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A timely revolution in consumer protection

A timely revolution in consumer protection

While our business headlines are awash with news of changes to restrictive trade practices laws, some big reforms are also under way to reshape Australia&

While our business headlines are awash with news of changes to restrictive trade practices laws, some big reforms are also under way to reshape Australia’s consumer protection regime, write Caroline Coops and Mary Syrotynskyj

Consumer protection laws play a vital role in protecting and promoting competition. As ACCC chairman Graeme Samuel has said: “Competition policy and consumer protection are inseparable; they are two sides of the same coin.”

The reforms aim to simplify Australia’s many fragmented consumer protection laws by creating a single, unified, national consumer protection regime to apply across all sectors of the economy. It is intended to give consumers cer­tainty about their rights and confidence that these rights will not change when they cross a border. The reforms will also encompass newer forms of commercial transactions such as e-commerce and online trading.

The details of the new national regime were released by the Federal Government on 17 February 2009. The reforms con­tain four key planks.

First, the Trade Practices Act will be the starting point for the new regime, with the addition of “best practice” laws from existing state and territory regimes. Second, the reforms will include a national unfair terms regime, with wide-ranging consequences for many existing business practices and contractual terms. Third, the new regime will arm the reg­ulators with additional enforcement tools, such as substantiation and infringement notices. Because these are cost-effective tools, they have the potential to enable regulators to scrutinise everyday business practices more easily and regularly and to take enforcement action quickly. And fourth, the regulator will be able to seek civil penalties of up to $1.1 mil­lion from breaches of many of the new consumer laws.

The new regime will not strip state and territory fair trading offices of their powers. Enforcement will be a coordinated effort, with the ACCC taking a leadership role. The Productivity Commission has cal­culated the potential benefits of implement­ing a national consumer protection regime to be in the order of $1.5 billion to $4.5 bil­lion, which the ACCC translates into as much as $542 per household per year.

Most of these savings are likely to be attributable to reduced business compliance costs, particularly for companies which operate nationally and are currently subject to many different, sometimes inconsistent, state and territory laws. While the current consumer protection laws have strengths, they are uncertain and uneven in application, largely due to poor regulatory design. This has also led to further regulatory burdens being imposed on businesses, particularly those oper­ating in already heavily regulated industries.

Each Australian jurisdiction currently has its own generic consumer laws, but “generic” does not mean “consistent”. For example, if a telemarketer sells you widgets in Victoria, you are entitled to a ten-day cooling-off period. If those widgets are sold to you in NSW, the cooling-off period is five days.

The jurisdictions also maintain other proscriptive consumer laws which usually pre-date and tend to overlap with the national consumer laws. Jurisdictions such as Victoria are already working to repeal some of these out-of-date “horse and buggy era” laws which most consumers – and many lawyers – would not know exist.

Adding to the complexity in this area is the raft of addi­tional consumer regulation imposed at industry level, such as the multitude of industry codes in the telecommunications and energy sectors. The Government has signalled its intention to review and reduce the number of indus­try-specific consumer laws, which tend to duplicate other legislation or regulation and – more problematically – invite scrutiny from yet more regulators.

According to the Productivity Commis­sion, Australia currently has more than 100 consumer regulators. There is little won­der that the case for reform is viewed as “compelling”. Reducing the number of industry-specific consumer laws is vital to the success of a national consumer protection regime. It should also provide a plat­form for industry to identify and oppose unwarranted and duplicated regulation.

The importance of consumer protec­tion laws is well recognised by the ACCC in both its policy and enforcement actions. In the past financial year formal consumer protection proceedings instituted by the ACCC outnumbered competition pro­ceedings three to one.

Furthermore, 51 of the 58 section 87B undertakings accepted by the ACCC involved con­sumer protection matters. The introduc­tion of component pricing reforms and proposals to introduce unit pricing sug­gests that the Rudd Government intends to make consumer policy core business in Canberra.

Graeme Samuel recently remarked that “21 million consumers will be keenly observing what can best be described as a revolution that will bring Australia’s consumer laws into the 21st century”.

Submissions on the new regime are due by 17 March 2009. It is our respon­sibility to ensure our clients are not let­ting this revolution pass them by. They need to be active participants in it.

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