The government is seeking submissions on exposure draft legislation which proposes to amend the Australian Consumer Law (ACL) following recommendations made by Consumer Affairs Australia and New Zealand (CAANZ).
Surprisingly, the draft legislation does not increase the quantum of penalties for breaches of the ACL despite the ACCC’s insistence on such a reform and as previously proposed by CAANZ. The draft however does provide the ACCC with stronger investigative powers in relation to possible breaches of the unfair terms regime and product safety matters and eases the evidentiary burden for private litigants seeking to bring follow on ACL actions.
There is also a new prohibition relating to fees or charges associated with pre-selected options that seeks to ensure they are all included in the single ‘headline’ price.
In June 2015, the consumer affairs ministers agreed that CAANZ would conduct a review of the ACL.
Following that review, in March 2017, CAANZ released its Final Report outlining proposals for legislative amendments that the CAANZ identified could improve the ACL.
The exposure draft follows an agreement by the consumer affairs ministers on 31 August 2017 to make amendments to the ACL as recommended by CAANZ.
Submissions on the draft legislation are due by 28 February 2018.
Proposed amendments and implications
The exposure draft proposes to make a number of changes to the ACL, the most significant of which are as follows:
Unconscionable conduct – Public companies may also be victims to unconscionable conduct;
Public companies would be able to challenge the unfair conduct of counterparties on the basis that it is unconscionable – this would require a comprehensive assessment of all of the circumstances including the relative bargaining powers of the parties involved but this would no longer be a barrier to bringing such an action.
Pricing – Fees or charges associated with pre-selected options must be included in the single ‘headline’ price.
This will require important changes to online purchasing websites such as airlines.
Unfair contract terms – The ACCC will be able to use its significant investigative powers to investigate possible unfair contract terms in consumer and small business contracts;
The ACCC are currently restricted in using its powers to investigate suspected unfair contract terms because the existence of an unfair contract term does not amount to a ‘contravention’ or ‘possible contravention’ of the law (currently required to trigger the investigative powers). The proposed change will enable the ACCC to use its investigative powers to consider whether to seek a court declaration that any unfair contract terms are void.
Evidentiary burden – Private litigants pursuing their own remedies for breaches of the ACL will be able to rely on admitted facts, in addition to findings of fact, from earlier proceedings. This eases the evidentiary burden making it easier for private litigants to pursue their own actions for breaches of the ACL;
We anticipate this change will result in more class actions against companies following ACCC proceedings similar to the recent Nurofen class action. This is a critical amendment which requires companies to carefully consider how to deal with defending any ACCC proceedings to minimise the risk of potential class actions.
Product safety – In addition to the supplier, the ACCC will be able to require information about unsafe products from third parties. Those third parties could include other traders, test laboratories, safety consultants, consumers or injured persons;
This is likely to increase regulatory costs for those companies that deal with a very significant number of products as for any product that is considered unsafe the ACCC may require information from such companies.
No increased penalties
In its Final Report, CAANZ made a proposal that the maximum financial penalties available under the ACL be increased to align with the penalty regime under the Competition and Consumer Act 2010 (Cth) for breaches of competition laws.
Currently the maximum penalties for breaches of the ACL are $1.1million for companies and $220,000 for individuals. CAANZ proposed they be changed as follows:
- For companies - the greater of:
- $10 million;
- three times the value of the benefit the company received from the breach; or
- 10 per cent of annual turnover in the preceding 12 months if the benefit cannot be determined.
- For individuals - $500,000.
Although the consumer affairs ministers identified that proposal as “a priority” and the ACCC has been a strong advocate for increased penalties, the only increase in penalties proposed by the exposure draft is in relation to contraventions of the voluntary product recall provisions. This may of course change by the time the final legislation comes into effect.
You may wish to consider making a submission on the exposure draft legislation by 28 February 2018.