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Wednesday, 23 June 2010
Page: 6486


Mr FLETCHER (4:54 PM) —I very much welcome and endorse the Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010. The catalyst for the reforms in this package of measures was the decision by the former Treasurer, Peter Costello, in 2006 to ask the Productivity Commission to undertake an inquiry into Australia’s consumer protection framework. Clearly, the Treasurer’s focus was the inefficiency caused for both Australian consumers and Australian businesses in having to be aware of and comply with the patchwork of complex and inconsistent laws across Australia’s many jurisdictions.

When the Productivity Commission reported on this issue in 2008 it confirmed the increased costs which the existing arrangements imposed on business and the uncertainty which they imposed on consumers. It recommended the introduction of a national scheme and estimated that such a scheme would provide a net gain to the community of between $1.5 billion and $4.5 billion per annum. Later in 2008 both the Ministerial Council on Consumer Affairs and the Council of Australian Governments endorsed reform.

I look at this legislation with particular interest, drawing upon my experience, prior to entering parliament, as a senior executive in a large telecommunications company responsible for the legal and regulatory functions of that company. At that company, Optus, which serves around seven million customers on a daily basis, there is a need to deal with the legal and regulatory obligations imposed upon the company by both national law and state and territory law. The matrix of obligations is a complex one and complying with it involves the application of very extensive resources. I know well from my responsibilities over that period that significant costs and frustrations are imposed upon business and consumers through having to deal with multiple sets of inconsistent laws seeking to regulate the same activities. The efficiency benefits of standardising the law nationally are very considerable. In the case of large businesses with standard form contracts, which are used to serve millions of customers all around Australia in the six states and two territories, the cost consequences of having different laws are significant and the benefits to be secured, if the law is standardised, are equally significant.

To give one example, it was frequently a requirement when a customer was connecting and taking a product from the company that the customer service representative, after interacting with the customer on the phone, would then play a recording to the customer or read out key standard terms giving effect to the legal and regulatory obligations on the company, ensuring that the customer was fully informed of the key aspects of the contract that he or she was about to enter into.

When you consider the hundreds of thousands of customer interactions which occur every year there are substantial cost savings if even a 30-second reduction in that customer interaction can be achieved and, conversely, there are substantial cost burdens if that customer interaction is extended by a further 30 seconds, especially when multiplied by the hundreds of thousands of interactions that occur.

There was a specific instance some years ago of the confusion caused by the inconsistent requirements of multiple jurisdictions when the Victorian government introduced a new law dealing with unfair terms in contracts. At that point telecommunications companies were subject to not only the requirements in the Trade Practices Act but also the requirements in the Telecommunications Consumer Protection Code, which is registered by the Australian Communications and Media Authority and has the force of law under the Telecommunications (Consumer Protection and Service Standards) Act.

The standard form contracts used by all the major telecommunications companies had been carefully developed to achieve compliance with the obligations imposed on those companies under the Trade Practices Act and under the industry-specific code. Unfortunately, the legislation introduced by the Victorian government was at odds with the existing arrangements. Therefore, telecommunications companies offering national services were required to negotiate with Consumer Affairs Victoria regarding the application of the new Victorian laws and the expectation of that particular department that standard form contracts would be changed to meet obligations applicable in Victoria.

To give just one example of the ways in which the expectations of Consumer Affairs Victoria as to the application of the Victorian legislation caused difficulty and confusion for a national company, there was a specific issue faced by Optus, which, unlike Telstra, does not have identical and uniform fixed line networks across Australia. Instead, the company serves several hundred thousand Australian households in Sydney, Melbourne and Brisbane using the HFC, or hybrid fibre coaxial, network, which offers broadband and other services. Elsewhere in Australia the company uses different networks, including reselling Telstra services in some places and using something called the unconditioned local loop service in other places. The consequence of this is that Optus—and this is true of other telecommunications companies as well—is not able to offer the same service in every location. This became a point of considerable discussion between that company and the consumer affairs department in Victoria, which took the view that if a customer disconnected from the network and moved to a new location then the customer should be provided with identical terms, even if the customer was moving to a location where Optus did not have the HFC network operational and was therefore physically unable to deliver the same services that it had previously delivered to the customer in his or her previous location.

I raise this issue not to canvass the merits of it one more time but because it is a good example of the costs that are imposed on business in dealing with multiple inconsistent regulatory requirements covering the same area—in this case, the protection of consumers from matters such as unfair terms and unconscionable terms—when a national company is required to operate under regimes which are not always consistent. I am disappointed to have to record that the attitude of the officials of Consumers Affairs Victoria was in no way sympathetic to the difficulties faced by a national company. It was clear that they regarded that as being wholly outside their remit and not something that concerned them at all.

It is therefore, I think, very encouraging that we have now policy going in a different direction and that we are seeing the introduction of a national regime which addresses the difficulties of the kind that I have talked about, difficulties that were well summed up in a paper published in 2008 by the Business Council of Australia, which stated:

… doing business across Australia is made unnecessarily confusing, complex and costly by the inability of governments to make adequate progress in harmonising and rationalising existing regulation.

I have given a very good example of the way that difficulty applied in one particular industry. Standardisation therefore is a very desirable goal and one that I very much support.

I do think it is important that, to the extent that this legislation should also involve any extension of existing consumer protection arrangements, those are properly justified in accordance with standard cost-benefit methodology. In that regard I note that, in a couple of areas at least, the bills as originally presented tended to overreach, although I would acknowledge that the government has generally been receptive to amendments proposed by the coalition to rectify such overreach.

This bill, as I have mentioned, is the second of a package of three and deals with implementing a national consumer law regime in relation to such matters as misleading and deceptive conduct, unconscionable conduct, unfair practices, consumer transactions, statutory consumer guarantees, a standard consumer product safety law and product related services.

The Senate Economics Legislation Committee, having reviewed the legislation, made a number of sensible recommendations, with the support of coalition senators, and the consequence has been the need for some amendments to this bill. It is unfortunate that aspects of the consultation process have been rather rushed, and regrettably this does appear to be a consistent feature of the way the present government approaches the legislative process. Happily, on this occasion the coalition has been able to identify some of the errors which occurred and suggest corrective measures, which have in large part—not entirely but in large part—been accepted.

One of the specific issues that we pointed out is that, under the law as it presently stands, any goods purchased below a certain value, which is currently set at $40,000, are taken to be consumer goods regardless of the purpose for which they are purchased. The consequence of that is that the present law affords protection to small businesses, which in many cases will be purchasing goods below that value. The bill as drafted proposed to change this and impose an additional requirement that, for the legislative protections to apply, the goods must be purchased for a personal, household or domestic purpose. I am pleased to note that the government has accepted the coalition’s suggestion that the status quo on this point should be maintained.

We have also raised concerns about the way in which an exemption which presently applies to architects and engineers was proposed to be removed in the bill that was before the House. There was inadequate consultation about this removal. We are pleased that the government has now accepted the point made by the coalition that the exemption which it was proposing to remove should in fact be retained.

The coalition also raised concerns about product reporting, particularly the incident based nature of the approach which is proposed in the legislation. We proposed an alternative, that being a risk based approach, and we continue to believe that that would be a superior approach. We acknowledge, however, that the government has to some extent taken account of the arguments raised by the coalition and has agreed to make changes to the incident based approach to appropriately narrow its scope.

One issue that has been discussed in the process of the legislation moving through the House is the question of the existence of industry-specific regimes, and this brings me back to the topic that I addressed when I was speaking earlier. In the telecommunications industry, there is a set of industry-specific consumer regulations, and there are other industries—such as the banking industry with the Banking and Financial Services Ombudsman—which have similar industry-specific consumer protections.

I note that clause 65 of the bill would allow for the creation of regulations to exempt gas, electricity and telecommunications from the ‘fitness for purpose’ provisions. As I understand it, this is designed to recognise the existence of industry-specific regulation. Members of the telecommunications industry have raised a question about the interaction of the new legislation with existing industry-specific regulation, and there is certainly a serious policy question to be asked. If we are purporting to cover the field with universally applicable consumer regulation, it does raise a question as to the appropriateness of existing industry-specific regulation. Conversely, to the extent that there is industry-specific regulation which deals with the particular complexities of products and services delivered by particular industries—and, again, I gave an example of that earlier—there may well be a logic for the proposal to allow for exemptions. I note that the chair’s report from the Senate committee expresses some caution on this point, stating:

The Committee recommends caution in applying exemptions to telecommunications services, in particular telephone services, to remote areas and other types of connection problems in the ordinary course of business.

I would suggest that the policy in this area has not been fully developed and there is a need to more carefully consider the appropriate interaction of uniform consumer legislation which is designed to cover the field and the needs of specific industries such as telecommunications and banking. That involves asking whether the existing industry-specific regulation remains appropriate. If it is concluded that it does remain appropriate, it certainly raises the question of whether sufficient care has been given to address any inconsistencies between the industry-specific regime and the uniform legislation designed to cover the field.

In closing, I think it is important that we acknowledge the role of the former Treasurer, Peter Costello, and the role of the coalition government in initiating a process which is designed to deliver greater efficiencies for business, particularly business which operates on a nationwide basis, while at the same time protecting consumers and offering appropriate and widely available consumer protections, recognising the well-understood case that consumers engaging in contracting with businesses of any kind need to ensure that their rights are protected and any imbalance in bargaining power is not taken advantage of. I believe that to move to a uniform approach nationally rather than the previous approach, under which the legislation of states and territories in some ways conflicted with federal legislation and under which there were troubling inconsistencies in regulation covering the same territory, is a sensible move which will achieve greater efficiency for business and, therefore, economic advantages while at the same time maintaining the protections for consumers, which are very important in ensuring confidence on the part of consumers in engaging with suppliers of goods and services which they acquire on a day-to-day basis.