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Title: Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010
Database: Explanatory Memoranda

Date: 10-02-2012 05:21 PM
Source: House of Reps
System Id: legislation/ems/r4335_ems_8a3cd823-3c1b-4892-b9e7-081670404057

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

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2009-2010

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

Trade practices amendment

(Australian Consumer Law) bill (No.2) 2010

EXPLANATORY MEMORANDUM

(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 Preliminary matters....................................................... 19

Chapter 2 Introduction.................................................................... 21

Chapter 3 Misleading or deceptive conduct................................ 35

Chapter 4 Unconscionable conduct............................................. 41

Chapter 5 Unfair contract terms.................................................... 57

Chapter 6 Unfair practices.............................................................. 77

Chapter 7 Consumer Guarantees.............................................. 177

Chapter 8 Unsolicited selling...................................................... 211

Chapter 9 Lay-by sales................................................................. 233

Chapter 10 Safety of consumer goods and product related services......................................................................... 241

Chapter 11 Information standards................................................ 279

Chapter 12 Liability of manufacturers for goods with safety defects........................................................................... 289

Chapter 13 Offences....................................................................... 303

Chapter 14 Enforcement................................................................ 317

Chapter 15 Remedies..................................................................... 329

Chapter 16 Country of origin representations............................ 361

Chapter 17 Application of the Australian Consumer Law........ 373

Chapter 18 Commonwealth enforcement and administration 385

Chapter 19 Administration and enforcement of consumer product safety.............................................................. 395

Chapter 20 Liability of suppliers and credit providers................ 427

Chapter 21 Infringement notices.................................................. 435

Chapter 22 Amendments to Part IVB of the TP Act................... 445

Chapter 23 Regulation Impact Statement: The Australian Consumer Law — Reforms based on best practice in State and Territory consumer laws.......................... 455

Chapter 24 Regulatory Impact Statement: The Australian Consumer Law — Aspects of the new national product safety law....................................................... 565

Chapter 25 Regulatory Impact Statement: The Australian Consumer Law — A national consumer guarantees law................................................................................. 595

Index........................................................................................................... 637

Do not remove section break.

G lossary

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

*Abbreviation*	*Definition*
ACCC	Australian Competition and Consumer Commission
ACL	Australian Consumer Law
ACL Bill or Bill	Trade Practices Amendment (Australian Consumer Law) Bill (No. 2) 2010
Applied ACL	Applied Australian Consumer Law
ASIC Act	Australian Securities and Investments Commission Act 2001 (Cth)
CC Act	Competition and Consumer Act 2010
Corporations Act	Corporations Act 2001 (Cth)
Corporations law	The ASIC Act and the Corporations Act 2001 (Cth)
COAG	Council of Australian Governments
Federal Court	Federal Court of Australia
first ACL Bill	Trade Practices Amendment (Australian Consumer Law) Bill 2009
FT Act or FT Acts	State and Territory Fair Trading Legislation, including Fair Trading Act 1987 (New South Wales), Fair Trading Act 1999 (Victoria), Fair Trading Act 1989 (Queensland), Fair Trading Act 1987 and Consumer Transactions Act 1972 (South Australia), Fair Trading Act 1987 and Consumer Affairs Act 1971 (Western Australia), Fair Trading Act 1990 (Tasmania), Fair Trading Act 1987 and Fair Trading (Consumer Affairs) Act 1973 (Australian Capital Territory) and Consumer Affairs and Fair Trading Act 1990 (Northern Territory).

*Abbreviation*	*Definition*
IGA	Intergovernmental Agreement for the Australian Consumer Law signed on 2 July 2009 by COAG
LI Act	Legislative Instruments Act 2003 (Cth)
MCCA	Ministerial Council on Consumer Affairs
NPA	National Partnership Agreement to Deliver a Seamless National Economy
PC	Productivity Commission
Regulators	The ACCC and the consumer agencies of the States and Territories, including: NSW Office of Fair Trading, Consumer Affairs Victoria, Queensland Office of Fair Trading, Department of Commerce — Consumer Protection (Western Australia), Office of Consumer and Business Affairs (South Australia), Department of Justice — Consumer Affairs and Fair Trading (Tasmania), Department of Justice — Consumer Affairs (Northern Territory) and Department of Justice and Community Safety — Office of Regulatory Services — Fair Trading (Australian Capital Territory)
TP Act	Trade Practices Act 1974 (Cth)

G eneral outline and financial impact

Outline

The Trade Practices Amendment (Australian Consumer Law) Bill 2010 (the ACL Bill) is a Bill for an Act to amend the Trade Practices Act 1974 (TP Act) to complete the initial text of the Australian Consumer Law (ACL), to make related amendments to the TP Act, the Australian Securities and Investments Commission Act 2001 (ASIC Act), the Corporations Act 2001 (Corporations Act) and to make consequential amendments to other Commonwealth Acts.

The ACL Bill will deliver the agreements of the Council of Australian Government (COAG) made on July 2008 and October 2008, to create a single national consumer law for Australia, including a national product safety law. The Trade Practices Amendment (Australian Consumer Law) Bill 2009 (first ACL Bill) will implement the first tranche of these reforms.

The first ACL Bill creates a new Part XI of the TP Act, which makes provision for the application, administration and amendment of the ACL. The text of the ACL is contained in Schedule 2 of the TP Act. The first ACL Bill will also implement the new national unfair contract terms law.

The measures in the ACL Bill complete the initial text of the ACL by:

â¢ incorporating the fair trading and consumer protection provisions of the TP Act into the ACL, including unfair contract terms and provisions implementing enhanced enforcement powers, penalties and redress options;

â¢ creating a national legislative scheme for consumer product safety, to replace the existing Commonwealth, State and Territory regulatory schemes;

â¢ creating a national legislative scheme for statutory consumer guarantees, to replace the existing Commonwealth and State and Territory legislation concerning implied conditions and warranties in consumer transactions; and

â¢ augmenting the fair trading and consumer protection provisions of the TP Act with changes drawn from existing provisions of the consumer laws of the States and Territories, as agreed by the Ministerial Council on Consumer Affairs (MCCA) at its meeting on 4 December 2009.

The ACL Bill also creates an infringement notice regime that will apply to specified provisions of the ACL. The infringement notice regime will be a law of the Commonwealth but may used as the basis for provisions in the application Act of a State or Territory to complement enforcement of the ACL in that jurisdiction. The infringement notice provisions are not included in the ACL as some States have their own State-wide infringement notice schemes.

In addition, the ACL Bill implements other measures:

â¢ changing the name of the TP Act to the Competition and Consumer Act 2010 (CC Act) and making necessary consequential changes to the TP Act and other Acts;

â¢ amending the consumer protection provisions of the ASIC Act and Corporations Act, where relevant, to maintain consistency with the ACL;

â¢ providing for Commonwealth-specific enforcement and administrative provisions, to enable Commonwealth agencies and judicial bodies to enforce the ACL as a law of the Commonwealth; and

â¢ making changes to the enforcement powers for Part IVB of the TP Act, which implements key elements of the Australian Government’s response to the Parliamentary Joint Committee on Corporations and Financial Services inquiry Opportunity not opportunism: improving conduct in Australian franchising .

The Australian Consumer Law

Legislative arrangements for the administration and enforcement of the ACL are provided in Part XI of the TP Act. The text of the ACL is contained in Schedule 2 of the TP Act. Currently, the ACL contains only the provisions relating to unfair contract terms.

On 2 July 2009, COAG signed the Intergovernmental Agreement for the Australian Consumer Law (IGA). The IGA sets out the arrangements for creating the initial text of the ACL, as well as procedures for future changes to the ACL by agreement of the Australian, State and Territory Governments.

The Bill completes the text of the ACL, in accordance with the requirements of the IGA. Under the IGA, the ACL is to commence on 1 January 2011.

The IGA requires that the ACL is based on the fair trading and consumer protection provisions of the TP Act, modified as agreed by MCCA.

The TP Act fair trading and consumer protection provisions comprise:

â¢ Part IVA (unconscionable conduct);

â¢ Part V (consumer protection);

â¢ Part VA (liability of manufacturers and importers for defective goods);

â¢ Part VC (offences); and

â¢ relevant parts of Part VI (enforcement and remedies).

At its meeting on 4 December 2009, MCCA agreed to amendments to the TP Act fair trading and consumer protection provisions to be included in the ACL. MCCA also agreed to include in the ACL some fair trading and consumer protection provisions that currently exist in the FT Acts of the States and Territories only.

The ACL is a generic law that applies to all sectors of the economy. However, separate laws dealing with financial products and services are necessary, due to constitutional issues relating to the States’ referral of those powers under the Corporations Agreement 2002 . The IGA requires the Commonwealth to enact changes to the investor protection provisions of the ASIC Act and, to the extent necessary, the Corporations Act, to ensure that they are consistent with the ACL. This Bill enacts changes to the ASIC Act and Corporations Act, consistent with the objectives of the IGA.

Commonwealth, State and Territory industry-specific legislation will continue to apply in some areas to the extent that it does not duplicate or is inconsistent with the ACL. Under the IGA, the Australian Government and the governments of the States and Territories are to repeal or modify any laws which duplicate or are inconsistent with the ACL.

MCCA will commence a process of reviewing existing sector-specific laws to remove inconsistent or duplicative provisions following commencement of the ACL.

Administration and enforcement

In October 2008, COAG agreed that the ACL will be administered jointly by the Australian Governments and the governments of the States and Territories.

Through the Standing Committee of Officials of Consumer Affairs, the Australian Competition and Consumer Commission (ACCC), the Australian Securities and Investments Commission (ASIC) and the State and Territory offices of fair trading (regulators) are developing a Memorandum of Understanding (MOU) and supporting frameworks to guide coordinated administration of the ACL.

New Zealand’s Ministry of Economic Development and Commerce Commission will also participate in the MOU to facilitate greater coordination of consumer law administration and enforcement between Australia and New Zealand.

Product safety

The ACL Bill creates a national consumer product safety regulatory regime as part of the ACL.

The national consumer product safety provisions in the ACL replace the product safety provisions in Part V, Division 1A of the TP Act and equivalent provisions in State and Territory FT Acts.

Product safety law and regulation differs between jurisdictions. In broad terms current Commonwealth, State and Territory consumer product safety laws are similar and allow governments to:

â¢ regulate the supply of products that pose a risk to consumers, through the imposition of mandatory standards for the design, manufacture and labelling of such products;

â¢ prohibit outright the supply of products that pose a risk to consumers, through the imposition or interim or permanent bans; and

â¢ monitor or direct recalls of consumer products that have already been supplied.

Under the ACL, permanent product bans and mandatory safety standards will only be able to be made to apply nationally. This ensures that product safety concerns that are identified in one jurisdiction can be addressed consistently on a national basis.

Individual State and Territory Ministers retain the ability to issue interim bans and to conduct recalls. Interim bans and recalls are temporary regulatory measures that usually need to be implemented rapidly after a consumer safety hazard is identified.

As is the case with the other provisions of the ACL, the national product safety law is to be administered jointly by the ACCC and the State and Territory regulators.

The product safety provisions of the ACL implement a number of recommendations made by the Productivity Commission (PC) in its Review of the Australian Consumer Product Safety System , including:

â¢ expanding the scope of product safety regulation to cover services related to the supply, installation or maintenance of consumer goods in all jurisdictions;

â¢ allowing product safety standards, bans and recalls to be put in place where a reasonable foreseeable use, or misuse, may render an otherwise safe product dangerous;

â¢ allowing regulators to undertake product recalls directly where no supplier can be found; and

â¢ requiring suppliers to report serious product incidents to regulators.

The ACL Bill also streamlines the operation of the temporary exemption process for product bans and standards under the Mutual Recognition Agreement and the Trans-Tasman Mutual Recognition Agreement .

In addition to the legislative reforms contained in the ACL Bill, MCCA charged the ACCC and State and Territory product safety agencies with implementing a number of non-legislative reforms to the product safety framework. These reforms include:

â¢ creating a hazard identification system based on a clearing house approach;

â¢ creating a national system for exchange of consumer product safety complaint information;

â¢ establishing an internet based consumer product safety ‘one stop shop’;

â¢ undertaking a review of existing recall guidelines to determine how recalls might be improved;

â¢ developing guidelines for encouraging suppliers to explain to consumers and retailers how they can notify the supplier of unsafe products; and

â¢ moving to a ‘hazard focused’, rather than ‘product focused’ approach to developing mandatory safety standards.

These non-legislative reforms will be implemented throughout 2010 in time for commencement of the ACL on 1 January 2011.

Consumer guarantees

The ACL Bill provides for statutory consumer guarantees that will apply uniformly across Australia. Statutory consumer guarantees replace conditions and warranties that were implied into contracts by the TP Act and FT Acts.

The ACL provides consumers with the following guarantees in respect of supplies of goods:

â¢ a guarantee that the supplier has the right to sell the goods;

â¢ a guarantee that goods are free from any undisclosed security;

â¢ a guarantee that the consumer will have undisturbed possession of the goods;

â¢ a guarantee that goods are of ‘acceptable quality’;

â¢ a guarantee that goods are fit for a purpose that the consumer makes known to the supplier;

â¢ a guarantee that goods match their description or a sample;

â¢ a guarantee that spare parts and facilities for the repair of goods are reasonably available for a reasonable period; and

â¢ a guarantee that any express warranty is complied with.

The ACL provides the following guarantees in respect of supplies of services:

â¢ a guarantee that the services are carried out with due care and skill;

â¢ a guarantee that services are fit for a purpose made known to the supplier; and

â¢ a guarantee that services are provided within a reasonable time.

The ACL sets out the remedies that are available to consumers when goods or services fail to meet consumer guarantees. The appropriate remedy varies depending on whether a failure to comply with a guarantee is major or not major, but generally includes refunds, repairs and replacements. Damages are also available against suppliers and manufacturers in certain circumstances.

Offences, enforcement and remedies

The ACL contains a single set of enforcement powers, penalties, remedies and redress provisions applicable to breaches of the consumer protection provisions, which will apply nationally and in each State and Territory.

These provisions allow for:

â¢ court-enforceable undertakings to allow administrative resolution with the regulator for minor breaches;

â¢ injunctions to restrain conduct or require something to be done;

â¢ damages to redress loss or damage caused by a breach;

â¢ non-punitive orders such as orders for community service;

â¢ punitive orders — adverse publicity orders, which require a person to publish particular information;

â¢ compensatory orders to allow compensation for breaches of the ACL;

â¢ civil pecuniary penalties of up to $1.1 million for bodies corporate and $220,000 for persons other than a body corporate for breaches of many provisions of the ACL;

â¢ disqualification orders to prevent a person from managing a corporation;

â¢ substantiation notices to allow a regulator to assess claims relating to goods or services;

â¢ infringement notices to allow regulators to issue a penalty that a person can (but does not have to) pay to avoid liability to further court action;

â¢ redress provisions allowing regulators to seek redress for consumers that are not identified as a party to proceedings to receive redress such as refunds or variation of contract; and

â¢ public warning notices for regulators to warn the public about conduct.

These enforcement powers, penalties and remedies apply to the majority of the provisions in the ACL. Each enforcement, penalty or remedy provision identifies those other provisions of the ACL to which it applies.

Many of the consumer protection provisions have corresponding criminal offences with maximum fines of up to $1.1 million for bodies corporate and $220,000 for persons other than a body corporate.

Product safety

The ACL includes an enhanced market surveillance and enforcement framework for the new national product safety law. The framework recognises the greater role of the responsible Commonwealth Minister and the ACCC will play under the national product safety law as well as the focus of product safety regulatory activity on proactively removing hazardous products from the marketplace. Product safety market surveillance enforcement powers include the power to:

â¢ enter premises to which the public has access in order to inspect, take photographs of, or purchase any consumer goods or product related services;

â¢ require a person who supplies consumer goods or product related services in trade or commerce, to provide the ACCC or the Minister with information, documents or evidence about those goods or services; and

â¢ enter premises under a search warrant, or without a warrant in cases where the occupier has consented or there is an immediate danger to life or public safety, and exercise search-related powers.

Amendments that do not form part of the ACL

Amendments to facilitate administration and enforcement of the ACL by the Commonwealth

Schedule 2 of the Bill provides Commonwealth-specific administrative and enforcement provisions. These provisions relate to:

â¢ procedures to be followed by the ACCC when undertaking investigations or bringing proceedings for alleged breaches of the ACL;

â¢ rules to be followed by Commonwealth Courts in conducting proceedings or making findings or awards in respect of the ACL; and

â¢ saving of State and Territory laws and equitable and common law principles, where appropriate.

Similar provisions may be included in State and Territory ACL application legislation, as required.

Schedule 2 of the Bill provides for an infringement notice scheme in respect of specified provisions of the ACL.

In Schedule 5 of the Bill, the short title of the TP Act is changed to the Competition and Consumer Act 2010 . The long title of the CC Act is changed to ‘An Act relating to competition, fair trading and consumer protection, and for other purposes’.

In Schedules 5 and 6, consequential amendments are made to the CC Act and other Acts to reflect this and to alter references to sections of the TP Act that are repealed and replaced by sections in the ACL.

Amendments to the corporations law

Separate laws dealing with financial products and services are necessary, due to constitutional issues relating to the States’ referral of powers to regulate those matters under the Corporations Agreement 2002 .

Part 2, Division 2 of the ASIC Act currently contains consumer protection provisions in respect of financial services. Schedule 4 of the ACL Bill amends certain provisions of the ASIC Act to maintain consistency with the ACL.

In addition, Schedule 4 of the ACL Bill makes some amendments to the Corporations Act to facilitate the disqualification of persons from managing corporations, in respect of breaches of the ACL.

Government response to the Parliamentary Joint Committee on Corporations and Financial Services

The ACL Bill implements a strengthened enforcement and redress regime for industry codes of conduct prescribed under Part IVB of the TP Act.

These measures were announced in the Australian Government’s response to the Parliamentary Joint Committee’s franchising inquiry and comprise:

â¢ substantiation notices for suspected breaches of prescribed industry codes;

â¢ public warning notices for repeated or serious breaches of prescribed industry codes;

â¢ non-party redress where there has been a breach of a prescribed industry code; and

â¢ a random audit power to allow the ACCC to inspect documents or records required to be kept pursuant to a prescribed industry code.

The ACCC is responsible for enforcing industry codes prescribed under Part IVB.

Part IVB of the TP Act does not form part of the ACL.

Date of effect : The ACL Bill will commence on different dates for different purposes.

Sections 1 to 3 of the ACL Bill and the remaining provisions of the Bill not included in Schedules 1 to 7 commence on the day of Royal Assent.

Schedules 1 to 5, Schedule 6, items 1 to 46, Schedule, items 48 to 141, Schedule 6, items 143 to 191 and Schedule 7 commence on the later of 1 January 2011 or the commencement of Schedule 1 of the Trade Practices Amendment (Australian Consumer Law) Bill 2009 (the first ACL Bill). The first ACL Bill is currently before the Parliament.

The remaining items of Schedule 6 commence either on the date of the commencement of the remainder of Schedule 6, or a later date, to be determined by reference to the passage of other legislation.

The Australian, State and Territory governments have agreed, in accordance with the National Partnership Agreement to Deliver a Seamless National Economy (NPA), to enact the ACL as a law of each f their respective jurisdictions by 1 January 2011.

Proposal announced : On 2 October 2008, the COAG agreed to a new consumer policy framework comprising a single national consumer law, having agreed to develop a national consumer law on 3 July 2008.

In so doing, COAG based its decision on the proposals of MCCA, which were announced on 15 August 2008.

At its meeting on 4 December 2009, MCCA agreed to the final form of the ACL.

Financial impact : This Bill has no significant financial impact on Commonwealth expenditure or revenue at this time.

Compliance cost impact : Moderate. The ACL Bill applies regulatory provisions and concepts in a single national law, drawing on Commonwealth and State and Territory laws that exist in only some jurisdictions presently.

Four Regulation Impact Statements (RIS) have been prepared in respect of measures included in the ACL. All four of these RISs were considered by MCCA in the context of developing the ACL.

â¢ Framework and unfair contract terms . This RIS examined recommendations made by the Productivity Commission in its Review of Australia’s Consumer Policy Framework . These recommendations form the basis of the ACL.

The measures considered in this RIS will be implemented by first ACL Bill and the RIS is published in the explanatory memorandum to that Bill.

â¢ Reforms based on best practice in State and Territory consumer laws . This RIS examined measures intended to modify or augment the existing consumer protection provisions of the TP Act, based on existing best practice provisions in State and Territory consumer laws. These reforms are of two types: those that which create a single, simplified national law; and those which draw on best practice in State and Territory laws.

The full text of this RIS is included at Chapter 23.

â¢ Product safety . This RIS examines the case for implementing legislative recommendations made by the Productivity Commission in its Review of the Australian Consumer Product Safety System .

The full text of this RIS is included at Chapter 24.

A separate RIS was prepared in May 2008 to support the agreement of MCCA to create a national product safety system.

â¢ Consumer guarantees . This RIS examines the case for implementing the findings of the Commonwealth Consumer Affairs Advisory Committee’s report Consumer rights: Reforming statutory implied conditions and warranties .

The full text of this RIS is included at Chapter 25.

Summary of regulation impact statement

Regulation Impact: Reforms based on best practice in State and Territory laws

Impact:

Moderate. This Bill establishes a single, national consumer law framework and, in doing so, promotes consistency and protections across all Australian jurisdictions. This framework will reduce multi-jurisdictional complexities and result in lower compliance costs for businesses operating nationally. Once implemented, major parts of 17 jurisdictional laws dealing with generic consumer protections will be reduced to one law, substantially reducing business compliance costs.

There will be a transitional cost for these businesses as they adjust to the operation of the new, national regime and, specifically, to the new unfair contract terms provisions.

The compliance cost in relation to the new penalties, enforcement and consumer redress powers will be minimal, as these provisions provide for additional powers to deal with existing breaches of, or the investigation of suspected breaches of, the ACL and the new unfair contract terms provisions. Once the ACL takes effect, there will be common national enforcement powers covering all of Australia’s consumer law agencies.

The publication of national guidance on subjects under the ACL, developed jointly by the ACCC and the State and Territory regulators (and, where appropriate, ASIC), will assist business in compliance with the ACL.

Once the initial period of implementation is completed, ongoing compliance with the ACL will not impose significantly greater costs on businesses, as they should already comply with provisions in the ACL as they are either similar to existing laws or the same as existing national, State and Territory obligations.

Main points:

â¢ The PC estimated that the implementation of a national consumer law could result in benefits to Australian consumers of between $1.5 billion and $4.5 billion a year.

â¢ Businesses will benefit from consistent national regulation, which will reduce complexity and compliance costs by eliminating significant jurisdictional variation. This will provide:

- savings for businesses currently operating nationally;

- incentives for expansion and innovation for businesses previously unwilling to deal with the complexity of multi-jurisdictional regulation;

- greater incentives for new entrants to markets due to a simpler regulatory framework;

- greater clarity and certainty in relation to consumer law, allowing for more efficiency in the markets;

- easier understanding of consumer contracts and greater opportunities for exercising choice when considering consumption possibilities; and

- greater consistency in enforcement for businesses and a realignment of resources as more emphasis can be placed on effective enforcement by the most appropriate consumer law agency.

â¢ Consumers will also benefit from the changes through:

- greater confidence in dealing with businesses due to more consistent laws;

- easier understanding of consumer contracts and greater opportunities for exercising choice when considering consumption possibilities;

- greater confidence in dealing with businesses due to greater consistency in the enforcement of these laws; and

- lower prices for goods and services to the extent that businesses pass on the benefits of lower compliance costs to their customers.

Regulation Impact: Product Safety

Impact : Moderate. This measure affects suppliers of consumer goods or product related services, to the extent that they are required to comply with a consumer safety order (such as a safety standard, ban or recall) or a reporting requirement. The consumer safety provisions of the ACL are modelled on the current product safety provisions of the TP Act and State and Territory FT Acts.

Where a supplier is already required to comply with a similar safety requirement in respect of a good or service, the additional compliance costs, if any, associated with a safety order made under the national consumer law will be minimal. Separate regulatory impact analysis must be undertaken on a case-by-case basis before bans, standards or recalls can be issued under the ACL.

Main points :

â¢ Product safety regulatory actions impose requirements only on suppliers where particular consumer goods or product related services are judged to pose a risk of injury.

â¢ The ACL will create a single national set of product safety standards and permanent bans that will apply in all jurisdictions.

Reasonable foreseeable use or misuse

â¢ Incorporating the concept of ‘reasonably foreseeable use or misuse’ into the threshold tests for imposing safety bans and recalls may impose additional compliance burdens on suppliers as bans and recalls will no longer be confined to circumstances where the primary, normal or intended use of a good creates a risk of injury. Suppliers will also have to consider the possibility that an improper or unintended use or misuse of the goods, which is foreseeable, may pose a risk of injury.

Product related services

â¢ Where applicable, the consumer safety provisions of the ACL extend to cover product related services. Suppliers of such services would incur compliance costs, but only if the services they supply are of the kind to which a safety order relates.

â¢ Suppliers of services required to comply with requirements under industry-specific regulation would need to continue observing those requirements, together with any extra requirement in a safety order made under the generic consumer safety provisions of the ACL, with the more industry-specific requirement prevailing to the extent of any inconsistency between the two requirements.

Mandatory reporting

â¢ The requirement for suppliers to report incidents where consumer goods or product related services have been associated with death or serious injury would impact on suppliers only to the extent that they become aware of incidents within their ordinary course of business. This provision does not require suppliers to gather information they would not otherwise have gathered.

Regulator-led recalls

â¢ Where regulators undertake a recall directly, there would be no compliance cost impact on businesses. Rather this measure will help manage consumer expectations and concerns about unsafe goods where no supplier of the goods can be found.

Regulation Impact: Consumer Guarantees

Impact : Moderate. This measure affects businesses that supply goods or services to consumers. The obligations imposed upon such businesses are similar to those that apply under pre-existing law. Compliance costs for business are expected to be reduced under a national system of consumer guarantees, when compared to laws that imply conditions and warranties that vary slightly across each jurisdiction within Australia. This is especially the case for suppliers who trade in more than one State or Territory of Australia.

Main points:

â¢ Statutory consumer guarantees provide consumers with a basis for seeking redress when goods or services do not meet the standards that they are entitled to expect.

â¢ Statutory consumer guarantees replace conditions and warranties that were implied into contracts by the TP Act and the FT Acts. The substantive rights and obligations under statutory consumer guarantees are broadly similar to those that were implied under pre-existing laws.

â¢ Implied conditions and warranties are difficult for consumers and businesses to understand, leading to confusion, increased disputation and increased costs.

â¢ Statutory consumer guarantees will be more readily understood by businesses and consumers since archaic terms, such as ‘merchantable quality’, will be replaced and, in some instances, defined, when previously the meaning of these terms was determined only by judicial pronouncement.

â¢ Remedies applicable to consumer guarantees are set out in the ACL. Previously, businesses and consumers required an understanding of remedies under the law of contract to effectively apply implied conditions and warranties to their particular situation. By setting out the applicable remedies, the ACL will reduce costs for businesses and consumers when they seek to assert, or defend, their rights.

C hapter 1

Preliminary matters

Outline of chapter

1.1 The ACL Bill changes the long title and short title of the Trade Practices Act 1974 (TP Act).

Context of amendments

1.2 On 24 June 2009, the Minister for Competition Policy and Consumer Affairs announced that the name of the TP Act will be changed to the Competition and Consumer Act 2010.

Detailed explanation of new law

Competition and Consumer Act 2010

1.3 The long title of the TP Act is changed from ‘An Act relating to certain Trade Practices’ to ‘An Act relating to competition, fair trading and consumer protection, and for other purposes’. [Schedule 5, item 1]

1.4 The short title of the TP Act is changed from ‘ Trade Practices Act 1974 ’ to ‘Competition and Consumer Act 2010’. [Schedule 5, item 2]

Application and transitional provisions

1.5 The ACL commences on the later of 1 January 2011 or the commencement of Schedule 1 of the Trade Practices Amendment (Australian Consumer Law) Bill 2009 (the first ACL Bill). The first ACL Bill is currently before the Parliament. [Section 2]

Consequential amendments

1.6 Consequential amendments are made to the CC Act and a wide range of Commonwealth Acts which refer to the TP Act by name, or to sections of the TP Act which are now repealed and replaced by sections of the applied ACL as a law of the Commonwealth. [Schedule 5, items 1 to 129 and Schedule 6, items 1 to 191]

C hapter 2

Introduction

Outline of chapter

2.1 The Australian Consumer Law (ACL) includes definitions, application and miscellaneous provisions in Chapter 1.

Context of amendments

2.2 At its meeting on 4 December 2009, the Ministerial Council on Consumer Affairs (MCCA), agreed to the final form of the ACL.

2.3 The provisions of the ACL Bill build upon the first ACL Bill. The first ACL Bill creates the ACL as a schedule to the TP Act and introduced unfair contract terms regulation into the schedule. The first ACL Bill also introduces a range of penalties, enforcement and redress provisions into the TP Act.

2.4 The first ACL Bill makes similar amendments to the Australian Securities and Investments Commission Act 2001 (ASIC Act), to maintain consistency between the consumer protection provisions of the TP Act and ASIC Act.

2.5 The States and Territories are able to apply schedule version of the ACL, containing only the unfair contract terms provisions, as laws of their jurisdictions from 1 July 2010, if they choose to do so.

Summary of new law

2.6 Chapter 1 of the ACL covers the defined terms and other definitions that are relied on throughout the ACL.

Detailed explanation of new law

Definitions

2.7 The ACL applies to the extent provided by Part XI of the CC Act or a State or Territory’s application law. [Schedule 1, item 1: Chapter 1, section 1]

2.8 Section 2 of the ACL defines terms that are relevant to the understanding, interpretation and application of the provisions of the ACL. [Schedule 1, item 1: Chapter 1, section 2]

2.9 These terms are explained in the context of the provisions in which they are used, as they are discussed in this explanatory memorandum.

The meaning of ‘consumer’

2.10 For many purposes the provisions of the ACL apply to all persons and are not limited to a defined class of consumers. However, for some purposes, provisions apply with respect to a defined class of consumer on the basis that it is not appropriate to extend the protection afforded by the relevant provision more broadly.

2.11 A reference to a supply of goods or services to a consumer in the ACL, is a reference to a supply to a person who is taken to have acquired them as a consumer within the meaning of section 3 of the ACL. [Schedule 1, item 1: Chapter 1, subsection 3(5)]

2.12 The definition of a consumer is relevant to the following provisions in the ACL:

â¢ consumer guarantees; [Schedule 1, item 1: Chapter 3, Part 3-2, Division 1]

â¢ unsolicited consumer agreements; [Schedule 1, item 1: Chapter 3, Part 3-2, Division 2]

â¢ lay-by sales agreements; [Schedule 1, item 1: Chapter 3, Part 3-2, Division 3]

â¢ the provision of itemised bills; [Schedule 1, item 1: Chapter 3, Part 3-2, Division 4, section 101]

â¢ the definition of continuing credit contracts ; [Schedule 1, item 1: Chapter 1, section 14]

â¢ linked credit contracts. [Schedule 1, item 1: Chapter 5, Part 5-5, Division 1]

2.13 The use of the term consumer in the unconscionable conduct provisions of Part 2-2 of the ACL [Schedule 1, item 1: Chapter 2, Part 2-2] is not linked to the definition of consumer in section 3. A consumer for the purposes of the unconscionable conduct provisions is the other person to whom a person supplies or will possibly supply with goods and services. [Schedule 1, item 1: Chapter 2, Part 2-2, section 21(1)]

2.14 The definitions of consumer good in section 2 and consumer contract in section 23 of the ACL are couched in similar terms to the definition of consumer in section 3, but are not subject to that definition.

2.15 The definition of non-party consumer in section 2 of the ACL is not defined by reference to the definition of consumer in section 3.

2.16 The definition establishes when a person is a consumer, which is determined by reference to the nature of the goods or services acquired or to be acquired. [Schedule 1, item 1: Chapter 1, section 3] The concept of consumer is defined separately with respect to the supply of goods and the supply of services.

2.17 A person is taken to have acquired goods as a consumer if:

â¢ the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption [Schedule 1, item 1: Chapter 1, paragraph 3(1)(a)] . This is an objective assessment based on the nature and usual purpose of the goods; or

â¢ the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads [Schedule 1, item 1: Chapter 1, paragraph 3(1)(b)] . Neither ‘vehicle’ nor ‘trailer’ is defined in section 2 of the ACL or elsewhere in the ACL. The question of whether a vehicle or trailer is acquired as a consumer is determined subjectively with reference to the actual purpose for which the vehicle or trailer were acquired.

2.18 A person is taken not to have acquired goods as a consumer if the person acquired the goods, or held himself or herself out as acquiring the goods for commercial purposes, including for the purpose of:

â¢ re-supply; or

â¢ using them up in the course of trade or commence.

[Schedule 1, item 1: Chapter 1, subsection 3(2)]

2.19 A person is taken to have acquired services as a consumer if, and only if, the services were of a kind ordinarily acquired for personal, domestic or household use or consumption. [Schedule 1, item 1: Chapter 1, subsection 3(3)]

2.20 With regard to the interpretation of goods or services ‘of a kind ordinarily acquired for personal, domestic or household use or consumption’ the jurisprudence relating to section 4B of the TP Act is relevant.

2.21 There is a rebuttable presumption that a person is a consumer with respect to the acquisition or possible acquisition of goods and services. Where a claimant has alleged that he or she is 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. [Schedule 1, item 1: Chapter 1, section 3]

Misleading representations with respect to future matters

2.22 Section 4 of the ACL includes a provision that replaces section 51A of the TP Act. It places an evidentiary burden on a defendant who is alleged to have made a representation as to a future matter that is misleading. When compared to section 51A, the new provision seeks to clarify that [Schedule 1, item 1: Chapter 1, section 4]

â¢ the burden of proof under this section is evidentiary in nature and does not place a legal burden on defendants to prove that representations were not misleading;

â¢ satisfying the burden of proof under this section does not constitute a substantive defence for breach of any other section of the ACL; and

â¢ the section can operate in proceedings against accessories to contraventions as well as primary contraveners.

2.23 The clarification of the burden as requiring only evidence of reasonable grounds to be adduced is to reverse the effect of some past court decisions, such as Australian Competition & Consumer Commission v IMB Group Pty Ltd ^{^[1]} , that have interpreted section 51A of the TP Act as requiring a respondent to prove that he, she or it had reasonable grounds.

2.24 In certain cases, Section 51A of the TP Act was interpreted in such a way to, by implication, provide that proving reasonable grounds is a substantive defence to an allegation of misleading conduct. ^{^[2]} To reverse the effect of such decisions, section 4 of the ACL states explicitly that it does not imply that a representation as to a future matter is not misleading merely because the person had reasonable grounds for making the representation.

2.25 Section 51A of the TP Act has been interpreted to not allow the provision to apply to alleged accessories to a contravention because it was worded as to require the ‘corporation’ to adduce evidence ^{^[3]} . Section 4 of the ACL reverses the effect of such decisions to allow its application to accessories.

2.26 The drafting of section 4 of the ACL clarifies the operation of this provision and ensures that it has the effect of facilitating the presentation of evidence to the court when a representation of a future matter is alleged to be misleading. [Schedule 1, Item 1: Chapter 1, section 4]

2.27 Section 12BB of the ASIC Act is in the same terms as section 51A of the TP Act. The changes made to section 51A for the purposes of its inclusion in the ACL have been mirrored in the ASIC Act. [Schedule 3, Item 6: section 12BB] .

When donations are treated as supplies or acquisitions

2.28 For the purposes of the provisions of the ACL except those concerning the safety of consumer goods and product related services [Schedule 1, item 1: Chapter 3, Part 3-3] , information standards [Schedule 1, item 1: Chapter 3, Part 3-4] and offences relating to safety of consumer goods and product related services [Schedule 1, item 1: Chapter 3, Part 4-3] a donation is not treated as a supply of the goods unless the donation of the goods is for promotional purposes. Nor is the receipt of a donation of goods or services treated as an acquisition of those goods or services unless the donation is for promotional purposes. Neither ‘donation’ nor ‘promotional purposes’ are defined specifically in the ACL. [Schedule 1, item 1: Chapter 1, Subsection 5(1)]

2.29 For the purposes of the provisions of the ACL concerning the safety of consumer goods and product related services [Schedule 1, item 1: Chapter 3, Part 3-3] , information standards [Schedule 1, item 1: Chapter 3, Part 3-4] and offences relating to safety of consumer goods and product related services [Schedule 1, item 1: Chapter 3, Part 4-3] any donation is treated as a supply of the goods and the receipt of a donation of goods or services is treated as an acquisition of those goods or services. [Schedule 1, item 1: Chapter 1, Subsection 5(2)]

Related bodies corporate

2.30 It is recognised that, for the purposes of the ACL, there are many potential applications of the Law that could be:

â¢ avoided or frustrated unless the activities of all corporations forming part of a corporate group are treated in the same way and taken together; or

â¢ may apply inconsistently or inappropriately if the activities of a corporate group are not recognised and treated accordingly.

2.31 The ACL imports the meaning of related bodies corporate from section 4A(5) of the CC Act [Schedule 1, item 1: Chapter 1, Subsection 6(1)] Subsection 4A(5) of the CC Act deems a body corporate to be related to another body corporate where the first-mentioned body corporate is:

â¢ the holding company of another body corporate;

â¢ a subsidiary of another body corporate; or

â¢ a subsidiary of the holding company of another body corporate.

2.32 For the purposes of the ACL, it is presumed that bodies corporate are not related to each other. [Schedule 1, item 1: Chapter 1, Subsection 6(1)]

2.33 The provisions are relevant to circumstances in which a body corporate is either subject to an obligation or a liability under the ACL.

2.34 With regard to the interpretation of ‘related bodies corporate’ the jurisprudence relating to section 4A of the TP Act is relevant. Further guidance on the interpretation of concepts associated with the concept of a ‘body corporate’ may be found in the Corporations Act and related jurisprudence.

The meaning of ‘manufacturer’

2.35 The meaning of manufacturer is relevant to the consumer guarantees [Schedule 1, item 1: Chapter 3, Parts 3-2 and 5-4] , liability of manufacturers for defective goods [Schedule 1, item 1: Chapter 3, Part 3-5] and country of origin representations [Schedule 1, item 1: Chapter 1, Part 5-3] of the ACL.

2.36 The meaning of manufacturer in section 7 of the ACL draws on the definition of ‘manufactured’ is the repealed section 74A of the TP Act. The jurisprudence relating to that definition may be relevant to the interpretation or understanding of the meaning of manufacturer under the ACL, insofar as those provisions are similar.

2.37 The meaning of manufacturer encompasses a wide range of activities that that represent the first point in the chain of distribution of a product into an Australian market, whether directly by a person or in that person’s name or brand.

2.38 For the purposes of the ACL, the activities of a manufacturer include:

â¢ the activities of a person (being the manufacturer for these purposes) of growing, extracting, producing, processing or assembling the goods. [Schedule 1, item 1: Chapter 1, paragraph 7(1)(a)] These activities encompass a very wide range of agricultural, mining, forestry, fishing and aquacultural, manufacturing, product assembly, trade, craft and artisanal activities.

â¢ the activities of a person (being the manufacturer for these purposes) who holds himself or herself out to the public as the manufacturer of the goods. [Schedule 1, item 1: Chapter 1, paragraph 7(1)(b)] This covers, among other things, a range of activities that relate to the activities of importers and agents and entities acting as the local representative of manufacturers.

â¢ the activities of a person (being the manufacturer for these purposes) who causes or permits the name of the person, a name by which the person carries on business or a brand or mark of the person to be applied to goods supplied to the person. [Schedule 1, item 1: Chapter 1, paragraph 7(1)(c)] This covers, among other things, a range of activities that relate to the activities of importers and agents and entities acting as the local representative of manufacturers.

â¢ the activities of a person (the ‘first person’, being the manufacturer for these purposes) who causes or permits another person, in connection with the supply or possible supply, or the promotion of the supply, of the goods, to hold out the first person to the public as the manufacturer of the goods. [Schedule 1, item 1: Chapter 1, paragraph 7(1)(d)] This covers, among other things, a range of activities that relate to the activities of importers and agents and entities acting as the local representative of manufacturers.

â¢ the activities of a person (being the manufacturer for these purposes) who imports goods into Australia if that person is not the actual manufacturer of the goods and, at the time of the importation of the goods, the manufacturer does not have a place of business in Australia. [Schedule 1, item 1: Chapter 1, paragraph 7(1)(e)] ‘Import’ is not specifically defined for the purposes of the ACL.

2.39 A person is taken to have associated their name or brand with a product if their name, brand or mark is:

â¢ woven in, impressed on, worked into or annexed or affixed to the goods;

â¢ it is applied to a covering, label, reel or thing in or with which the goods are supplied. [Schedule 1, item 1: Chapter 1, paragraph 7(2)(a)]

2.40 It is presumed for the purposes of the ACL that if a person’s name, brand or mark is applied to goods, then that person caused their name, brand or mark to be so applied. [Schedule 1, item 1: Chapter 1, paragraph 7(2)(b)]

2.41 If goods are imported into Australia on behalf of a person, that person is taken to have imported the goods. [Schedule 1, item 1: Chapter 1, subsection 7(3)]

Goods affixed to land or premises

2.42 For the purposes of the ACL, goods are taken to be supplied to a consumer (within the meaning of section 3) even if they are affixed to land or premises at the time of the supply. Goods supplied in relation to another transaction, for example the transfer of an interest in a property, are subject to the ACL for certain purposes. This could include, for example, kitchen or laundry fittings supplied as part of a home construction contract, which would otherwise become fixtures at the time of their installation. [Schedule 1, item 1: Chapter 1, section 8]

The meaning of ‘safety defect’ in relation to goods

2.43 The meaning of safety defect is relevant to the provisions of the ACL dealing with the liability of manufacturers for goods with safety defects. [Schedule 1, item 1: Chapter 5, Part 5-3]

2.44 The general test for the existence of a safety defect in a good is whether the safety of the goods is not such as persons generally are entitled to expect. [Schedule 1, item 1: Chapter 1, subsection 9(1)]

2.45 The concept of safety or what a person is generally entitled to expect is not defined. However the provision sets out a non-exhaustive set of principles to which a court or tribunal may have regard in determining this question. [Schedule 1, item 1: Chapter 1, subsection 9(2)]

2.46 The question of whether a good has a safety defect is an absolute, rather than relative, proposition and must be determined with reference to the state of scientific or technical knowledge that existed at the time the goods were supplied. The ACL provides that an inference is not to be made that a good has a safety defect only because:

â¢ after they were supplied by their manufacturer, safer goods of the same kind were supplied; or

â¢ the goods complied with a Commonwealth mandatory standard that was not the safest possible standard having regard to the latest state of scientific or technical knowledge. [Schedule 1, item 1: Chapter 1, subsections 9(3) and 9(4)]

Asserting a right to payment

2.47 The meaning of asserting a right to payment is relevant to the provisions of the ACL relating to asserting a right to payment for unsolicited goods or services, and unauthorised directory entries or advertisements. [Schedule 1, item 1: Chapter 3, Part 3-1, Division 2, sections 40 and 43] [Chapter 4, Part 4-1, Division 2, sections 162 and 163]

2.48 A person is taken to assert a right to payment from another person if the person takes some action with a view to obtaining payment from the other person. Such actions could include:

â¢ making a demand for payment or asserting a present or future right to payment for the goods or services;

â¢ threatening to commence legal proceedings with a view to obtaining payment;

â¢ placing or causing to be placed the name of the person on a list of defaulters or debtors, or threatening to do so, with a view to obtaining payment;

â¢ invoking or causing to be invoked any other collection procedure, or threatening to do so, with a view to obtaining payment;

â¢ sending any invoice or other document that:

- states the amount of the payment (to which a right to payment is asserted); or

- sets out the price of unsolicited goods or unsolicited services (to which a right to payment is asserted); or

- sets out the charge for placing, in a publication, an entry of advertisement (to which a right to payment is asserted),

and does not contain a statement, to the effect that the payment is not an assertion of a right to payment, that complies with any requirements prescribed by the regulations. [Schedule 1, item 1: Chapter 1, subsection 10(1)]

2.49 Regulations specifying the requirements for statements concerning the assertion of rights to payment have not yet been prepared.

2.50 An invoice or other document purporting to have been sent by or on behalf of a person is taken to have been sent by that person unless the contrary is established. [Schedule 1, item 1: Chapter 1, subsection 10(2)]

ASIC Act

2.51 A provision in similar terms to section 10 of the ACL is included in the ASIC Act. Section 12BEA of the ASIC Act deals with the meaning of asserting a right to payment in the context of financial services and products. [Schedule 3, item 8: section 12BEA]

References to acquisition, supply and re-supply

2.52 Section 11 of the ACL is relevant to the many provisions of the ACL covering conduct concerning the acquisition, supply or re-supply of goods and services. It draws on section 4C of the CC Act, which will continue to apply only for the purposes of the CC Act, and not the ACL. The jurisprudence relating to section 4C may be relevant to the interpretation or understanding of the meaning of section 11 of the ACL, insofar as those provisions are similar.

2.53 For the purposes of the ACL:

â¢ a reference to the acquisition of goods includes a reference to the acquisition of property in, or rights in relation to, goods pursuant to a supply of the goods; and

â¢ a reference to the supply or acquisition of goods or services includes a reference to agreeing to supply or acquire goods or services; and

â¢ a reference to the supply or acquisition of goods includes a reference to the supply or acquisition of goods together with other property or services, or both; and

â¢ a reference to the supply or acquisition of services includes a reference to the supply or acquisition of services together with property or other services, or both; and

â¢ a reference to the re-supply of goods acquired from a person includes a reference to:

- a supply of the goods to another person in an altered form or condition; and

- a supply to another person of goods in which the first-mentioned goods have been incorporated; and

â¢ a reference to the re-supply of services (the ‘original services) acquired from a person (the ‘original supplier’) includes a reference to:

- a supply of the original services to another person in an altered form or condition; and

- a supply to another person of other services that are substantially similar to the original services, and could not have been supplied if the original services had not been acquired by the person who acquired them from the original supplier.

[Schedule 1, item 1: Chapter 1, section 11]

2.54 The purpose of this provision is to make clear the circumstances in which transactions may be covered by the ACL.

Application of Schedule in relation to leases and licenses of land and buildings

2.55 This provision is relevant to any provision of the ACL that applies to a contract which involves a lease of, or licence in respect of, land or a building. It clarifies that any reference to a contract includes a reference to a lease of, or licence in respect of, land or a building, regardless of whether there are express references to leases or licences in the provisions of the ACL). [Schedule 1, item 1: Chapter 1, section 12]

2.56 Similarly, a reference to making or entering into a contract for such a lease or licence refers to granting or taking the lease or licence, and a reference to a party to a contract in respect of such a lease or licence includes any person bound by, or entitled to the benefit of, any provision contained in the lease or licence.

Loss or damage to include injury

2.57 For the purposes of the ACL, references to ‘loss or damage’ includes injury. [Schedule 1, item 1: Chapter 1, subsection 13(a)] Injury includes bodily or personal injury and may extend to other forms of harm.

2.58 A reference to the amount of any loss or damage includes a reference to damages in respect of any injury. [Schedule 1, item 1: Chapter 1, subsection 13(b)]

2.59 ‘Loss and damage’ is not defined for the purposes of the ACL.

Continuing credit contract

2.60 Section 12 of the ACL provides, for the purposes of the provisions of the ACL dealing with liability of suppliers and credit providers [Schedule 1, item 1: Chapter 5, Part 5-5] , that a continuing credit contract is one where:

â¢ a creditor agrees to provide credit for goods or services (either supplied by the creditor or another person) or cash paid to the consumer or another person;

â¢ they have an arrangement or course of dealing; and

â¢ the amounts owing and paid are kept in accounts for the purposes of the arrangement or dealing. [Schedule 1, item 1: Chapter 1, subsection 14(1)]

2.61 Where the credit relates to goods, services or cash provided by another person, the creditor is taken to have provided credit to the consumer even though the payments were not to the consumer. [Schedule 1, item 1: Chapter 1, subsection 14(2)]

Contraventions of the ACL

2.62 Conduct covered by:

â¢ the voiding of a unfair contract term under section 23(1) of the ACL;

â¢ a failure to honour the consumer guarantees set out in Division 1 of Part 3-2; or

â¢ a failure to meet obligations under the provisions dealing with the liability of manufacturers for goods with safety defects in Part 3-5,

are not contraventions of the ACL. [Schedule 1, item 1: Chapter 1, section 15]

Severability

2.63 A provision in a contract which causes that contract to contravene the ACL, is severable from that contract. The concept of severability means that the contract remains valid and enforceable otherwise than in relation to the particular provision, so far as it can be without that provision. [Schedule 1, item 1: Chapter 1, subsection 16(1)]

2.64 Where an order made under a provision of Part 5-2, Division 4 of the ACL applies to a contract, the rule created by section 16 of the ACL applies subject to those orders. [Schedule 1, item 1: Chapter 1, subsection 16(2)] Part 5-2, Division 4 covers a wide range of potential remedies for breaches of the ACL that may, among other things, include variations to provisions in a contract.

References to provisions in the ACL

2.65 A reference to a section in the ACL is a reference to that section only, and cannot be taken to be a reference to the same numbered section in the CC Act or any other Act, unless otherwise provided for. [Schedule 1, item 1: Chapter 1, section 17]

C hapter 3

Misleading or deceptive conduct

Outline of chapter

3.1 The ACL contains a general prohibition against misleading and deceptive conduct in trade or commerce.

Context of amendments

3.2 The ACL includes a provision to replace the prohibition on misleading or deceptive conduct currently set out in section 52 of the TP Act , without substantive change. A similar prohibition is in the FT Acts of the States and Territories in substantially the same form as section 52 of the TP Act.

3.3 The only change made in including the prohibition in the ACL is to apply the prohibition to ‘a person’ rather than ‘a corporation’. This reflects the broader application of the ACL.

3.4 The jurisprudence associated with the understanding and interpretation of section 52 of the TP Act and the equivalent provisions in State and Territory fair trading laws is still relevant.

Summary of new law

3.5 Subsection 18(1) of the ACL provides that a person must not, in trade or commerce, engage in misleading or deceptive conduct or conduct that is likely to mislead or deceive. This is a general prohibition, which creates a norm of business conduct in the market.

3.6 Section 19 of the ACL provides that the provisions relating to misleading or deceptive conduct do not apply to an information provider if the information provider made a publication in the course of carrying on a business of providing information, unless the publication is related directly to the business activities of the person publishing the notice.

Comparison of key features of new law and current law

New law

Current law

Engaging in misleading or deceptive conduct is prohibited.

Engaging in misleading or deceptive conduct is prohibited in section 52 of the TP Act. Provisions in essentially the same form as section 52 of the TP Act exist in the FT Acts of the States and Territories, namely:

Section 42 NSW FT Act

Section 9 Vic. FT Act

Section 38 Qld FT Act

Section 56 SA FT Act

Section 10 WA FT Act

Section 14 Tas. FT Act

Section 12 ACT FT Act

Section 42 NT FT Act

The prohibition of misleading or deceptive conduct does not apply to an information provider if the information provider made the publication in the course of carrying on a business of providing information, unless the publication is:

â¢ an advertisement;

â¢ in connection with the supply of certain goods or services; or

in connection with the sale or grant of certain interests in land, or the promotion of such a sale or grant.

A similar provision is contained in section 65A of the TP Act and section 12DN of the ASIC Act. Provisions with the same effect as section 65A of the TP Act exist in the FT Acts of the States and Territories, namely:

Section 60 NSW FT Act

Section 32 Vic. FT Act

Section 51 Qld FT Act

Section 63 WA FT Act

Section 74 SA FT Act

Section 28 Tas. FT Act

Section 31 ACT FT Act

Section 60 NT FT Act

Detailed explanation of new law

3.7 Section 18(1) of the ACL prohibits a person from engaging in conduct in trade or commerce that is:

â¢ misleading and deceptive; or

â¢ likely to mislead or deceive.

[Schedule 1, item 1: Chapter 2, Part 2-1, subsection 18(1)]

3.8 Section 18(2) provides that the application of section 18(1) is not (and cannot be) limited by the operation of a provision in Chapter 3, Part 3-1, which prohibits specific unfair practices, and the provisions may apply concurrently. [Schedule 1, item 1: Chapter 2, Part 2-1, subsection 18(2)]

3.9 The provisions of the ACL apply to all persons — whether they are individual persons or bodies corporate — as it will be a law both of the Commonwealth and of each State and Territory. Section 131 of the CC Act applies the ACL to the conduct of corporations. [Schedule 3, item 1: section 131]

3.10 The prohibition on misleading or deceptive conduct creates a broad norm of conduct in the market. A finding that the prohibition is proven according to the relevant standard of proof does not result in exposure to a criminal sanction or civil penalty under the ACL. Rather, such a finding exposes the person who has breached the provision to the wide range of remedies available under Chapter 5, Part 5-2 of the ACL, including redress for non-party consumers. [Schedule 1, item 1: Chapter 5, Part 5-2]

3.11 Section 18 of the ACL replaces the repealed section 52 of the TP Act. The substance of the drafting of the prohibition has not been changed, other than changing the reference to ‘a corporation’ to ‘a person’. Accordingly, t he well-developed jurisprudence relating to section 52 of the TP Act is relevant to the interpretation or understanding of the meaning and application of section 18 of the ACL.

3.12 Section 18 of the ACL applies to conduct ‘in trade or commerce’. ‘Trade or commerce’ is defined as meaning ‘trade or commerce within Australia, or between Australia and places outside Australia, and includes any business or professional activity (whether or not carried on for profit)’. The ACL applies to conduct engaged in outside of Australia, provided that at least some aspect of the trading relationship between two or more parties has taken place in Australia. [Schedule 1, item 1: Chapter 1, section 2]

3.13 The High Court has found, for the purposes of section 52 of the TP Act, that ‘trade or commerce’ includes conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial nature. ^{^[4]}

3.14 ‘Misleading or deceptive’ is not defined for the purposes of the ACL. The High Court has found that, for conduct to be misleading or deceptive, the conduct must either induce error or be capable of inducing error. ^{^[5]}

3.15 Section 18 of the ACL does not specify a requirement for intention on the part of the person engaged in the conduct to be shown. The High Court has found that intention is not a requirement for a person to have engaged in misleading or deceptive conduct. ^{^[6]}

3.16 Section 18 of the ACL refers only to ‘conduct’ which is misleading or deceptive or is likely to mislead or deceive. The High Court has found that the ambit of ‘conduct’ is not limited to a positive action or representation, and that silence can be considered misleading or deceptive in certain circumstances. ^{^[7]}

Enforcement and remedies

3.17 The following enforcement powers and remedies apply to section 18 of the ACL:

â¢ undertakings; [Schedule 1, item 1: Chapter 5, Part 5-1, Division 1]

â¢ substantiation notices; [Schedule 1, item 1: Chapter 5, Part 5-1, Division 2]

â¢ public warning notices; [Schedule 1, item 1: Chapter 5, Part 5-1, Division 3]

â¢ injunctions; [Schedule 1, item 1: Chapter 5, Part 5-2, Division 2]

â¢ damages; [Schedule 1, item 1: Chapter 5, Part 5-2 ,Division 3]

â¢ compensatory orders; [Schedule 1, item 1: Chapter 5, Part 5-2, Division 4, Subdivision A]

â¢ redress for non-parties; and [Schedule 1, item 1: Chapter 5, Part 5-2, Division 4, Subdivision B]

â¢ non-punitive orders [Schedule 1, item 1: Chapter 5, Part 5-2, Division 5, section 246]

3.18 For further information on these powers, remedies and penalties generally see Chapters 14 and 15.

Information providers

3.19 The prohibition in section 18 of the ACL does not apply to publications by an information provider, where the information provider made the publication in the course of carrying on a business of providing information or, in the case of a radio or television broadcaster, the publication was by radio or television broadcast by the information provider. This exemption does not apply to:

â¢ advertisements;

â¢ a publication in connection with the supply (or promotion of the supply) of goods or services by the information provider; or

â¢ a publication in connection with the sale or grant (or promotion of the sale or grant) of an interest in land by the information provider.

[Schedule 1, item 1: Chapter 2, Part 2-1, section 19]

3.20 Section 19 of the ACL operates in the same way as the repealed subsections 65A(1) and (2) of the TP Act, and the jurisprudence on the understanding, interpretation and application of those provisions is relevant to section 19.

3.21 In particular, subsections 19(3) and (4) have been drafted in such a way as to maintain the High Court’s interpretation of section 65A of the TP Act in ACCC v Channel Seven Brisbane Pty Limited [2009] HCA 19. In that case, the High Court held that the second exception applies for publications made on behalf of, or pursuant to a contract, arrangement or understanding with a person who supplies goods or services, rather than for publications made in connection with relevant goods or services in relation to the information provider. The exceptions have a wide application rather than a narrow one. [Schedule 1, item 1: Chapter 2, Part 2-1, subsections 19(2)-(4)]

3.22 Information provider is defined expansively for the purposes of the ACL in subsections 19(5) and (6), and includes media organisations such as radio and television stations (including the Australian Broadcasting Corporation and the Special Broadcasting Service Corporation), as well as publishers of newspapers and magazines. This definition operates in the same way as the one in the repealed subsection 65A(3) of the TP Act. [Schedule 1, item 1: Chapter 2, Part 2-1, subsections 19(5) and (6)]

ASIC Act

3.23 Section 12DN of the ASIC Act is repealed and replaced by a new provision which reflects section 19 of the ACL. [Schedule 3, item 29: section 12DN]

Application and transitional provisions

3.24 The ACL commences on the later of 1 January 2011 or the commencement of Schedule 1 of the Trade Practices Amendment (Australian Consumer Law) Bill 2009 (the first ACL Bill). The first ACL Bill is currently before the Parliament. [Section 2]

3.25 Chapter 2, Part 2-1 applies to all relevant conduct occurring in trade or commerce on or after 1 January 2011.

3.26 Conduct occurring prior to 1 January 2011 will remain subject to the repealed (and saved, for those purposes) provisions in the TP Act or the relevant FT Act of a State or Territory. [Schedule 7, item 6]

3.27 The TP Act, as in force immediately before the commencement of the ACL, continues to apply to or in relation to any proceedings under or in relation to that Act, which were commenced, but not concluded, before that commencement. [Schedule 7, item 7]

3.28 The Governor-General may make regulations prescribing matters of a transitional, application or saving nature in relation to the amendments and repeals made by the Schedules to this Act. [Schedule 7, item 12]

Consequential amendments

3.29 References to provisions of the TP Act in other CC Act provisions and provisions of other Acts will be consequentially amended to refer to provisions of the ACL to ensure that the affected provisions continue to apply in the way in which they did under the TP Act. [Schedules 5 and 6]

C hapter 4

Unconscionable conduct

Outline of chapter

4.1 The Australian Consumer Law (ACL) includes provisions prohibiting persons from engaging in unconscionable conduct towards consumers or businesses.

Context of amendments

4.2 Part IVA of the Trade Practices Act 1974 (TP Act) prohibits corporations from engaging in unconscionable conduct.

4.3 There are three substantive prohibitions currently in Part IVA:

â¢ section 51AA prohibits unconscionable conduct within the meaning of the unwritten law of the States and Territories;

â¢ section 51AB prohibits conduct in connection with the supply of goods or services to ‘consumers’ that is, in all the circumstances, unconscionable; and

â¢ section 51AC prohibits conduct in connection with the supply of goods or services to a ‘business consumer’, or in connection with the acquisition of goods or services from a ‘small business supplier’, that is, in all the circumstances, unconscionable.

4.4 Section 51AB was first inserted into the TP Act in 1986, section 51AA was inserted in 1992 and 51AC was inserted in 1998.

4.5 Every State and Territory has similar provisions to 51AB in their FT Acts. Western Australia, Victoria and Tasmania also have equivalents to section 51AC and Victoria also has an equivalent to section 51AA.

4.6 Since 1988, the TP Act unconscionable conduct provisions have been mirrored in Part 2, Division 2, Subdivision C of the Australian Securities and Investments Commission Act 2001 (ASIC Act), which applies in respect of financial services.

4.7 Section 51AA defines unconscionable conduct by reference to the unwritten law from time to time of the States and Territories.

4.8 While, the meaning of unconscionable conduct in the current sections 51AB and 51AC of the TP Act is based in the equitable doctrine, statutory guidance is provided to the courts by lists of factors set out in those sections. These factors are not an exhaustive list, but are specific factors to which the court may have regard in making a decision about whether unconscionable conduct has occurred.

4.9 In accordance with the Intergovernmental Agreement for the Australian Consumer Law (IGA), the TP Act unconscionable conduct provisions will be included in the ACL.

Future changes to statutory unconscionable conduct

4.10 In December 2008, the Senate Standing Committee on Economics (Senate Committee) released an inquiry report into the need, scope and content of a definition of unconscionable conduct for the purposes of Part IVA of the TP Act. The Senate Committee recommended:

â¢ a clarifying amendment to ensure that section 51AC applies to the behaviour of parties under a contract, in addition to their behaviour during the process of agreeing the terms of the contract;

â¢ that the Government further consider the need for a guiding statement of principles in the law, with particular regard to the retail tenancy leasing and franchising industries; and

â¢ that the Australian Competition and Consumer Commission (ACCC) should undertake targeted investigation and funding of unconscionable conduct test cases.

4.11 An amendment giving effect to the first recommendation of the Senate Committee is included in section 22(2)(j) of the ACL.

4.12 On 5 November 2009, the Australian Government released its response to the Senate Committee. The Government agreed to a clarifying amendment to the 51AC, along the lines of that recommended by the Senate Committee. The Government also established an expert panel to consider:

â¢ whether a list of examples of unconscionable conduct should be incorporated into the TP Act; and

â¢ the case for amendments to strengthen the Franchising Code of Conduct.

4.13 The expert panel reported to the Government in February 2010 and on 3 March 2010, the Government responded to the expert panel’s report. The Government has announced that it will:

â¢ insert a statement of interpretative principles into the provisions; and

â¢ redraft sections 51AB and 51AC to either harmonise or unify them.

4.14 No amendments to implement the Government’s response to the expert panel report are included in the ACL Bill. The Government has announced that it will implement its response through separate legislative amendments to be introduced later in 2010 and in cooperation with the States and Territories.

Summary of new law

4.15 Part 2-2 of the ACL includes prohibitions against a person engaging in unconscionable conduct.

4.16 The concept of ‘unconscionable conduct’ is not defined for the purposes of the ACL. However:

â¢ section 20 provides that conduct that is unconscionable within the unwritten law of the States and Territories, from time to time, is unconscionable for the purposes of the ACL;

â¢ section 21 provides a non-exhaustive list of types of conduct which may be unconscionable in the context of a business’s dealings with consumers; and

â¢ section 22 provides two non-exhaustive lists of types of conduct that may be unconscionable in the context of a business’s dealings with other businesses, either as a customer or a supplier to those businesses.

4.17 The inclusion of a prohibition on unconscionable conduct within the ACL ensures that consumers and businesses are able to access a range of remedies under the ACL, and that regulatory agencies are able to access penalties under the ACL, in addition to any remedies courts may provide under the common law or the principles of equity.

4.18 The unconscionable conduct provisions also guide the courts’ application of the common law and equitable principles of unconscionable conduct in the context of consumer and business interactions that take place during the course of trade or commerce.

Comparison of key features of new law and current law

*New law*	*Current law*
A person must not, in trade or commerce, engage in unconscionable conduct within the meaning of the unwritten law.	Section 51AA of the TP Act prohibits a corporation, in trade or commerce, from engaging in unconscionable conduct within the meaning of the unwritten law of the States and Territories. Section 12CA of the ASIC Act prohibits a person, in trade or commerce, from engaging in conduct in relation to financial services that is unconscionable within the meaning of the unwritten law of the States and Territories. Section 7 of the Vic FT Act prohibits a person, in trade or commerce, from engaging in unconscionable conduct within the unwritten law.

New law

Current law

A person must not, in trade or commerce, engage in unconscionable conduct within the meaning of the unwritten law.

Section 51AA of the TP Act prohibits a corporation, in trade or commerce, from engaging in unconscionable conduct within the meaning of the unwritten law of the States and Territories.

Section 12CA of the ASIC Act prohibits a person, in trade or commerce, from engaging in conduct in relation to financial services that is unconscionable within the meaning of the unwritten law of the States and Territories.

Section 7 of the Vic FT Act prohibits a person, in trade or commerce, from engaging in unconscionable conduct within the unwritten law.

*New law*	*Current law*
A person must not, in trade or commerce, in connection with the supply or possible of goods or services to another person, engage in conduct which is in all the circumstances unconscionable.	Section 51AB of the TP Act provides that a corporation, in trade or commerce, must not in relation to the supply or possible supply of goods or services to a person, engage in conduct which is in all the circumstances unconscionable. Section 12CB of the ASIC Act provides that a person must not, in trade or commerce, in connection with the supply or possible supply of financial services to a person, engage in conduct that is, in all the circumstances, unconscionable. Section 43 of the NSW FT Act Section 8 of the Vic. FT Act Section 39 of the Qld FT Act Section 11 of the WA FT Act Section 57 of the SA FT Act Section 15 of the Tas. FT Act Section 13 of the ACT FT Act Section 43 of the NT CAFT Act

New law

Current law

A person must not, in trade or commerce, in connection with the supply or possible of goods or services to another person, engage in conduct which is in all the circumstances unconscionable.

Section 51AB of the TP Act provides that a corporation, in trade or commerce, must not in relation to the supply or possible supply of goods or services to a person, engage in conduct which is in all the circumstances unconscionable.

Section 12CB of the ASIC Act provides that a person must not, in trade or commerce, in connection with the supply or possible supply of financial services to a person, engage in conduct that is, in all the circumstances, unconscionable.

Section 43 of the NSW FT Act

Section 8 of the Vic. FT Act

Section 39 of the Qld FT Act

Section 11 of the WA FT Act

Section 57 of the SA FT Act

Section 15 of the Tas. FT Act

Section 13 of the ACT FT Act

Section 43 of the NT CAFT Act

*New law*	*Current law*
A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services to another person, other than a listed public company, engage in conduct that is in all the circumstances unconscionable.	Subsection 51AC(1) of the TP Act provides that a corporation must not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, other than a listed public company, engage in conduct that is in all the circumstances unconscionable. Subsection 51AC(2) of the TP Act provides that a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services to a corporation, other than a listed public company, engage in conduct that is in all the circumstances unconscionable. Section 12CC of the ASIC provides that a person must not, in trade or commerce, in connection with the supply or possible supply of financial services to another person, other than a listed public company, engage in conduct that is, in all the circumstances, unconscionable. Section 8A of the Vic. FT Act Section 11A of the WA FT Act Section 15A of the Tas. FT Act

New law

Current law

A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services to another person, other than a listed public company, engage in conduct that is in all the circumstances unconscionable.

Subsection 51AC(1) of the TP Act provides that a corporation must not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, other than a listed public company, engage in conduct that is in all the circumstances unconscionable.

Subsection 51AC(2) of the TP Act provides that a person must not, in trade or commerce, in connection with the supply or possible supply of goods or services to a corporation, other than a listed public company, engage in conduct that is in all the circumstances unconscionable.

Section 12CC of the ASIC provides that a person must not, in trade or commerce, in connection with the supply or possible supply of financial services to another person, other than a listed public company, engage in conduct that is, in all the circumstances, unconscionable.

Section 8A of the Vic. FT Act

Section 11A of the WA FT Act

Section 15A of the Tas. FT Act

*New law*	*Current law*
A person must not, in trade or commerce, in connection with the acquisition or possible acquisition of goods or services from another person, other than a listed public company, engage in conduct that is, in all the circumstances, unconscionable.	Subsection 51AC(1) of the TP Act provides that a corporation must not, in trade or commerce, in connection with the acquisition or possible acquisition of goods or services from another person, other than a listed public company, engage in conduct that is, in all the circumstances, unconscionable. Subsection 51AC(2) of the TP Act provides that a person must not, in trade or commerce, in connection with the acquisition or possible acquisition of goods or services from a corporation, other than a listed public company, engage in conduct that is, in all the circumstances, unconscionable. Section 12CC of the ASIC Act provides that a person must not, in trade or commerce, in connection with the acquisition or possible acquisition of financial services from another person, other than a listed public company, engage in conduct that is, in all the circumstances, unconscionable. Section 8A of the Vic. FT Act Section 11A of the WA FT Act Section 15A of the Tas. FT Act

New law

Current law

A person must not, in trade or commerce, in connection with the acquisition or possible acquisition of goods or services from another person, other than a listed public company, engage in conduct that is, in all the circumstances, unconscionable.

Subsection 51AC(1) of the TP Act provides that a corporation must not, in trade or commerce, in connection with the acquisition or possible acquisition of goods or services from another person, other than a listed public company, engage in conduct that is, in all the circumstances, unconscionable.

Subsection 51AC(2) of the TP Act provides that a person must not, in trade or commerce, in connection with the acquisition or possible acquisition of goods or services from a corporation, other than a listed public company, engage in conduct that is, in all the circumstances, unconscionable.

Section 12CC of the ASIC Act provides that a person must not, in trade or commerce, in connection with the acquisition or possible acquisition of financial services from another person, other than a listed public company, engage in conduct that is, in all the circumstances, unconscionable.

Section 8A of the Vic. FT Act

Section 11A of the WA FT Act

Section 15A of the Tas. FT Act

Detailed explanation of new law

Unconscionable conduct within the meaning of the unwritten law

4.19 Section 20 of the ACL creates a general prohibition against a person engaging in unconscionable conduct within the meaning of the unwritten law, from time to time, in the course of trade or commerce. [Schedule 1, item 1: Chapter 2, Part 2-2, subsection 20(1)]

4.20 Trade or commerce is defined for the purposes of the ACL as meaning ‘trade or commerce within Australia, or between Australia and places outside Australia, and includes any business or professional activity (whether or not carried on for profit)’. The ACL applies to conduct engaged in outside of Australia, provided that at least some aspect of the trading relationship between two or more parties has taken place in Australia. [Schedule 1, item 1: Chapter 1, section 2]

4.21 The ‘unwritten law, from time to time’ is the array of common law and equitable principles that have developed in the Australian courts over many years as they apply and relate to the concept of unconscionable conduct. Previous jurisprudence developed in the courts of England and Wales prior to the independence of the Australian judicial system, which occurred with the reception of the laws and statutes of England and Wales and the establishment of the colonial Supreme Courts in the nineteenth century, is also relevant, as are the decisions of the Privy Council exercising its now ended appellate jurisdiction over State courts.

4.22 The principal purpose and function of section 20 of the ACL is to allow the penalties and remedies available under Chapter 5 of the ACL to be imposed with respect to conduct that is found to be considered to be unconscionable within the meaning of the unwritten law, from time to time.

4.23 A person contravening section 20 of the ACL is liable to pay a civil pecuniary penalty of up to:

â¢ $1.1 million for a body corporate;

â¢ $220,000 for other persons.

[Schedule 1, item 1: Chapter 5, Part 5-2, Division 1, section 224]

4.24 The following enforcement powers and remedies apply to section 20 of the ACL:

â¢ undertakings; [Schedule 1, item 1: Chapter 5, Part 5-1, Division 1]

â¢ substantiation notices; [Schedule 1, item 1: Chapter 5, Part 5-1, Division 2]

â¢ public warning notices; [Schedule 1, item 1: Chapter 5, Part 5-1, Division 3]

â¢ injunctions; [Schedule 1, item 1: Chapter 5, Part 5-2, Division 2]

â¢ damages; [Schedule 1, item 1: Chapter 5, Part 5-2 ,Division 3]

â¢ compensatory orders; [Schedule 1, item 1: Chapter 5, Part 5-2, Division 4, Subdivision A]

â¢ redress for non-parties; and [Schedule 1, item 1: Chapter 5, Part 5-2, Division 4, Subdivision B]

â¢ non-punitive orders. [Schedule 1, item 1: Chapter 5, Part 5-2, Division 5, section 246]

4.25 For further information on these powers, remedies and penalties generally see Chapters 14 and 15.

4.26 The ACCC may issue an infringement notice for a contravention of section 20 of the ACL. The amount of the penalty specified in the infringement notice is:

â¢ 600 penalty units for a listed corporation;

â¢ 60 penalty units for a body corporate other than a listed corporation; and

â¢ 12 penalty units for any other person.

[Schedule 2, item 1: Part XI, Division 5]

4.27 The prohibition in section 20 applies only to conduct that is not covered by the more specific prohibitions in sections 21 and 22 of the ACL, that is:

â¢ the supply or possible supply of goods or services to consumers or businesses; or

â¢ the acquisition or possible acquisition of goods or services from businesses.

[Schedule 1, item 1: Chapter 2, Part 2-2, subsection 20(2)]

Unconscionable conduct towards consumers

4.28 Section 21 of the ACL prohibits a person from engaging in unconscionable conduct towards another person in connection with the supply or possible supply of goods or services. [Schedule 1, item 1: Chapter 2, Part 2-2, subsection 21(1)]

4.29 This section does not define ‘unconscionable conduct’, but it also does not limit it to the concept as understood under the ‘unwritten law, from time to time’.

The meaning of ‘consumer’ with respect to unconscionable conduct in the ACL

4.30 Section 21 only applies in respect of persons who are ‘consumers’. It does not apply the definition of consumer that is contained in section 3 of the ACL, although the provisions are consistent. The concept of ‘consumer’ used in section 21 limits the application of the section to situations where:

â¢ the goods or services involved in the conduct are goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption; and

â¢ supply is not taken to include supply or possible supply for the purposes of re-supply or for the purpose of using goods up or transforming them in trade or commerce. [Schedule 1, item 1: Chapter 2, Part 2-2, subsections 21(5) and 21(6)

4.31 The concept of ‘ordinarily acquired for personal, domestic or household use or consumption is drawn from the definition of consumer in section 3 of the ACL. This is an objective concept that is determined with reference to the nature of the goods or services acquired, rather than the actual purpose for which the goods or services were acquired.

4.32 The concept of ‘supply’ is also drawn from the definition of consumer in section 3 of the ACL. This is a subjective concept that must be determined with reference to the actual purpose for which particular goods were acquired.

Misleading representations within respect to future matters

4.33 Section 4 of the ACL, concerning the treatment of misleading representations as to future matters, applies in the same way to Chapter 2, Part 2-2 of the ACL as it does to Chapter 3, Part 3-1, Division 1. [Schedule 1, item 1: Chapter 2, Part 2-2, subsection 21(7)]

Matters to which the court must or may have regard

4.34 A court must consider allegations of unconscionable conduct in the context of all of the circumstances surrounding the relevant parties’ conduct towards each other. [Schedule 1, item 1: Chapter 2, Part 2-2, subsection 21(1] .

4.35 In doing this, the court may have regard to a list of matters specified in subsection 21(2) the ACL, but may also consider any other matter that it thinks relevant. [Schedule 1, item 1: Chapter 2, Part 2-2, subsection 21(2)] .

4.36 The existence of a legal dispute, manifest in legal proceedings, between two parties is not in itself determinative of unconscionable conduct on behalf of either party. Subsection 21(3) of the ACL provides that a person is not taken to have engaged in unconscionable conduct merely because the person instituted legal proceedings or another arbitration process against another person. [Schedule 1, item 1: Chapter 2, Part 2-2, subsection 21(3)]

4.37 In determining whether conduct is unconscionable, the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention. [Schedule 1, item 1: Chapter 2, Part 2-2, paragraph 21(4)(a)]

4.38 In determining whether conduct is unconscionable, the court may have regard to conduct engaged in, or circumstances existing, before the commencement of section 21 of the ACL (that is, before 1 January 2011). [Schedule 1, item 1: Chapter 2, Part 2-2, paragraph 21(4)(b)]

Enforcement

4.39 A person contravening section 21 of the ACL is liable to pay a civil pecuniary penalty of up to:

â¢ $1.1 million for a body corporate;

â¢ $220,000 for other persons.

[Schedule 1, item 1: Chapter 5, Part 5-2, Division 1, section 224]

4.40 The following enforcement powers and remedies apply to section 21 of the ACL: