The Minister for Competition Policy and Consumer Affairs described the Australian Consumer Law as the most comprehensive change to the Trade Practices Act since its inception in 1974. In this article, we summarise 10 key things that businesses should know about the introduction of the Australian Consumer Law.
1. What changes, and when?
The first part of the Australian Consumer Law (ACL) has already commenced. On 15 April 2010, the ACCC obtained a wide range of new enforcement powers. New laws on unfair contract terms commenced on 1 July 2010.
The main part of the ACL (the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010) commences on 1 January 2011. On that date, the existing consumer protection provisions in the Trade Practices Act 1974 (TPA) will be repealed and replaced with the ACL. The TPA will also be renamed as the Competition and Consumer Act 2010. The States and Territories are also intending to amend their existing laws on 1 January 2011 to adopt the ACL as a uniform national law.
2. Unfair terms in standard form consumer contracts are now void
The first part of the ACL introduced new uniform rules on unfair contract terms. A term is void and cannot be enforced if:
- it is a term of a consumer contract
- the contract is a standard form contract; and
- the term is unfair.
3. The ACCC has a wide range of new enforcement powers
The first part of the ACL also gave the ACCC new powers to:
- issue substantiation notices requiring a person to produce information and documents supporting its claims or representations;
- issue infringement notices;
- seek pecuniary penalties of up to $1,100,000 for corporations and $220,000 for individuals;
- seek orders disqualifying a person from acting as a director;
- seek orders to redress loss or require refunds to be paid to customers; and
- issue public warnings.
4. Who is a 'consumer'?
The second part of the ACL will introduce new definitions of a 'consumer', 'consumer goods' and a 'consumer contract' that define when the new provisions apply. The 'consumer' definition includes all goods or services where the amount paid did not exceed $40,000. As a result, some of the provisions, such as the new consumer guarantees, will apply to some business-to-business transactions.
5. The 'implied warranties' will become 'consumer guarantees'
The existing TPA 'implied warranties' will be replaced with new 'consumer guarantees'. The content of the warranties/ guarantees will change, with some new guarantees being introduced:
- the 'merchantable quality' warranty has been replaced with a guarantee that goods are of 'acceptable quality', which is defined.
- a new guarantee applies in relation to compliance with any 'express warranties' that have been given by the supplier or manufacturer. 'Express warranties' are defined very broadly and will include many pre contractual representations and statements that are made in connection with the supply or promotion of goods, and it will not be possible to exclude liability for those representations.
6. New remedies will apply to breaches of the consumer guarantees
The ACL will set out in detail the remedies that are available to consumers against suppliers and manufacturers if the consumer guarantees are breached. The remedies against suppliers distinguish between major failures that cannot be remedied, and non-major failures. For a major failure, consumers will have an express right to reject the good and elect a replacement or refund. Consumers will also have a statutory right to bring an action in damages for the reasonably foreseeable loss arising from the breach.
7. Manufacturers will be exposed to broader direct liability to consumers
The ACL will introduce new provisions giving consumers the right to bring actions directly against manufacturers and importers. Manufacturers will also be required to indemnify suppliers for their liability to consumers for breach of the consumer guarantees in certain circumstances. Some of these provisions are significantly broader than the existing TPA provisions.
8. Suppliers will have a new obligation to report death , serious injury or illness
A new obligation will require a supplier to notify the Minister within two days if:
- it becomes aware of the death, serious injury or illness or any person; and
- it or another person considers that the death, serious injury or illness may have been caused by the use (or reasonably foreseeable misuse) of goods or product-related services that it supplies.
The draft Regulations proposes that this obligation will not apply to the pharmaceuticals industry where notification is required under the Therapeutic Goods Act 1989.
9. New laws apply to unsolicited consumer agreements and other matters
The ACL will introduce new national laws on unsolicited consumer agreements. New national laws will also apply to lay-by agreements. Suppliers will also be required to provide a 'proof of transaction' that meets specified requirements or an itemised bill in certain circumstances.
10. Proposed amendments to the unconscionable conduct provisions
The Government also introduced a third Bill related to the ACL – the Competition and Consumer Amendment Bill 2010. That Bill was not enacted prior to the 2010 election, but is likely to be passed in the near future. It will introduce amendments to the current provisions regarding unconscionable conduct.
This list is not comprehensive, but is intended to highlight some of the most significant issues that will arise under the ACL. Please contact us if you require advice on how the ACL will affect your business.
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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.