Submission to the Australian Consumer Law Review

Similar documents
Submission to the Inquiry into the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015

Review of tax and corporate whistleblower protections in Australia

Submission on options to address the design issues identified in the Petroleum Resource Rent Tax Review

Australian Consumer Law Review: Issues Paper

Submission to the Senate Inquiry into the Major Bank Levy Bill 2017

CONSUMER PROTECTION AND PRODUCT LIABILITY

Submission to the Senate Education, Employment and Workplace Relations References Committee Inquiry into the Adequacy of the Allowance Payment System

Proposed amendments to Telecommunications Consumer Protections Code (DR C628:2015)

The new Australian Consumer Law what does it mean for your business?

Work health and safety;

Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018

EXTENDING UNFAIR CONTRACT TERMS (UCT) PROTECTIONS TO GENERAL INSURANCE CONTRACTS

THE FRANCHISING CODE

New South Wales Climate Change Policy Framework

Inquiry into Privacy Amendment (Enhancing Privacy Protection) Bill 2012

Sanctions and Anti-Money Laundering Bill

OFFICE OF THE MINISTER OF COMMERCE. The Chair CABINET ECONOMIC DEVELOPMENT COMMITTEE REGULATION OF FINANCIAL INTERMEDIARIES PROPOSAL

Design and Distribution Obligations and Product Intervention Power Draft Legislation and Explanatory Memorandum

Submission to the Senate Standing Committee on Economics. Treasury Laws Amendment (2018 Measures No. 4) Bill 2018

Regulatory Charter. Consumer and Commercial Regulatory System. December 2017

National Consumer Credit Protection Bill 2009 and National Consumer Credit Protection (Transitional and Consequential Provisions) Bill 2009

Consultation Paper: Proposed exemption to facilitate personalised robo-advice

Discussion Paper: Claims Handling. April 2017 The Insurance in Superannuation Working Group

BBA RESPONSE TO JOINT COMMITTEE CONSULTATION PAPER ON GUIDELINES FOR CROSS-SELLING PRACTICES JC/CP/2014/05

FINAL NOTICE. Policy Administration Services Limited. Firm Reference Number:

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES CORPORATIONS AMENDMENT (LIFE INSURANCE REMUNERATION ARRANGEMENTS) BILL 2016

Comments below are set out under the relevant item from the terms of reference.

10-11/0679 File No: P/017/PR007/001 FINANCIAL MARKETS (REGULATORS AND KIWISAVER) BILL - INITIAL BRIEFING

Contango MicroCap Limited

Farm Business Concessional Loans Scheme

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES

SRA BOARD 21 January 2015

Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Power) Bill 2018

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES

Exposure draft - Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Power) Bill 2018

National Electricity Law And National Gas Law Amendment Package: Creating a binding rate of return instrument

Legislative Brief The Consumer Protection Bill, 2018

In Confidence. Office of the Minister of Commerce and Consumer Affairs Chair, Cabinet Economic Growth and Infrastructure Committee

'In Australia' Special Conditions for Tax Concession Entities

National Energy Guarantee Draft Detailed Design Consultation Paper

PLEASE READ THESE TERMS AND CONDITIONS OF USE CAREFULLY BEFORE USING. Welcome to our website. If you continue to browse and use this website you are

Myburgh & Associates Attorneys Conveyancers Notaries

FCA Consultation CP 13/10 December 2013 The ABI s response to proposals for the FCA regime for consumer credit

AUGUST ENERGY RETAIL CONTRACTS REVIEW Unfair contract terms

Review of the EFT Code. Submission in Response to ASIC s Consultation Paper

Statement of Recommended Practice. Practice Note 10: Audit of financial statements of public sector bodies in the United Kingdom

We would like to thank you for the opportunity to provide feedback on the draft Code and would be happy to discuss our comments.

World-wide Government Safety Reporting Requirements: A Comparison By Kenneth Ross, Bowman and Brooke LLP

Retail Entitlement Offer

OCCUPATIONAL HEALTH & SAFETY THE CARING CLIENT IMPLEMENTATION OF THE NATIONAL OHS STRATEGY

Regulatory Impact Statement

Guideline. Financial assurance for petroleum titles. Core concepts. N GL1381 Revision No 4 March 2015

Practice Note 10: Audit of financial statements of public sector bodies in the United Kingdom

1.6 This submission is made on behalf of the firm and not on behalf of any client of the firm.

For personal use only

Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018

Response to submissions on CP 288 and CP 289 on crowdsourced

TERMS & CONDITIONS. Promotion Period Promotion Period commences: 09.00am AEST on 04/04/2018 Promotion Period concludes: 11.59pm AEST on 29/05/2018

BENCHMARKS. for INDUSTRY-BASED CUSTOMER DISPUTE RESOLUTION SCHEMES. Released by the Hon Chris Ellison Minister for Customs and Consumer Affairs

AN APPROACH TO RISK-BASED MARKET CONDUCT REGULATION

POLICY. Enforcement REGULATORY FUNCTION POLICY

Submission: Retirement Living Council Retirement Living Code of Conduct

International Financial Reporting Standards (IFRS)

Regulatory Notice 4: Regulation of newly registered providers up to 31 July 2019

REPORT BY THE COMPTROLLER AND AUDITOR GENERAL HC 996 SESSION FEBRUARY Cabinet Office. Improving government procurement

Corporate & Commercial Newsletter

Government s Expert Report 1 Endorses Franchising and Suggests Code Improvements

22 May The Manager Consumer Credit Unit Corporations and Financial Services Division The Treasury PARKES ACT 2600

Draft Deregulation Bill Written evidence from R3, the insolvency trade body

TERMS & CONDITIONS. InComm Australia & New Zealand Pty Ltd (ABN ) of 11 Queens Road, Melbourne, Victoria, 3000.

TAXREP 22/14 (ICAEW REPRESENTATION 56/14)

KPMG submission - Making Tax Simpler: Towards a New Tax Administration Act

DEUTSCHER DERIVATE VERBAND DDV. And EUROPEAN STRUCTURED INVESTMENT PRODUCTS ASSOCIATION EUSIPA. Joint Position Paper. on the

JUNE Direct Selling Legal Update

Submission. Occupational Health and Safety Act 1986 Review

Terms and Conditions including General explanatory information Information statement effective

Departmental Disclosure Statement

Consumer Law Reform: Meridian Energy Group Oral Submission

Response to Ofcom s consultation on price rises in fixed term contracts

Finance and Expenditure Select Committee Briefing Note: Financial Services Conduct and Culture review

FACILITATING ELECTRONIC DISCLOSURE IN THE INSURANCE SECTOR

GUIDELINES FOR THE REMOVAL OF THE EMERGENCY SERVICES LEVY IN NSW

Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017

Practice Statement PS CM 2004/05 (RM)

o by banning the production, use, or trade of certain persistent organic pollutants:

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES CORPORATIONS AMENDMENT (PHOENIXING AND OTHER MEASURES) BILL 2012

1. The Planning (Hazardous Substances) (Determination of Procedure) (Wales) Order 2017;

International Financial Reporting Standards (IFRS)

Principles for cross-border financial regulation

Valuation of the Regulatory Asset Base: Submission on the Commerce Commission s Decision Paper

Superannuation Legislation Amendment (Governance) Bill and Regulation: Governance arrangements for APRA-regulated superannuation funds

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES CORPORATIONS AMENDMENT (FUTURE OF FINANCIAL ADVICE) BILL 2011

Taxation of insurance companies. Submission to Treasury

TERMS & CONDITIONS. Promoter The Promoter is CASELLA WINES PTY. LIMITED, ABN , PO BOX 1444, Griffith, NSW 2680.

Fair Work Commission Fair Work Act Annual Wage Review Submission in Reply by the Australian Catholic Council for Employment Relations

Life Insurance Code of Practice Second consultation draft. Financial Ombudsman Service Australia Submission September 2016

AN APPROACH TO RISK-BASED MARKET CONDUCT REGULATION

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA HOUSE OF REPRESENTATIVES

NATIONAL INSURANCE BROKERS ASSOCIATION OF AUSTRALIA (NIBA) SUBMISSION ON UNFAIR TERMS IN INSURANCE CONTRACTS

31 August Law Council of Australia Limited - ABN

Transcription:

Submission to the Australian Consumer Law Review JUNE 2016

Business Council of Australia June 2016 1 Contents About this submission 2 Key recommendations 2 Principles of regulation 3 Key issues 4 Unclear or uncertain terms 4 Remedies for major failures 5 Reporting requirements 5 Product safety 7 Unfair commercial practices prohibition 7 Small business extension to unfair contract terms 8

Business Council of Australia June 2016 2 The Business Council of Australia is a forum for the chief executives of Australia s largest companies to promote economic and social progress in the national interest. About this submission This is the Business Council of Australia s submission to the Australian Government Consumer Affairs Australia and New Zealand s (CAANZ) consultation on the Australian Consumer Law (ACL) Review. The ACL is a single national consumer protection law that commenced on 1 January 2011. It is jointly administered and enforced by federal, state and territory consumer law regulators (the single law multiple regulator model). The 2009 Intergovernmental Agreement for the Australian Consumer Law requires the ACL to be reviewed within seven years of implementation. The ACL Issues Paper is the start of this process and seeks stakeholder views on: the effectiveness of the ACL and whether it is operating as intended whether the national consumer policy framework meets its objectives of delivering the best outcomes for Australian consumers and businesses the flexibility of the ACL to respond to new and emerging issues so it remains relevant as an overarching consumer framework in the future. The Review s interim report will be released in the second half of 2016, with the final report to be provided to the Legislative and Governance Forum on Consumer Affairs by March 2017. This submission comments on selected issues raised in the ACL Issues Paper. Key recommendations The Business Council supports the current, national approach to consumer law and its regular review. The Business Council makes the following recommendations to the ACL Review team: 1. More clarity and certainty is needed in some areas covered by the ACL, for example the duration of guarantees. This could be achieved by regulators working with industry sectors to provide guidance. 2. Business should be given more opportunity to rectify a major failure before being required to issue a refund. 3. Reporting requirements should be examined to make them more efficient and effective by: 3.1 Proceeding with reforms to exclude food from the ACCC mandatory reporting regime and remove duplication with state and territory regulation. 3.2 The current two-day time frame for mandatory reports is very short. Consideration should be given to extending it.

Business Council of Australia June 2016 3 4. There should be a nationally consistent approach to product safety regulation. 5. A prohibition against the general supply of unsafe goods, as raised in the ACL Issues Paper, is not supported as a more detailed proposal is needed to assess whether it is warranted. 6. A prohibition against unfair commercial practices, as raised in the ACL Issues Paper, is not needed. There is insufficient evidence of an existing or foreseeable regulatory gap, nor of the merits of an economy-wide prohibition. 7. The experience of businesses implementing the recently legislated extension of unfair contract terms to small businesses should be examined within this review. The review should monitor implementation costs and identify any changes to the unfair contract terms provisions that will avoid unintended consequences and unnecessary costs from the new law. Principles of regulation Well-designed consumer protection regulation ensures businesses trade fairly and empowers consumers to confidently participate in markets. It can support effective competition which drives greater choice, better services and lower prices for consumers. As with all business regulation, best practice consumer protection regulation is clear, efficient and proportionate to the risk. 1. Good regulation is clear: it is drafted in plain English and reflects the policy intent and the problem it is addressing, so the community and business can understand the regulation and apply it consistently. 2. Good regulation is efficient: it achieves its objectives at least cost and does not unnecessarily distort decision making by businesses and consumers. Regulations should be consistent and not overlap or be duplicative across governments. 3. Good regulation is proportionate: regulatory powers should be designed to be proportionate to the problem being managed. Regulation should only be introduced if there is no alternative lower-cost means of achieving a policy objective. If regulation is necessary, a light touch or non-regulatory approach that addresses the policy problem, market issue or community concern is preferable to overly prescriptive regulation. In some cases, self-regulation and co-regulation can be effective in producing good outcomes for all parties involved, without the compliance and administrative costs of government imposed regulation. Poor regulation can reduce the competitiveness of businesses, limit their capacity to adjust to changing market conditions and increase the cost of doing business. The community is ultimately affected by poorly designed and administered regulation through less consumer choice and higher prices. It is important that regulatory interventions do not become a barrier to resources flowing to areas and activities where they can be put to best use. This can contribute to worse consumer outcomes as well as less investment, lower wages and reduced job creation.

Business Council of Australia June 2016 4 Key issues The elements of the ACL which the Business Council considers could be improved when assessed against the principles of best practice regulation are set out below. Unclear or uncertain terms There is a need for more clarity and certainty in some parts of the ACL, which could be achieved through issuing more guidance to industry. Many of the rules are principles-based and subject to interpretation, which can create uncertainty for businesses and consumers and add to costs. The 2016 ACL survey estimates the total cost for businesses to resolve consumer problems has fallen to $18 billion per annum, 1 from $21.6 billion before the introduction of the ACL. The decrease in overall cost is because the number of consumer related issues has fallen. However, the time spent dealing with each problem is estimated to have increased an average of 3.2 hours per issue compared to 2.5 hours in 2011. It is likely that the uncertainty of the law is contributing to the increase in time to resolve individual issues. A prime example of uncertainty is guarantee periods (Part 3-2, Division 1, Subdivision A). The ACL provides product guarantees that goods will be of acceptable quality (section 54), depending on the nature of the good or service purchased. It lists a range of factors that must be taken into account when determining the guarantee, but is silent on the actual duration of the guarantee period. This can be difficult to interpret for different categories of goods. For example, there is no guidance on the typical guarantee period for particular goods, such as refrigerators, mobile phone handsets, or gaming consoles. The uncertain nature of the guarantee period gives rise to two material cost impacts on businesses. Businesses incur higher costs from: additional time needed to train frontline staff to ensure a consistent, ACL compliant approach across the business a higher rate of refunds due to many businesses erring on the side of caution when complying with an uncertain and wider guarantee duration. These potential costs are considered to be high in Australia relative to jurisdictions with clearer consumer protection regimes. Any approach that provides greater clarity and improves business efficiency, while also delivering regulated consumer protections, should result in lower costs and, ultimately, consumer prices. One option to deliver greater clarity around the duration of consumer guarantees is to develop a regime where industry associations develop guidance, which could then be assessed and where appropriate endorsed by a regulator such as the ACCC. 1 This is an estimate of the value of the time spent by businesses dealing with consumer problems, not the direct costs to repair or replace products. EY Sweeney was commissioned to conduct the survey by the Australian Treasury, on behalf of CAANZ.

Business Council of Australia June 2016 5 Remedies for major failures As mentioned, the current legislation provides consumers with a range of guarantees, including that goods will be of acceptable quality, fit for a specified particular purpose, and match the description, sample or demonstration model. Where a good or service does not meet a consumer guarantee, remedies are available. Who chooses the remedy depends on whether the failure is major or minor : if a consumer experiences a minor failure with a product or service, the business can choose to give the consumer a free repair instead of a replacement or refund (section 259) if a consumer experiences a major failure with a product or service, the consumer can choose between a replacement, refund or compensation for the fall in value caused by the problem while keeping the good (section 259). A major failure is one where a reasonable consumer would not have bought it had they known about the nature and extent of the failure (section 260). Many businesses would prefer to repair or replace an item than provide a refund. In many cases where there is a major failure, a replacement product can resolve the issue, so a refund is not necessary. The ACL Review should examine increasing opportunities for businesses to rectify a failure before the consumer can ask for a refund, in particular in cases where: the good is clearly not a lemon the consumer has had the good for a long period of time. The major failure test (section 260) is arguably too restrictive and could be enhanced to be a two pronged rule before the consumer can choose the remedy that a reasonable person would not have bought it and it cannot be resolved by repair or replacement. There are also problems with refunding digital goods, like electronic computer software or games purchased and downloaded over the internet. If a refund is sought by the consumer, it can be difficult to ensure the consumer will not continue to have access and use of the working elements of the product that have not suffered from major failure (for example, the product may still be stored on their computer). Reporting requirements Mandatory reporting requirement for food The ACL mandates that suppliers of consumer goods (including food) report to the Commonwealth Minister (section 131) if the supplier becomes aware that the consumer goods caused, or may have caused, a death, serious injury or illness. Food does not lend itself to the ACCC mandatory reporting regime in the same way as other consumer goods: It is often not clear when a particular item of food has led to a serious illness or injury, in contrast to other types of consumer goods. There are already extensive state and territory based notification processes the mandatory reporting requirement merely duplicates those processes and does not lead to increased consumer safety.

Business Council of Australia June 2016 6 This is not a new issue, but it is yet to be addressed as the Competition and Consumer Amendment (Deregulatory and Other Measures) Bill 2015 lapsed after Parliament was prorogued in April 2016. This Bill proposed to remove the mandatory reporting requirement in relation to food. The Explanatory Memorandum to the Bill indicated that the ACCC and Australian food safety regulators considered the current reporting requirement did not support the food regulation system, was duplicative and placed a disproportionate cost on industry. 2 The subsequent Senate Economics Legislation Committee report 3 found that the current mandatory ACCC reporting requirements: are unnecessary and add to the compliance burden on business and regulators without delivering actual safety outcomes duplicate the reporting regimes of the states and territories that are already adequate. There are around 100 food-related notifications issued every month 4, placing a burden on businesses who prepare these reports and regulators who receive them. In particular, for clusters of incidents, such as the recent issues with frozen berries, businesses must continue to prepare and lodge a large number of mandatory reports even after the outbreak has been brought to the attention of the relevant regulators and the public. There should be renewed consideration of mandatory reporting in the food context with a view to food being excluded from the ACCC regime, as there is adequate state and territory regulation. Time frame for mandatory reporting The current two-day time frame for mandatory reports is very short (section 131). Consideration should be given to extending it. Not all of the necessary information can always be collated within 48 hours, meaning that reports are sometimes incomplete, leading to additional work on the part of regulators who then need to request additional information. In particular: The current time frame can be especially problematic on weekends and when responding to social media complaints, resulting in lower quality reports. The workload for the ACCC can be increased as it sometimes receives unnecessary reports. A longer reporting period would allow for more investigation to take place. This may reveal that the consumer goods did not cause the serious injury or illness, meaning that no report was required. 2 Competition and Consumer Amendment (Deregulatory and Other Measures) Bill 2015, Explanatory Memorandum, paragraph 1.7. 3 Senate Economics Legislation Committee Report on the Competition and Consumer Amendment (Deregulatory and Other Measures) Bill 2015, May 2015. 4 As reported in the Food Standards Australia and New Zealand submission to the Economics Legislation Committee Inquiry into the Competition and Consumer Amendment (Deregulatory and Other Measures) Bill 2015.

Business Council of Australia June 2016 7 Product safety Different approaches to product safety There should be a nationally consistent approach to product safety regulation in Australia. As the product safety regime in Australia is implemented by federal and state regulators, there can sometimes be inconsistencies in the approach. This leads to different outcomes for the states and territories and increases compliance costs for businesses. Further inconsistencies arise as different regulators are responsible for different aspects of product safety. Unsafe goods prohibition The ACL Review Issues Paper raised the issue on page 30 of whether there should be a general prohibition against the supply of unsafe goods, as well as against non-compliance with a safety standard or ban. It referred to a case study of the European regime, however a more detailed proposal, including a clearer description of the problem to be solved, needs to be provided for stakeholders to comment on. Unfair commercial practices prohibition The Business Council considers that, overall, the ACL adequately achieves its legislated objective of promoting fair trading and consumer protection and does not require substantial change. The ACL promotes these goals as it: has a range of general and specific protections distinguishes between consumers and businesses is flexible enough to adapt to the needs of the situation and society provides broad remedies to support its protections as well as offences to deter and punish more serious conduct. The ACL Review Issues Paper seeks views on whether a general prohibition against unfair commercial practices is warranted. As highlighted in the Productivity Commission s 2008 Review of Australia s Consumer Policy Framework, there must be strong evidence that a provision against unfair commercial practices is warranted, otherwise its usefulness is limited in practice. The Business Council considers that insufficient evidence has been put forward of an existing or foreseeable regulatory gap in the current law. Further, the existing protections in the ACL are flexible enough to address various situations from the perspective of the consumer. For example, the prohibition on misleading or deceptive conduct considers the effect the conduct would have on a reasonable or ordinary consumer, while the consumer guarantee that goods be of acceptable quality depends on what a reasonable consumer considers acceptable in the circumstances. The protections are also flexible enough to adapt to changes in technology and societal values, particularly through judicial interpretation. For example, the prohibition on false or misleading testimonials is useful for consumers relying on customer review websites when making purchasing decisions. Also, the protection for unconscionable conduct has been

Business Council of Australia June 2016 8 interpreted by the courts by reference to the norms of society which are permeated with accepted and acceptable community values. 5 The introduction of an economy-wide, catch-all provision, without sufficient evidence to justify its necessity and appropriateness, has the potential to generate uncertainty and cost for consumers and business. Businesses may become overly cautious when trying to avoid violating such a regulation, and exit or not even enter certain markets. This could have a detrimental impact on the economy through lower innovation and investment, and deliver worse outcomes for consumers. If a problem can only be demonstrated in a few narrow cases, other regulatory or policy options will be more appropriate than an economy-wide, uncertain prohibition. For example, if there is a particular industry with a problem involving systematic unfair trading, this could be adequately addressed through a code of conduct, which is a common practice to address and rectify clearly identifiable problems. The ACL has been appropriately drawn to achieve its aims and is generally regarded as doing so by consumers and businesses. 6 The Business Council does not consider there to be sufficient evidence to justify consideration of a prohibition against unfair commercial practices. Small business extension to unfair contract terms As outlined in our previous submissions, the Business Council is concerned that the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015 could give rise to unintended consequences and unnecessary costs on business (these changes will be inserted into sections 23 to 28 of the ACL). The Act will take effect from 12 November 2016. The Regulatory Impact Statement accompanying the changes forecast a compliance cost of only $50 million across all businesses. This ACL Review is an opportunity to collect information on the actual costs that businesses are incurring in the implementation of the unfair contract terms regulations, and any unintended consequences arising from the new laws. This information should be used to identify possible changes to the law that will reduce costs on business, without compromising the fundamental objective of removing unfair contract terms from business-to-business standard form contracts. 5 Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90, at paragraphs 23 and 41. 6 The 2016 ACL survey found that 91 per cent of businesses and 54 per cent of consumers believe the ACL adequately protects the rights of consumers.

Business Council of Australia June 2016 9 BUSINESS COUNCIL OF AUSTRALIA 42/120 Collins Street Melbourne 3000 T 03 8664 2664 F 03 8664 2666 www.bca.com.au Copyright June 2016 Business Council of Australia ABN 75 008 483 216 All rights reserved. No part of this publication may be reproduced or used in any way without acknowledgement to the Business Council of Australia. The Business Council of Australia has taken reasonable care in publishing the information contained in this publication but does not guarantee that the information is complete, accurate or current. In particular, the BCA is not responsible for the accuracy of information that has been provided by other parties. The information in this publication is not intended to be used as the basis for making any investment decision and must not be relied upon as investment advice. To the maximum extent permitted by law, the BCA disclaims all liability (including liability in negligence) to any person arising out of use or reliance on the information contained in this publication including for loss or damage which you or anyone else might suffer as a result of that use or reliance.