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Standing Committee on Social Policy and Legal Affairs
22/08/2012

HOENIG, Mr Daniel, Director of Policy, Direct Selling Association of Australia

HOLLOWAY, Mr John, Executive Director, Direct Selling Association of Australia

[17:20]

CHAIR: Welcome. I think both you gentlemen have been here throughout the afternoon?

Mr Holloway : Most of it.

CHAIR: Okay. Would either of you like to make an introductory statement before we move on to questions.

Mr Holloway : We have made a formal submission to the inquiry. In summary, we would like to draw on five points. If a register is warranted—and we say that it is not—we question if constitutionally it will reach all doorknockers. If it does not have universal reach, consumers could be misled about the protection in registering their address. If the bill's purpose is to protect the privacy of consumers, this is addressed by all Australian governments in the Australian Consumer Law and Commonwealth privacy regulation. If the bill's real purpose is to protect vulnerable consumers from excessive home selling, this is addressed by all governments in Australia in the Australian Consumer Law.

We say that there is no compelling case for the register and that the register proposal has not faced the rigour of best regulation principles, particularly the economic impact of its market intervention. Door-to-door selling is an established and accepted retail channel, which is likely to expand in coming years. It is used by a small number of our members—notably the iconic Avon brand, which uses independent contractors, the Avon ladies, to distribute its products. An Avon lady is typically unincorporated and conducts business locally. In these circumstances, the proposed register will not apply to the Avon lady. In other words, consumers will need to do more than register their addresses if they do not want a visit from the Avon lady. They will do what they currently do: place a sticker on their door or contact Avon to ensure she knows that she is not welcome at the address. The association says that this practice has worked in the past and with the Australian Consumer Law that is all we need for the future. We simply cannot support the Do Not Knock register. I draw the committees attention to the detail of our submission.

CHAIR: Just to clarify: did you say that the Avon lady is an individual in a contract with Avon? She is never incorporated?

Mr Holloway : Yes. That is not universal. Some distributers are incorporated. The vast majority are unincorporated.

CHAIR: Your position is that constitutionally they would not be covered by the—

Mr Holloway : They are certainly not within the reach of the corporation's power.

CHAIR: Okay.

Mrs MOYLAN: Thank you for your submission. Does the direct sales industry have a self-regulatory scheme, similar to the energy industry, to monitor and improve the door-to-door marketing standards?

Mr Holloway : Our association has operated under a code of practice for decades, which is auspiced to a world federation of direct selling associations and which has 60 national association members. The protection in our code exceeds, in respects, the protection in the Australian Consumer Law.

Mrs MOYLAN: Is there any monitoring of how that code is working?

Mr Holloway : Yes, there is. We have a code administrator who is a retired magistrate and coroner in New South Wales. He is the person that monitors complaints and the performance of members.

Mrs MOYLAN: Thank you.

Mr Holloway : I should also mention that less than a handful of our members are covered by this bill. They simply are not in the door-knocking space. They have moved their models into more of a network marketing or party plan model. We have literally got the Avon example as our lead case.

CHAIR: Can I ask about the Avon? If I have a Do Not Knock sticker on my door, would the Avon lady put something in my mailbox?

Mr Holloway : No, not in your mailbox. It is door-to-door knocking and catalogue drops.

CHAIR: Okay. Do you cover people who distribute flyers for other types of merchandise?

Mr Holloway : We have two members who drop catalogues at doorstops.

CHAIR: Do they drop those catalogues where there is a Do Not Knock sticker?

Mr Holloway : Yes, they would be.

Mr Hoenig : They are not actually knocking on the door.

CHAIR: Would they put it in the mailbox?

Mr Hoenig : Generally, from my understanding, they place it at the door.

CHAIR: But they do not knock on the door?

Mr Hoenig : They do not knock on the door.

CHAIR: They do not see the Do Not Knock as a revoking of their right to enter the property?

Mr Hoenig : If it is an issue of privacy, they are not disturbing anybody's privacy in this respect.

It is dropping a catalogue the re which they will come and collect later.

Mr Holloway : If your question is directed at the law of trespass—

CHAIR: You heard the earlier exchange.

Mr Holloway : Yes, indeed. You would have to say that the implied authority would be revoked by that sticker and, frankly, that would extend to just about any doorknocking in Australia. It is a civil remedy.

CHAIR: I know I am putting you on the spot with that question, but please get back to us on what their practice might be. I know you cannot speak for every Avon lady in the land.

Mr Hoenig : The point is that there are thousands of Avon ladies and hundreds or thousands of other people who undertake this sort of marketing. The vast majority, if not almost all, from our experience, do it in a way that is compatible with not only the Australian consumer law but the spirit of consumer protection.

CHAIR: Can you comment on the training of the door-to-door people? I should not keep saying Avon but let us say your members.

Mr Hoenig : The general membership?

CHAIR: Yes. What training do they provide about consumer law, about the code of practice, about high-pressure sales et cetera?

Mr Holloway : The business model that is used by the bulk of our members is a wholesale model. Our members are literally importing manufactured products which they sell to these distributors, who then onsell to consumers. In legal respects their obligations under the ACL are with the distributor, not with the companies. The companies go out of their way to train and educate the distributors.

CHAIR: In the Avon example, does the Avon lady purchase it?

Mr Holloway : Yes. It is a wholesale model.

CHAIR: So she buys the products—

Mr Holloway : And onsells the product.

CHAIR: Does she buy them before she meets her customers?

Mr Holloway : She takes orders and then places the orders.

CHAIR: So she has an offer.

Mr Holloway : Correct.

CHAIR: So in terms of knowledge of Australian consumer law, how is that provided?

Mr Holloway : Through the companies. They do not have to do it but they do because obviously their brand is very important to them and relations they have with consumers are very important because it is a relationship industry. If they have not got that personal relationship working, they simply do not have repeat sales.

CHAIR: And that person might not get the Avon licence. I assume they get a geographic patch.

Mr Holloway : It varies between companies. Avon does have a geographical base.

CHAIR: To maintain that patch you have to have certain competencies and a certain number of complaints, I assume.

Mr Holloway : The Avon brand is very important to Avon, so they go out of their way to make sure that customer relations are what they should be.

CHAIR: In terms of that constitutionality, you are comfortable with the Australian consumer law. You heard me ask that earlier question.

Mr Holloway : We are not comfortable with all the Australian consumer law. We said is a very good thing—

Mr Hoenig : The vast majority of it is an excellent piece of legislation. But not all of it.

CHAIR: How does your industry handle complaints? Is it kept in the silo of the company, like Avon, or does it go to a peak body? How is it done?

Mr Holloway : In the context of the development of the Australian Consumer Law this became quite a point as to what level of complaints there was about our members. We could not out of the regulatory authorities throughout Australia establish what the level was, although we suspect it is very small. The complaint base to the Direct Selling Association is relatively small and, frankly, I think that comes down to the way complaints are managed within the companies. Our complaint experience is very small.

CHAIR: You have got a lot of small and micro businesses. Do you know of any of them that are particularly targeting Aboriginal communities and Torres Strait Islander communities? You might have heard the earlier evidence.

Mr Holloway : No.

CHAIR: You do not know or they are not.

Mr Holloway : I have been there since 2007 and I have not heard it raised since I have been there. I do not know from what I have read in the organisation of it having occurred in the past. I am aware of the issues that have occurred more broadly within the Indigenous communities, particularly in Cape York. I heard a reference earlier today to first aid kits. The association does not for one moment suggest that does not happen in Australian retailing. There is no question about that.

CHAIRMAN: What about migrant populations? Have you heard of a group targeting a product to a particular group of migrants or people with a non-English-speaking background?

Mr Holloway : We have members that focus within particular ethnic areas, distributors and customers. For example, one of our members is very heavily committed to the Chinese community. That is just a market driver, there is nothing untoward and targeted.

CHAIR: Their products probably have information in Mandarin or the like.

Mr Holloway : The bulk of the dialogue, as I understand it, is in Asian languages.

CHAIR: So the language is not a hurdle there.

Mr Hoenig : No.

CHAIR: Thank you very much for taking the time to appear. I understand you have travelled here today and I appreciate you taking the time.

Mr Holloway : Thank you. Can I add one last thing. We have heard about widespread complaints and widespread problems. While it is acknowledged that there are issues and there are many people potentially out there who could be doing the wrong thing, the ACCC's own report provides that the problem is miniscule.

CHAIR: It certainly seems to be miniscule where there is strong self-regulation. I know you are here today as evidence of strong self-regulation.

Mr Hoenig : Even looking at the total number of sales or contacts that they estimate in the report at 1.3 million, they have identified roughly 895 complaints, if you look at page 74 and 75 of their own report. Even if you triple, quadruple, 10 times that number in terms of people who may be vulnerable and who may be affected, we are talking very small numbers.

CHAIR: Of known complaints.

Mr Hoenig : I understand that.

CHAIR: We have also had evidence today from the Victorian Ombudsman of that many in one quarter in one sector in Victoria.

Mr Hoenig : I understand that, but what I am saying is that, if you separate energy or even if you include energy, we are still talking about very small numbers of not only complaints but of issues. Any of those are still a problem. I want to say that any of those to our industry if it is happening by our members or people who operate in a similar way is a problem. The way the ACCC quite rightly are doing their work is to educate and to enforce. We support that. But they are not calling for further legislation and neither do we.

CHAIR: The flipside of that argument is that if you are targeting the vulnerable, the people who cannot speak up, by its very nature they are not going to speak up to the ACCC. You have to have a fair understanding of consumer law to know how the ACCC operates. So it might not be on the mind of everyone in Woorabinda to go and track down the ACCC and make a complaint.

Mr Hoenig : My issue is that this register will not make that happen either. If you are a scam artist and you are looking to target vulnerable consumers, you are hardly likely to be checking a government register to check whether someone is on there or not.

CHAIR: You have my point earlier about the 99. The rogue is not going to be worried by this Do Not Knock register.

Mr Hoenig : That is the issue. The only people affected by this are going to be the people who are looking to stick to the current laws and looking to do the right thing, not the people who are not looking to do the right thing and not going to be worried by this at all. It is not to go near them.

CHAIR: They will strike and move on and be gone.

Mr Hoenig : So this will be completely ineffective, their proposal.

Mr Holloway : Can I make one last point. The claim that the register will not have any financial impact is just plain wrong. We just looked at some figures of ACMA. In June 2009 ACMA estimated the direct cost of operating the Do Not Call register over four years was over $10 million and with costs increasing it estimated the need to cost-recover $2.8 million in 2010-11. This did not include further expenditure of $4.7 million from 2009-2010 to 2012-13 to widen the scope of the register. So to suggest no financial impact is wrong. That is a financial impact to the operation of the register but the financial impact on those that have to comply, those that have to watch lists and everything, is going to be extraordinary. There is no financial analysis of that been done.

CHAIR: According to Mr Hoenig's evidence, the one per cent of rogues will not be paying the money anyway.

Mr Holloway : Precisely.

Resolved (on motion by Ms Moylan):

That the committee authorises publication of the proof transcript of evidence given before it at the public hearing today, including publication on the parliamentary electronic database.

Committee adjourned at 17:36