Yesterday the ACCC hosted its annual National Consumer Congress in Sydney. This event brings together a broad range of stakeholders from across the public, private and government sectors to explore key issues impacting consumers. Over 200 attendees from 86 different organisations explored this year’s theme “A fit-for-purpose consumer law?” – a timely opportunity to discuss how our consumer laws and framework are working and whether and how they might be improved in the lead up to this year’s review of the Australian Consumer Law (ACL).
An impressive and diverse array of speakers and panellists representing regulators and key consumer organisations such as the ACCC, Choice, the Consumer Action Law Centre (CALC), the Australian Energy Regulator, the Consumers’ Federation, as well as both State and Federal Governments, presented at the Congress. This year we also heard from a representative from the ABC’s The Checkout and Uber, who provided some unique perspectives.
Emerging from the Congress was a general consensus that the introduction of the ACL was a positive change and has been an important source of rights for consumers, as well as an important and effective tool for regulators. The question is whether there is a need for any improvement or expansion. Plenty of views and commentary were provided, clearly indicating the potential areas of focus or reform that would be sought by some regulators, consumer advocacy groups and organisations, including the ACCC, as part of the Review.
Key themes included:
- penalties (particularly whether they should be increased);
- product safety;
- unconscionable conduct and unfair practices more generally; and
- challenges facing vulnerable consumers.
King and Wood Mallesons Special Counsel, Melissa Monks, who attended the event, shares her insights and observations from the day.
Background to the ACL Review
In 2009, COAG signed the Intergovernmental Agreement for the Australian Consumer Lawwhich agreed, among other things, to a review of the ACL within seven years of commencement. The Review will be conducted this year by Consumer Affairs Australia and New Zealand (CAANZ), in consultation with regulators, consumer representatives, businesses and the public.
ACCC Chairman Rod Sims in his opening address emphasised the importance of wide consultation and encouraged everyone to get behind the Review. He said that “the ACCC is just one voice in this exercise” and that the “broader consumer voice also needs to be very loud and clear”.
The Review’s terms of reference are broad and threefold:
- to assess the effectiveness of the ACL provisions;
- to consider the extent to which the consumer policy framework has met COAG’s objectives; and
- to assess the flexibility of the ACL to respond to new and emerging issues to ensure that it remains relevant into the future.
CAANZ’s final report is currently scheduled for early 2017.
Making markets work
Rod Sims in his opening address discussed the importance of effective consumer laws to a successful marketplace. He said that consumer laws “underwrite confident consumer participation in commerce, enhance transparency and informed choice. They also ensure that businesses compete on merit and not falsehoods and protect all consumers and small businesses from unfairness that has no place in a properly functioning market.” Mr Sims also expressly rejected any notion that consumer protection laws are “softer” or any less important in comparison with other marketplace regulations, such as cartel laws.
Mr Sims outlined some recent developments as well as some of the ACCC’s recent “success stories” including:
- the commencement of the Competition and Consumer Amendment (Payment Surcharges) Act 2016 in February this year, which inserted a new part into theCompetition and Consumer Act 2010 (CCA) to combat excessive surcharges for particular payment methods such as credit cards;
- the ACCC’s successful action in relation to misleading representations about the Nurofen specific pain product range; and
- enforcement action in relation to alleged unconscionable conduct by private training colleges.
Mr Sims then set the scene for the rest of the conference and indeed the year ahead by discussing some potential areas of focus for the ACL Review, as well as reiterating the ACCC’s 2016 enforcement priorities relevant to the ACL.
Penalties featured prominently in Mr Sims’ remarks.
Mr Sims called for an increase in pecuniary penalties for a breach of the ACL. Although he noted that the introduction of a penalty of up to $1.1 million per breach had been a “game changer”, he expressed doubt about whether the current level is sufficient to deter larger companies. He observed that “large penalties which are, frankly, headline grabbing, have an enormous deterrent impact, especially to the Boards of those [large] companies”.
The ACCC has, particularly over the last 18 to 24 months, repeatedly raised concerns about the adequacy of the maximum penalty available for a breach of the ACL, and the need for these to be at a level that achieves both specific and general deterrence. The Courts have also echoed this sentiment, for example, Justice Gordon has said “It is a matter for the Parliament to review whether the maximum available penalty of $1.1 million for each contravention of Pt 2–2 of the ACL by a body corporate is sufficient when a corporation with annual revenue in excess of $22 billion acts unconscionably. The current maximum penalties are arguably inadequate for [very large corporations].”
Mr Sims also referred to there being a “strong case” for extending the penalty provisions to cover misleading and deceptive conduct under section 18 of the ACL, sharing the thought that it is “weird for penalties not to attach to that part of the Act” and noting how the ACCC usually needs to plead other breaches to be able to get a penalty.
What can we expect?
We expect to see the ACCC strongly advocating for increasing the statutory maximum penalties for breaches of the ACL. We also expect the ACCC to push hard to extend pecuniary penalties to contraventions of the general prohibition against misleading and deceptive conduct – this would be a major and significant change if adopted. The ACCC and consumer groups had previously sought such an extension in the course of the Productivity Commission’s 2008 inquiry into Australia’s consumer policy framework, which led to the introduction of the ACL. Ultimately it was rejected based on concerns about imposing such a significant consequence for breach of a prohibition that establishes a general standard of conduct, in relation to which “reasonable minds” can and do differ. There were also concerns that the deterrent effect would simply be passed onto consumers. However penalties have been available under the ACL for a breach of another form of general conduct – unconscionable conduct – and the ACCC is likely to use this to add to its justification for an extension.
Product safety continues to be an enduring enforcement priority for the ACCC. The ACCC’s recent action in relation to unsafe products involved a creative use of the misleading conduct provisions by the regulator to address product safety concerns. Despite the ACCC’s success in that case, Mr Sims raised the prospect of a new general obligation to supply safe products, an idea welcomed by Choice and other consumer groups. Choice Chair Nicole Rich also called for a better approach to product recalls and public reporting in this area.
In a keynote address Dr Ruth Barker, an emergency paediatrician at Lady Cilento Children’s Hospital who works closely with the ACCC and other consumer regulators and organisations, shared some unique insights around the effect of unsafe products in the course of her work and perspectives on Australia’s product safety regime. This included providing graphic real life examples of the extreme impact unsafe products can have on the lives of ordinary consumers. Dr Barker said that in her view, around 90% of the injuries she sees are preventable, and that she sees the same injuries from the same products (such as button batteries) time and time again. She too called for a general product safety provision in the ACL, as well as obliging quality assurance testing and more transparency around mandatory reporting (especially of “near-misses”).
International safety standards are also on the ACCC’s radar. Mr Sims said that the Review provides a timely opportunity to “reduce duplicative domestic regulations” by integrating trusted international safety standards into Australian mandatory standards to reduce transaction costs and inefficiencies in having to draft and apply equivalent Australian safety standards, and then vary these each time a change to overseas standards is made.
Unconscionable conduct and unfair and deceptive practices
Following significant consideration of our unconscionable conduct provisions by the courts of late, Mr Sims said that it is time to consider extending their application to all companies, including publically listed companies. Section 21 of the ACL currently prohibits unconscionable conduct in dealings with persons other than listed companies. Mr Sims suggested that the restriction is outdated, as ASX listing is no longer an accurate reflection of a company’s size and any company should be able to take action if they are on the receiving end of unconscionable conduct.
Mr Sims also encouraged the Review to look to other jurisdictions to consider whether any new provisions might be warranted in this space to address types of harmful behaviour not necessarily captured by the current ACL provisions. To this end Mr Sims posed the question of whether something akin to the US unfair and deceptive practices law may provide an opportunity to address behaviour that might not be misleading but may still be harmful to consumers. However Mr Sims noted the controversy that surrounds such a proposal and that, if the ACCC received such a power, it would need to “exercise it carefully”. The Minister for Small Business and Assistant Treasurer the Hon. Kelly O’Dwyer MP also encouraged the Review to examine overseas models, but generally favoured the concept of “regulating better” over regulating more.
The CEO of the CALC, Gerard Brody, in his keynote address expressed similar concerns that some harmful conduct was still slipping through the cracks. He said that the misleading and unconscionable conduct laws were being inconsistently applied by the courts and were of limited utility in stemming systemic conduct, particularly given they were enforced on a single case by case basis. He also reflected on whether consumers would understand the terminology of “unconscionable conduct” and whether a change in the vernacular was required to make it more accessible. He called for the introduction of a broader prohibition on unfair trading which he feels could act as a preventative measure more broadly rather than dealing with actual harm in individual cases. Ms Rich stated that Choice would be in favour of such a law, citing door-to-door sales situations as an area which may benefit from such a change although she went on to observe that in Choice’s view, the practice would be better off banned. She also called for regulators like the ACCC and ASIC to do more, particularly in taking up redress for more consumer groups.
Interestingly, in response to Mr Brody’s call for a prohibition on unfair trading, Mr Sims noted that the ACCC has been “trying to push the boundaries on unconscionable conduct…it gets us a fair way” but acknowledged that there may be a gap in some kinds of behaviour and that it wasn’t clear if unconscionable conduct could step in here but that the Review was important in making an assessment and considering what was needed. Of particular note, Mr Sims observed that the ACCC may not have quite gone far enough to get at systemic unconscionable conduct “but we will”.
What can we expect?
We think that one of the more contentious issues emerging in the Review is likely to be whether the existing provisions of the ACL and its framework need to be merely tweaked or whether there should be more substantive reform and expansion. Interestingly, Mr Sims seemed to advocate for a cautionary approach, involving the “cementing of what we have” and considering the future and whether the ACL merely needs some enhancements rather than an expansion or overhaul in order to be fit-for-purpose. It certainly seems that the ACCC will continue to test the boundaries of statutory unconscionable conduct, as we’ve seen to date with a number of high profile court cases.
“Tweaking”: some provisions and clear law
Mr Sims also posed the question of whether more generally there was a need to “tweak” other ACL provisions, citing component pricing and unfair terms as examples where problems and learnings from experience could bring improvements.
Further on unfair terms, Mr Sims made an interesting comment about the ACCC currently considering whether a contract can be unfair if it is too long or complex, noting that if a contract is short a consumer may well read it but if it is long, the implication is they won’t.
Related to the concept of complexity, The Checkout’s Julian Morrow put forward a novel call for the form and content of the ACL to be improved by simplifying it and making it clearer and more accessible to consumers.
What can we expect?
Such comments highlight just how wide ranging submissions to the Review are likely to be and the diversity of opinion and competing agendas on what changes should be made. Given the rare opportunity for business and the public to provide feedback and proposals for reform on laws, including the ACL, we expect there to be a significant number of submissions to the Review.
The ACCC this year elevated the protection of indigenous Australians as an enduring priority, but also acknowledged the vulnerability of older Australians as well as newly arrived migrants.
In a workshop session, Congress attendees considered questions such as whether vulnerable consumers are better or worse off since the introduction of the ACL and whether the ACL has changed commercial culture in dealing with vulnerable consumers. The consensus seemed to be that the ACL had had a positive impact on vulnerable consumers, but also that vulnerable consumers were still being exploited by unfair practices.
A recurring example was unfair sales tactics such as door-to-door sales, with pressure from multiple consumer groups to ban such practices outright. This was met with restraint from Mr Sims, who cautioned against blanket bans. Others suggested that we need to be looking at the ability of consumers to assert their rights and seek redress, rather than at the laws themselves.
Access to information
Finally, Rod Sims briefly raised the idea of increasing access to information as a way to empower consumers – in particular more transparency around the kind of information companies collect about individual consumers, and how consumers can influence that and themselves use it to make informed purchasing decisions. The idea gained some traction throughout the day. Small Business Minister and Assistant Treasuer Kelly O’Dwyer for example, said empowered consumers “armed with information” were essential to effective regulation. However, no detail or explanations were offered as to how the concept would be practically translated in the ACL or the broader education, access or enforcement framework.
Conclusion: striking the right balance
The Congress provided a good indication of things to come as the official commencement of the ACL Review draws nearer. The ACL Review Secretariat announced at the Congress the release of an Issues Paper for public comment in the coming weeks.
Although the general consensus seems to be that the ACL has served us well, and while the ACCC’s preliminary view seems to be that a measured approach rather than wholesale reform is appropriate, we expect there to be wide ranging calls for change to existing provisions, the introduction of new provisions and tools, more enforcement (both by regulators and consumers), increased education and access to information. We can certainly expect the subjects of penalties (and likely the ACCC’s approach to enforcement more generally including its increasing use of infringement notices), product safety and unfair practices to feature prominently.
A key challenge for the Review will be to listen to and understand the competing interests coming out of the consultation process and to strike the right balance between protection, prevention, red tape, competition, innovation, regulation and enforcement so that the ACL is “fit-for-purpose” for the next five years and beyond.