Executive summary

Introduction

As with a number of large corporates and industry associations, Freehills recently made a submission to the Federal Government on the Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010 (Bill).

In addition to its written submission, Freehills partners Alan Peckham and Professor Bob Baxt and Consultant to Freehills, Professor John Carter, were invited to appear before the Senate Economics Committee as part of its inquiry into the Bill.

In our submission, we supported the idea of creating a national consumer protection regime. However, we noted a number issues with the Australian Consumer Law (ACL) as proposed. We believe the preferred outcome for the new regime should be effective protection for real consumers, and clarity for business in terms of its application. Our view is that the Bill fails to fulfil these objectives and we very much hope that the Federal Government will reconsider the Bill in its current form.

A copy of our full submission is available from Senate Economics Committee pages of the Parliament website. Below is an executive summary of our comments:

General comments

  • The Federal Government has stated on a number of occasions that many provisions of the ACL are only a restatement of the existing Trade Practices Act 1974 (Cth) (TPA) provisions or best practice from relevant state and territory law rewritten in plain language and to conform with new drafting conventions which have been adopted since the TPA was written. We do not agree with this comment and suggest that, despite the intention, the Bill does in fact make substantive amendments to existing legislation with undesirable consequences which require greater scrutiny as part of the drafting process.
  • The general public and industry did not have the chance to comment on the proposals before the Bill was introduced into Parliament. The reason why this did not happen is, perhaps, because of the misconception that many provisions of the Bill were simply a restatement of the existing law?
  • The Regulatory Impact Statement which accompanied the Bill does not take account of the new consumer guarantee regime introduced as part of the ACL. Again, this may be because of the misconception that this new regime is similar to existing law.

Moving onto the detail

  • The definition of ‘consumer’: We suggest that a single definition of ‘consumer’ should have been adopted, being one which takes into account not only the type of goods or services being acquired, but also the purpose for which the goods or services are being acquired. We believe that the effect of the main definition proposed in the Bill is to:
    • remove some current consumer protection without addressing the needs of small business
    • create inconsistent concepts within the ACL and in relation to application of the consumer credit legislation, and
    • create anomalies, including the protection of large corporations as if they were consumers acquiring goods or services for personal use.
  • Requirement to pay for contractual rights: Given the new unfair practice of making a false or misleading representation concerning a requirement to pay for a contractual right wholly or partly equivalent to any guarantee under Division 1 of Part 3-2, there is a significant risk of inadvertent non-compliance with the pecuniary penalties regime.
  • Consumer Guarantees: The new consumer guarantee scheme:
    • is far too complex for consumers to understand
    • reduces consumer rights by placing emphasis on repair of goods and whether there is a ‘major’ failure to comply the ACL, and
    • will have considerable negative impact on commercial transactions – undermining certainty and freedom of contract, creating uninsurable liabilities and placing small business at a disadvantage.
  • Product safety: In relation to consumer product safety and mandatory reporting, problems arise with:
    • use of the concept ‘associated with’
    • whether the relevant inquiry is with goods or services supplied by the supplier, and
    • the definition of ‘serious injury or illness’, which needs to be reconsidered.

Next steps

As far as the Bill itself is concerned, the Senate Economics Committee is due to report back to Parliament about the Bill on 21 May 2010. We will know more about the progression of the Bill through Parliament and whether the Bill is likely to be amended after this time.

In the meantime, companies should not forget that the new enforcement powers for the ACCC and ASIC have already come into effect and the new provisions regulating unfair contract terms in standard form consumer contracts are intended to be effective as of 1 July 2010. This means that businesses should be reviewing their standard form consumer consumers for possible unfair contract terms now.