Australia: A Sense Of Deja Vu: Proposed Reforms To Australia´s Consumer Policy Framework

Last Updated: 27 March 2008
Article by Jocelyn Kellam

Most Read Contributor in Australia, November 2016

Key Points

  • Recommendations to streamline Australian consumer protection law regarding product safety and implied terms are to be welcomed.
  • Australian businesses face the prospect of mandatory product defect reporting.

As this article is published we are awaiting the release of the Productivity Commission's Final Report into Consumer Policy.

The Productivity Commission's draft report, Review of Australia's Consumer Policy Framework, was released as two volumes on 12 December 2007 together with a consultancy report, "Comparison of Generic Consumer Protection Legislation", by Professor Stephen Corones and Professor Sharon Christensen, Faculty of Law, Queensland University of Technology.

Although it is a draft, we expect that the final report will be significantly the same.

Much of what was said in the draft Report is familiar. However, as an overall summary and perhaps a warning, the words of Delacroix (Lettre à Philarète Chasles 8 March 1860) seem apt:

"Experience has two things to teach: the first is that we must correct a great deal; the second, that we must not correct too much."

Product safety

In the product risk area, the Draft Report considers the following Divisions of Part V of the Trade Practices Act: Divisions 1 (Consumer information and Product safety) 2 (Comparison of non-excludable implied warranties and conditions in the Trade Practices Act and State regimes) and 2A (Actions against manufacturers and importers) of the Trade Practices Act. It does not however consider Part VA, presumably because its provisions are not replicated in the state Fair Trading Acts. Whether or not this is a problem in itself is not considered.

The recommendation that Australia should have a single generic consumer law and a single regulator has merit. Otherwise, reading the draft Productivity Report produces a sense of déjà vu, particularly in the area of consumer protection and product safety. The same well known issues which have been well traversed by inquiries and law reform commissions in the past both in Australia and overseas are identified and discussed thoroughly (again).

A central question, however, that is why Australian regulators appear not to be using the extensive powers already available to them, however, is not answered. Before the powers of Australian regulators are increased, it is submitted that it would be prudent to question why this is the case and whether the current powers and remedies are indeed already adequate.

A short period was allowed for written submissions in relation to the draft Report (6 February 2008) which has now closed. Submissions can however still be made at public hearings to be held early in 2008 to be published on the Productivity Commission's website.

A single generic consumer law and a single regulator

The Productivity Commission says that as consumer markets and issues are increasingly national in character, responsibility for consumer protection in these areas should reside with the Australian Government. Accordingly, it recommends as a first step towards nationally coherent consumer policy framework, the introduction of a single generic consumer law applying across Australia based primarily on the consumer provisions in the Trade Practices Act.

It is difficult to argue against this common sense proposition.

The Productivity Commission also proposes that the ACCC should be solely responsible for enforcing the product safety provisions nationally. In the interim, the Productivity Commission has recommended that the States and Territories should explore referring their enforcement powers for all of the new law to the ACCC.

Again, this recommendation is also of merit. The multiplicity of regulators is burdensome for industry in itself. In the case of a product recall, for example, due to the number of statutes imposing recall obligations (and guidelines that recommend notifications be made) numerous regulators need to be notified of a product recall in Australia.

The regulators currently to be notified will vary according to the type of goods but may include:

  • The relevant Minister under the Trade Practices Act (who is currently represented by the Parliamentary Secretary to the Treasurer);
  • Six State and two Territory Departments of Fair Trading
  • Food Standards Australia New Zealand - food and drinks;
  • The Department of Transport and Regional Services - motor vehicles;
  • The Therapeutic Goods Administration - drugs and medical devices;
  • The Australian Pesticides & Veterinary Medicines Authority - agricultural and veterinary chemicals;
  • State and Territory electrical regulators; and
  • State and Territory gas regulators - gas appliance products.

Other recommendations: grounds for concern

Other recommendations made by the Productivity Commission, however, would increase (rather than reduce) the burden on Australian business.

The Productivity Commission has recommended that there be mandatory reporting of product incidents associated with serious death or injury which have been the subject of a successful product liability claim or multiple out-of-court settlements.

With respect, it is difficult to see how such reporting, sometimes years after an accident, will assist Australian governments in improving product safety. Further, the need for such a reporting obligation has not been demonstrated. Responsible Australian companies will take appropriate action in relation to a serious product defect regardless of such a reporting obligation. Irresponsible companies which would take no action would ignore the existence of such an obligation in any event.

Section 15(b) of the US Consumer Product Safety Act adopts a different standard and requires a manufacturer or distributor or retailer to report to the CPSC if it has information that "reasonably supports" the conclusion that a defect in a product could create a substantial product hazard; or, a product poses an unreasonable risk of serious injury or death. The statute allows for a penalty to be imposed of approximately US $1.7 million.

Before an equivalent provision is introduced into Australian law it is submitted that the US experience should be analysed to ascertain whether any tangible benefits and improvements would be generated by the introduction of such a law into Australia.

The Productivity Commission has also suggested that there should be a wider range of enforcement tools for consumer regulators and improved consumer complaint and redress mechanisms. The specific recommendations include:

  • infringement notices for minor breaches of the new law.
  • civil pecuniary penalties (including recovery of profits from illegal conduct);
  • banning orders; and
  • substantiation notices for claims and representations made to consumers.

In many respects, these remedies parallel the redress currently available under existing laws. It would appear that the existence of these remedies per se is not a solution to the problems perceived, for example, by consumer groups. To the extent that the recommendations advocate the need for greater powers the recommendations are predicated on the assumption that the existing enforcement tools et al are inadequate and that further regulation is needed. This has not been demonstrated.

In relation to the last recommendation concerning substantiation notices, Part 2 Division 3A Substantiation of claims and representations, specifically section 23A of the Fair Trading Act already allows the NSW Director-General to require a person who, in trade or commerce, makes a statement promoting, or apparently intended to promote, the supply of goods or services with proof of any claim or representation (express or implied) made in the statement.

The Productivity Commission has similarly made a number of recommendations aimed at improving consumer access to redress for complaints, including allowing courts to make decisions based on the basis of written submissions and allowing representative actions by regulators on behalf of consumers, regardless of whether the consumers are also parties to the proceedings.

Increasing "access to justice" was a buzz word of the 1990s. It was followed by its antithesis, civil liability reform. It seems that some clearer thinking is needed.

Other options, however, might be explored - such as a lack of consumer education as to their remedies and government enforcement resources. This is also recognized by the Productivity Commission. It is noted that consumers are not aware of the implied warranty provisions of the Trade Practices Act and the rights it affords. The Productivity Commission advocates that consumers be educated and enforcement action be taken. The practice of many suppliers of offering "extended warranties" to be of concern. The view is expressed that such warranties replicate the protections already afforded by the Trade Practices Act. Whether or not this is the case requires further debate.

Product-related injuries study

Other recommendations include that a study be undertaken to assess the extent of product-related injuries in Australia and the Australian governments monitor the impact of recent tort reforms limiting the availability of personal injury claims on suppliers' incentives to supply safe products.

A study of the cost of product-related injuries was undertaken by the National Audit Office in 1995 which estimated that the range within which total government expenditure on direct treatment of consumer product-caused injury was likely between $194 and $238 million annually.

The Consultancy Report

Professor Stephen Corones and Professor Sharon Christensen, the authors of the separate consultancy report, are to be congratulated for their clear description of the inconsistencies between the state and federal regimes.

There seems little doubt that Australia's consumer policy framework would benefit from reform. The duplication and inconsistency between the laws of the different states and territories and the Commonwealth has been a topic of past criticism in previous articles in Product Risk Insights.

The consultancy report highlights an extensive number of anomalies between state and federal law. To this long list, a further issue deserves to be added. Awards for compensation for breach of Div 2 of Part V are governed by state law (to which a three times cap of average weekly earnings applies) and Div 2A by Part VIB of the Act (to which a two times cap applies). It seems manifestly illogical that a supplier is obliged to pay more compensation than a manufacturer for breach of the same implied warranty provisions in a claim by the same consumer.

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.

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