A Retailer's Guide to Part 2 of the new Australian Consumer Laws

You may recall reading the first part of this article, introducing retailers to the unfair contract terms regime that came into effect on 1 July 2010 as the first tranche of the new Australian Consumers Laws (ACL). Retailers should now be considering how the second tranche of the ACL, which comes into effect on 1 January 2011, may impact on their business operations. In this second part of a two-part guide to the reforms, we introduce retailers to the most relevant components of the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Act).

The Act amends the Trade Practices Act (TPA), Australian Securities and Investments Commission Act (ASIC Act) and Corporations Act to address general and specific consumer protections, misleading and deceptive conduct, unconscionable conduct, unfair practices, consumer transactions and statutory consumer guarantees. It also aims to create a standard consumer product safety law for consumer goods and product related services and to expand enforcement powers of Commonwealth agencies and judicial bodies.

Certain aspects of the ACL are limited in application to consumers, rather than to all persons. These provisions relate to consumer guarantees, unsolicited consumer agreements, lay-by sales agreements, the provision of itemised bills, the definition of continuing credit contracts and linked credit contracts. A 'consumer' is any person who purchases goods and/or services below $40,000 in value or who purchases goods and/or services above this value for personal, domestic or household use or consumption.

Relevant provisions of the Act

While the Act covers a lot of ground, the following reforms are of particular relevance to retailers:

• Misleading and deceptive conduct: The Act provides that a person must not, in trade or commerce, engage in misleading or deceptive conduct or conduct that is likely to mislead or deceive. The Act does not make major changes to this area of the law when compared to the TPA, but it applies more broadly with prohibitions relating to 'a person' rather than only to 'a corporation'.
• Unconscionable conduct: The ACL prohibits a person from engaging in unconscionable conduct. This area of the law will be familiar to retailers through existing laws such as the TPA and the state and territory Fair Trading Acts (FTAs). The Act seeks to harmonise the laws surrounding unconscionable conduct and create uniformity. Retailers will no longer be subject to subtle differences from one jurisdiction to another.
• Unfair practices: The Act includes prohibitions on specific conduct that is considered 'unfair' and applies generally to all forms of business and related activities. Of relevance to retailers are the prohibitions against false or misleading representations or conduct in relation to providing goods or services, testimonials, prize, gift, or rebate offers, sending unsolicited credit cards or debit cards and displaying multiple prices for goods.
• Consumer guarantees: The ACL implements uniform statutory consumer guarantees that replace conditions and warranties that were implied into contracts by the TPA and state and territory FTAs. The Act provides consumers with certain guarantees regarding the supply of goods and services, including: that goods are of an 'acceptable quality'; that goods and/or services are fit for the purpose that the consumer makes known to the supplier; that goods match their description or a sample; that spare parts and facilities for the repair of goods are reasonably available for a reasonable period; that any express warranty is complied with; that services are carried out with due care and skill; and that services will be provided within a reasonable time. Under the Act, consumers can require the supplier to repair, refund or replace goods or services within a reasonable time if a guarantee is not complied with.
• Unsolicited selling: The Act includes provisions dealing with unsolicited offers to supply goods and services to a consumer. The Act regulates such matters as permitted hours for visiting consumers and the duty to clearly advise the consumer of the reason for the contract, to display or produce identification, to leave a consumer's premises on request and to inform the consumer prior to making the agreement of their right to terminate, as well as formal requirements for valid agreements.
• Lay-by sales: Under the Act, a lay-by agreement is an agreement for the supply of consumer goods after payment by way of three or more instalments. The Act sets out five fundamental rules that apply to lay-by sales transactions: (i) a lay-by agreement must be in writing, a copy of which must be given to the consumer; (ii) the consumer has the right to terminate the agreement at any time before the goods are delivered, subject to payment of a termination charge; (iii) in the event of termination by the consumer, the consumer may be required to pay a cancellation charge reflecting the retailer's reasonable costs; (iv) a retailer may cancel a lay-by agreement only if the consumer has breached a term of the agreement, the retailer is ceasing to trade or the goods are no longer available; and (v) in the event of termination of the agreement by either party, the retailer must refund any money paid by the consumer, less any applicable termination charge.
• Safety of goods and services and liability for defective goods: The Act creates a national consumer product safety regulatory regime. The relevant provisions replace the product safety provisions in the TPA and equivalent provisions in state and territory FTAs. Under the Act, permanent product bans and mandatory safety standards will apply nationally.
• Liability of manufacturers for defective goods: Manufacturers are liable to compensate injured individuals for loss or damage suffered as a result of supplying goods that contain a safety defect and for loss or damage suffered because of injuries to another individual as a result of supplying defective goods.

• Information standards: The Act empowers the relevant Federal Minister to prescribe information standards for goods and/or services that require specific information to be provided and in a certain manner or form.

Enforcement of the Act

The Act contains a uniform set of enforcement powers, penalties, remedies and redress provisions for breaches of the consumer protection provisions. These include court-enforceable undertakings, damages, non-punitive orders, punitive orders (including adverse publicity orders), compensatory orders, civil pecuniary penalties (up to $1M for corporations and $220K for individuals), disqualification orders, substantiation notices, infringement notices, redress for non-parties and public-warning notices.

Conclusion

While consumer protection laws are not new to Australian retailers, the Act amends and consolidates certain existing laws and imposes additional obligations on all businesses. Retailers in particular need to be cognisant of the ACL in its entirety due to their constant interaction with consumers. With the second part of the ACL coming into force on 1 January 2011, retailers need to start reviewing their business practices and documentation to ensure compliance with the Act.

This article first appaered in Inside Retailing.

Author: Tamsyn Hutchinson, Cornwall Stodart