Is A Unified Consumer Law In Sight?

Key Points

• The Productivity Commission says the current Australian consumer policy framework does not contain fundamental deficiencies but there is considerable scope for improvement.

• There is the prospect of a move towards a single national consumer product safety law through the Trade Practices Act.

• Proposed new disclosure requirements regarding recalls and harmful products are likely to affect Australian business.

In recent years, the Commonwealth Productivity Commission has devoted considerable time and effort to reviewing Australia's consumer product safety regime. In 2006, the Commission released a report on the consumer product safety provisions of the Trade Practices Act 1974 ("TPA") and the various Fair Trading Acts. Since then, the Commission has released two further related reports.

At a superficial level, the recent reform agenda is driven by the desire to minimise regulation and complexity while promoting certainty and consistency for businesses and consumers alike. With a change in Government, it will be interesting to see what policy approach and political determination emerges from behind this general concern.

According to the Commission, there is no fundamental problem with Australia's current consumer policy framework that puts consumers at an imminent risk of injury. The Commission does believe, however, that changes are necessary to ensure a sustainable, effective and efficient system of consumer product safety for future generations.

The Commission has made a number of recommendations in its draft report released late last year entitled "Review of Australia's Consumer Policy Framework". That review focused on policies that are designed to protect and empower consumers. This article focuses on those recommendations regarding product safety that will affect business, namely:

• The Australian Government should establish a new national generic consumer law; and

• The Australian Government should commission a study to assess product-related injuries, develop a hazard identification system for consumer product incidents, introduce mandatory reporting requirements for product recalls and require suppliers to report products associated with serious injury or death or products which have been the subject of a successful product liability claim or multiple out of court settlements.

Why is reform needed?

According to the Policy Framework Review, Australia's multi-jurisdictional framework suffers from the following four key weaknesses:

• There are no coherent and clear objectives for consumer policy.

• Dividing responsibility between State and Federal Governments has resulted in an incoherent and disparate framework of consumer law.

• The processes which allow legislation to be reviewed and amended are not sufficiently rigorous across the jurisdictions which means that 'band aid' solutions to problems are easy to implement but out-of-date and irrelevant legislation is difficult to eradicate.

• Consumers are not adequately protected because they are confused by the information that is provided to them and current mechanisms to assist consumers who suffer detriment are not working properly.

The reform agenda - issues for business to consider

The Commission's 2006 review of Australia's consumer product safety system argued that significant regulatory inconsistencies between governments reduces the overall efficiency and effectiveness of the system.

The Policy Framework Report did not investigate matters dealt with in the 2006 report except to state that the Australian Competition and Consumer Commission should be solely responsible for enforcing the product safety provisions nationally and that the Government should implement the recommendations of that first report.

It is obvious that a number of the proposed reforms, and the suggested basis for their advancement, will be of interest to Australian business.

Single generic consumer law

During the 1980s the States and Territories agreed to enact a generic consumer law. Unfortunately, over the years, there has been a breakaway from this generic law as states and territories have independently legislated. The recent Policy Framework Review assesses the need for a single generic consumer law. The Commission suggests that, while a significant portion of generic consumer law is consistent across the Australian jurisdictions, the differences across the various jurisdictions are inherently inefficient and the implementation of a single consumer law would eliminate them. In its view, the new regime should be extended internationally to include New Zealand.

The Commission envisages a two-tiered model of legislation with the base tier being the single generic model and the second tier involving industry specific consumer regulation. The proposed overseer for the co-ordination of the two-tiered system is the Council of Australian Governments (COAG). In addition, COAG would review and assess the need for specific legislation.

A single generic consumer law is likely to be welcomed by the business community as it would lead to lower regulatory compliance costs, especially for businesses which operate in multiple jurisdictions.

Defective product recommendations

The Policy Framework Review specifically considers the role that the Australian Government should play in relation to defective products. The recent tort law reforms have brought about far-reaching changes to injured persons' ability to establish an entitlement to compensation, leading the Commission to suggest that they may have had an impact on businesses' willingness to ensure that their products are safe. Whether Australian business would agree with that proposition is debatable - and query whether or not it is empirically true. On that basis, however, the Commission has recommended that the Government should:

• commission a study to assess the incidence and nature of product-related injuries;

• develop a hazard identification system for consumer product incidents;

• introduce mandatory reporting requirements for all product recalls; and

• introduce a requirement that suppliers report products associated with serious injury or death (or products that have been the subject of a successful product liability claim or multiple out of court settlements) to the appropriate regulator.

Whether mandatory reporting of all product recalls is necessary is arguable and economically inefficient. Section 65R of the TPA already makes notification of voluntary safety-related product recalls mandatory. Surely the issue is not whether a manufacturer or supplier is publicly identifiable when it has conducted a product recall, but whether those firms do, in fact, recognise and actively pursue appropriate recalls in the first place.

What are the obstacles to reform?

The Commission faces several obstacles to its vision of a single law and single regulator. The proposal will see a shift in responsibility from the states to the Federal Government. On this level alone, it will face difficulties. While acknowledging the role of financial incentives in other similar processes (for instance the National Competition Policy), it dismisses the need for an incentive in this case. Rather, the Commission regards a higher profile for consumer policy at federal level and an increased role for the Ministerial Council on Consumer Affairs as sufficient incentives.

Responses to the reform

Given that consumer policy affects a wide section of the community, not surprisingly the Commission received well over 100 submissions prior to the release of the draft report and over 100 submissions since publishing the report.

ACCC's response

The ACCC has responded to the latest report with a draft submission. It disagrees with the recommendation to have a single regulator, identifying constitutional and infrastructure problems and doubting any benefits of a single regulator would outweigh its increased costs. It would appear that the ACCC is either reluctant to take on the task or is asking for money to do so.

CHOICE's response

CHOICE has strongly supported the consolidation of the various frameworks yet criticised the Commission for failing to support a General Safety Provision¹. It has also recommended mandatory recalls for unsafe goods.^2.

COAG

COAG announced in its 'Regulatory Reform Plan April 2007' that the States and Territories had agreed to develop a uniform approach to consumer product safety within 12 months. COAG has provided very little information as to when or how that may take place and little, if anything, appears to have occurred since that announcement but it intends to meet four times during 2008. It seems that the States might be concerned about another shift in power to the Federal Government.

Conclusion

The Commission has set the scene for the potential reform of consumer policy in this country.

Ideally, the Commission recommends a single generic consumer law and regulator. In addition, it recommends the need for consumers to be provided with better education about product laws and for disclosure laws to be strengthened. In the Commission's view, the outcome from such reform would be a substantial gain in efficiency for consumers and business at a national, and possibly international, level.

The 2006 inquiry and the subsequent reports were the first substantial review of Australia's consumer policy framework since 1984. As such, we are yet to see how the new Federal Government, which came to power in late 2007, will address the concerns raised in the report.

The ALP National Platform and Constitution 2007 stated that 'Labor will implement the recommendations of the Productivity Commission and introduce uniform product safety laws and a Product Safety Regulator.' Of course, once in Government, the world is necessarily a different place. Current economic shifts and an adverse Senate may yet mean that this aspirational agenda receives later or lesser consideration. The actual policy approach and determination of the new government is unclear at this stage.

The date of release of the Commission's final report has been extended to 30 April 2008. We will continue to carefully monitor and report the development and implementation of this reform agenda.

Footnotes

1 A general safety provision would impose an explicit obligation on suppliers to market only 'safe' (or not 'unsafe') products. Action could be taken if a product is deemed unsafe, regardless of any injury having been caused by the product.

2 As section 65F of the TPA already provides a regime for the compulsory recall of products which will or may cause injury, by implication, it seems that CHOICE wish to move away from such recalls being subject to the Minister's discretion.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.