The Australian Consumer Act (CTH)

Introduction

Consumer protection is one of the most fundamental parts of a country’s business law (Gibson & Fraser 2011). Generally, consumers are protected for the simple reason that they have no power against large corporations which may impose unfair contractual terms in their dealings with them (Ardagh 2001). In Australia, consumer protection laws have mainly been state-sanctioned thus consumers have been enjoying different levels of protection depending on their location.

The ACCC (Australian Competition and Consumer Commission) is the mandated body that ensures consumer rights are protected through promotion of fair competition and trade. It was founded in 1995 as the administrator of the Trade Practices Act of 1974 and Price Surveillance Act of 1983 which were the consumer protection laws that applied on a national level. Generally, the ACCC has been involved in advocating for consumer rights on issues such as refunds, guarantees, warranties, unfairness, improper conduct, pricing, service delivery, GST and international issues relating to consumer protection.

Other institutions that oversee consumer protection include state/territorial consumer protection bodies and the Ministerial Council for Consumer Affairs (MCCA) which comprises of Ministers for trade, consumer protection and credit in New Zealand, the Commonwealth, States and Territories. These bodies have been the custodians of Australia’s laws on fair trade and consumer protection and as such they have ensured that the consumer protection framework in Australia remains strong.

Despite Australia’s national and statewide laws being generally adequate, they have tended to be diverged and imbalanced. The Productivity Committee (PC) in its 2005 review of national competition policy reforms found that there was need for consumer-protection legislation reform. It stated that national consumer coordination mechanisms were inefficient and inconsistent thus causing detriment to both businesses and consumers. It then recommended that the governments of the various states and territories together with that of the Commonwealth should review the consumer protection policy (Commonwealth of Australia 2010).

One year later, another report by the Taskforce on Reducing Regulatory Burdens on Business made similar recommendations after receiving suggestions from stakeholders. In 2008, both the MCCA and the PC recommended that a single national law be put in place to address consumer protection issues. The MCCA began to work on a national law and the eventual product was consented to in December 2009. This new law named the Trade Practices Amendment (Australian Consumer Law) Act (No. 1) 2010 contains revised consumer protection clauses and makes provisions to strengthen the ACCC and the Securities and Investments Commission (ASIC).

A Brief Look at the New Australian Consumer Law

The Australian Consumer Law (ACL) received Royal assent on April 14th 2010 and came into force on January 14, 2011 effectively changing the consumer protection framework completely. The legislation is a schedule to the 2010 Competition and Consumer Act which has effectively replaced the Trade Practices Act of 1974. It is to be applied as a Commonwealth law and as such, all states and territories are expected to apply it in their jurisdiction as a substitute for their own existing consumer laws.

The ACL will be enforced by all courts and tribunals in Australia including state and territorial ones. The ACCC has also been given the mandate to administer the Act together with state and territorial consumer law agencies. The Act has also been incorporated into the Australian Securities and Investment Commission Act (ASIC Act) 2001 to ensure that there is uniformity in the treatment of financial services and products (Commonwealth of Australia 2010).

Changes brought by the new law

The ACL looks to bring in changes to the entire legal consumer-protection framework in Australia. Chapter 1 of the Act defines various relevant terms and concepts used in consumer protection law. Chapter 2 introduces the various safeguards for consumers that the Act provides by creating general standards of conduct for businesses. First it prohibits all misleading and deceptive behavior in the field of commerce and retains the broad protection provided under the 1974 TPA (Commonwealth of Australia 2010).

The ACL has retained the TPA provisions for unconscionable conduct towards businesses and/or consumers but this is to be amended vide the Competition and Consumer Legislation Amendment Bill of 2010. It has made broader provisions on unfair contract terms as pertains to standard form consumer contracts. The Act defines ‘unfair’ to mean any term that introduces significant imbalance in the rights and obligations of contracting parties (Paterson 2009; Gillies 2009).

Chapter 3 also deals with unfair business practices but it makes specific provisions for activities that are considered particularly detrimental such as; all types of misleading and false conduct or misrepresentations in transactions of land, goods or employment, failure to provide prizes and gifts offered to consumers, ‘bait’ advertising, unfair pricing practices, pyramid schemes, and coercion and harassment of consumers.

The ACL introduces into the chapter new consumer guarantees that replace the previous system of warranties and implied conditions under the TPA 1974. This provision is borrowed from the 1993 New Zealand Consumer Guarantees Act which is a modern version of protecting consumer rights in trade of goods and services. Consumer guarantees ensure that certain standards are met by suppliers. These guarantees are required of the seller such as the provision of goods; of an acceptable standard, within proper description, fit for the intents and purposes known to the seller which the consumer makes known and with reasonably available repair parts (Cunningham 2010). In addition, the seller has to show that he has the right to sell and that services provided will be completed within a reasonable time and finally, that the services are provided with due care and skill.

The Act also makes provisions for unsolicited practices which include telemarketing, door to door sales and other direct selling methods that are not within the retail context. However, telemarketing provisions under the Do Not Call Register Act 2006 are not affected in the new law (Commonwealth of Australia 2006). The ACL has ensured that sellers disclose agreements and post-contractual obligations and has provided rules on how consumers are approached.

Another area covered under Chapter 3 is lay-by agreements for which the Act makes provisions that are to be uniformly applied in all states and territories. In other provisions, consumers are to receive evidence of transactions as a rule where transactions are over $75 and upon request for lower amounts. Information provided should be itemized and within the GST requirements. For safety, the ACL has introduced a wider enforcement framework to be coordinated by the ACCC. It has also brought in new safety standards to be uniformly applied for consumer goods and services within Australia. It empowers the relevant Commonwealth Minister to make new standards where necessary. The standards ensure that suppliers will only provide goods and services that comply with set safety standards.

Safety bans are another type of consumer protection under the ACL and the Act empowers the Commonwealth Minister to make permanent bans for unsafe goods while State or Territorial Ministers may make interim bans. Once a good or service is banned, whether such ban is permanent or interim, no business shall supply it. For recalls, the ACL provides a unitary approach to issuance and enforcement. It further provides that suppliers who export goods must notify the suppliers where such goods have been exported and also notify the Minister that this has been done. Voluntary recalls are also to be within required notification standards.

Safety warning notices under the ACL should be published in a prescribed manner. The Act further provides that a supplier should notify the Minister where an accident occurs involving their goods or services that leads to the death, illness or injury of a consumer. Finally, Chapter 3 provides that manufacturers shall compensate consumers for losses and damages caused by defective goods. It empowers enforcement agencies to bring forth an action on behalf of an individual who suffers such loss or damage.

Chapter 4 deals with the offences under consumer protection law. Corporations guilty of offences under the ACL could pay a fine of up to $1.1 million while an individual could pay a maximum of $220,000. The Chapter also provides for defenses to offences, prosecution and compensation for infringement of consumer rights. Chapter 5 deals with remedies and enforcement of the ACL.

Under Chapter 5, new enforcement powers are provided such as enforcement undertakings where a guilty party commits to undertake compliance measures, substantiation notices and public warning notices. The ACL has made provisions for new remedies that seek to increase the ACCC’s power to protect consumers. These include both punitive and non-punitive orders. Punitive orders include civil pecuniary penalties, adverse publicity orders, disqualification orders, non-punitive orders, declarations, injunctions, damages and compensatory orders. New defenses include specific defenses for countries of origin of goods and those concerning cost of manufacture or production.

Weaknesses of the new law

While the PC and MCCA have gone a long way in making recommendations to change the consumer protection framework in Australia, the new law still falls short of bringing in positive effects for consumers due to much of the same weaknesses that other laws have had. When the PC submitted its report, it stated that “’reductions in trade barriers and competition policy reforms have put downward pressure on prices, enhanced product quality and increased consumer choice (PC 2008).” However, its recommendations failed to appreciate that all reform must gravitate towards those three basic consumer rights- price, quality and choice.

McLeod (2011) states that though the new law is commendable in unifying the consumer protection framework, it fails to meet the threshold of a satisfactory consumer protection law. First, she argues that the basic consumer rights as propounded by former US President John. F. Kennedy in 1962 are; the right to safety, choice, information and fair hearing. She argues that while the law does a commendable job on the four, it completely ignores the other four rights in consumer protection provided by the UN in 1985 which are; the right to education, satisfaction of basic needs, redress and a healthy environment.

In other quarters, the Act has been dismissed as a mere piece of paper that would not be applied on the ground. This is because the enforcement mechanisms such as the ACCC have not been given enough power to ensure that they ‘ruffle up’ big businesses and corporations that have traditionally treated consumers with disregard. Most critics point out that the ACCC and state consumer agencies lack prosecutorial powers and have to rely on state machinery for this. This has reduced them to mere complaint bodies that ‘lack teeth’.

Another key weakness in the new law is the amount fined for breaching offences under the Act. Critics state that the $1.1 million for corporations is laughable judging from the amounts these corporations make by ‘fleecing’ customers. Consumers remain pessimistic that such an amount would deter these businesses from continuing in their unfair practices. Again, the Act has allowed loopholes by providing new defenses such as cost of production in determining consumer protection cases. This will ease the pressure manufacturers would ordinarily have if faced by a civil suit for damages and losses due to defective goods.

The ACL has been criticized as bringing nothing new to the consumer protection framework. Pundits argue that other state and territorial laws such as the Fair Trading Act of New South Wales and the Consumer Guarantee Act of New Zealand provided the same protection as that in the ACL save for minor changes. Additionally, the fact that the consumer has the burden of proving unreasonableness of suppliers in some cases makes the law unfair (Duke 2009). This is because the onus of proof has only been reversed in some aspects (Cunningham 2010).

Finally, there are lingering questions about the constitutionality of the comprehensive law. Section 51 of the Australian Constitution provides the powers of the Commonwealth Parliament in prescribing national laws. Within the provisions, consumer protection is not stated within the provided jurisdiction. The closest element to consumer protection in Section 51 is the Weights and Measures provision under subsection 51xv. This has raised questions about the validity of the ACL judging from the fact that states already have legislation on the same.

Conclusion

The criticism leveled against the ACL seems to take away the fact that it is among the best pieces of consumer protection law globally. While it is true that consumer protection is important, many governments are usually caught up between protecting consumers and allowing free flow of trade. Often, the two seem to be on a collision course and governments prefer the latter over the former and choose to pay ‘lip-service’ to consumer protection while allowing business to flow smoothly (McLeod 2011).

References

Ardagh, A. (2001) Business law – Questions & Answers. Melbourne: Lexis Nexis Butterworths.

Commonwealth of Australia (2006) Do Not Call Register Act 2006. Sydney: Commonwealth of Australia.

Commonwealth of Australia (2010) The Australian Consumer Law: An Introduction. Sydney: Commonwealth of Australia.

Cunningham, R. (2010) Ensuring Compliance with the New Australian Consumer Law. Brisbane: Flower & Hart Lawyers.

Duke, A. (2009) Representations as To the Future under the Proposed Australian Consumer Law. Melbourne University Law Review, 33, 454-482.

Gibson, A. & Fraser, D. (2011) Business Law, 5th ed. Melbourne: Pearson Education.

Gillies, P. (2009) Misrepresentations as to Future Matters — Current Issues in Interpretation. Trade Practices Law Journal, 25, 32–4.

McLeod, A. (2011) Just Say No: Consumer Policy and the Case for Restricting Rights. Australian Policy and History. Web.

Paterson, J. (2009) The Australian Unfair Contract Terms Law: The Rise of Substantive Unfairness As A Ground for Review of Standard Form Consumer Contracts. Melbourne University Law Review, 33, 934-956

Productivity Commission (PC) (2008) Review of Australia’s Consumer Policy Framework. Inquiry Report No 45. Web.