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Consumer law reforms - change is on its way

Consumer law reforms - change is on its way

For some organisations, the introduction of a new national approach to consumer laws will mean change and substantial review of existing processes - this of course, means time and money, Nick…

For some organisations, the introduction of a new national approach to consumer laws will mean change and substantial review of existing processes - this of course, means time and money, Nick Abrahams writes

February and March have been busy reading for those interested and affected by consumer protection law. First, on 17 February 2009, the Minister for Competition Policy & Consumer Affairs released an information and consultation paper, An Australian Consumer Law: Fair market - Confident consumers. Only two weeks later, the minister announced a review of the adequacy of statutory conditions and warranties. This article will provide an update on both of these initiatives and help you to make an assessment on how these changes might impact on business.

Australian consumer law - reforms and consultation paper

The information and consultation paper, An Australian Consumer Law: Fair market - Confident consumers (Consultation Paper) is a step toward the reform process to develop a new national consumer law for Australia.

The Consultation Paper, prepared by the Standing Committee of Officials of Consumer Affairs, shares the Council of Australian Governments' agreed consumer reforms and seeks to obtain public and stakeholder comments on further suggestions for reform (however, the deadline for responses was 17 March 2009).

The minister is looking to fast-track these amendments with legislation to go before Parliament mid-year and be in operation for 1 January 2010.

There are some key themes in the Consultation Paper - enhancing consumer protection, reducing regulatory complexity and having a consistent national approach to facilitate a seamless national economy.

The key components of the framework involve a new national consumer law, to be called the Australian Consumer Law, based on the existing consumer protection provisions of the Trade Practices Act (TPA). In addition, there will be some new consumer laws including:

  • provisions which regulate unfair terms in consumer contracts;
  • new penalties, enforcement powers and redress options for consumers (ultimately, what every supplier doesn't want to hear); and
  • a new national product safety regulatory system.

There are strong reasons to have a national approach to consumer protection in Australia. The obvious reason is to ensure a consistent approach for both suppliers and consumers.

Many organisations that supply consumer products and services, supply to consumers nationally and this is an increasing trend. It can become a logistical nightmare to manage different regimes in different states, not to mention the compliance costs associated.

In addition, there is no rational explanation for why consumers are offered different levels of protection just because they live in a certain state or territory.

For some organisations, however, introducing a national approach with new consumer laws will mean change and substantial review of existing processes - this of course, means time and money.

For example, a national approach to unfair contract terms will mean that organisations supplying to consumers will need to ensure that their agreements do not contain "unfair contract terms".

According to the Council of Australian Governments (COAG), unfair contract terms are those which cause significant imbalance in parties' rights and obligations arising under a contract and are not reasonably necessary to protect the legitimate business interests of the supplier.

Such terms will be prohibited in agreements (ie. agreements that are not negotiated) with remedies available where a claimant can show detriment to the consumer, or a substantial likelihood of detriment (not limited to financial detriment). In getting up to speed on this change, it will be important for organisations to assess the meaning of an "unfair contract term" - the Consultation Paper provides some examples, but in practice it is likely that there will be uncertainty about what is and isn't an unfair contract term.

Review of statutory conditions and warranties

In addition to the release of the Consultation Paper, the minister announced that the Commonwealth Consumer Affairs Advisory Council (CCAAC) will review the adequacy of existing laws on conditions and warranties that are implied into consumer contracts under the TPA.

It seems that the review has been brought about because of concerns that: suppliers are misleading consumers in their terms and conditions as to what the consumers' entitlements are under law; and the rise in the "extended warranty" business has lead to some retailers charging consumers for "extended warranties" that offer no more than what the consumer has under the TPA anyway. Let us ask you - did you agree to purchase an extended warranty on that new plasma you just bought? If yes, perhaps this initiative will help you save a bit of cash next time - something to put towards the upgraded model.

The TPA implies into contracts for the supply of goods and services to consumers certain conditions and warranties. Some of these implied terms are excludable and others are non-excludable, but are able to be limited. Some examples are:

  • In relation to goods: an implied condition that goods supplied by description will correspond with the description; an implied condition that the goods are of merchantable quality; and an implied condition that, where the purpose for which the goods are being acquired is made known to the corporation, the goods are reasonably fit for that purpose.
  • In relation to services: an implied warranty that the services will be rendered with due care and skill; and an implied warranty that, where the purpose for which the services are required is made known to the corporation, the services supplied and any material supplied in connection with those services will be reasonably fit for that purpose.
  • CCAAC will review the adequacy of the current laws and determine whether there is a need for any amendments and, more generally, it will consider how the operation of the statutory implied terms can be improved.
  • CCAAC will also consider if there is a need in Australia for "lemon laws" in order to protect consumers against goods that repeatedly fail to meet expected standards in relation to performance and quality. These laws could apply to specific goods such as motor vehicles.
  • CCAAC is preparing to consult with specific industry stakeholders and is scheduled to provide its report to the minister by 31 July 2009.

Conclusion

It seems that change is well on its way with various proposals and reviews which are likely to significantly change consumer protection law in Australia.

Whether these changes are good or bad will depend on which side of the fence you sit and, if it is the supplier side, whether your current practises in dealing with consumers are significantly different to the proposed initiatives.

So to answer the question as to whether these changes will be as good as a holiday, we'll leave it for you to determine - but we doubt it will be a holiday for everyone.

Like this story? Read more:

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Consumer law reforms - change is on its way
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