The implementation of national, uniform consumer laws commenced
with the recent enactment of the Trade Practices Amendment
(Australian Consumer Law) Act (No 1) 2010
(Act), which comes into effect on 1 July 2010 and
creates a national unfair contract terms regime for standard-form
contracts, introduces new penalties and expands the enforcement
powers of the ACCC and ASIC. This Act is just the first part of a
planned national consumer regime, broadly termed the Australian
Consumer Law (ACL), with further amendments
proposed under the Trade Practices Amendment (Australian
Consumer Law) Bill (No 2) 2010 (Bill). It was
initially thought the ACL would be fully implemented by 1 January
2011; however, with a federal election looming, it is difficult to
gauge the likelihood of the Bill being passed (whether at all or in
an amended form) and the full ACL coming into effect.
1 THE BILL
The Bill completes the initial text of the ACL and, if enacted,
will amend the Trade Practices Act 1974
(TPA), Australian Securities and Investments
Commission Act 2001 (ASIC Act) and
Corporations Act 2001 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. The Bill also implements a proposed change of
title of the TPA to the Competition and Consumer Act
2010.
2 APPLICATION
2.1 Definitions
2.1.1 The definition of 'consumer' and the scope of the
Bill
The Bill incorporates multiple definitions of consumer, and
unfortunately fails to unify the concept. For most purposes, the
ACL applies to all persons and is not limited to a defined class of
consumers. However, in relation to consumer guarantees, unsolicited
consumer agreements, lay-by sales agreements, the provision of
itemised bills, the definition of continuing consumer credit
contracts and linked credit contracts, the relevant provisions
apply to a defined class of consumer (namely individuals who
acquire goods of a kind ordinarily acquired for personal, domestic
or household use or consumption, which do not exceed a value of
$40,000, where the goods are acquired for personal, domestic or
household use or consumption). Given the widespread criticism of
the definitions and their proposed operation, these provisions may
be amended before the Bill is passed.
2.2 Misleading and deceptive conduct
The Bill includes a provision to replace the prohibition on
misleading or deceptive conduct currently set out in s52 of the
TPA. There are few substantive changes, except that the Bill
applies the prohibition to 'a person' rather than 'a corporation'.
This reflects the broader application of the ACL. Jurisprudence
relating to the interpretation of the equivalent TPA provision is
still relevant. Section 18(1) of the Bill 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. Section 19
of the Bill excludes the application of the provisions relating to
misleading or deceptive conduct to an information provider if the
information provider made a publication in the course of carrying
on a business of providing information, unless the publication is
related directly to the business activities of the person
publishing the notice.
2.3 Unconscionable conduct
The TPA prohibits corporations from engaging in unconscionable
conduct: s51AA prohibits unconscionable conduct within the meaning
of the common law; s51AB prohibits unconscionable conduct in
connection with the supply of goods or services to 'consumers'; and
s51AC prohibits unconscionable conduct in connection with the
supply of goods or services to a 'business consumer', or in
connection with the acquisition of goods or services from a 'small
business supplier'. Since 1988, the TPA unconscionable conduct
provisions have been mirrored in the ASIC Act, which applies in
respect of financial services. In accordance with the
Intergovernmental Agreement for the Australian Consumer
Law (IGA), the TPA unconscionable conduct
provisions will be included in the ACL. Part 2-2 of the Bill
includes prohibitions against a person engaging in unconscionable
conduct. The concept of 'unconscionable conduct' is not defined for
the purposes of the ACL. However, s21 provides a non-exhaustive
list of types of conduct which may be unconscionable in the context
of a business' dealings with consumers, and s22 provides two
non-exhaustive lists of types of conduct that may be unconscionable
in the context of a business' dealings with other businesses,
either as a customer or a supplier to those businesses. The
unconscionable conduct provisions are designed to ensure that
consumers and businesses are able to access a range of remedies
under the ACL and that relevant regulatory bodies have access to
penalties under the ACL.
2.4 Unfair contract terms
The unfair contract terms provisions apply to standard-form
consumer contracts only. A consumer contract is defined in the ACL
as a contract for the supply of goods or services or the sale or
grant of an interest in land to an individual whose acquisition of
the goods, services or interest is wholly or predominantly for
personal, domestic or household use or consumption. A term in a
consumer contract is void if the term is 'unfair'. The concept of
an 'unfair term' arises where the term: (i) would cause a
significant imbalance in the parties' rights and obligations under
the standard form contract; (ii) is not reasonably necessary to
protect the legitimate interests of the party who would be
advantaged by the term; and (iii) would cause financial or
non-financial detriment to a party if the term were to be applied
or relied on. In finding that a term in a consumer contract is
unfair, a court may take into account any matters it considers
relevant. However, the court must
take into account the extent to which a term is transparent and the
contract as a whole.
2.5 Unfair practices
The Bill includes prohibitions on specific conduct that is
considered 'unfair', which apply generally to all forms of business
activity in all sectors of the economy, rather than to specific
industry sectors. Chapter 2 of the Bill includes general
prohibitions, whereas Chapter 3 includes provisions targeted at
particular kinds of activities. Part 3-1 deals with:
- False or misleading representations or
conduct. The Bill prohibits false
or misleading representations in relation to specific matters,
including goods or services, testimonials, sales or grants of
interests in land, employment and certain business activities.
Information providers are exempt from these requirements in certain
circumstances.
- Unsolicited supplies. The Bill prohibits the
sending of unsolicited credit cards or debit cards, while asserting
a right to payment for unsolicited goods or services or
unauthorised entries or advertisements.
- Pyramid schemes. The Bill prohibits a person
from participating in, or inducing another person to participate
in, a pyramid scheme. Legitimate multi-level marketing schemes are
excluded from the definition of a pyramid scheme.
- Pricing. The Bill sets out rules addressing
the display of multiple prices for goods, as well as a requirement
that businesses state a total, single price for goods or services
where quantifiable.
- Other unfair practices. The Bill prohibits
practices relating to bait advertising, harassment and
coercion.
- Miscellaneous. The Bill requires that a
consumer be given a proof of transaction or an itemised bill in
certain circumstances.
2.6 Consumer guarantees
The Bill implements national, uniform statutory consumer
guarantees, which replace conditions and warranties that were
implied into contracts by the TPA and state and territory Fair
Trading legislation.
The Bill provides consumers with the following guarantees with
respect to the supply of goods:
- That the supplier has the right to sell the goods.
- That goods are free from any undisclosed security.
- That the consumer will have undisturbed possession of the
goods.
- That goods are of 'acceptable quality'.
- That goods 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.
The Bill provides the following guarantees with respect to the
supply of services:
- That the services are carried out with due care and skill.
- That services are fit for the purpose that the consumer makes
known to the supplier.
- That services will be provided within a reasonable time.
In the event that goods or services fail to meet these
guarantees, the Bill sets out remedies available to consumers
including refunds, repairs and replacements. Damages are also
available against suppliers and manufacturers in certain
circumstances.
2.7 Unsolicited selling
The Bill includes provisions dealing with unsolicited offers to
supply goods and services to a consumer and the agreements arising
from such offers. The relevant provisions cover four areas:
- In relation to face-to-face marketing approaches, the Bill
outlines supplier obligations regarding approaching consumers,
including permitted hours of visiting consumers, the duty to
clearly advise the consumer of the reason for the contract and to
display or produce identification, and the duty to leave a
consumer's premises on request.
- In relation to face-to-face and telephone marketing approaches,
the Bill outlines supplier disclosure obligations regarding
agreements, including the duty to inform the consumer prior to
making the agreement of their right to terminate and formal
requirements for valid agreements. A valid agreement must include,
for instance, the terms of the agreement, a termination notice and
supplier information.
- In relation to face-to-face and telephone sales, the Bill
outlines consumer rights and obligations including a 10-day
termination right, provisions specifying that the consumer can also
terminate an agreement after the termination period in certain
circumstances, provisions specifying the effect of termination, and
provisions specifying the entitlement of a consumer to goods and
services upon termination.
- In relation to face-to-face and telephone sales, the Bill
outlines supplier obligations about post-contractual behaviour,
including prohibitions during the termination period against a
supplier supplying goods or services, or requiring/accepting
payment for goods or services to be supplied, a requirement that a
supplier immediately repay money received under the agreement if
the agreement is terminated, prohibitions against a supplier taking
action against a consumer under a terminated agreement, and
prohibitions against a supplier seeking to avoid provisions
concerning a termination right or operation of the
regime.
2.8 Lay-by sales
A lay-by agreement is defined in the Bill as an agreement
between a supplier and a consumer for the supply of consumer goods
after payment by way of three or more instalments. The ACL, if
enacted as currently drafted, sets out five fundamental rules that
apply to lay-by sales transactions.
1 A lay-by agreement must be
in writing, a copy of which must be given to the consumer
(s96).
2 The consumer has the right
to terminate the agreement at any time, subject to payment of a
termination charge (s97).
3In the event of cancellation
by the consumer, the consumer may be required to pay a cancellation
charge reflecting the business' reasonable costs (ie, not
more than an amount equal to reasonable costs incurred by the
supplier) (s97(2)).
4 A supplier may cancel a
lay-by agreement only if the consumer has breached a term of the
agreement, the supplier is ceasing to engage in trade or commerce,
or the goods are no longer available (s98).
5 In the event of
cancellation by either party, the consumer is entitled to a full
refund of amounts paid. However, where a consumer cancels
the agreement, the supplier is entitled to recover a reasonable
termination charge (s99). This amount may be withheld from any
money repaid to, or recovered from, the consumer where
necessary.
2.9 Product safety: safety of
consumer goods and product related services and liability of
manufacturers for goods with safety defects
The Bill creates a national, consumer product safety regulatory
regime as part of the ACL. The relevant provisions replace the
product safety provisions in Part V, Division 1A of the TPA and
equivalent provisions in state and territory Fair Trading
legislation.
Under the proposed Bill, permanent product bans and mandatory
safety standards will apply nationally. This ensures that product
safety concerns which are identified in one jurisdiction can be
addressed consistently on a national basis. Individual state and
territory Ministers retain the ability to issue interim bans and
conduct recalls. Interim bans and recalls are temporary regulatory
measures that usually require rapid implementation after a consumer
safety hazard is identified.
The proposed national product safety law is to be administered
jointly by the ACCC and the state and territory regulatory
bodies.
The product safety provisions of the Bill implement a number of
changes, including expanding the scope of product safety regulation
to cover services related to the supply, installation or
maintenance of consumer goods in all jurisdictions, allowing
product safety standards, bans and recalls to be put in place where
a reasonably foreseeable use, or misuse, may render an otherwise
safe product dangerous, allowing regulators to undertake product
recalls directly where no supplier can be found and requiring
suppliers to report serious product incidents to regulators.
2.10 Information standards
The Bill empowers the Commonwealth Minister to prescribe
information requirements, enabling the Minister to make information
standards and prohibit, in certain circumstances, the supply of
goods or services that do not comply with a relevant standard.
Prescriptions can be made in one of two ways: (i) by
making a new information standard; or (ii) by
declaring a standard made by Standards Australia (or
another prescribed organisation) a new information standard.
3 OFFENCES, ENFORCEMENT AND REMEDIES
The proposed Bill contains a uniform set of enforcement powers,
penalties, remedies and redress provisions for breaches of the
consumer protection provisions. These provisions include
court-enforceable undertakings, damages, non-punitive orders,
punitive orders (including adverse publicity orders), compensatory
orders, civil pecuniary penalties, disqualification orders,
substantiation notices, infringement notices, redress for
non-parties and public-warning notices.
If enacted in its current form, the Bill will comprise a
comprehensive overhaul of consumer protection laws in Australia and
will provide uniform operation of those laws across the
country.
For further information, please contact:
Nicole Stevens-Warton, Partner
Ph
(direct): +61 3 9608 2264
Email:
n.stevens-warton@cornwalls.com.au
or
Tamsyn Hutchinson, Law Clerk
Ph
(direct): +61 3 9608 2143
Email:
t.hutchinson@cornwalls.com.au