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Tuesday, 20 October 2009
Page: 10375

Ms NEAL (6:24 PM) —I rise today to speak in support of the Trade Practices Amendment (Australian Consumer Law) Bill 2009 The desire for a national consumer framework and provisions to restrict unfair contracts was canvassed by the Labor Party more than a decade ago, but this policy agenda was not a priority for the Howard government.

In October 2008, the Council of Australian Governments agreed on the vital necessity for Australia to move boldly and comprehensively towards a national consumer policy framework. It was also agreed by COAG’s Business, Regulation and Competition Working Group that this be done with the close cooperation of all the states and territories. It has been formulated in equally close consultation with the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission. The reform measures put forward in the bill represent a central element in the COAG reform program that will deliver a seamless national economy for Australia. The changes presented here are a generational change in consumer law and policy in Australia. They are the first step towards an Australia-wide, seamless economy.

In brief, the new bill before us today will introduce a national unfair contract terms law. It will also provide the ACCC and ASIC with a new framework of penalties and enforcement powers. The two regulatory bodies will also have the powers to enforce new consumer redress options. Unfair contract terms laws exist today in many jurisdictions, including the UK, the EU, South Africa and Japan. Unfair contract laws exist in the US and in Canada.

Under the current regime in Australia, a number of consumer protection measures exist in various Commonwealth, state and territory laws. There are many broad similarities in these laws. However, over time, significant differences have begun to emerge between consumer laws in the various jurisdictions across Australia. This has had the effect of creating confusion for consumers as well as increasing business costs across the board. There are in fact 13 different consumer protection regimes operating across Australia at the present time. The Australian consumer law regime will for the first time be amalgamated into one national system of consumer law. This national consumer law framework will promote consistency and protection across all Australian jurisdictions. This framework will reduce multijurisdictional complexity and result in lower compliance costs for businesses operating nationally.

National consumer laws are a vital first step to creating a seamless national economy, a reform goal that has been championed by the Business Council of Australia. It was also a goal endorsed by the 2020 Summit held last year. The Productivity Commission has estimated that reforming Australia’s consumer protection laws will save the national economy up to $4.5 billion per year. This is an important saving, but it is equally important to remember that the bill will also give added protection to consumers. It will also make the law clearer, easier to implement, more transparent and more accountable for all parties who use contracts to conduct some element of their personal and business lives.

The Australian consumer law bill will amend the Trade Practices Act 1974 and make corresponding amendments to the Australian Securities and Investments Commission Act 2001. The reforms will be implemented through an application law scheme which the Australian government and the states and territories have agreed to implement for consumer protection and fair trading. The single national consumer law will be called the Australian Consumer Law. It introduces changes that will make life easier for all consumers through clearer, fairer standard form contracts. It will also provide for more effective enforcement of our consumer laws.

One of the primary reforms under the bill is the introduction of the national provisions regulating unfair contract terms. Under the bill, the new national unfair contract terms provisions will apply only to standard form contracts entered into during business-to-consumer transactions. Regulation of business-to-business transactions will be reviewed as part of an ongoing reform process of the Trade Practices Act and the Franchising Code of Conduct. However, sole traders are included in the scope of the current bill because, for many of them, business and personal interests are often identical when entering into transactions or contracts.

The new unfair contract terms provisions will provide protections for consumers. Consumers will have greater choice, a greater ability to seek alternative options and more ability to accurately assess the risks of signing a particular contract. Businesses will also have to assess their risk properly and will no longer be able to exploit their stronger bargaining position to transfer all of the risk to consumers.

Put simply, a term in a contract will be void if it is unfair. It will be deemed unfair if there is a significant imbalance in the parties’ rights and obligations and/or the term is not necessary to protect the legitimate interests of the supplier. In determining whether a contract term is unfair, a court will determine whether the term has a ‘substantial likelihood of detriment’ to one party. In order to take an action, the claimant does not have to prove that actual detriment has occurred but only that there is a substantial likelihood of detriment occurring under the terms of the contract. Detriment includes both financial and non-financial detriment.

Contract terms must also be transparent. The view that, if something is disclosed, it is therefore all right and beyond reproach no matter how unclearly or obscurely the information is presented is no longer sufficient as a consumer safeguard. This old concept of caveat emptor is no longer an appropriate assumption in a complex modern world of business and contract law. Any lack of transparency is a strong indicator of unfairness.

In assisting regulators to decide the fairness or otherwise of terms contained in contracts, a non-exhaustive, indicative list of unfair terms has been developed. This so-called ‘grey list’ gives examples of terms which may be considered unfair. The ‘grey list’ does not prohibit the use of terms in contracts but it can be used for guidance in assessing the fairness of agreements entered into in business to consumer transactions. While certain types of terms may be prohibited in standard form contracts, it has been decided that specific terms should be not be prohibited at this time. However, this issue will be kept under review and the position may potentially change. The bill does not precisely define a standard form contract, but it does provide a set of considerations to be taken into account when assessing a contract’s fairness. One of the matters excluded from the unfair terms test is the main subject matter of the contract—for example, the upfront price payable under the contract. A consumer, for example, cannot be allowed to purchase goods, services or land and renege on the contract just because they later decide it was not a good deal or a good price.

The Australian consumer law bill will provide the ACCC and ASIC with a broad range of nationally applicable powers to enforce the new laws. This will ensure that consumers are protected fairly and uniformly across the nation. Under current arrangements, the ACCC and ASIC have been hampered by inadequate powers to deal with harmful and exploitive business practices. In many cases, the states and territories have had wider powers in this regard. The ACCC and ASIC will be able to seek civil pecuniary penalties and disqualification orders and to issue infringement notices, substantiation notices and public warning notices. These regulators will also be able to seek redress for consumers not party to enforcement proceedings.

The civil pecuniary penalties will now apply to breaches that can currently only be punished by criminal sanctions and for breaches of the unconscionable conduct provisions of the Trade Practices Act and the ASIC Act. These penalties will be serious, with maximum penalties of up to $1.1 million for corporations and $220,000 for individuals. The ACCC and ASIC will be empowered to disqualify people in breach of the consumer protection laws from being a director of a company. The regulators may also issue substantiation notices, requiring traders to produce documents or other information to substantiate claims they have made in their business or contractual dealings. Substantiation notices can also provide the regulators with a useful preliminary investigative tool to guide their deliberations. Minor breaches of the consumer protection laws can also be dealt with via infringement notices, which may allow those in breach to pay an amount without the need to go to court.

One of the most effective ways of ensuring compliance with consumer protection laws is the public warning notices issued by various regulators, including some state fair trading bodies. The so-called ‘naming and shaming’ option is an effective tool to provide information to the public and alert them to traders that may cause detriment to consumers. The agencies will also be able to seek orders for redress on behalf of consumers not party to enforcement proceedings for breaches of the law, ensuring that all consumers affected by a breach have easier access to redress, including refunds. This power would extend only to redress that is quantifiable and would not allow for a court to make orders of a more general nature, such as damages. This mechanism for redress for non-parties will be particularly useful for those thousands of consumers who suffer small losses and who decline to take action individually because of the cost or inconvenience. Businesses should not profit from consumer loss just because the detriment is small or because the harm is spread widely.

These enhanced enforcement tools will provide the ACCC and ASIC with additional ways to take effective, proportionate action against a wide range of businesses and others who breach consumer laws. The new Australian Consumer Law represents a milestone in the regulation of business law. The bill before the House today brings substantially enhanced protections to consumers. It contains some of the most significant and far-reaching consumer laws brought before the Australian people in many years. But the bill is just the first step in what will be the most comprehensive overhaul of consumer laws in at least a generation.

It is a bill of which this government is very proud. In 2010, the government will introduce measures that will complete the Australian Consumer Law reform process. A second round of reform will then be introduced to parliament to bring in a new national regime of product safety regulations. The Commonwealth will then be able to implement temporary and, if deemed necessary, permanent bans on unsafe products that will apply nationally. This round will also amend the Trade Practices Act to change its name to the Competition and Consumer Act. By the end of 2010, the Australian Consumer Law reform process will be complete. This process will take Australia a long way towards the seamless national economy that was agreed by COAG to be one of this nation’s most fundamental national goals. It is a goal that this government is fully committed to and one that will bring multiple benefits to the Australian people, to Australian business and to the Australian economy. I commend the bill to the House.