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Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010

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2008-2009-2010

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

SENATE

 

 

 

Trade Practices Amendment (Australian Consumer Law)

bill (No. 2) 2010

 

 

 

 

SUPPLEMENTARY EXPLANATORY MEMORANDUM

AND

CORRECTIONS TO THE EXPLANATORY MEMORANDUM

 

Amendments moved on behalf of the Government

 

(Circulated by the authority of the

Minister for Competition Policy and Consumer Affairs,

the Hon Dr Craig Emerson MP)



T able of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Chapter 1            Explanation of amendments............................................. 5

 



The following abbreviations and acronyms are used throughout this supplementary explanatory memorandum.

Abbreviation

Definition

ACCC

Australian Competition and Consumer Commission

ACL

Australian Consumer Law

ASIC

Australian Securities and Investments Commission

ASIC Act

Australian Securities and Investments Commission Act 2001

Bill

Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010

Committee

Senate Standing Committee on Economics

Corporations Act

Corporations Act 2001

TP Act

Trade Practices Act 1974

 



Outline of amendments

On 17 March 2010, the Australian Government introduced the Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010 (the Bill) into the Australian Parliament.  On 18 March 2010, the Bill was referred to the Senate Standing Committee on Economics (the Committee) for inquiry and report.  The Committee reported on 21 May 2010 and recommended that the Bill be passed, preferably with some amendments. 

The amendments to the Bill primarily relate to the Australian Consumer Law (ACL) provisions of the Bill, set out in Schedule 1.  These amendments:

•        return the definition of a ‘consumer’ (which applies to provisions of the ACL dealing with consumer guarantees, unsolicited consumer agreements, lay-by sales, the provision of itemised bills, continuing credit contracts and linked credit contracts) to apply to any person that purchases goods and services below $40,000 in value;

•        as a consequence of the aforementioned amendment, allow suppliers and manufacturers to limit their liability in respect of goods not ordinarily acquired for personal, domestic or household use or consumption that fail to meet the standards required by consumer guarantees (in line with existing sections 68A and 74L of the TP Act);

•        exempt, for the time being, services provided by qualified architects or engineers from the statutory guarantee that services are fit for purpose in line with existing section 74(2) of the TP Act;

•        make a number of amendments to the mandatory reporting requirement where a supplier of consumer goods or product-related services becomes aware that a product they have supplied has been involved in the death, serious injury, or illness of any person;

•        clarify that a consumer may choose to terminate a contract for the supply of services that are connected to goods that have been rejected;

•        clarify that the obligation upon a supplier to refund monies in respect of services when connected goods have been rejected extends only to services that have not yet been consumed; and

•        clarify that the scope of the definition of an ‘unsolicited consumer agreement’ includes situations where a consumer provides contact information to a supplier for purposes other than soliciting goods or services (such as entering a competition) or where a consumer contacts a supplier in response to a failed attempt by a supplier to contact them (missed call marketing).

Minor and technical amendments are also made to the Bill.  Specifically, these amendments:

•        provide for matters that the Minister must take into consideration when prescribing additional examples of terms that may be unfair;

•        insert a definition of ‘conduct’ into the ACL;

•        clarify that a supplier is entitled to recover certain amounts from a consumer if an unsolicited consumer agreement is terminated;

•        insert a definition of ‘Family Court Judge’ into the ACL;

•        substitute section 236 for section 82 in section 87CB of the TP Act; and

•        substitute section 139DA of the TP Act for section 231 of the ACL.

Date of effect : The amendments commence at the same time as the provisions of the Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010 — that is, on 1 January 2011.

Financial impact Nil.

Compliance cost impact Nil. 

 



C hapter 1     

Explanation of amendments

Outline of chapter

1.1.             The Bill would amend the TP Act to complete the initial text of the ACL and make related amendments to the TP Act, the ASIC Act, the Corporations Act and to other Commonwealth Acts.  The amendments would alter the operation of the law in the ways outlined below.  In addition, the amendments include several minor corrections to the provisions of the Bill.

Meaning of consumer

1.2.             Many provisions of the ACL apply to all persons and are not limited to a defined class of consumers.  However, some provisions of the ACL apply only to a defined class of consumer as it is not appropriate, in those cases, to extend protections afforded by the relevant provisions more broadly.

1.3.             The meaning of consumer is relevant to the following provisions of the ACL:

•        consumer guarantees; [Division 1 of Part 3-2 of the ACL]

•        unsolicited consumer agreements; [Division 2 of Part 3-2 of the ACL]

•        lay-by sales agreements; [Division 3 of Part 3-2 of the ACL]

•        the provision of itemised bills; [section 101 of the ACL]

•        the definition of continuing credit contracts; [section  14 of the ACL]; and

•        linked credit contracts. [Division 1 of Part 5-5 of the ACL]

1.4.             Currently, under section 4B of the TP Act, a person is taken to have acquired goods as a consumer if any one of three element are satisfied:

•        the goods are priced at less than the prescribed amount (currently $40,000); or

•        the goods are priced at more than $40,000, but are of a kind ordinarily acquired for personal, domestic or household use or consumption; or

•        the goods consisted of a road vehicle or trailer acquired for use principally in the transport of goods on public roads.

1.5.             Similarly, under section 4B of the TP Act, a person is taken to have acquired services as a consumer if:

•        the services are priced at less than the prescribed amount (currently $40,000); or

•        the services are priced at more than $40,000, but are of a kind ordinarily acquired for personal, domestic or household use or consumption. 

1.6.             Section 3 of the ACL, as drafted, would have removed the $40,000 element from the TP Act definition of consumer, but otherwise would not have altered that definition.  A number of stakeholders raised concerns about the impact of this change.  Some stakeholders have indicated that it may have limited consumer protection when consumers purchase items that are not ordinarily acquired for personal, domestic or household use or consumption but are priced at less than $40,000.  Examples cited by stakeholders include purchases of cement mixers or elevators by consumers for use in or about their homes.

1.7.             The Government amendments revise section 3 of the ACL to re-instate the $40,000 threshold in the definition of consumer.  This change will extend the coverage of all provisions of the ACL that rely on the definition of consumer to apply to all acquisitions of goods or services where the relevant price is less than $40,000, with the exception of acquisitions where the person acquired the goods for the purpose of re-supply or for the purpose of using them up or transforming them in trade or commerce.

Amounts paid or payable for purchases

1.8.             Currently, paragraph 4B(2)(b) and (c) of the TP Act makes provision for calculation of the price of goods or services for the purposes of subsection 4B(1) of the TP Act.  The Government amendments would replicate the effect of subsection 4B(2)(b) and (c) of the TP Act in subsections 3(4) and 3(5) of the ACL.

1.9.             Determining the price of goods or services for the purposes of subsection 3(1) or 3(3) of the ACL may not be straightforward when goods or services are not purchased individually but, instead, form part of a bundle of goods and services.  Common examples of this type of supply include internet services supplied in conjunction with network equipment and a Single Lens Reflex camera supplied with optional lenses.  Subsection 3(11) of the ACL defines these types of purchases as constituting a mixed supply .

1.10.         Subsection 3(4) of the ACL provides that the amount paid or payable for goods or services is taken to be the price paid or payable by the person, unless subsection 3(5) applies.  Subsection 3(5) of the ACL provides rules for determining the price of individual components of a mixed supply for the purposes of subsections 3(1) and 3(3).  The price of goods or services purchased as part of a mixed supply is to be taken to be:

•        if the goods or services could have been purchased from the supplier separately from the mixed supply — the price at which they could have been purchased; or

•        if the goods or services were not available separately from the supplier — the lowest price at which goods or services of that kind could have been purchased from another supplier; or

•        if the goods or services are not available other than by way of a mixed supply- the value of the goods or services.

Amounts paid or payable for other acquisitions

1.11.         In certain circumstances goods or services are acquired otherwise than by way of purchase, such as when trade occurs by way of barter.  In such cases, subsection 3(6) of the ACL will provide that the amount paid or payable is taken to be the price at which the person could have purchased the goods or services from the supplier at the time of the acquisition.

1.12.         Subsections 3(7) provides that the price of goods acquired other than by way of purchase is the lowest price at which the relevant person could have purchased the goods or services from another supplier if the goods or services could not be purchased from their actual supplier, either because they were not available for purchase, or because they were only available as part of a mixed supply.

1.13.         Subsection 3(8) provides that the price of goods or services acquired other than by way of purchase is taken to be their value if the goods or services are not available, other than by mixed supply, from any supplier.

Amounts paid or payable for obtaining credit

1.14.         The effective price of acquiring goods or services may be increased by the cost of obtaining credit.  Subsection 3(9) provides that amount paid or payable for goods or services is increased, for the purposes of subsections 3(1) and 3(3), by the amount paid or payable for the service of being provided with credit.  This ensures that it is not possible to avoid the total amount paid or payable for goods or services exceeding the prescribed amount by attributing a portion of the effective purchase price to the cost of obtaining credit.

Presumption that persons are consumers

1.15.         Subsection 3(10) provides a rebuttable presumption that a person is a consumer if it is alleged that a person was a consumer in relation to particular goods or services.  Where a claimant has alleged that they are a consumer, then it is for the respondent to prove, according to the civil standard of proof, that the claimant is not a consumer within the meaning of section 3 of the ACL.

Supplies to consumers

1.16.         Subsection 3(12) clarifies that a reference to a supply of goods or services to a consumer in the ACL is a reference to a supply of goods or services to a person who is taken to have acquired them as a consumer.

Limitation of liability for failures to comply with guarantees

1.17.         Sections 64A and 276A of the ACL provide for suppliers and manufacturers, respectively, limiting their liability for failure to comply with consumer guarantees.  This amendment to the Bill follows from the decision to re-instate the $40,000 threshold in the meaning of consumer.  In each case the ability to limit liability applies only to goods or services that are not ordinarily acquired for personal, domestic or household use or consumption.

1.18.         The ability to limit liability under section 64A and 276A does not allow a manufacturer or supplier to exclude all liability that would otherwise arise under the relevant consumer guarantees.  Under subsection 64A(1), liability may be limited to the replacement of goods or the supply of equivalent goods, the repair of goods, the payment of the cost of replacing the goods or of acquiring equivalent goods or the payment of the cost of having goods repaired.  Under subsection 64A(2), liability may be limited to the cost of supplying services again or the payment of the cost of having services supplied again.  Under section 276A, liability may be limited to the cost of replacing goods, the cost of obtaining equivalent goods or the cost of having goods repaired, whichever is the lowest.

1.19.         Subsections 64A(3) and 276A(2) provide that the provisions which allow liability to be limited do not apply if it is not fair or reasonable for the supplier or manufacturer, respectively, to limit liability.  Subsections 64A(4) and 276A(3) provide for certain matters to which a court is to have regard when determining whether limitation of liability is fair and reasonable in a particular case. 

1.20.         Subsection 276A(4) provides for a contract between a manufacturer and supplier providing that the manufacturer may provide for the manufacturer has a greater liability than that provided for in subsection 276A(1).  This allows a supplier and manufacturer to agree that the manufacturer will accept greater liability than merely that which relates to replacing or repairing defective goods.

Application of fitness for purpose guarantee to architects and engineers

1.21.         Currently, under subsection 74(2) of the TP Act, services of a professional nature provided by a qualified architect or engineer are exempt from the requirement that they are fit for a purpose, or achieve a result, made known to them by a consumer.  Section 61 of the Bill would not have retained this exemption to services of a professional nature provided by architects or engineers.

1.22.         The exemption means that consumers are not able to seek redress in respect of services failing to be fit for a purpose, or achieve a desired result, that they make known to an architect or engineer.  The exemption does not apply to excuse architects or engineers from this, or any other, liability that may arise from services provided that do not fall within their respective areas of professional expertise.  For example, the exemption would not apply if an engineer contracted to provide building services to a consumer in addition to providing engineering services.

1.23.         The exemption does not affect other avenues of redress that may be available to consumers if services provided by architects or engineers do not meet the standards that consumers are entitled to expect.  These include actions under the guarantee of due care and skill and actions in negligence if an architect owes a duty of care to the consumer and has failed to meet the standard required by that duty. 

1.24.         The Government amendments reinstate the exemption for services of a professional nature provided by qualified architects and engineers from the requirement that their services are fit for purpose or achieve a result made known to them by a consumer as recommended by Coalition Senators who are members of the Senate Economics Committee.  The Coalition Senators’ Recommendation was motivated by a number of arguments put forward by representatives of architects and engineers.  Those arguments include that:

•        architects or engineers might be held responsible for actions of third parties, such as builders, if the relevant guarantees apply to those occupations;

•        insurance costs will rise if the relevant guarantees apply to those occupations;

•        architects and engineers often experience difficulties ascertaining the wishes of consumers when contracted to provide the relevant services; and

•        consumers are adequately protected by other sources of redress, such as actions for negligence and the guarantee of due care and skill, when services do not meet the standard that consumer are entitled to expect. 

1.25.         The relative merit of arguments put forward by representatives of architects and engineers are difficult to assess given that the effect of removing the exemption would have effects in the future that are not capable of being accurately measured at the present time.  The fact that subsection 74(2) has applied to every other occupational grouping since 1977 would tend to militate against these arguments.  However, representatives of the industry have argued that services provided by architects and engineers have unique features that justify the exemption, although this was not accepted by all stakeholders.

1.26.         Given the current state of the debate about whether professional services provided by architects and engineers should be required to be fit for a purpose or achieve a result that consumers tell the relevant professionals that want to achieve, the  exemption will be retained for the time being.  However, the exemption in favour of architects and engineers will be subject to a comprehensive review three years after the commencement of the ACL.

Mandatory reporting for product safety incidents

1.27.         The ACL contains provisions for a national law on consumer product safety for consumer goods and product related services.  The national consumer product safety law is included in the ACL through Schedule 1 Parts 3-3 and 4-3.

1.28.         The ACL allows the responsible Commonwealth Minister to take certain actions to reduce the risks posed by unsafe consumer goods or product related services, including banning products or imposing standards on their design, construction or labelling, ordering suppliers to recall products or issuing warning notices to the public. 

1.29.         The consumer product safety provisions of the ACL require suppliers to notify the Commonwealth Minister if they become aware that consumer goods or product related services that they have supplied have been associated with a death, serious injury or illness (Schedule 1 Part 3-3 Division 5). 

1.30.         The amendments to the ACL clarify and improve the operation of the mandatory reporting requirement in the ACL.  These amendments:

•        improve the operation of the reporting requirement by amending the reporting triggers;

•        clarify that reports are only required to be made by suppliers who have supplied the specific particular product or service in question;

•        provide suppliers with an exemption from the reporting requirement if they or any other person are already required to report the incident under another law or industry code of practice; and

•        require that information reported be kept confidential except in specified circumstances.

Reporting triggers

1.31.         Section 131 and 132 of the ACL requires suppliers of consumer goods and product-related services to notify the responsible Minister if they become aware that a product has been associated with the death, serious injury or illness of any person.  The terms ‘consumer goods’ and ‘product related services’ are defined in section 2 of the ACL. 

1.32.         The amendments alter the reporting triggers in subsections 131(1) and 131(2) of the ACL so that new subsections 131(1) and 132(1) provide that:

•        where a supplier of a consumer good or product related service becomes aware of a death or serious injury or illness of any person; and

•        the supplier:

-       considers that the accident was caused or may have been caused by the use or foreseeable misuse of their good, or of a consumer good which relates to their service; or

-       becomes aware that another person considers that the accident was caused or may have been caused by the use or foreseeable misuse of their good, or of a consumer good which relates to their service;

then the supplier must report the incident within two days to the responsible Commonwealth Minister.

1.33.         Under new subparagraphs 131(1)(b)(i) and 132(1)(b)(i) of the ACL, the reporting requirement is triggered if a supplier considers a consumer good supplied by them, or a good relating to a product related service supplied by them, was the cause or may have been the cause of a death, serious injury or illness.  The amended provision does not require a supplier to undertake further investigations to make themselves aware of information that they would not otherwise be aware of. 

1.34.         Under new subparagraphs 131(1)(b)(ii) and 132(1)(b)(ii) the reporting requirement will be triggered where a supplier becomes aware that another person considers that their good, or a good related to their service, was the cause or may have been the cause of an accident (new subparagraphs 131(1)(b)(ii) and 132(1)(b)(ii) of the ACL).  For this purpose, ‘another person’ includes any member of the public (such as a consumer). 

Becomes aware

1.35.         A supplier ‘becomes aware’ of a death, serious injury or illness, under new paragraphs 131(1)(b) and 132(1)(b) of the ACL, when they are informed or notified about the accident.  Similarly, under new subparagraphs 131(1)(b)(ii) and 132(1)(b)(ii), a supplier ‘becomes aware’ that another person considers that a good was or may have been the cause of an accident when they receive that information or are notified about it. 

1.36.         A supplier can become aware of information through any avenue or means.  For example, a supplier may become aware of an incident if a consumer complains to the supplier and alleges that they product was or may have been a cause of an incident. 

Causation

1.37.         The amendments clarify the operation of the reporting triggers by replacing the concept of a product being ‘associated with’ an incident, with the concept of an incident being ‘caused by’ a product.  This covers situations that include:

•        where the accident was the result of, or possibly the result of, using the good; and

•        where the accident was the result of, or possibly the result of, misusing the good, and the misuse is reasonably foreseeable.

1.38.         The amended provision does not require a supplier to have established that their product was the cause of an incident before making a report. 

Use and foreseeable misuse

1.39.         Where use or foreseeable misuse of a consumer good is considered by a supplier of that good (or by the supplier of a product related service which the good relates to) to be the cause or possible cause of a death, serious injury or illness — then the supplier must report the incident to the ACCC. 

1.40.         ‘Use’ of a consumer good includes applying the good for its primary, normal or ordinary purpose(s).  Labels, instructions, directions and any other information that may accompany a good may be relevant in determining what the uses are for the good. 

1.41.         A ‘foreseeable misuse’ of a consumer good includes applying the good for a purpose other than its primary, normal or ordinary purpose(s), as long as the misuse is reasonably foreseeable.  Irrelevant is the intention or motivation of the user or whether the good was deliberately or intentionally misused.  Rather what is relevant is whether the misuse is reasonably foreseeable.  For example, placing a toy in one’s mouth, although not a normal or intended use for that type of good is nevertheless reasonably foreseeable where the intended user is a small child.

Suppliers who are required to report

1.42.         Amendments to the ACL clarify who is required to report the necessary information under the mandatory reporting requirement by removing the words ‘of a particular kind’ from paragraphs 131(1)(a) and 132(1)(a) of the ACL.

1.43.         Under new paragraphs 131(1)(a) and 132(1)(a), only suppliers of the consumer good considered to have caused or possibly caused an accident, or of the product related service which the good relates to, are required to provide a report to the ACCC.  Suppliers of similar products or of substitute or competing products are not required to provide a report. 

1.44.         For the purposes of the reporting requirement, suppliers of a consumer good include all participants in the supply chain for that good.  That is, it includes those who were involved in supplying the good in question, such as the manufacturer, retailer, distributor, dealer or importer of the good.   Reporting obligations do not apply to other persons, including competitors.

1.45.         For example, the manufacturer of a bicycle who considers that a bike that he or she manufactured may have caused a serious injury, will be required to report the incident under the mandatory reporting requirement in the ACL.  Other bicycle manufacturers are not required to make a report.  Similarly, the retailer who sold the bicycle will be required to make a report if they believe (for instance, through a consumer complaint) that the bicycle may have caused an accident.

Exemptions

1.46.         In limited circumstances, suppliers may be exempted from making a report under section 131 or 132.  Four exemptions are available and are set out under subsection 131(2) of the ACL for suppliers of consumer goods, and under subsection 132(2) for suppliers of product related services. 

1.47.         The amendments to the ACL alter the operation of the reporting exemptions:

•        to complement amendments to the reporting triggers; and

•        to exempt suppliers from having to report an incident where another person has already done so. 

Suppliers are exempt from reporting an incident to the ACCC if one of the following four specific circumstances exist:

•        where it is clear that the use or foreseeable misuse of a consumer good supplied by them, or of a good relating to a product related service supplied by them, was not the cause of the accident in question (new paragraphs 131(2)(a) and 132(2)(a) of the ACL);

•        where it is very unlikely that the use or foreseeable misuse of a consumer good supplied by them, or of a good relating to a product related service supplied by them, was not the cause of the accident in question (new paragraphs 131(2)(b) and 132(2)(b) of the ACL);

•        where the supplier or another person is already required to report the incident under another law specified in the regulations (new paragraphs 131(2)(c) and 132(2)(c) of the ACL); or

•        where the supplier or another person is already required to report the incident under an industry code of practice specified in the regulations (new paragraphs 131(2)(d) and 132(2)(d) of the ACL). 

Clearly or very unlikely to be the cause

1.48.         Amendments to the ACL ensure that the first two exemptions complement the reporting triggers.  Paragraphs 131(2)(a), 131(2)(b), 132(2)(a) and 132(2)(b) of the ACL provide an exemption where the incident was clearly or very unlikely to have been ‘associated with’ the good in question.  Following amendments to the reporting triggers to replace the words ‘associated with’, with the words ‘caused by’, the exemptions are similarly amended with complementary changes (new paragraphs 131(2)(a), 131(2)(b), 132(2)(a) and 132(2)(b)).

1.49.         For the purposes of relying on the first two exemptions (new paragraphs 131(2)(a), 131(2)(b), 132(2)(a) and 132(2)(b) of the ACL), it is not enough for a supplier to show that their good, or a good relating to a their service, may not have been the cause of the accident in question.  Rather the supplier must have some reason to believe that that use or foreseeable misuse of the good either clearly did not cause, or was very unlikely to have caused, the accident. 

1.50.         For example, where a sporting injury was suffered as a result of rough play on the playing field, the manufacturer of the footwear worn by the injured player at the time of accident could rely on the first or second reporting exemption.

Reporting under another law or industry code

1.51.         Amendments to the ACL provide exemptions to suppliers where either they or any other person is already required to report the incident to a regulator (third and fourth exemption).

1.52.         New paragraphs 131(2)(c), 131(2)(d), 132(2)(c) and 132(2)(d) of the ACL exempt suppliers from having to report if they or another person are already required under a specified law or specified code of practice to report about the same incident to a regulator.  For the purposes of these exemptions, ‘another person’ includes any member of the public who is required, under a specified law or industry code of practice, to report the incident in question.

Confidentiality

1.53.         New subsection 132A(1) of the ACL requires reported information to be treated confidentially and to not be disclosed by any person.  This includes keeping the entire report, or any part of, or any information contained in, the report, confidential. 

1.54.         In specified circumstances, reported information can be disclosed.  New subsections 132A(1) and 132A(2) of the ACL sets out six exemptions to the confidentiality requirement, they are:

•        if the person who made the report has consented for the report or any part of it to not be treated as confidential;

•        if disclosure is by the Commonwealth Minister to another responsible Minister, to the ACCC or to an associate regulator (such as a state or territory consumer agency);

•        if disclosure is by the Commonwealth Minister and the Minister considers that the disclosure is in the public interest (for example, for the purposes of issuing a warning notice to the public on an unsafe good);

•        if disclosure is by:

-       an ACCC staff member to another ACCC staff member, to a staff member of an associate regulator or to an associate regulator; or

-       a staff member of an associate regulator to another staff member, to an ACCC staff member, to the ACCC or to another associate regulator;

•        if disclosure is authorised or required by or under a law (for example, if disclosure is required by court order); or

•        if disclosure is reasonably necessary to enforce the criminal law or a law that imposes a pecuniary penalty.

1.55.         A new definition of ‘associate regulator’ is inserted into section 2 of Schedule 1 of the Bill.  An associate regulator includes another Commonwealth or State or Territory regulatory agency with responsibility for administering the ACL in their jurisdiction. 

Termination of contracts for services that are connected to rejected goods

Consumer has the option of terminating

1.56.         Section 265 of the ACL, as drafted, would have provided that a consumer is taken to have terminated a contract for the supply of services that are connected to certain goods at the time that the consumer elects to receive a refund in respect of those goods when they have been rejected under section 259 of the ACL.  A number of stakeholders raised concerns about the automatic termination of contracts for the supply of services that are connected with rejected goods.  In some circumstances, consumers may wish to retain the benefit of a contract for the supply of services despite having rejected goods that are associated with those services.

1.57.         Amendments to the ACL would replace the automatic termination of contracts for the supply of services with provisions that would provide consumers with the option of cancelling contracts for the supply of services that are connected with rejected goods.

1.58.         The Government amendment to section 265 provides that a consumer may terminate a contract for the supply of services if three conditions are satisfied:

•        the consumer notifies the supplier that they are rejecting the goods under section 259 of the ACL;

•        the supplier is required to give the consumer a refund under paragraph 263(4)(a) of the ACL (in other words, the goods have been validly rejected); and

•        a person supplies services to the consumer that are connected with the rejected goods.

1.59.         The only relevant change in the provision compared to the Bill, as drafted, is from a contract for the supply of services being taken to be terminated to a the provision that allows that a consumer may terminate such a contract. 

1.60.          An example of the application of this provision would be to a contract for the provision of internet access.  The ACL, as drafted, would have provided for the automatic termination of the contract for supply of internet access if a consumer rejected a faulty modem that was supplied by their internet service provider.  The amendment will allow a consumer to retain their internet connection whist rejecting a faulty modem, or rejecting the faulty modem and cancelling the connection, at their option.

Supplier must refund only cost of services not yet consumed

1.61.         Paragraph 265(e) and subsection 269(3) of the ACL, as drafted, would have provided that a consumer is entitled to recover a refund of money paid or other consideration paid or provided for services when they have a right to terminate contracts for the supply of services.  The government amendment clarifies that the requirement to refund money or consideration to consumers is limited to amounts that relate to services yet to be consumed.

1.62.         The amendment limits the amount refunded in respect of services if they have been provided to consumers without any issue or problem.  For example, if a mobile telephone fails to function 22 months into a 24 month contract, the amount refunded (or not charged) in respect of services would relate only to the final two months of the contract.  If services have not been ‘consumed’ because a faulty good connected with the services prevented the consumer from receiving the benefit of the services, the amount refunded might be increased to take that into account.

Definition of ‘unsolicited consumer agreement’

1.63.         Subsection 69(1) of the ACL defines ‘unsolicited consumer agreement’.  Four elements need to be satisfied.  The third element of the test in paragraph 69(1)(c) requires that ‘the consumer did not invite the dealer to come to that place, or to make a telephone call, for the purposes of entering into negotiations relating to the supply of goods or services’.  That provision is silent on the types of conduct that would be sufficient to amount to such an invitation. 

1.64.         The ACL will be amended to clarify that two types of conduct in which consumers may engage are not invitations for the purposes of paragraph 69(1)(c). 

1.65.         New paragraph 69(1A)(a) would provide that a consumer giving his or her name or contact details other than for the predominant purpose of entering into negotiations relating to the supply of goods or services referred to in subsection (1)(c) is not taken to be an invitation for a dealer to come to a place or make a telephone call. 

Example 1.1

An example of the application of this provision includes where a consumer provides their name and contact details for the purposes of entering a competition.  If a dealer subsequently uses those details to contact the consumer to supply them goods or services, the competition entry would not be taken to be an invitation for the dealer to contact the consumer.

1.66.         Paragraph 69(1A)(b) would provide that a consumer contacting a dealer in connection with an unsuccessful attempt by the dealer to contact the consumer is not taken to be an invitation for a dealer to come to a place or make a telephone call.

Example 1.2

Examples of the application of this provision include where:

•        a consumer calls a number on their mobile telephone that appears as a result of a ‘missed call’;

•        a customer calls a dealer in response to a message left by the dealer on the consumer’s answering machine or mobile telephone in relation to the supply of goods or services; and

•        a dealer leaves a ‘calling card’ on the doorstep of the consumer and the consumer uses contact details on the card to contact the dealer.

Minor technical amendments

1.67.         The government amendments also make a number of minor technical amendments to the Bill.  These amendments address drafting issues that have been identified since the Bill was introduced.

1.68.         Subsection 2(2) of the Bill inserts a definition of ‘conduct’ into the ACL.  This provision extends the ordinary meaning of ‘conduct’ to include refusing to do certain things or making it known that certain things will not be done.  This provision is modelled on, and should be given the same meaning as, subsection 4(2) of the TP Act. 

1.69.         Subsection 25(2) of the ACL provides for matters that the Minister must take into consideration when prescribing additional examples of terms that may be unfair.  This provision was inserted into the ACL by the Trade Practices Amendment (Australian Consumer Law) Act 2010 , but omitted from the Bill.  The Government amendment ensures that this subsection is part of the Schedule version of the ACL.

1.70.         Section 88 of the ACL prohibits a supplier from attempting to recover payment from a consumer after an unsolicited consumer agreement has been lawfully terminated.  The Government amendment clarifies that suppliers are not prevented from recovering certain amounts specified in section 85 in the ACL.

1.71.         The government amendments insert a definition of ‘Family Court Judge’ into section 130 of the TP Act.  ‘Family Court Judge’ is defined as a Judge of the Family Court (including the Chief Judge, the Deputy Chief Judge, a Judge Administrator or a Senior Judge).

1.72.         The government amendments substitute section 236 of the ACL for section 82 of the TP Act in section 87CB of the TP Act.  This corrects a minor drafting error in the Bill.

1.73.         The government amendments substitute section 139DA of the TP Act for section 231 of the ACL.  This corrects a minor drafting error in the Bill.

Corrections to the Explanatory Memorandum

1.74.         In clause 5.85 of the Explanatory Memorandum, replace the reference to section 249 with a reference to section 250.

1.75.         In clause 5.89, replace, ‘payment of compensation or exemplary damages’ with ‘or payment of compensation’.

1.76.         In Chapter 16, all references to ‘Part 5-2’ should be replaced with references to ‘Part 5-3’.

1.77.         In clauses 18.17, 18.18, 18.19 and 18.20, references to ‘137K’ should be replaced by ‘137F’.

1.78.         In clause 18.21, replace ‘137L’ with ‘137G’.

1.79.         In clauses 18.22 and 18.23, replace references to ‘137M’ with ‘137H’. 

1.80.         At the end of clause 19.47, insert ‘ [Schedule 2, item 2, Part XI, Division 4, section 133E]’ .