On 17 March 2010, Federal Parliament passed the Trade Practices Amendment (Australian Consumer Law) Bill 2009 (Cth) (ACL). This legislation introduces important changes dealing with unfair contracts and institutes new penalties and consumer redress options. Linked to the changes, the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) will have expanded enforcement and investigative powers. The name of the Trade Practices Act 1974 (Cth) (TPA)1 will change to the Competition and Consumer Act 2010 once phase 2 of the new consumer legislation is enacted (see below). The ASIC Act2 will not be renamed.

This new Australian consumer law is the most important piece of consumer protection legislation since the introduction of the TPA in 1974. The true national nature of the ACL will provide consistency throughout the land. Companies will need to ensure that their compliance programs are up to date to cater for these new laws. The start date for the ACL will be no earlier than 1 July 2010 (for the unfair contract provisions) and 1 January 2011 for the remainder of the ACL. However, these dates are still to be confirmed.

Freehills have previously commented on the amendments in relation to the unfair contract regime,3 which will prevent, amongst other things, companies from using standard-form contracts to onerously burden consumers with terms ‘tucked away in the fine print.’4

Of more immediate interest are the new enforcement powers to be vested in Australia’s consumer regulators, the ACCC and ASIC, which will allow them to:

  • seek a declaration from a court that a term of a consumer contract is an unfair term or a prohibited term
  • issue substantiation notices relating to consumer protection in certain circumstances. This is intended as an investigative tool where the information sought can assist the regulator in deciding whether to take further action
  • seek orders that would redress, wholly or in part, loss or damage to non-party consumers arising out of contraventions of certain consumer protection provisions of the TPA or ASIC Act or who are disadvantaged by a term in a consumer contract which has been declared an unfair term or a prohibited term
  • issue an infringement notice containing financial penalties for suspected contraventions of various provisions, including the unconscionable conduct provisions under the TPA. ASIC already possesses this power in relation to minor contraventions of the continuous disclosure provisions of the Corporations Act.5 In practical terms, the use of this notice reverses the onus of proof in relation to these provisions—a most unfortunate further development in the use of this reversal of proof process in modern regulatory legislation, and
  • issue a public warning notice in respect of suspected breaches of certain provisions of the TPA or ASIC Act or for a failure to respond to a substantiation notice (provided certain conditions are satisfied). Being able to ‘name and shame’ companies publicly is a strong penalty for suspected breaches, as reputations are on the line.6

Part IVA of the TPA, which contains the TPA’s unconscionable conduct provisions, will form part of the ACL. These provisions will become more significant with the introduction of civil penalties of up to $1.1 million for corporations and $220,000 for individuals who engage in unconscionable conduct. Regulators will also be able to seek orders disqualifying individuals who engage in unconscionable conduct from managing corporations.

Phase two of the ACL

On the same day, phase two of the ACL, the Trade Practices Amendment (Australian Consumer Law) Bill (No.2) 2010, was tabled in Federal Parliament. The Bill has been referred to the Senate Economics Committee for inquiry and to report on by 21 May 2010. When passed, the law will:

  • incorporate fair trading and consumer protection provisions of the TPA into the ACL, including unfair contract terms and provisions implementing enhanced enforcement powers, penalties and redress options
  • enable the ACCC to impose infringement notices for specified civil contraventions of the ACL
  • implement a national approach to product safety, and
  • introduce a new system of statutory consumer guarantees.