On 17 February 2009, the Federal Minister for Competition Policy & Consumer Affairs released an information and consultation paper, “An Australian Consumer Law: Fair market – Confident consumers” (Consultation Paper). Two weeks later, the Minister announced a review of the adequacy of statutory conditions and warranties. This article will provide an update on both of these initiatives.

Australian Consumer Law – Reforms and Consultation Paper

The Consultation Paper is a step towards the reform of consumer law in Australia and the development of a new national consumer law regime. The Consultation Paper, prepared by the Standing Committee of Officials of Consumer Affairs, refl ects the Council of Australian Governments’ (COAG) agreed consumer reforms and invites public and stakeholder comments on further suggestions for reform. It is anticipated that the proposed bill will be introduced to Parliament in mid-2009, with the legislation to commence by 1 January 2010.

The key themes of the Consultation Paper include enhancing consumer protection, reducing regulatory complexity and having a consistent national approach to facilitate a seamless national economy. The key components of the framework involve a new national consumer law, to be called the Australian Consumer Law, based on the existing consumer protection provisions of the Trade Practices Act 1974 (Cth) (TPA). In addition, there will be some new consumer laws including:

  • provisions which regulate unfair terms in consumer contracts
  • new penalties, enforcement powers and redress options for consumers (ultimately, what every supplier doesn’t want to hear), and
  • a new national product safety regulatory system.

There are strong reasons to have a national approach to consumer protection in Australia. The obvious reason is to ensure a consistent approach for both suppliers and consumers. Increasingly, many organisations that supply consumer products and services do so on a national scale. It can become a logistical nightmare to manage different regimes in different states, not to mention the associated compliance costs. In addition, there is no rational explanation for why consumers are offered different levels of protection just because they live in a certain state or territory.

For some organisations however, introducing a national approach with new consumer laws will mean change and substantial review of existing processes – this of course means time and money. For example, a national approach to unfair contract terms will mean that organisations supplying to consumers will need to ensure that their standard form agreements do not contain “unfair contract terms”.

According to COAG, unfair contract terms are those which cause significant imbalance in parties’ rights and obligations arising under a contract and are not reasonably necessary to protect the legitimate business interests of the supplier. Such terms will be prohibited in agreements that are not negotiated, with remedies available where a claimant can show detriment to the consumer or a substantial likelihood of detriment (not limited to financial detriment).

In getting up to speed on this change, it will be important for organisations to assess the meaning of an “unfair contract term”. The Consultation Paper provides some examples but, in practice, it is likely that there will be uncertainty as to what is and isn’t an “unfair contract term”.

Review of Statutory Conditions and Warranties

In addition to the release of the Consultation Paper, the Minister announced that the Commonwealth Consumer Affairs Advisory Council (CCAAC) will review the adequacy of existing laws on conditions and warranties that are implied into consumer contracts under the TPA.

It seems the review has been brought about because of concerns that:

  • suppliers are misleading consumers in their terms and conditions as to what the consumers’ entitlements are under law, and
  • the rise in the “extended warranty” business has led to some retailers charging consumers for “extended warranties” that offer no more than what the consumer is entitled to under the TPA anyway.

The TPA implies into contracts for the supply of goods and services to consumers certain conditions and warranties. Some of these implied terms are non-excludable and others are non-excludable but are able to be limited. In relation to goods, these terms are:

  • an implied condition that goods supplied by description will correspond with the description
  • an implied condition that the goods are of merchantable quality, and
  • an implied condition that, where the purpose for which the goods are being acquired is made known to the corporation, the goods are reasonably fit for that purpose.

In relation to services, the implied conditions and warranties are:

  • an implied warranty that the services will be rendered with due care and skill, and
  • an implied warranty that, where the purpose for which the services are required is made known to the corporation, the services supplied and any material supplied in connection with those services will be reasonably fit for that purpose.

CCAAC will review the adequacy of the current laws and determine whether there is a need for any amendments and, more generally, it will consider how the operation of the statutory implied terms can be improved. CCAAC will also consider if there is a need in Australia for “lemon laws” in order to protect consumers against goods that repeatedly fail to meet expected standards in relation to performance and quality. These laws could apply to specific goods such as motor vehicles.

CCAAC is set to consult with specific industry stakeholders and is scheduled to provide its report to the Minister by 31 July 2009.

Conclusion

It seems that change is well on its way with various proposals and reviews which are likely to significantly change consumer protection law in Australia. As to whether these changes are good or bad will depend on which side of the fence you sit on and, if it is the supplier side, whether your current practices in dealing with consumers are significantly different to the proposed initiatives.