1 January 2011 was a significant date in the history of Australian competition and consumer protection legislation. On that day, the Trade Practices Act 1974 (Cth) (TPA), which had regulated the competitive and consumer conduct of businesses in Australia for over 36 years, was consigned to the annals of history, to be replaced by the Competition and Consumer Act 2010 (Cth) (CCA).
Following on from the introduction of provisions regulating unfair terms in standard form consumer contracts in July 2010, Australia now has, for the first time, uniform consumer protection legislation across all States and Territories; competition legislation having been uniform since the adoption of the various Competition Codes in 1995.
The changes outlined in this Alert will require organisations and individuals doing business in Australia to review their current practices to ensure compliance with the new laws, including, for example, ensuring that their consumer contracts and terms and conditions include, or are not inconsistent with, the relevant consumer guarantee provisions and do not include any unfair terms, putting in place processes to capture the new product safety reporting requirements and updating their trade practices compliance programs and training to ensure that staff are aware of, and comply with their new obligations.
What changes have been made by the Competition and Consumer Act and why?
The changes brought about by the introduction of the CCA are significant and will require organisations and persons doing business in Australia to familiarise themselves, and comply with, a number of new provisions, as well as a re-ordering and restructuring of the previous consumer protection provisions of the TPA.
The consumer protection provisions formerly found in Parts IVA, V, VA, VB and VC of the TPA are now (largely) located in a Schedule (Schedule 2) to the CCA, known as the Australian Consumer Law (ACL). The relocation of these provisions into a Schedule to the CCA was necessary to address the complex constitutional requirements of Australia's federal system. The ACL has been enacted by each of the States and Territories which means not only that there is a set of uniform and harmonious consumer laws throughout Australia, but also that the laws apply not just to corporations and individuals knowingly concerned in the acts of corporations, but also to other organisations and individuals in their own right.
The changes made include:
- a change in name of the TPA to the CCA;
- provision for joint administration and enforcement of the ACL by the Australian Competition and Consumer Commission (ACCC) and the respective State and Territory regulators being, NSW Fair Trading, Consumer Affairs Victoria, Queensland Office of Fair Trading, WA Department of Commerce- Consumer Protection, SA Office of Consumer & Business Affairs, Consumer Affairs & Fair Trading Tasmania, ACT Office of Regulatory Services and NT Consumer Affairs. In practice, there will be a division of responsibility between the various regulators with the ACCC retaining responsibility for administration and enforcement of national consumer laws. The Australian Securities and Investment Commission (ASIC) will continue to administer and enforce the consumer protection provisions of the Australian Securities and Investment Commission Act;
- the introduction of a set of definitions in the ACL, some of which differ from the definitions used in the TPA. The ACL definitions are additional to definitions in the CCA and will require practitioners to be especially vigilant in determining which definitions apply in certain circumstances;
- the repeal of the TPA provisions dealing with unfair practices (including the prohibitions against misleading and deceptive conduct and unconscionable conduct), which are now repeated and expanded upon in the ACL;
- the incorporation of the law on unfair terms in standard form consumer contracts into the ACL;
- new national consumer guarantee provisions which replace the implied conditions and warranties previously contained in the TPA;
- a new regime dealing with unsolicited consumer agreements, which replaces State and Territory laws dealing with door to door sales and direct marketing;
- a new national product safety regime which includes mandatory reporting of cases of death or serious injury associated with use of consumer goods;
- new national provisions dealing with information standards for goods and services;
- new laws relating to lay by agreements; and
- new enforcement powers for regulators.
Details of some of the more significant of these changes are provided below.
The devil is in the detail – subtle and not so subtle changes and additions to the CCA and ACL
In addition to the major changes noted above (and discussed in further detail below), there are a number of changes and additions scattered throughout the CCA and the ACL which mean that it is dangerous for businesses and practitioners to view the new law as simply a rearrangement of the TPA with some additions. What follows is intended to be illustrative rather than exhaustive and to highlight the need to be vigilant in ensuring compliance with the new law. Examples of these changes include:
- there is a definition of "consumer" in each of the CCA (section 4B) and the ACL (Schedule 2 section 3), which differ slightly in their wording;
- the ACL contains many definitions which were either not previously included in the TPA (for example, the definitions of "business or professional relationship", "free item", "evidential burden", "label", "unsolicited consumer agreement") or which differ slightly but materially from the TPA definition (for example, the definition of "consumer goods" now includes goods which have become fixtures where there is a mandatory or voluntary recall in place for those goods);
- a number of sections which replace TPA sections covering the
same subject matter have had significant amendments or additions
made to them. In some cases, these are consequential, insofar as
they are required to ensure that they cover the ACL (for example,
changes to sections 5 and 6 to ensure the extended
extra-territorial coverage of the CCA includes the ACL). In other
cases, they amend, add to or clarify the prohibitions and
obligations in the old TPA sections. These latter include:
- an amendment to the prohibition on unconscionable conduct in business dealings (old TPA section 51AC, new ACL Schedule 2 section 22), to allow the Court to have regard to conduct occurring after the parties have entered a contract;
- an amendment to the provision which deems representations as to future matters to be misleading unless the party making them has reasonable grounds for doing so (old TPA section 51A, new ACL Schedule 2 section 4), to clarify that the burden of proving reasonable grounds is evidentiary only and that merely adducing such evidence is not of itself a defence. This section is now located in the introductory section, rather than with the provisions dealing misleading and deceptive conduct;
- amendments to the prohibitions on false and misleading conduct and representations (old TPA section 53, new ACL Schedule 2 section 29) to prohibit both false and misleading representations where previously only false representations were prohibited, to clarify that discharging an evidentiary burden doesn't amount to a defence and to add further prohibitions relating to false and misleading testimonials or representations about testimonials and false and misleading representations concerning consumer guarantees;
- an amendment to the prohibition on accepting payment without intending to supply goods or services (old TPA section 58, new ACL Schedule 2 section 36) to provide that the goods or services must be supplied within the time specified , or if no time is specified, within a reasonable time; and
- a new prohibition (ACL Schedule 2 section 47) which provides that where multiple prices are displayed, goods must be sold at the lowest price.
Repeal and replacement of unfair practices provisions - section 52 is dead, long live section 18
Practitioners and many businesses will be familiar with the provisions of the TPA which dealt with unfair practices such as misleading and deceptive conduct (old TPA section 52), unconscionable conduct, bait advertising, pyramid selling, component pricing and the like. While the prohibitions in those sections remain largely unchanged, they have been removed from the body of the CCA and are now located in the ACL. Consequently, their section references, and in some cases their order within the ACL have now changed. For example, what was section 52 in the TPA is now Schedule 2, section 18. Section 53 of the TPA is now Schedule 2, section 29.
Incorporation of the law on unfair terms in standard for consumer contracts into the ACL
On 1 July 2010 the TPA was amended to include a new law prohibiting unfair terms in standard form consumer contracts. These amendments, which were the subject of an earlier Alert, are now located in the ACL, Schedule 2, Part 2-3, sections 23 to 28.
New Consumer Guarantee provisions
One of the most significant changes has been the replacement of the implied conditions and warranties in consumer contracts found in sections 66 to 74 of the TPA with new consumer guarantee provisions in Schedule 2 Part 3-2, Division 1 of the ACL.
These new consumer guarantees apply to the supply of goods and services to consumers. By reason of the definition of consumer, these guarantees apply where the goods or services acquired do not exceed $40,000 or where they are of a kind ordinarily acquired for personal, domestic or household use. It is not possible to contract out of the guarantees.
They are not limited to the period of the manufacturer's warranty and consumers can claim against the supplier or the manufacturer.
The regulations (ACL Reg 90) provide specific wording to be included in consumer terms and conditions which refer to the existence of the guarantees and the fact that they cannot be excluded.
The guarantees are:
- the supplier has the right to sell goods;
- the consumer will have a right to undisturbed possession of goods and that they will be free of undisclosed charges, securities and encumbrances;
- that goods will be of an acceptable quality ie fit for purpose, acceptable in appearance and finish, free from defects, safe and durable;
- that goods will be fit for any purpose which is disclosed to the supplier or for which the supplier represents they are reasonably fit;
- that goods will correspond with their description;
- that goods will correspond with any sample or demonstration model;
- the supplier will take reasonable action to ensure the reasonable availability of repair facilities and spare parts for a reasonable period after supply of goods;
- that the supplier will comply with any manufacturer's express warranties;
- that services will be rendered with due care and skill;
- that services, and any product resulting from the services, will be fit for purpose;
- that services, and any product resulting from the services, will be of such a nature, quality, state or condition, as to reasonably achieve any desired result which a consumer makes known to the supplier that he or she wishes to achieve; and
- that services will be provided within a reasonable time.
Part 5-4 of Schedule 2 also introduces new laws governing the remedies available to consumers for breach of the consumer guarantees. Where there is a major failure to comply with a guarantee (ie where the goods would not have been acquired by a reasonable consumer who was aware of the failure, or there is a significant departure from the description or sample or the defect cannot be fixed or fixed easily within a reasonable period), a consumer can elect to reject the goods and obtain a refund or replacement or keep the goods and obtain compensation for the drop in value of the goods. Where the failure is not major, a consumer can require the supplier to rectify (or a supplier may choose to refund or replace). If the supplier refuses to repair or takes too long to do so, the consumer can return the goods and seek a refund or replacement or get someone else to fix the problem and require the consumer to pay the reasonable costs of that repair.
Unsolicited consumer agreements
A new regime governing unsolicited consumer agreements (which is in addition to the provisions dealing with unsolicited goods and services including credit and debit cards, has been included in ACL Schedule 2, Part 3-2 Division 2. These provisions apply to the supply of goods and services to a consumer where the supply is a result of negotiations between a supplier and the consumer:
- which take place either over the telephone or in the presence of each other, other than at the supplier's place of business; and
- where the consumer has not invited the supplier to make the call or come to that place for the purpose of those negotiations; and
- the total price payable is either not ascertainable at the time the agreement is made or exceeds $100, if known.
The new laws prohibit such negotiations on Sundays and public holidays, before 9.00a.m. on other days and after 6pm on Mondays to Fridays and after 5pm on Saturdays. Persons engaged in such negotiations must disclose their purpose and their identity, must cease negotiations on request by the consumer and have no contact for at least 30 days after the request is made. Detailed provisions for termination of such agreements (including cooling off periods of 10 business days) have also been introduced.
The ACL also contains provisions relating to product safety, including provisions for interim and permanent bans for goods which will or may cause injury or the reasonably foreseeable use or misuse of which will or may cause injury and provisions for compulsory and voluntary product recalls. Of significance is the introduction of a provision requiring suppliers who become aware of the death or serious injury of a person which they, or some other person of whom they are aware, considers was or may have been caused by the use or foreseeable misuse of consumer goods or product related services, to report the matter to the government. The obligation is to report within 2 days of becoming aware of the matter. The threshold for "serious injury" is relatively low, including injuries which require medical treatment.
The provisions specify that the report must identify the consumer goods and include information about when, and in what quantities, the goods were manufactured, supplied in, imported in or exported to, Australia, the circumstances in which the death or injury occurred, the nature of any serious injury and the action which the supplier has taken or intends to take. The report itself cannot be taken as an admission of liability in relation to the goods or the death or serious injury of any person.
Enhanced regulatory powers
1 July 2010 saw the introduction of new powers for the ACCC (including Substantiation Notices, Public Warning Notices and Infringement Notices) which have now been enshrined in ACL Schedule 2 Part 5-1. The ACL also provides broad powers for the Courts to make compensation orders for injured persons and for consumers who are not parties to proceedings. Among the remedial orders which can be made are orders varying contracts, refunding money and requiring the return of property.
How should business address these new laws?
The changes to the laws are extensive and complex and have a broad reach. No business or individual dealing with consumers will be unaffected by the laws, or can afford to assume that, just because they complied with the TPA, they will comply with the CCA and ACL. As a starting point businesses need to ensure that they, and their staff understand the new laws as they apply to the conduct of their businesses and then take steps to review their agreements, documents and practices to ensure compliance.
Truman Hoyle is a Sydney based law firm serving the new economy industries across the Asia Pacific region. Australasian Legal Business has recently ranked the firm's Telecommunications, Media & Technology and Intellectual Property practices as top-tier in Sydney. The firm was named Australian Law Firm of the Year in 2005 and again in 2006, for firms with 50 lawyers or less. In 2009 our firm was awarded the prestigious ACOMM Award for Professional Services Excellence at the annual Australian telecommunications industry awards.
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.