The ACCC's annual report exhibits a focused national consumer protection agency.
Last week's release of the ACCC's annual report provides a useful opportunity to reflect on the extent and tempo of regulatory action in the areas of product safety and consumer protection during the 2011/2012 financial year.
The ACCC's consistent message to business that contraventions of the Australian Consumer Law (ACL) will not be tolerated is being reflected in corrective action. In this regard it is evident that the ACCC will continue to take advantage of an expanded repertoire of enforcement tools. The ACCC is also keen to showcase its efforts to educate consumers and the business community about the new legal framework and an increasingly international regulatory landscape.
Given the length of the ACCC's annual report (300+ pages), this article provides a snapshot of some of the ACCC's more significant priorities and results during the past year.
What was the ACCC seeking to achieve during 2011/2012?
During 2011/2012 financial year, ACCC Chairman Rod Sims and senior members of his team seized every opportunity to communicate the ACCC's priorities and activities. They made it clear that the ACCC would continue to proactively and strategically make full use of the profound changes in the ACL; that it would act against widespread consumer detriment with particular focus on vulnerable consumers; that the energy and telecommunications sectors would be in the spotlight; that door to door sales practices would be scrutinised; and that assistance would be provided to consumers to enable them to recognise scams.
The annual report indicates that these stated objectives were not mere puffery: the ACCC has taken action in each of these areas. In addition, despite the fact that net staff numbers at the ACCC are reducing, the regulator has nevertheless worked to extend its international presence and to address a number of domestic issues including, for example, the risks for businesses that choose to attribute price increases to the carbon price framework.
This report also confirms that the ACCC attached priority to making full use of the ACL and its enhanced regulatory toolkit, including, for example, pecuniary penalties, public warning notices, infringement notices and substantiation notices (which require businesses to substantiate their claims). Looking back, the record suggests that this approach was reflected in performance.
Rapid response to potential contraventions
The ACCC acknowledges the public interest in regulatory speed and in its taking swift and proactive responses to various potential threats to consumer safety.
As one example, earlier this year, the ACCC became aware of a large multinational company engaging in what it considered to be misleading and deceptive advertising about the operational characteristics of its product. Less than three weeks after the advertising began, the ACCC made an application to the Federal Court seeking urgent interlocutory relief.
In response, the company provided an undertaking to the Federal Court that it would display statements which clarified the product's functionality. Moreover, within two months of the Australian launch of the product, and as a likely consequence of the ACCC's action, the company announced that it would globally change the product name in order to clarify its functionality.
Consumer protection – Enforcement action and penalties
Civil pecuniary penalties
In the year in review, the Federal Court imposed penalties of more than $10.7 million for breaches of the ACL, including six matters where the penalties imposed exceeded $1 million. There were three significant cases involving misleading and deceptive conduct and false representations in which penalties of $3.61m, $2.5m and $1.25m were imposed on three separate companies.
Infringement, public warning and substantiation notices
The annual report provides a detailed picture of the ACCC's use of infringement, public warning and substantiation notices.
One of the most significant new tools now available to the ACCC is the ability to issue infringement notices where it believes that a contravention of certain provisions of the ACL has occurred.
Issuing an infringement notice is an attractive option for the ACCC because it is a way of addressing a less serious breaches of the ACL in an expeditious and efficient manner. Moreover, payment of an infringement notice is not an admission of wrongdoing by the business and involves no court finding of any contravention, so it is in a business' interests to pay the infringement notice if it has contravened the ACL. It is also worth noting that, last week, the ACCC finally released its long-awaited "Guidelines on the use of infringement notices".
The ACCC has deployed this tool with some enthusiasm and businesses issued with infringement notices have generally opted to make payment rather than contest the alleged contravention. Specifically, 34 infringement notices were actually paid during the 2012 financial year, with some of those penalties exceeding $220,000.
In contrast, the ACCC has been far less active in relation to public warning and substantiation notices. Only five substantiation notices and one public warning notice were issued by the ACCC during the 2011/2012 financial year. This is notable given business' concerns about being able to comply within 21 days with a request from the ACCC to provide information or documents to substantiate a representation made about a product/service.
Court enforceable undertakings
During the 2011/2012 year, the ACCC secured 15 court enforceable undertakings to remedy fair trading and consumer protection contraventions. A majority of these undertakings were given in response to misleading representations about products. Many of the businesses involved were required to publish corrective notices and to establish and implement trade practices compliance programs.
In May this year, for the first time under the new legislation, the Federal Court banned a company director from managing a corporation for 15 years and imposed penalties of $450,000 after it was established that he and the organisations he established had engaged in false, misleading or deceptive conduct in the promotion and sale of a parcel distribution business for household products.
The Court found that consumers (many of whom were elderly) were misled about the profitability and earnings potential of the business opportunity, and its overall viability. In the regulator's words, "This outcome demonstrates the ACCC will use all its powers to take action against those who engage in unscrupulous business practices which prey on disadvantaged or vulnerable consumers."
Several other disqualification orders sought by the ACCC during the 2012 financial year are said to remain pending as at the date of the annual report.
Consumer protection – Education and consultation
During the 2011/2012 financial year, the ACCC consulted with businesses, business stakeholder groups, state and territory consumer protection agencies on a range of consumer issues and ran a number of educational campaigns. For example, in March this year, the ACCC hosted a consumer forum in Melbourne which enabled consumer groups to meet with all the consumer regulators and to exchange views on the operation of the new consumer law.
In addition to face-to-face meetings and forums, the ACCC also acknowledged the role of less traditional forms of communication and social media. It launched a number of e-resources including the Product Safety Australia Facebook page, Product Safety Recalls Australia iPhone application, various e-books and a national DIY vehicle maintenance safety education campaign promoted via social media vehicles.
The ACCC's awareness campaigns have provided both consumers and businesses with information to assist compliance with the ACL. These campaigns have included a focus on consumer guarantees, warranties and refunds, new unfair contract term laws, environmental claims, scams and carbon pricing.
In March this year, the ACCC ran a particularly extensive campaign designed to educate businesses and consumers about their rights in a situation where they purchase a product or a service that is faulty, unsafe or does not work as intended. It was reported that the "Repair. Replace. Refund" campaign increased the surveyed consumers' confidence in their knowledge of consumer rights in relation to a faulty product or a substandard service by 17 percent. That result was even higher with vulnerable consumers, such as those with an education of high school level or below or who do not speak English at home.
It is also worth noting that, during the last financial year, the ACCC reviewed the consumer refund and warranty policies of a number of major traders and found many of them to be non-compliant. In response, many traders voluntarily made changes to their policies.
On the same day as releasing its annual report, the ACCC reinforced its intention to police the ACL consumer guarantees regime by issuing proceedings in the Federal Court against Hewlett-Packard Australia Pty Ltd for allegedly misrepresenting the remedies available for breaches of consumer guarantees.
ACCC's focus on product safety during 2011/2012
The ACCC continues to use its Clearinghouse system to identify emerging product hazards. This system facilitates a systematic review and analysis of information, including injury data, from a wide range of national and international sources. During the 2011/2012 financial year, the ACCC received 2357 mandatory reports as a result of the new legislative requirement (introduced on 1 January 2011) for suppliers to notify the Australian Government within two days of becoming aware that a product (or product related service) they have supplied has caused, or may have caused, serious injury, serious illness or death.
The ACCC publicised 420 recalls during the 2012 financial year, including one compulsory recall (corrosive teeth whitening agent) and 135 hazardous products. This was a 9 percent increase on the previous year. Ninety-five percent of these recalls were a direct result of active intervention by the ACCC prompted by a range of factors, including overseas recalls. While privacy rules are in play, the ACCC also indicated that some recalls were the direct consequence of the ACL's mandatory reporting requirement.
In Australia, there are 60 mandatory standards and bans currently in force, including 37 mandatory safety standards. In the past financial year the ACCC investigated 135 potential breaches of mandatory standards or bans. It also worked on the possibility of a mandatory standard for children's portable swimming pools and a mandatory service standard for the installation of corded internal window coverings, and began reviewing some existing standards including hot water bottles and baby walkers.
In 2011/2012, the ACCC reported ongoing close work with international regulators and an increased international presence. This included continued participation in the International Consumer Protection and Enforcement Network (ICPEN) and as Chair of the Organisation for Economic Cooperation and Development (OECD) Product Safety Working Party, which has as one objective the establishment a global recalls database.
Reflecting a focus on the Asia Pacific Region, in October 2013 the ACCC will co-host the Asia-Pacific Consumer Product Safety Symposium with the International Consumer Product Health and Safety Organisation (ICPHSO).
In a recent speech, Rod Sims announced that the ACCC is "making strategic and deliberate use of our powers under the Competition and Consumer Act and Australian Consumer Law to draw clear boundaries in many markets, enabling fairer competition and long term protections for consumers" and cautioned that the ACCC "will continue to use whatever powers necessary to remove systemic and extreme detriment that non-compliant businesses impose on their businesses and on consumers."
The ACCC's recently released annual report reflects the regulator's active engagement in Australian and international markets and a willingness to take consumer protective action using an expanded enforcement armoury. There is every reason to believe that this is a continuing, and increasingly internationalised, course.
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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.