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Trade Practices Amendment (Small Business Protection) Bill 2002

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2002

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

TRADES PRACTICES AMENDMENT (SMALL BUSINESS PROTECTION) BILL 2002

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by authority of the Minister for Small Business and Tourism,

the Honourable Joe Hockey,  MP)

 

 

 

 



 

TRADES PRACTICES AMENDMENT (SMALL BUSINESS PROTECTION) BILL 2002

 

OUTLINE

 

The Bill proposes amendments to Section 87 of the Trades Practices Act 1974 (TPA) to enable the Australian Competition and Consumer Commission (ACCC) to bring representative actions in respect of contraventions of Sections 45D and 45E of the TPA.

 

FINANCIAL IMPACT STATEMENT

 

The Bill has no financial impact on the Commonwealth Budget.

 



 

REGULATION IMPACT STATEMENT

 

Secondary Boycotts - Representative Actions by Australian Competition and Consumer Commission

 

Problem:

 

The problems addressed by this Bill are deficiencies in the Trade Practices Act 1974 (the TPA) compliance and redress mechanisms and barriers to the institution of proceedings under the TPA.

 

Current Situation:

 

At present, section 87 of the TPA allows the Australian Consumer and Competition Commission (ACCC) to bring representative actions in respect of contraventions of all of Part IV of the TPA, except for sections 45D and 45E.

 

Objective:

 

The objective of the proposed amendments is to improve the enforcement aspects of the regulatory regime contained within the TPA and address the shortcomings in present legal remedies to encourage compliance with the obligations under the TPA.

 

Options:

 

Option 1 - No Action

 

This option would involve no change to the current regulatory regime.

 

Option 2 - Legislative Amendments

 

This option would involve a series of legislative amendments to be made to the TPA to address the identified problems.

 

Impact analysis (costs and benefits) of each of the options:

 

Option 1 - No action

 

The Australian Law Reform Commission (ALRC) in Australian Law Reform Commission Report No 68: Compliance with the Trade Practices Act 1974 (1994), documented that business (particularly small business) and consumers are unable to access appropriate legal remedies under the TPA.  The ALRC noted that the cost of bringing proceedings was a substantial impediment to bringing an action.

 

If no action is taken, the difficulties associated with accessing legal remedies under the TPA will remain.  Where the TPA has been contravened and private individuals are unable to commence their own legal proceedings (and thereby punish contravening parties for their misconduct), the ACCC will be required to carry a greater share of the enforcement burden and associated costs.  Maintenance of the status quo will mean that businesses (particularly small business) and consumers will continue to be denied the protection purported to be offered by the TPA and hence will bear the costs of the loss or damage produced by the unlawful conduct.  This may be particularly costly for small businesses wishing to compete with businesses that successfully gain market share through unlawful conduct.  The flow-on from this is the creation of inefficient and uncompetitive markets, which will produce a negative result for the community generally. 

 

Option 2 - Legislative Amendments

 

Amendments would be made to section 87 of the TPA to allow the ACCC to bring actions for compensation or a representative action in respect of contraventions of sections 45D and 45E of the TPA

 

The general problem of access to legal remedies under the TPA would be addressed by ensuring that the ACCC has clear powers to enable it to bring representative proceedings on behalf of businesses and consumers.

 

Consumers and businesses that are presently unable to recover compensation for their loss would benefit from improved access to legal remedies.  This correction of market processes will produce a more competitive environment for business and hence enhance the welfare of the community. 

 

Consultation:

 

The proposed measures have been subject to broad consultation.  The amendments were originally contained within the Australian Law Reform Commission Discussion Paper 56: Compliance with the Trade Practices Act 1974 .  The submissions to this Paper were considered and a position developed and documented in the Australian Law Reform Commission Report No 68: Compliance with the Trade Practices Act 1974

 

The ALRC consulted with peak business organisations, consumer groups, the judiciary, government departments, enforcement agencies and academia.

 

The former Minister for Customs and Consumer Affairs, the Hon Chris Ellison MP released the Legislative Outline: Amendments to the Trade Practices Act 1974: A Better Deal for Consumers and Small Business in September 1997.  This discussion paper drew on the recommendations for reform made by the ALRC.  The public submissions expressed general support for the legislative amendments proposed under Option 2 .

 

The proposed measures were also considered by the Joint Select Committee on the Retailing Sector, in its August 1999 report, Fair Market or Market Failure?   The Committee consulted with peak business organisations, enforcement agencies and government departments.

 

Treasury, the Attorney-General's Department, the Department of Prime Minister and Cabinet, the then Department of Industry, Science and Resources, the Department of Transport and Regional Services, the Department of Finance and Administration and the Australian Competition and Consumer Commission were consulted when the proposed amendments were brought forward as part of the Workplace Relations and Other Legislation Amendment (Small Business and Other Measures) Bill 2001 .

 

Treasury, the Department of Prime Minister and Cabinet and the Department of Employment and Workplace Relations have been consulted.

 

Conclusion and recommended option:

 

The preferred option is to amend the TPA to allow the ACCC to bring representative actions in respect of contraventions of sections 45D and 45E of the TPA.

 

If there is no action, then the current problems of business (particularly small business) and consumers being unable to access appropriate legal remedies under the TPA will continue.

 

Implementation and review:

 

Implementation of the preferred option will occur through this Bill.  The Government has informed the public of the intention to amend the TPA in the media.

 

As the TPA has fundamental effects on the business environment and establishes the parameters within which Australian business operates, it is subject to continuing evaluation and assessment by the Treasury to ensure its continued effectiveness.

 



 

NOTES ON CLAUSES

 

Clause 1 - Short title

 

This is a formal provision specifying the short title of the Act.

 

Clause 2 - Commencement

 

Clause 2 specifies that Act is to commence on the day on which it receives Royal Assent.

 

Clause 3 - Schedule

 

Clause 3 specifies that the Trade Practices Act 1974 is amended as set out in the Schedule.

 

Schedule 1

 

Item 1 - Paragraph 87(1A)(b)  

 

This item would remove the words “(other than section 45D or 45E)” from Paragraph 87(1A)(b) of the Trade Practices Act 1974 (TPA).  The effect of this change would be to enable the Australian Consumer and Competition Commission (ACCC) to seek orders from the Federal Court on behalf of one or more persons who have suffered, or are likely to suffer, loss or damage by conduct of another person where the conduct engaged in is in contravention of sections 45D or 45E.

This change would remove the current limitation, where the ACCC is able to seek such orders for all of Part IV of the TPA other than sections 45D or 45E.

Item 2 - Paragraph 87(1B)(a)

This item would remove the words “(other than section 45D or 45E)” from Paragraph 87(1B)(a) of the Act, which prescribes the conditions the ACCC must satisfy before they may commence a representative action on behalf of a person or persons who have suffered loss or damage, or likely to suffer loss or damage, as a result of conduct in contravention of the TPA.

This change would allow the ACCC to initiate representative actions in respect of breaches of sections 45D and 45E.  The ACCC may currently initiate such representative actions for all of Part IV of the TPA, other than sections 45D and 45E.

Item 3 - Application

Item 3 makes it clear that the ACCC may only bring actions for compensation or representative actions for contraventions of Sections 45D and 45E in relation to conduct that occurred on or after the commencement of the amendment.