Federal Government Releases First Tranche of Major Australian Consumer Law Reforms
The Federal Government has released exposure drafts of the Treasury Laws Amendment (Australian Consumer Law Review) Bill 2018 (Cth) and the Competition and Consumer Amendment (Australian Consumer Law Review) Regulations 2018 (Cth) to give effect to recommendations made in the final report of the Australian Consumer Law Review issued in March 2017 (Report).
The proposed amendments to the Competition and Consumer Act 2010 (Cth) (CCA), the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act 2001 (Cth) ASIC Act, set out in summary below, address recommendations in the Report relating to consumer guarantees, voluntary recalls, unsolicited consumer agreements, product safety, false billing, unconscionable conduct, pricing and unfair contract terms.
These are the first major reforms of the ACL since its implementation in 2011. They are intended to strengthen and clarify the law in order to assist both consumers and traders to understand their rights and obligations and to provide regulators with greater investigative powers. The amendments, once enacted, will require careful consideration by business and implementation of processes to ensure compliance, particularly in the areas of headline pricing, voluntary recalls, transport of goods for consumers and the text of warranties.
A second tranche of proposed reforms to the ACL to give effect to the remaining recommendations in the Report, is expected to follow in due course. Those remaining proposals include increasing the maximum financial penalties to align with the competition provisions in the CCA, amendments to the consumer guarantees in relation to major failures and rights to refunds/ replacements and enhancements to product safety requirements.
Single 'headline price' to include pre-selected options
- The current exemption in the ACL from optional charges being included in the headline price for goods or services, is to be amended to require that the headline price include charges that are automatically applied by the seller, even if those charges can be deselected by the buyer during the course of the transaction.
- This amendment is intended to provide greater transparency to consumers in regard to the overall cost of supply of goods and services which may have pre-selected additional charges (for example airline tickets and insurance).
Strengthening voluntary recall requirements and increased penalties for non-compliance
- It is proposed that the ACL will be amended to insert, for the first time, a definition of 'recall' in the context of voluntary recalls - being "any corrective action taken by a person engaged in trade or commerce to mitigate safety risks of the consumer goods". The amendment would clarify whether remedial steps taken by a person trigger the requirement to notify a recall under section 128 of the ACL. Types of action that would trigger notification include, but are not limited to, withdrawing faulty products from sale at any level in the supply chain, modifying a product (even before it is supplied by the manufacturer) so that it is no longer faulty and notifying customers of the fault.
- The existing penalties for failure to meet voluntary recall notification requirements are to be increased in order to address the Report's finding that current penalties are set too low.
- The maximum civil penalty for companies will be the greater of USD 165,000 or three times the value of the benefit obtained from failing to notify of the corrective action. The maximum civil penalty for individuals will be USD 33,000. Criminal penalties will similarly be increased and they remain strict liability offences.
Exemption from consumer guarantee requirement for transport or storage of goods only applies to business-to-business contracts
- The exemption from consumer guarantees for the transport or storage of goods will be clarified so that it only applies in circumstances where both parties to the transaction are businesses (or purchased by an individual for use in their business, trade or occupation).
- Relevant providers will no longer be exempt from the consumer guarantees when transporting or storing goods for consumers that are not businesses.
Consumer protections in the ASIC Act to apply to financial products
- The ASIC Act will be amended to clarify that the consumer protections afforded in the Act apply to 'financial products' as well as financial services. This amendment is intended to bring the protections under the ASIC Act in line with those in the ACL.
Unconscionable conduct prohibition extended to conduct against publicly listed companies
- The definition of "unsolicited consumer agreement" will be amended to clarify that such an agreement can be entered into when a dealer meets a consumer away from the dealer's premises, including in public places such as shopping centres and streets.
- The definition of "unsolicited services" is to be amended to include services which were unrequested and not in fact supplied. This amendment is intended to assist the ACCC in enforcing the false billing prohibitions in the ACL.
Broader information gathering powers regarding unsafe products
- The powers of the Minister and ACCC to issue disclosure notices will be extended, to enable notices to obtain information about the safety of goods and services to be issued to all persons who may possess relevant information or documents about the product, for example laboratories, safety consultants and affected consumers. Under the present law, notices may only be issued to the supplier of the product.
ACCC and ASIC investigative powers extended to unfair contract terms
- The compulsory investigative powers available to ASIC and the ACCC will be extended to alleged unfair contract terms. The amendment will provide regulators with wider powers to investigate and assess whether or not contract terms are unfair, including by the issue of compulsory notices.
Mandatory text for warranties against defects in the supply of services
- The Competition and Consumer Regulations 2010 (Cth) currently prescribe mandatory text for warranties against defects in the supply of goods but do not refer to services or services bundled with goods. The regulations will be amended to prescribe mandatory text for the supply of services and goods and services.
Reliance on admitted facts in subsequent proceedings
- The existing 'follow-on' provision (section 137H of the CCA), is to be extended to permit private litigants to rely on admissions of fact made by the respondent in previous proceedings, (in addition to findings of fact in those earlier proceedings).
- The proposal is intended to reduce an applicant's evidentiary burden in circumstances where the respondent has made relevant admissions in prior litigation.
Engagement of third party to perform community service remedy
- The ACL will be amended to give the court power to issue a community service order requiring a person at their expense, to engage a third party to perform a service required by a community service order. Courts may consider this remedy when the person in breach of the ACL is not qualified or trusted to give effect to a community service order themselves.
The public submission period for the draft legislation closes on 28 February 2018.