The passage of the Trade Practices Amendment (Australian Consumer Law) Bill 2009 (Consumer Bill) marks a new era in Australian consumer law as we farewell the Trade Practices Act (TPA) and usher in the Competition and Consumer Act.
Some of the amendments are welcome and will help to harmonise and nationalise Australian consumer laws , but other changes effectively rewrite aspects of contract law which have been part of our legal landscape for over 200 years. In addition, the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission gain significant new powers.
The new unfair terms regime contained in the Consumer Bill will have a significant effect on a large number of businesses using standard form contracts. For example, a term in a consumer contract will be deemed to be unfair if the term causes a ‘significant imbalance’ in the rights of the parties and their obligations. Similarly, a contract will be unfair if it is deemed unnecessary to protect the legitimate interests of the party who proposed the term.
The practical effect of the unfair terms provisions is that a large number of Australian organisations using standard form contracts will now have to justify all of the terms of their contract. Even aspects of the pricing for a particular product or service may be challenged as being unfair.
Whilst Victoria has had unfair contract terms legislation for a few years, the jury is still out on whether it has delivered the benefits that the Federal Government believes this legislation will bring.
Even more disconcerting are the new powers to be vested in both the ACCC and ASIC . While some make sense, we are concerned that the two bodies will have the power, in effect, to reverse the onus of proof on persons who are alleged to have committed a breach of the law. They will have the power to issue an infringement notice. This provides for the imposition of financial penalties for suspected contraventions of provisions, including the unconscionable conduct provisions, of the TPA. ASIC already possesses this power in relation to contraventions of the continuous disclosure provisions of the Corporations Act 2001 (Cth). The use of the infringement notice effectively reverses the onus of proof – requiring parties who wish to challenge the notice to either run the risk of prosecution in a court or pay a penalty to avoid prosecution.
There is also the new power to issue a public ‘shaming’ notice in respect of suspected breaches of certain provisions of the relevant legislation or for a failure to respond to a substantiation notice . This ability to name and shame companies publicly, whilst already ‘enjoyed’ by certain consumer affairs organisations, is a very blunt instrument. Hopefully the ACCC and ASIC will rarely use these powers. The burden will be on a business which wishes to avoid potential court proceedings, which is the appropriate way for regulators to pursue alleged breaches of the law, to pay the fine or to comply with the substantiation notice without the benefit of a court hearing. Whilst civil penalties have not been introduced for misleading or deceptive conduct, they have been introduced for unconscionable conduct and for a range of other practices. A maximum of $1.1m for corporations and $220,000 for individuals will certainly create a very different and more costly business environment with costs likely to be passed on to consumers.
Regulators should pursue parties in the courts for alleged breaches of the major provisions of the relevant legislation. We do not support a regime under which the regulators can force parties to either pay a fine or agree to correct certain behaviour, which is not the subject of a legal decision, if they wish to avoid court action, and which has not been found to be illegal.
And this is only the first package of reforms, Phase Two of the Australian consumer law is currently before parliament.
Whilst the Government was receptive to suggestions concerning the exclusion of the unfair terms legislation to business-to-business contracts, it was not willing to expose for preliminary discussion, the second stream of Consumer Law reform, the Trade Practices Amendment (Australian Consumer Law) Bill (No.2) 2010, before it was tabled in parliament. This is regrettable. The second bill will impact significantly on well understood concepts in our law (rules relating to warranties covered by sale of goods legislation for well over 100 years) yet was tabled without the benefit of professional consultation.
The Government should not just be driven by its desire to achieve a potential political solution, it should also ensure that the legislation does not create unnecessary costs and difficulties for business and consumers alike. It would be better (and it is still not too late) for this new legislation to be treated as an exposure draft for review by business and the legal profession.
The Australian Consumer Law presents the most significant change in our Consumer Law regime in Australian political history. It is up to all of us to ensure that the legislative regime is as right as it can be from the word go rather than suffer the consequences associated with subsequent review and amendment of the law in years to come.
This article appeared in The Australian Financial Review on 9 April 2010.
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