From 1 January 2011, the Trade Practices Act 1974 (TPA), a key feature of the Australian commercial law landscape, was replaced by the Competition and Consumer Act 2010 (CCA).
In addition to a name change, there are a number of other significant changes that businesses need to be aware of under the CCA, including the commencement of the new Australian Consumer Law – a national set of consumer protections.
In particular, these changes will require businesses to ensure:
- their consumer contracts and terms and conditions do not conflict with the new consumer guarantee provisions and do not include unfair terms;
- their product recall procedures are amended to incorporate new recall triggers and notifications;
- their trade practices compliance programs are updated and staff trained to ensure compliance with the CCA.
Restructure of Act
While the anti-competitive provisions of the former TPA remain the same and still sit within Part IV of the body of the CCA itself, almost all of the former consumer protection provisions (which used to be located in Parts IVA, V, VA, VB and VC of the TPA) have now been renumbered and moved for the most part to Schedule 2 of the CCA. Schedule 2 of the CCA has been named the Australian Consumer Law (ACL).
A uniform consumer law
The ACL has also been enacted by each of the States and Territories. It will replace the consumer protection provisions which had previously been found in each of the State and Territory Fair Trading Acts. This means that in practice, consumer protection laws will apply consistently now throughout each State and Territory in Australia.
Importantly, in practice this also means that the ACL applies not just to corporations (and individuals who are knowingly concerned in the acts of those corporations) but also to individuals acting in their own right and other types of organisations, such as sole traders and partnerships.
Substantive changes to the law
The ACL introduces a number of new provisions including:
- a new regime prohibiting unfair contracts;
- new national provisions regarding unsolicited consumer agreements;
- a uniform national set of consumer guarantees;
- a single national product safety regime.
This article discusses these changes.
Unfair contracts provisions incorporated into the ACL
The TPA was amended last year to include a new law that unfair terms in consumer contracts are void. These amendments are now found within sections 23 to 28 of the ACL. Essentially, a "consumer contract" is a standard form agreement for the supply of goods or services that are wholly or predominantly for personal, domestic or household use or consumption. A term in a consumer contract is unfair if it:
- would cause a significant imbalance in the parties' rights and obligations arising under a contract;
- is not reasonably necessary to protect the legitimate business interests of the supplier; and
- would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.
Unsolicited consumer agreements
New provisions regarding unsolicited consumer agreements also came into force on 1 January 2011. These replace State and Territory laws dealing with door to door sales and direct marketing.
An unsolicited consumer agreement exists where the following four elements are present:
- the agreement is for the supply of goods or services to a consumer; and
- the agreement is made as a result of negotiations (i.e.
discussions) between a dealer (which includes any sales
representative, sales agent or independent contractor of a
supplier) and the consumer:
- in each other's presence at a place other than trade premises; or
- by telephone; and
- the consumer has not invited the dealer to approach or telephone them; and
- the total price of the sale is over $100 or cannot be determined at the time of the sale.
The ACL imposes the following key obligations on dealers who supply goods and services by way of unsolicited consumer agreement:
- restricted calling hours: the dealer must not call on a consumer for the purposes of negotiating an unsolicited consumer agreement on Sundays and public holidays or outside the hours of 9:00am and 6:00pm (on weekdays) and 9:00am and 5:00 pm (on Saturdays) (section 73);
- disclosure requirements at the time of contact: the dealer
- prior to the commencement of negotiations with the consumer, disclose their identity, including their address, and the purpose of the call, being to negotiate the supply of goods or services (section 74 of the ACL and 82 of the Regulations); and
- o leave the premises immediately on request;
- disclosure requirements prior to execution of an
unsolicited consumer agreement: prior to reaching any
agreement, the dealer must:
- disclose information about the cooling off period (section 76);
- ensure the front page of the agreement includes certain prescribed statements (section 79).
Under section 82 of the ACL, a consumer has a 10 day cooling-off period in which to terminate an unsolicited consumer agreement. This cooling-off period extends to a cooling-off period of three months if a dealer has negotiated outside the permitted hours, fails to disclose their identity in the manner required under the ACL or continues to negotiate after the occupier of a property has requested that negotiations cease.
The cooling-off period can extend to 6 months in certain additional circumstances, such as where the dealer has not disclosed information about the original cooling-off period (as required under section 76).
Contravening the express supplier obligations of the unsolicited sales laws can result in criminal penalties of up to $50,000 for bodies corporate and up to $10,000 for persons other than bodies corporate. Contraventions of the unsolicited consumer agreements provisions of the ACL can attract injunctions, damages, compensatory orders, non-punitive orders and adverse publicity orders. The provisions are also subject to civil pecuniary penalties of up to $50,000 for bodies corporate and up to $10,000 for persons other than bodies corporate, as well as disqualification orders, redress for non-parties and public warning notices.
A new regime of statutory consumer guarantees
The ACL provide consumers with a single set of consumer guarantees in relation to the goods and services they acquire as opposed to the implied warranties that applied in relation to the supply of goods and services under the TPA and under previous State and Territory Fair Trading laws. As a result, consumers have statutory remedies available to them and regulators will now have greater ability to intervene where a supplier breaches a guarantee.
There are various guarantees that apply to goods with two new guarantees. The guarantees are:
- the supplier has the right to sell goods (section 51);
- the consumer has a right to undisturbed possession of goods (section 52);
- goods will be free of security interests (section 53);
- goods will be of an acceptable quality (the goods must be fit for the purpose commonly acquired, acceptable in appearance and finish, free from defects, safe and durable) (section 54);
- goods will be fit for any purpose which is disclosed to the supplier or for which the supplier represents they are reasonably fit (section 55);
- goods supplied by description will correspond with their description (section 56);
- goods will correspond with any sample or demonstration model (section 57);
- the manufacturer will take reasonable action to ensure the reasonable availability of repair facilities and spare parts for a reasonable period after supply of goods (section 58) – this is a new guarantee; and
- goods will comply with any express warranties given in relation to them (section 59) – this is also a new guarantee.
There are a number of guarantees that apply in relation to services, one of which is new:
- services will be rendered with due care and skill (section 60);
- services, and any product resulting from the services, will be fit for a disclosed purpose and that 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 (section 61); and
- services will be provided within a reasonable time (section 62) – this is a new provision.
A person cannot exclude any of the guarantees or the remedies provided for breach of them although suppliers are able to limit liability for breach of a guarantee in respect of goods not ordinarily acquired for personal, domestic or household use or consumption.
Part 5-4 of the ACL sets out the remedies available to consumers for a breach of the consumer guarantees. The ACL categorises failure to comply with consumer guarantees into those failures that are major, and those that are not.
For example, a major failure with goods occurs when:
- a reasonable consumer would not have bought the goods if they had known about the problem;
- the goods are significantly different from the description, sample or demonstration model shown to the consumer;
- the goods are substantially unfit for their normal purpose and cannot easily be made fit, within a reasonable time;
- the goods are substantially unfit for a purpose that the consumer told the supplier about, and cannot easily be made fit within a reasonable time; or
- the goods are unsafe (section 260 of the ACL).
Where there is a major failure to comply with a consumer guarantee, a consumer can elect to reject the goods and obtain a refund or replacement or keep the goods and obtain compensation for the reduction in the value of the goods.
If a failure of goods is not major and can be repaired within a reasonable time, the consumer cannot reject the goods and demand a refund. The consumer can instead ask the supplier to fix the problem. The supplier may then choose to provide a refund, replace the goods or repair the goods.
A Single National Product Safety Regime
The ACL introduces a single national law for consumer product safety. Importantly, the provisions introduced in the ACL regarding product recalls expand the trigger for a recall. Suppliers of consumer goods therefore need to amend recall procedures as a result.
Under the former TPA provisions, a recall was required where goods were of a kind which "would or may cause injury" to a person or where the goods failed to comply with a product safety standard. Under the ACL, where the reasonably foreseeable use or misuse of consumer goods presents a safety risk, consumer goods can be recalled compulsorily by the Federal Minister for Competition and Consumer Affairs or voluntarily by a supplier.
In light of these changes, the ACCC has also issued a new set of product recall guidelines. These guidelines provide a set of procedural requirements that businesses need to comply with when conducting a recall.
The ACL also introduces simpler notification provisions in the case of a voluntary recall.
There is also a new and onerous obligation on all suppliers to notify the government within two days of becoming aware of the death or serious injury or illness of a person which was or may have been caused by the use or foreseeable misuse of consumer goods or product related services. The phrase "serious injury" is defined to include injuries which require medical treatment under the supervision of a medical practitioner.
The introduction of the ACL has resulted in substantial changes to Australia's consumer protection regulatory framework. Businesses need to ensure that their internal trade practices documents properly reflect the new ACL, that their terms, conditions and warranties are updated so as to be compliant and also that their employees understand the obligations placed upon them under the ACL in their dealings with consumers.
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.