The government has released exposure draft legislation specifying proposed amendments to the Australian Consumer Law (ACL). The exposure draft includes a proposal to enable private litigants to rely on facts admitted in ACCC enforcement proceedings. This change may result in more 'follow on' litigation, including class actions against companies who the ACCC has successfully pursued for contravening the ACL.
The Competition and Consumer Act (CCA) has long included a provision (section 137H) which enables findings of fact made against a person in proceedings brought by the ACCC to be used as prima facie evidence against them in a subsequent proceeding. This 'follow-on' provision reduces the evidentiary burden on private litigants who take subsequent action seeking remedies arising from conduct that a Court has found to have contravened the ACL. This mechanism helps to reduce the costs involved in private actions because the private litigant is not required to incur expense establishing key facts that have already been determined in enforcement proceedings.
However, currently there is no provision which enables private litigants to easily rely on admissions of fact as prima facie evidence in a subsequent action. Some case law suggests that the existing 'follow on' provision may not extend to such admissions.
The exposure draft legislation proposes to amend section 137H of the CCA to enable private litigants to rely on admissions made by the respondent, as well as facts established in earlier proceedings, as evidence in their own case. Agreed facts from earlier proceedings will remain available to litigants.
The proposed amendment is designed to provide individual consumers or businesses with greater access to remedies for harm arising from contraventions of the ACL. It is proposed that the amendment would apply to admissions of fact made on or after the commencement of amending legislation.
By reducing the evidentiary burden on private litigants, the amendment has the potential to lead to more class actions concerning contraventions of the ACL, like the Nurofen class action.
In 2017, Reckitt Benckiser, the maker of Nurofen settled a consumer class action for $3.5 million. The class action followed on from successful ACCC enforcement action in which Reckitt Benckiser was ordered to pay penalties of $6 million for making false and misleading representations that four products in the Nurofen Specific Pain range were each formulated to treat specific pain when, in fact, the products were each identical.
With recent amendments to the ACL extending some consumer protections to small businesses, the proposal to enable private litigants to rely on admissions of fact in subsequent litigation may lead to large scale class actions arising from business-to-business contraventions of the ACL.
If the proposed amendment is enacted, companies who find themselves pursued by the ACCC for contraventions of the ACL will need to give careful consideration to minimising the risk of possible follow-on litigation.
The exposure draft legislation specifies a number of other proposed amendments to the ACL. The government is currently seeking submissions on the exposure draft legislation.
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