bill. The Minister’s second reading speech noted that
‘consumers and businesses support this reform’.[10]
Financial
implications
The Explanatory
Memorandum notes that there are no financial implications to the
Commonwealth arising from the Bill.[11]
The Bill is however likely to impose some compliance costs on business,
estimated at $9.4 million in total per year.[12]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the
Bill’s compatibility with the human rights and freedoms recognised or declared
in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[13]
Parliamentary Joint Committee on
Human Rights
The Parliamentary Joint Committee on Human
Rights considers that the Bill does not raise human rights concerns.[14]
Key issues
and provisions
Item 6 introduces proposed Division 3A
of Part 3-2 into the ACL. Part 3-2 of the ACL is entitled Consumer
Transactions.
Proposed Division 3A is divided into seven clauses,
numbered 99A to 99G sequentially. Proposed clause 99A defines gift card,
the definition being consistent with the common understanding of that term. Regulations
may specify kinds of articles which either do or do not fall within the
definition (see proposed clause 99G below).
Proposed clause 99B sets a minimum expiry period
for gift cards of three years from the date of supply of the card. This is a
minimum period—a business can set a longer period if it wishes to do so as long
as the provision in the following proposed clause 99C is adhered to.
Proposed clause 99C requires the supplier to
display the expiry date prominently on the card; unless the card has no expiry
date, in which case that must also be displayed prominently on the card.
Proposed clause 99D notes that a post-supply fee
must not be applied to a gift card. An example of a post-supply fee might be an
annual fee which reduces the credit amount available on the card. The CCAAC
report commented:
There does not appear to be any reason why fees other than
upfront fees should be applied to cover costs where gift card issuers retain
gift card breakage and are able to make a return on sales.[15]
Proposed clause 99E makes it further unlawful for a
person to either demand or receive a post‑supply fee.
Proposed clause 99F makes a term or condition of a
gift card void, if that term or condition has the effect of, or tries to, set
terms contrary to the intention of proposed clauses 99B to 99E.
That is to say if a supplier and consumer were to attempt to agree to reduce
the terms set out in the ACL, the agreed to terms would have no legal effect.
Each of proposed clauses 99B to 99F contains
a note that pecuniary penalties may apply for breaches of the relevant
sections. Items 8 and 9 amend existing clause 224 of the ACL
to specify that the applicable pecuniary penalty is not to exceed $30,000 for a
body corporate or $6,000 otherwise.
Proposed clause 99G allows regulations to be
made relevant to provisions of proposed Division 3A of Part 3-2. The
regulations, which will be disallowable instruments under the terms of the Legislation Act
2003, may exclude certain types of gift cards or persons, or gift cards
supplied in certain circumstances, from the application of Division 3A of Part
3-2.
Item 7 introduces proposed Division 3A into
Part 4-2 of the ACL. Part 4-2 sets out offence provisions relating to
consumer transactions. Proposed Division 3A introduces five
clauses, numbered 191A to 191E sequentially.
Proposed clauses 191A to 191D introduce
offences relating to contravention of the provisions set out above in Division
3A of Part 3-2.
Proposed clause 191A introduces the offence of a
person breaching the requirement to apply a minimum expiry period of three
years.
Proposed clause 191B makes it an offence to breach
the proposed requirement to provide information to consumers, by not having that
information displayed prominently on a gift card.
Proposed clause 191C makes it an offence to include
the payment of any post-supply fee as one of the terms and conditions of supply
of a gift card. This is the case whether the supplier describes the terms and
conditions in those words or by some other expression.
Proposed clause 191D makes it an offence to demand
or receive post-supply fees.
Each of the offences set out in proposed clauses 191A to
191D is an offence of strict liability— which is to say that commission of
the offence is sufficient on its own to prove that a penalty might apply; the
offender’s intentions are not a relevant consideration. However, as a strict
liability offence rather than an absolute liability offence, an accused person
can raise as a defence honest and reasonable mistake.[16]
In each clause the maximum penalty is the same—$30,000 in
case of a body corporate or $6,000 in the case of an individual. This is the
same penalty as currently applies to breaches of lay-by provisions in Division
3 of Part 4-2 of the ACL. The correlation between gift cards and lay-bys seems
a logical one— both are delayed purchase schemes.
Proposed clause 191E introduces a regulation-making
power, allowing regulations to be made that limit the penalty provisions
introduced.
Item 10 introduces a transitional provision into
the ACL, the effect of which is to ensure that the provisions set out in this
Bill will only apply to gift cards purchased after 1 November 2019. The purpose
of introducing a lead time of around 12 months is to ensure that businesses
selling gift cards have sufficient time to introduce any system changes that
may be necessary to give effect to the provisions of the Bill.[17]
Other provisions
Items 1 to 5 make a number of amendments to
the Act to include references to the new clauses introduced into Part 3-2 the
ACL. For example, items 2 and 3 bring the gift card provisions within the scope
of the infringement notice scheme in the CCA, which means that the
Australian Competition and Consumer Commission can issue infringement notices
for breaches.
Concluding comments
This Bill appears largely uncontroversial—while some
businesses may consider that standardisation imposes additional requirements on
them, this is counteracted by the transparency of conditions relating to gift
card products that the Bill provides.
[1]. Commonwealth
Consumer Affairs Advisory Council (CCAAC), Gift
cards in the Australian Market, Final report, July 2012, p. 27.
[2]. Ibid.,
p. 45. Cards are generally not considered a financial product but can be when
they represent a non-cash payment facility.
[3]. Ibid.
[4]. Ibid.,
p. 4.
[5]. Ibid.,
p. 48.
[6]. M
King, ‘Second
reading speech: Treasury Laws Amendment (Gift Cards) Bill 2018’, House of
Representatives, Debates, 16 October 2018, p. 67.
[7]. CCAAC,
Gift
cards in the Australian Market, op. cit. For example, see summary of
submission of Consumer Law Action Centre, p. 79.
[8]. Ibid.,
p. 84.
[9]. Association
for Data-Driven Marketing and Advertising (ADMA), ‘NSW
set to get new gift card laws following selective consultation’, ADMA
website, 5 October 2017.
[10]. S
Robert, ‘Second
reading speech: Treasury Laws Amendment (Gift Cards) Bill 2018’, House of
Representatives, Debates, 20 September 2018, p. 41.
[11]. Explanatory
Memorandum, Treasury Laws Amendment (Gift Cards) Bill 2018, p. 3.
[12]. Ibid.
[13]. The
Statement of Compatibility with Human Rights can be found at page 59 of the Explanatory
Memorandum to the Bill.
[14]. Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 11, 2018,
Canberra, 17 October 2018, p. 72.
[15]. CCAAC,
Gift
cards in the Australian Market, op. cit., p. 42.
[16]. See
sections 6.1 and 9.2 of the Criminal Code Act 1995.
[17]. Explanatory
Memorandum, op. cit., p. 13.
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