17 February 2009

Australian Consumer Law - The Future


Address to the Monash Centre for Regulatory Studies, Monash University Law Chambers

Introductory remarks

Thanks to David Cousins and the Monash Centre for Regulatory Studies for hosting this symposium and inviting me to speak today.

There is a lot happening in the field of consumer protection and regulation and symposia such as this are a very worthwhile opportunity to flesh out some of the complex and nuanced questions that need to be addressed in what is a significant reform process.

The COAG agreement in October last year represented a coming together of all Australian governments - Commonwealth, state and territory - in a commitment to build a world class, best practice consumer policy framework.

This has been talked about for a long time - in fact I know that some people, who have been involved in consumer policy for a long time, had reluctantly come to the conclusion that they wouldn't live to see a national consumer law.

The new Australian Consumer Law will mean that Australians will be able to expect the same protections wherever they shop, and for whatever they buy. They will be entitled to the same standards of business conduct in the marketplace. And they'll have the same access to redress when they are wronged.

The Australian Consumer Law breaks new ground in creating an environment in which consumers around Australia can expect stronger, more effective and consistent national protection. These reforms also represent a conscious effort to ensure not only better regulation, but also more consistent regulation so that business compliance is minimised while consumer benefit is maximised.

It is also appropriate to use the opportunity of the introduction of the Australian Consumer Law to reflect on 35 years of operation of the Trade Practices Act.

The consumer protection provisions of the Trade Practices Act will form the basis of the new consumer law.

The Trade Practices Act has served Australians well over the last 35 years.

However, the process of modernising the law gives us the opportunity to consider ways the Act can be improved.

Despite the importance of the Act to protecting consumers, I would suggest that most consumers wouldn't recognise a 'Trade Practices' Act as they key piece of legislation which protects their rights.

Partly this is because 'Trade Practices' is not a term in common, every day usage.

Accordingly, I'm proposing today that the Trade Practices Act be renamed the 'Australian Competition and Consumer Act' to better reflect its purposes of promoting competition and empowering consumers.

Information paper

I'm pleased today to be launching an information and consultation paper on the national consumer law reforms.

Entitled 'An Australian Consumer Law: fair markets - confident consumers', this paper communicates to the public information about COAG's agreed consumer reforms and the process for developing the national law. It also invites the public to submit their views on the process, so that we can move forward with direct engagement from all relevant stakeholders.

I know all of you here today will need no encouragement to review the paper and contribute your ideas. I look forward to your reading your submissions.

The paper represents a huge amount of work undertaken by consumer policy officials in all Australian governments through the Standing Committee of Officials of Consumer Affairs. It represents a commitment to cooperative action which is to be commended and encouraged.

The paper also outlines the work that is now to be done.

Fortunately, a lot of the detail of the reforms has been agreed. And work on implementing those agreed reforms is well under way.

The product safety aspects of the national law were agreed by COAG on 3 July 2008. The Commonwealth will assume responsibility for permanent bans and standards, and will share enforcement responsibility with the States and Territories.

I'm encouraged by the spirit of cooperation that guided all jurisdictions in agreeing to the new product safety regime. This bodes very well for the work we still have to do.

COAG has also agreed to an enhanced set of consumer law penalties and enforcement powers. Civil pecuniary penalties and disqualification orders will both feature in the Australian Consumer Law. Regulators will also be able to issue substantiation orders, and will be able to seek redress for consumers without having to sign them all up to a court proceeding.

These are all things that have been decided, and they are areas in which we can move quickly to benefit consumers.

In respect to the basic consumer protection provisions of the consumer law, the Productivity Commission said the Trade Practices Act should be the basis for the new law, and COAG agreed. The TPA is already the foundation of Australia's consumer policy framework, and that framework already has considerable strengths.

The information paper discusses the ways we can augment the consumer law, and the processes for agreeing best practice reforms. The Commonwealth has been actively engaging all State and Territory Governments on what 'best practice' provisions of their Fair Trading Acts should be included in the new Australian Consumer Law.

This is an important area of reform for the Australian Consumer Law and the Commonwealth will continue working constructively with its State and Territory counterparts to ensure the 'best practice' provisions are agreed upon and included in the new law.

Unfair contract terms

Of course, a key element of the reforms has already been agreed by COAG. Unfair contract terms, the theme of today's discussions, will be a major addition to consumer protection in Australia.

Unfair contract terms have been subject to regulation in Victoria for some time, and in the United Kingdom for some time before that. The experience of these two jurisdictions has given us insights into how unfair contract terms will be best regulated across Australia.

We've heard much today about unfair contract terms regulation, particularly about the Victorian regime - on which we've drawn to develop this new model - and recent work in the field by Consumer Affairs Victoria.

I would at this point like to acknowledge the work and support of Victoria and Minister Robinson is furthering the national reform agenda in this area of policy

It has been a pleasure to work with Minister Robinson in facilitating the transition of the unfair contracts regime from Victoria to the whole nation. His professionalism and constructive approach are very much appreciated by me.

Under the agreed model, a term will be considered 'unfair' when it causes a significant imbalance in the parties' rights and obligations, but isn't reasonably necessary to protect the legitimate interests of the supplier.

The provision is not designed to distort business activity. Rather, it protects legitimate business interests, while ensuring consumers aren't subject to manifestly unfair contractual arrangements.

What we're talking about are situations where businesses use their position to remove all risk from a transaction and push it on to the consumer. For example, it's not uncommon to find terms where the supplier can vary a contract unilaterally, exclude the supplier's liability, or prevent consumers from cancelling contracts.

There are rarely any legitimate business reasons for terms like these, and in many cases they serve only to subordinate the interests of consumers to the whim of businesses.

Though many contracts containing unfair provisions may never give rise to any substantive unfairness, many do.

The existence of these unfair contracts leaves consumers in a vulnerable position, and this isn't conducive to the effective participation of consumers in the market.

This reduces competition and innovation, and compromises the effectiveness and efficiency of markets. This is all bad news for consumers.

We are keen to hear stakeholder views about the implementation of the unfair contract terms provision in the new law.

The Australian Consumer Law will ban unfair contract terms, and it's important we come to a clear understanding of the sorts of terms that should be banned. The paper suggests a number of contract terms which it might be appropriate to ban, for which we are seeking feedback.

The unfair contracts provision will apply only to standard-form, non‑negotiated contracts. Where consumers have the opportunity to negotiate a term of the contract, and agree to it specifically, it doesn't make much sense to say that term is unfair to the consumer. But, when consumers complain or regulators investigate, businesses will have the onus of proving that their contracts are negotiated.

Similarly, the provision wouldn't regulate the upfront price of the good or service. Prices are easily understood by consumers, and when they are stated in an upfront manner they won't create any imbalance in the parties' rights and obligations. Consumers are always free to choose not to enter a contract.

Where there is a contractual term that is unfair, remedies will only be available where consumer detriment exists or is likely to exist.

The agreed model is not about stamping consumer contracts with the government's imprimatur and declaring them to be fair.

It is about identifying real problems faced by consumers, and acting appropriately to address them, by making business think carefully about how they need - not want - to protect themselves.

If no detriment is likely to result from an unfair contract term, no net benefit will result from government intervention.

Nevertheless, it's important for the government to have the capacity to intervene in cases where the chance of consumer detriment is real.

This is one obvious area where the Trade Practices Act can be augmented, and this can be done quickly. If we can deliver for Australian consumers, there's no reason to delay in this reform which has been agreed by COAG, while many Australian consumers are effectively compelled to sign potentially unfair contracts.

Time to act - the June Bill

Apart from launching this consultation paper, today I want to announce that the Rudd Government will be bringing forward key planks of the Australian Consumer Law, in a legislative package, for introduction into the Parliament within the next five months.

We are committed to implementing the Australian Consumer Law in step with our state and territory colleagues, but the national regulation of unfair contract terms will be an immediate and important step on the way to the new national law.

There is no sensible reason why we should be holding back the protections of a national unfair contract terms provision from the Australian consumer.

Now is also the time to back up the consumer law - including the unfair contracts regulation - with the suite of improved enforcement powers agreed by COAG, which will give our national, state and territory enforcement agencies consistent powers to take more effective action to protect consumers.

For too long the ACCC has not had the requisite tool kit at it's disposal to protect the interests of Australian consumers.

For too long State and Territory consumer protection agencies have had a range of enforcement powers at their disposal, which the ACCC has not.

It's not fair to charge the ACCC with the mandate of protecting Australian consumers and then to deny them the requisite powers to carry out that mandate.

Accordingly, in line with the agreements reached at the Ministerial Council on Consumer Affairs and at COAG last year, the Bill I introduce to the House in June will include significantly enhanced enforcement powers for the ACCC.

Civil pecuniary penalties will complement the existing criminal penalties in the consumer law. This will enable the regulators to take appropriate and timely action in response to breaches of the law.

We won't have to content ourselves with injunctions to stop businesses harming consumers. Nor will we have to commit to resource‑intensive criminal prosecutions every time a breach of the law deserves punishment.

We will augment these enforcement options by creating serious disincentives for businesses engaging in conduct that harms consumers. By enabling regulators to seek penalties in a civil court, we will no longer have to choose between punishment, disincentives, and redress for consumers. All these outcomes can be achieved, where appropriate, in the timely manner afforded by the civil process.

We will also provide for disqualification orders. It will be appropriate at times to ban individuals from managing corporations when they have shown themselves incapable of considering the welfare of consumers. Regulators will be able to seek these orders for corporate officers involved in violations of the consumer law.

Outside of the courtroom, we will give the regulators more weapons to deal with businesses caught breaking the law. They will be able to issue infringement notices for some breaches of the consumer law, which will sometimes be a more appropriate and efficient way of dealing with offenders.

They will also be able to issue substantiation notices to businesses, asking them to substantiate the claims they make about their goods and services. These notices will encourage them to engage with regulators in a spirit of cooperation, to ensure consumers are not misled or deceived.

Similarly, the 'naming and shaming' powers we will give to regulators will provide businesses with a further incentive to do the right thing, rather than simply slapping them on the wrist when they do the wrong thing. It will also allow us to more effectively tackle - nationally - the problems of 'fly by night' operators and scamsters.

As I've said, the ACCC, in the field of competition law, where criminal sanctions for serious cartel conduct are being introduced for the first time. It is now over to them to use these enhanced powers and use them well, for the benefit of all Australians.

Next stage - 'Best practice' and Product Safety reforms

What I have outlined to you today is a two-stage process.

We are consulting about the detailed form the final Australian Consumer Law should take and we will continue to work closely with the States and Territories in developing the 'best practice' components of their Fair Trading Acts, for inclusion in the Australian Consumer Law.

But we will not wait for this important work before strengthening the Commonwealth law.

The national unfair contracts regime and enhanced enforcement powers will be a much needed boost to consumer protection whilst we finalise the finer details of the reformed, nationally consistent consumer law.

By pursuing all these reforms right away, Australian consumers will reap the benefits promised by the COAG agreement as soon as possible. COAG has set some deadlines to guide our work. But we must approach implementation of the reforms with a degree of flexibility, so that Australian consumers are not denied additional protections simply because we have a generous timetable.

When we're ready to act, we will do so without delay.

The Australian Consumer Law is an integral part of the Government's desire to create a seamless national economy that means we are prepared to meet the challenges that confront us as a nation. It will enable consumers to better protect their own interests, and let regulators take decisive action against unscrupulous operators.

The new law will improve consumer confidence in markets, giving them greater protections and more assurance that effective action will be taken to guarantee these protections.

The announcement today represents what is perhaps the most important stage of what has been a very activist 12 months in the field of consumer law reform.

Things that have been on the wish list of the consumer movement for a very long time are now a reality.

The Clarity in Pricing legislation passed both House of Parliament with hardly a whisper.

A national, mandatory unit pricing code will soon be the law of the land.

And in all we have paid close attention to, and have minimised the regulatory burden - unnecessarily high compliance costs benefits no one, least of all consumers.


I would like to conclude by thanking you again for organising this symposium.

Although I can't stay all day, I am of course represented here all day and I expect to be briefed on the outcomes.

I look forward to your feedback on the discussion paper.

I have tasked the newly reformed Commonwealth Consumer Affairs Advisory Committee (CCAAC) with providing me with their input on the discussion paper and you should feel free to provide your feedback to CCAAC members as well to directly to me and the Treasurer.

The spirit of cooperation and reform showed by all levels of government over the last 12 months; the spirit of excitement about these, the most significant reforms we have seen to consumer protection in a generation, and the spirit of grasping the nettle to ensure we get this reform process right - will stand us in good stead.

Let me also thank my state and territory colleagues for the hard work they've done to get us to a point where the future of consumer policy appears so clear and so bright.

It is the historical unity of spirit that we've shown, together, that will see us through the coming reforms and ensure the fruits of reform are delivered speedily to Australian consumers.

Thank you for your time.