It is a pleasure to be here today to speak at Consumers 2011.
As the Parliamentary Secretary to the Treasurer, I am extremely fortunate to have taken on the consumer affairs portfolio at the commencement of the most significant reforms to consumer law since the introduction of the Trade Practices Act in 1974.
This conference is an opportunity to talk about that reform and look forward to some of the emerging issues that we will all face as policy makers, consumers and businesses.
The consumer environment has changed remarkably since 1974.
October of that year marked the introduction of the first credit card in Australia.
The mobile telephone had only just been invented – with the first successful call being made by a researcher in April 1973.
The computer industry was in its infancy – the first home computer was not sold until early in 1975.
Thirty seven years later, our world has changed dramatically.
Today, not only can we access credit to purchase consumer goods but we now only have to wave a computer-chip equipped card in front of a sensor to complete our transactions.
Not only do we have mobile phones that let us make voice calls but pocket-sized devices that connect us wirelessly to the world.
Not only do we have computers in our homes, but we have touch-screen tablets and wi-fi enabled television.
These technological innovations of the past four decades have demonstrated the highly evolved and fluid nature of the modern marketplace but have also presented us with some of our most challenging consumer issues.
And the pace at which these innovations are changing the way we consume goods and services is not likely to slow down either.
While some sectors of the business community are still wondering aloud about the merits of using the web to sell their goods, the next generation of entrepreneurs is already tapping into the vast social media networks of Twitter and Facebook to sell their wares. Today's trend is group buying – who knows what will take off tomorrow?
Just think: at the Consumers Conference five years ago, no-one had heard of Twitter.
And as we roll out the National Broadband Network and deliver super-fast internet access to homes across Australia, the brilliant minds of tomorrow will be hatching ideas that those of us sitting here today can barely imagine.
The Australian Consumer Law
The challenge for policy-makers, then, is to make sure that our consumer protection framework is well-equipped to deal with the fluid nature of commerce in this digitized age.
While the pace of technological innovation continued to gather speed over the last four decades, arguably the pace of consumer policy reform has, for most of that time, failed to keep up.
Since the introduction of the Trade Practices Act in 1974, business, lawyers, academics and consumer advocates have been saying that it made no sense to have slightly different consumer laws in each State and Territory and another slightly different consumer protection regime in the Trade Practices Act.
Several attempts were made in the 1980s to harmonise consumer laws under a ‘model law' approach. In each case, harmony was achieved only briefly – one government or another, including the Commonwealth, would break away and make some unilateral changes to deal with specific issues.
Consumer rights varied in subtle ways across jurisdictions and there was no way to know other than by checking the relevant law.
These differences were usually relatively small in the scheme of things, but the cumulative effect was to increase the volume of red tape for businesses operating across jurisdictions and increase the uncertainty for consumers who more and more purchased goods and services from providers all around the country, regardless of where they lived in Australia.
The commencement of the Australian Consumer Law on the first of January this year, however, changed all of that.
The ACL is the product of cooperation between the Commonwealth, State, Territory and New Zealand governments in a policy development process that began in 2007 and involved many of you gathered here today.
We have replaced around 900 provisions in at least 20 State, Territory and Commonwealth laws and replaced them with one national law that gives consumers the same rights, no matter where they live in Australia.
The consolidation of the nation's consumer laws and product safety regulations is estimated to benefit the Australian economy by up to $4.5 billion a year.
As a micro-economic reform, the ACL is a significant achievement as one of the 27 priorities of the Council of Australian Governments, and as a consumer law reform, it is the most important in a generation.
As we approach the six month mark of the ACL, it is pleasing to report that the doomsayers who predicted that a single national consumer law would cause the collapse of the Australian economy have been proven wrong. In fact, what has been shown is that Australian businesses are pragmatic and when presented with change will embrace it and get on with the job.
Of course, our regulators have been hard at work monitoring compliance with the ACL and using their new enforcement powers, including infringement notices, substantiation notices and public warning notices, where necessary.
These new powers are being used to very good effect and Graeme Samuel will shortly discuss the new enforcement environment.
This will, of course, be Graeme's last appearance at this conference as Chairman of the Australian Competition and Consumer Commission (ACCC), and before I move on, I would like to take a moment to acknowledge his service in his current role over the past eight years and his previous service as Chair of the National Competition Council.
Graeme has made a significant contribution to public life during his tenure, and I wish to place on record the Government's appreciation for his service to the Australian community. I think we've been very fortunate to have had someone of Graeme's experience and skills heading our national consumer protection and market regulator and I know that his presence on the national stage will be missed.
In his place we are welcoming another eminently qualified Australian in Rod Sims, who is here this morning and who has been nominated as the next Chair of the ACCC. Rod has had a long career as a distinguished Australian economist, with deep knowledge and experience in advising on the competitive dynamics of industries across our economy. Rod is highly regarded for the breadth of his work and leadership in both the private and public sector and is well placed to take on the Commission's vital role as an economic regulator.
Australian Consumer Survey
The work of the regulators in enforcing the ACL is arguably made easier when consumers and businesses alike have a high level of awareness of their rights and responsibilities under the law.
So just how much do consumers and businesses know about their obligations and their rights when they interact with each other?
This is the question that is answered in the first Australian Consumer Survey, which will be officially released tomorrow.
Commissioned by the Standing Committee of Officials of Consumer Affairs, the Survey will be used as a baseline for evaluating the introduction of the ACL in terms of the benefits for both consumers and business.
The Survey is a measure of consumer and business awareness of consumer protection laws; trends in consumer and business behaviour; and current potential areas of consumer detriment. It also provides an indication of issues that may warrant further consideration.
While the full results of the survey will be released tomorrow, I would like to share a couple of key observations with you.
The general message is positive. Australian consumers have a basic awareness that they have consumer rights, and generally are confident that businesses will do the right thing. They also know that they have options for seeking redress when they have been wronged.
But the Survey does raise some issues for us to think about, particularly for those groups in our society who are less able to obtain information about their rights and to exercise them.
One interesting observation is that the vast majority of young people are aware that consumer protection laws exist, but the survey shows that they are less inclined to seek help about consumer matters when they need it.
Younger respondents, including students and those living at home with their parents, are also less likely to participate in dispute resolution schemes. Clearly, one of the challenges going forward is reaching younger audiences and encouraging them to seek assistance.
I'm pleased to see that our consumer protection agencies are using the latest technologies, including Twitter, Facebook and smartphone apps, to get this message out.
Ultimately, markets work more effectively when consumers are confident that they can buy what they need and want by making effective choices and because businesses are free to compete and innovate to serve consumer needs. The role of government lies in working to ensure that these conditions exist.
I hope that the Survey is a valuable tool for consumer agencies, advocates and businesses in thinking about how to promote well-functioning markets for the benefit of consumers and businesses.
New point-of-sale signs
I was also struck, when reading the Survey, that while we have done much to simplify the law through the ACL, the critical next step is to ensure that consumers have an awareness of their essential rights.
The Government supported this effort through committing $1.6 million to the ACCC in this year's Budget to promote the new consumer guarantees law.
This builds on funding delivered by the Government to the ACCC to support the unfair contract terms law, the new product safety system and the ACL more generally. Indeed, in the past three years, the Government has allocated a total of $36.6 million to the ACCC to support the implementation of the ACL, beyond its base funding.
Our consumer agencies have jointly developed a large range of informative products for both consumers and traders, many of which are available at the display stand outside.
Through the ACL, our consumer agencies work together to deliver education and information materials that can be used anywhere in Australia.
Today I have the pleasure of launching a new piece of information material – a new national Point of Sale sign that will be available to all retailers in Australia to clearly outline consumers' rights to refunds and returns.
A consumers' right to a refund or a return has been the catalyst for many an in-store argument or complaint to a regulator. Combined with innovations like the "MyShopRights" iPhone app developed by Consumer Affairs Victoria that outlines key rights under the ACL, this simple Point of Sale sign gives consumers ready access to the information they need to be able to exercise their legal rights.
Copies of the sign are also available from the display table on the Terrace, from the Consumer Law website and from each consumer agency.
Supporting the efforts to better inform consumers, earlier this year I launched the new MoneySmart consumer finance website.
MoneySmart was funded by the Gillard Government and developed by the Australian Securities and Investments Commission.
MoneySmart has a range of tools and information that can help consumers navigate through the potential difficulties associated with the purchase of a variety of goods and services.
Take, for example, this fantastic credit card calculator.
The worked example on the website shows that someone with a $10,000 credit card debt paying only the minimum required amount of $200 a month would take almost 63 years to pay off the entire amount.
However, the calculator shows that if that person were to pay an additional $50 each month, they would cut this time down to just over five years, saving themselves almost $27,000 in interest repayments.
Another feature of MoneySmart, which was only launched last week, are the new apps for iPhone and Android smartphones.
One of the functions of the apps allow the user to work out the monthly repayments required to pay off an interest-free store loan. It will even use the monthly account-keeping fees that are often charged through these products to give you an effective interest rate.
For the young and technologically savvy consumer, these tools are simple to understand and easy to use but they have the capacity to help consumers avoid many of the problems they may otherwise encounter without this information.
And the early popularity of MoneySmart demonstrates that there is a real appetite among consumers to tap into these useful tools – already more than 250,000 individual users have logged on to the website and more than 10,000 people have already downloaded the iPhone app, making it the second-highest ranking financial app on Apple's App Store.
Not only are we empowering consumers with information about their rights, but we are also, through the implementation of the ACL, modernising some of the rights that form part of the consumer protection regime.
My predecessor, Craig Emerson, asked the Commonwealth Consumer Affairs Advisory Council (CCAAC) to review Australia's laws on implied conditions and warranties in March 2009. CCAAC provided their report in December 2009 and recommended that the ACL include consumer guarantees to replace implied conditions and warranties.
This part of consumer law is probably the most used by consumers out of the entire ACL. Whilst some consumers might never be misled, deceived, harassed, or coerced, every consumer buys goods or services covered by consumer guarantees.
The complexity associated with implied conditions and warranties under the Trade Practices Act inevitably led to confusion for consumers and a general lack of awareness that statutory rights existed.
This fact is borne out by the results presented in the survey – around 20 per cent of consumers are aware that they have such statutory rights.
Some traders have actively encouraged and exploited this lack of consumer awareness - to discourage consumers from obtaining remedies to which they are entitled and to sell them extended warranties that often provide few additional benefits.
The consumer guarantee provisions in the ACL are easier to understand and apply, which provides the foundation for greater consumer and business awareness.
Importantly, these rights are backed with tough new enforcement powers. When false or misleading statements are made about consumer guarantees, the offending business faces a maximum fine of $1.1 million, which should serve to deter harmful business practices.
Unfair Contract Terms in Insurance
I would like to take a few moments to look ahead at some of the issues that we are dealing with that have emerged from the implementation of the ACL.
One of those issues is the application of unfair contract terms in insurance.
I have been undertaking consultation with stakeholders around the application of UCT to insurance contracts, including a roundtable in March with representatives of the insurance industry and consumer groups.
Out of those discussions, the Government has asked Treasury to put together a Regulatory Impact Statement on a number of options for reform.
These options include:
Applying UCT provisions to insurance contracts;
Applying UCT provisions to insurance contracts, with a clarification of whether the main subject matter of an insurance contract either includes or excludes exclusion provisions; and
Allowing UCT provisions to apply to insurance but restricting the ability to bring an action to only the regulator.
Whilst we acknowledge the unique nature of the insurance contract and the insurance market, we are determined to achieve a compromise so as to bring insurance contracts within the broader UCT framework. I look forward to seeing the feedback from the consultation being undertaken through the RIS process and I will continue to meet with industry and consumer groups again as we consider the next steps forward.
Fine tuning the ACL
As we continue to bed down the ACL, my State and Territory counterparts and I met last Friday at the Ministerial Council on Consumer Affairs to consider some minor fine-tuning changes to the ACL.
As you would be aware, the ACL has been introduced subject to a small number of transitional provisions. For example, some of the State and Territory laws regarding unsolicited consumer agreements continue to apply until the end of the year.
A refinement to the ACL proposed by MCCA would remove the prohibition on the supply of goods during the 10-day cooling off period of an unsolicited consumer agreement. This would apply to goods worth less than a specified value and would allow businesses to supply consumers with goods for trial, or allow consumers to immediately take receipt of goods they have consented to buy. This amendment would not affect the prohibition on the supply of services or on the prohibition on the payment for goods within the cooling off period.
The Ministerial Council agreed to advance this amendment, but only on the basis that consumers are clearly informed of their rights under Section 74 of the ACL to terminate the agreement, and that suppliers have an obligation to accept or collect goods where the agreement has been terminated during the cooling-off period.
This change will ensure that the highest level of protection afforded by existing State and Territory laws will become the national standard under the ACL as of 1 January 2012.
This change reduces formal compliance requirements for businesses, while ensuring consumers get the goods they want without affecting their cooling off rights.
New appointments to the Commonwealth Consumer Affairs Advisory Council
With my portfolio responsibilities for competition policy, consumer affairs, corporate law and financial literacy, I have the great pleasure of working with many of you.
Recognising and understanding consumer issues is an important part of my role and I would like to take this opportunity to publicly acknowledge the great work undertaken by the Commonwealth Consumer Affairs Advisory Council.
CCAAC has undertaken some great work on developing the policy case for the consumer guarantees reform in the ACL, and a thorough examination of the issue of ticket onselling in 2010. I would like to begin by introducing to you the members of the Council as many of them are here either presenting, chairing a panel discussion or being part of one. They are all consumer policy experts, with a wealth of experience in their fields.
Professor Stephen Corones
I would like to take this opportunity to thank Michael for his significant contribution to the work of the Council as he will not be seeking re-appointment.
And now I would like to introduce to you two new members of the Council who will take up their appointments in July.
Lynda is an indigenous worker employed by Centacare in the WilcanniaForbes region. Centacare plays a lead role in developing best practice models, particularly around engaging and supporting Aboriginal families.
Lynda is on a well deserved holiday and sends her apologies.
Dr Rhonda Smith
Rhonda is currently a senior lecturer in the Department of Economics, University of Melbourne. In addition she provides consulting services mainly in relation to trade practices issues.
Rhonda is also a member of the Australian Government's Copyright Law Reform Committee and a lay member of the High Court of New Zealand.
As their recent detailed reports on consumer guarantees and ticket onselling illustrate, CCAAC plays an important role by providing advice on consumer policy issues - so please welcome Lynda and Rhonda and I look forward to working with them both.
I am also pleased today to announce that, following a resolution at MCCA, CCAAC will be charged with exploring the way in which gift cards are used by businesses and consumers and developing options to better protect consumers who purchase gift cards.
As the popularity of gift cards has grown, so too have complaints from consumers about the terms and conditions that are attached to them, particularly expiry dates. As a product that is traded as a consumer item but that has the underlying properties of a financial product, gift cards have presented some interesting issues for regulators and policy makers. This CCAAC inquiry will look at how we can better manage these issues and ensure that consumers are getting the product they thought they paid for.
I have also separately asked CCAAC to undertake a research study on the issue of information sharing in the automotive repair market. It goes without saying that cars have not escaped the technological innovation of the last four decades, with most cars these days relying on sophisticated onboard computers. There are concerns, however, that the use of this technology by manufacturers may be having an adverse impact on competition by impeding the ability of independent mechanics to compete in the servicing and repairing of cars and the provision of spare parts.
Whilst we recognise the interconnected nature of the intellectual property rights of those who have created these new technologies, we don't want to see technological innovations being used to reduce competition and the choices available to consumers.
I anticipate that the outcome of this CCAAC inquiry will have important implications, not only for the automobile servicing sector, but potentially for all industries where the use of technology creates artificial barriers to competition.
The past few years have been very productive for consumer law reform, and as the dramatic changes in the way we consume goods and services over the past 37 years have demonstrated, there will always be more work to do.
The ACL provides a sound basis for continued co-operation between the Commonwealth and State and Territory Governments on further reforms that will deliver benefits for consumers and businesses.
I look forward to continuing to work with consumers, consumer advocates, CCAAC, businesses, our regulators and my Ministerial colleagues to advance the interests of Australian consumers.
I hope you all enjoy the conference and I look forward to hearing about all of your new ideas for further improving consumer policy in Australia.