Parliamentary Secretary to the Treasurer
14 September 2010 - 5 March 2012
A Microeconomic Reform Success Story
Address to the Australian Consumer Law Conference
15 March 2011
Thank you Professor Arie Freiberg for the introduction.
I wish to acknowledge Professor David Cousins and the Monash University Centre for Regulatory Studies for hosting this conference on World Consumer Rights Day and for its important and ongoing contribution to the consumer policy debate in Australia.
And thank you for the invitation to deliver the keynote address today.
World Consumer Rights Day
It is a great pleasure to be here on this important day in the annual calendar for all who have an interest in consumer affairs to talk about our new national consumer policy framework – the Australian Consumer Law.
Since 1983, the international consumer movement has marked the 15th of March each year as World Consumer Rights Day as a means of raising global awareness about consumer rights. The date was chosen because this was the day in 1963, when the President of the United States of America, John F Kennedy conveyed a message to the US congress where he formally addressed the issue of consumer rights. He is widely recognised as the first global leader to do so.
In making some remarks today about the new Australian Consumer Law, which we have all come to know affectionately as the "ACL", I will draw upon some of the themes and sentiments that were expressed by President Kennedy in his 1963 address.
Consumer protection – the role of national government
One of the key themes in President Kennedy's message to the US Congress was that consumers' interests should be protected by the Federal Government. He stated:
"The federal Government--by nature the highest spokesman for all the people--has a special obligation to be alert to the consumer's needs and to advance the consumer's interests."
He then observed that, even since the enactment of laws protecting consumers from frauds connected with the US Postal system in 1872:
"the Congress and Executive Branch have been increasingly aware of their responsibility to make certain that our nation's economy fairly and adequately serves consumers' interests."
Indeed, in the history of Australian consumer protection, it was not until the early 1970s that the Federal Government began to step up to the mark in attempting to address consumer protection issues at the national level.
The turning point in Australian consumer protection occurred when the Whitlam Government passed the Trade Practices Act 1974. This was the first attempt by an Australian government to enshrine consumer protection measures in federal law.
The Trade Practices Act 1974 represented a significant leap forward in Australian consumer protection law, however, the Act had its limitations – specifically its constitutional limitations.
While the Trade Practices Act would remain the cornerstone of Australia's national consumer protection regime for the next 37 years, the assumed limits on the Commonwealth's power under the Constitution meant that it continued to apply to a patchwork set of entities and situations and was supplemented by separate fair trading and consumer protection laws in each of the States and Territories.
In total, the maze of Australian consumer protection law had become characterised by more than 900 provisions in 20 separate laws around the country. All of this regulation, all of this red tape across a single national economy consisting of a mere 22 million people.
All of this was to change on the 1st of January this year, when a single set of consumer laws came into effect across the Australian economy.
When I became Parliamentary Secretary to the Treasurer with responsibility for consumer affairs, one of the first actions I took was to introduce the ACL Regulations, which provided a further and additional layer of clarity to the new ACL, which had been the product of the hard work and collective efforts of the many ministers, officials and stakeholders who had helped drive these reforms well before my time.
I take this opportunity to pay tribute to my predecessors, Ministers Chris Bowen and Craig Emerson, who worked tirelessly to advance the ACL agenda.
I must confess that one of my most horrifying moments in this role, was while reading one of my first Treasury briefings - in the very first days in the job. I vividly recall being struck down in a state of considerable panic when I learned that as the person within government having ministerial responsibility for consumer affairs, one of my first responsibilities would be to preside over the effective repeal of the Trade Practices Act. Lionel Murphy, I thought, would be turning in his grave.
However, as you all know, the passing of the Trade Practices Act, also marked the ushering in of a new and exciting era of consumer protection law, where Schedule 2 of the new Competition and Consumer Act contains Australia's new single national consumer law, the ACL.
The road to reform
The ACL was the product of a two-year reform process.
Identified as one of the 27 priority areas of deregulatory reform committed to by the Council of Australian Governments, the task of harmonising Australia's consumer laws is well and truly on its way to completion.
It is one of the key microeconomic reforms of this Labor Government, designed to dismantle the barriers to efficiency created by the increasingly anachronistic rail-gauge economics of our Federal system of Government.
As a major advanced economy, outperforming most of our international competitors, the legacies of our separate colonial histories have continued to mire many of our regulatory systems in complexity and duplication. Overcoming, what many have described as "the tyranny of small differences" in the overlap of 20 separate Commonwealth, State and Territory consumer protection laws, the ACL represents one of Australia's significant microeconomic reform achievements, helping take us one step closer towards the aspiration of a Seamless National Economy.
Under the ACL, we now have more consistent protections for consumers right across Australia, so that a consumer can expect the same rights and obligations to apply whether they live in Adelaide or Alice Springs, Brisbane or Burnie, or Perth or Penrith.
Equally as important, businesses will have greater clarity over their rights and obligations as they will now only have to comply with a single set of consumer laws when operating across State and Territory borders.
The process has not been without its challenges, but I do believe that the ACL stands as a living example of how harmonisation should be undertaken.
Importantly, the harmonisation project was evidence based. In 2008, in its Review of Australia's Consumer Policy Framework, the Productivity Commission recommended the development of a single law dealing with consumer affairs and fair trading across the nation.
While the PC made the obvious case for the benefits to consumers, it also argued for the role of a single national consumer law in broader microeconomic reform.
The PC argued that a consistent consumer policy framework would reduce consumer detriment, improve efficiency and reduce cost and red tape for business, estimating a benefit of up to $4.5 billion to the Australian economy.
It recognised the compliance burden facing businesses that were operating across State and Territory borders and the cost to the economy of having multiple laws imposing inconsistent obligations.
With 50 per cent of national turnover in consumer markets generated by multi-jurisdictional businesses, the PC found that a single national law would alleviate the overall compliance burden and reduce costs, particularly in the areas of staff training, IT and reliance on legal advice.
Inconsistent regulation was strangling business and acting as a strong impediment to businesses expanding outside of their home State.
In an increasingly competitive and global business operating environment there was a compelling case for harmonisation.
Another important feature of the harmonisation project was that it relied upon co-operative federalism.
Whilst it was significant that the Federal Government agreed with the PC's recommendation for harmonisation, this significant microeconomic reform could not have been achieved without the support of the State and Territory governments.
Anyone who has observed the dynamics of Federal-State relations over the last 110 years will appreciate just how important this sense of co-operative federalism has been. The ACL could not have been achieved had we not had all the Australian Governments come to the table with a united sense of purpose.
I take this opportunity to acknowledge the Ministerial Council on Consumer Affairs, its ministerial members, past and present for their contributions. I also wish to acknowledge the important role of the officials who have supported this process, especially through the Standing Committee of Officials of Consumer Affairs.
As we look back on the process of harmonisation so far, I think it is worth noting that, with the great support of the States and Territories, the Federal Government has gone a long way towards fulfilling its role as Kennedy declared "the highest spokesman for all the people" and meeting its "special obligation to be alert to the consumer's needs and to advance the consumer's interests."
The ACL – protecting consumer's rights
In his 1963 message to the US Congress, President Kennedy referred to the consumer rights that he believed the Federal Government needed to support. These rights, he stated, include:
- The right to safety – including the right to be protected from goods which are hazardous to health or life.
- The right to be informed – including the right to be given the facts to make informed decisions and to be protected against fraudulent, deceitful, or grossly misleading information.
- The right to choose – including the right to have access to a range of products and services at competitive prices with an assurance of satisfactory quality.
- The right to be heard - including in the formulation of Government policy, and the fair and expeditious treatment in its administrative tribunals.
Indeed, these rights accurately reflect some of the elements that underpin the rights and obligations conferred under the ACL.
The key elements of the ACL include:
- A harmonised national product safety system, where bans and mandatory standards apply in all States and Territories, and are backed up by a nationally-consistent compliance and enforcement regime administered by all the consumer protection regulators across Australia;
- Consistent laws dealing with sales practices, including misleading and deceptive conduct;
- New national consumer guarantees that provide consumers with a comprehensive, nationally-consistent set of rights for the goods and services they acquire based on the same core principles as implied warranties and conditions that previously existed in state and territory fair trading laws and the Trade Practices Act 1974; and
- A national unfair contract terms law covering standard consumer contracts;
A limited number of the measures proposed under the ACL are subject to transitional arrangements, most notably those that deal with unsolicited selling and warranties against defects.
Giving these affected sectors time to adjust to the new regulatory environment will also give these reforms the best chance of working well into the future.
The ACL in operation
So how is the ACL faring after 74 days in operation?
While it is still early days in its implementation, the introduction of the ACL is an ambitious exercise in ongoing harmonisation, but one that has been working relatively well in its infancy.
I'm not about to claim that the implementation of the ACL has been perfect, because inevitably there will be some challenges as we settle into the new system.
But with all consumer protection agencies administering the same law, they are sharing experiences and knowledge in a way that was not possible when they each administered a State or Territory Fair Trading Act or the Trade Practices Act.
During the summer, for example, when large swathes of the country were inundated by flood waters or struck by fires and storms, our regulators were in constant contact.
As the Queensland flood waters began to rise, so did reports that consumers were being targeted by unscrupulous operators and scam artists. In response, consumer officials from around Australia met regularly by teleconference and, drawing upon experience gained from the Victorian bushfires, kept ahead of the issues arising from these crises.
The result was a well-informed network of regulators in each jurisdiction who were able to deal consistently with the range of consumer enquiries and enforcement issues that arose.
The strategies and materials developed out of that process will continue to have national application for any future natural disasters our country may face.
There is no doubt that the spirit of cooperation between consumer protection agencies and regulators in each jurisdiction borne out of the process that led to the ACL has been a great platform for ongoing co-operation in the new consumer protection framework with a single law and multiple regulators.
Enforcement of the ACL
Under the ACL, there are a variety of new, low-cost mechanisms that give our regulators the ability to enforce compliance with the consumer laws.
Since April 2010, under the first phase of the ACL, the ACCC has had enhanced enforcement powers, including public warnings and infringement notices.
In this time, the ACCC has issued 19 infringement notices and taken court action against four businesses that opted to ignore their infringement notices.
In each case the ACCC was successful and the penalties imposed by the courts were larger than the amount set out in the original infringement notices.
From the 1st of January 2011, all consumer protection agencies were given the power to issue infringement notices to persons in breach of the ACL. Infringement notices are proving to be an effective enforcement mechanism for regulators that is one step short of commencing legal action.
Public warning notices are also an important preventative tool available to consumer protection agencies. This recognizes that while a court action may secure a prosecution, often the damage to consumers has already been perpetrated, particularly through scams and other fraudulent activity. In this regard, prevention is definitely better than prosecution.
Technology and the ACL
One of the factors that President Kennedy referred to in his message to Congress that demanded greater Federal Government intervention to ensure the protection of consumers was "the march of technology" which, as he put it, has:
"increased the difficulties of the consumer along with his opportunities; and it has outmoded many of the old laws and regulations and made new legislation necessary."
Commenting on the increasingly complex nature of the many new products used every day in the home, President Kennedy, in what was a forgivable sign of the times, marvelled at how:
"The housewife is called upon to be an amateur electrician, mechanic, chemist, toxicologist, dietitian, and mathematician--but she is rarely furnished the information she needs to perform these tasks proficiently."
Whilst, our social attitudes have come a long way since the 1960s, so too has the rate and range of technological advances increased.
The rise of the Internet and e-commerce has certainly amplified some of the opportunities and challenges that Kennedy spoke about. Equally, these technologies provided further impetus for the increased harmonisation of consumer protection laws in Australia. As consumers embrace new opportunities to transact across the globe, legal distinctions between State and Territory laws seem even more arcane.
It is worth noting that all provisions of the ACL apply equally whether goods or services are purchased in a shop, online or on the telephone.
The ACCC recently took action against one company in the Federal Court and it was fined $7,500 for failing to respond to or delete false, misleading and deceptive testimonials on its Facebook page, on its website and its Twitter pages.
The company had been earlier subject to Court orders about misleading and deceptive conduct in 2009.
This case sets a new precedent that indicates that companies will be held responsible for their social media activities.
Equally, we all have to be mindful of the risks to consumers of new technology. During our recent National Consumer Fraud Week, it was revealed that the number of scams reported to the ACCC in 2010 involving the Internet and email almost equalled the total number of scams reported in 2009.
But these risks don't outweigh the benefits by any measure. Importantly, we have seen our consumer protection agencies embracing new forms of technology to help educate Australians about the ACL.
For example, Consumer Affairs Victoria collaborated with other consumer agencies to develop an 'app' for the iPhone that allows consumers to carry all the information they need to know about the ACL in their pockets.
The 'app' is designed to give shoppers quick and easy access to information about consumer guarantees, warranties and refunds.
Having ready access to this kind of information is essential if we are to raise community awareness of the rights and obligations of consumers and businesses alike.
The introduction of the ACL has been a great microeconomic success story.
Under the ACL, we now have more consistent protections for Australian consumers, so that consumers all around the country can expect the same rights and obligations to apply regardless of where they live.
At the same time, businesses will have greater certainty over their rights and obligations as they will now only have to comply with a single set of consumer laws when operating across State and Territory borders.
We now have a single national consumer law, enforced by a network of National, State and Territory based regulators that are working together with unprecedented levels of cooperation.
While the early signs for the ACL are positive, we have to continue to work hard to ensure that these reforms are enduring and realise the potential benefits to our national economy.
All of us here, who have a stake in consumer policy, have a role to play in getting the message out to consumers and businesses, to raise their awareness of the statutory framework that sets out their rights and obligations.
This will take time, and it will take the collective effort of Governments, consumer advocates and the business community to make it work.
In this regard, I look forward to working with you all to ensure that the ACL reforms stand the test of time.