The New Australian Consumer Law

The new Australian Consumer Law (“ACL”) commenced on 1 January 2011, introducing a unified national consumer law regime concerning consumer protection and fair trading. It aims to benefit consumers and businesses alike, providing one law that is easy to understand, better enforcement and clear rights and obligations. The ACL includes:

1. A new national unfair contract terms law covering standard form contracts;
2. A new national law guaranteeing consumer rights when buying goods and services, which replaces existing laws on conditions and warranties;
3. A new national product safety law and enforcement system;
4. A new national law for unsolicited consumer agreements, which replaces existing State and Territory laws on door-to-door sales and other direct marketing;
5. Simple national rules for lay-by agreements; and
6. New penalties, enforcement powers and consumer redress.

The ACL was implemented in two parts. The first phase was marked by the passage of the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010, introducing a new unfair contracts regime, new civil pecuniary penalties and new enforcement powers of the ACCC and ASIC. These new enforcement provisions came into effect on 14 April 2010, while the unfair contracts regime came into effect on 1 July 2010.

The enactment of the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010 marked the second and final phase of the ACL. On 1 January 2011 the Trade Practices Act 1974 (“TPA”) was renamed the Competition and Consumer Act 2010 (“CCA”), giving the provisions of the ACL full effect as a law of the Commonwealth and of each State and Territory. The TPA will however continue to apply for transactions that occurred up to 31 December 2010.


1. UNFAIR CONTRACTS

On 1 July 2010 the ACL introduced new uniform rules on unfair contract terms. A term is void and therefore cannot be enforced if it is a term of a consumer contract, the contract is a standard form contract and the term is unfair.

(a) A term of a consumer contract
The new definition of a consumer contract takes the circumstances of the individual purchaser into consideration, making it more difficult for businesses to determine and necessitating the adoption of different contracts for business and consumer goods.

(b) The contract is a standard form contract
The relevant factors in determining whether a contract is a standard form contract include whether:

• one party has all or most of the bargaining power;
• one party prepared the contract before discussions commenced;
• the consumer was effectively required to “take it or leave it”;
• the consumer has an opportunity to negotiate the terms; and
• the terms take into account the specific circumstances of the parties.

(c) The term is unfair
A term is deemed unfair if it:

• would cause a significant imbalance in the parties’ rights and obligations under the contract;
• is not reasonably necessary in order to protect the legitimate interests of the party that would be advantaged; and
• would cause detriment to a party if it was applied or relied on.

2. CONSUMER GUARANTEES

The CCA introduces a new law of consumer guarantees, which replaces the conditions and warranties that are currently implied into consumer contracts under the TPA and State and Territory legislation.

There are nine consumer guarantees that apply to goods:

• Goods will be of acceptable quality
• Goods will be fit for a particular purpose
• Goods will match their description
• Goods will match the sample or demonstration model
• Any express warranties will be honoured
• Spare parts and repair facilities will be available for a reasonable time
• You will have title to the goods
• You will have undisturbed possession of the goods
• There are no undisclosed securities on the goods

There are three consumer guarantees that apply to services. Service providers guarantee to provide services:

• with due care and skill
• which are fit for any purpose; and
• within a reasonable time, when no time is set.

Remedies for breach of consumer guarantee

The new consumer guarantees cannot be excluded by contract, however, a failure to comply with a guarantee will not constitute a contravention of the ACL. Instead, the ACL provides for a number of specific remedies that may be sought where the standards of a consumer guarantee are not met. The remedies available to consumers will largely depend on whether the breach of the guarantee amounts to a major failure or a non major failure.

A major failure to comply with a consumer guarantee will occur where the relevant goods:

• would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or
• are substantially unfit for the purpose for which they are commonly supplied; or
• depart significantly from a sample or description; or
• are not fit for a purpose that was disclosed to the supplier; or
• are unsafe.

Where there is a major failure and the defect in the goods cannot be remedied, the consumer will ordinarily be entitled to recover compensation for any reduction in the value of the goods caused by the defect, or reject the goods.  Where the consumer elects to reject the goods, they will be entitled to choose either a replacement or a refund.  The consumer may also claim damages for any loss caused by the failure to comply with the guarantee.

Where there is a non major failure and the defect in the goods can be remedied, the consumer may require the supplier to remedy the failure within a reasonable time.  Where the supplier fails to repair goods within a reasonable time, the consumer may elect to either have the goods repaired elsewhere, and recover the costs of the repair from the supplier, or reject the goods.  Where the consumer elects to reject the goods, they will be entitled to choose either a replacement or refund.  The consumer may also claim damages for any loss caused by the failure to comply with the guarantee.


3. PRODUCT SAFETY LAW

The CCA introduces a single national law for consumer product safety for consumer goods and consumer related services relating to the supply, installation, maintenance, cleaning, assembly or delivery of consumer goods. Although the new regime will be administered jointly by the ACCC and by state and territory regulators, there has been a significant transfer of powers to the Commonwealth. Under the new provisions, only the Commonwealth Minister has power to prescribe product safety standards and impose permanent bans on consumer goods and product-related services.

Product bans, recalls and reporting requirements

The CCA allows for product bans and recalls to be implemented where a reasonably foreseeable use or foreseeable misuse deems an otherwise safe product dangerous. Previously, bans and recalls were confined to circumstances where the primary, normal or intended use of a good creates a risk of injury.  They will now extend to situations where a foreseeable misuse of the good creates a risk of injury.

In addition to the existing requirements upon businesses that undertake a voluntary recall of dangerous goods, suppliers of goods will now also need to comply with stringent new reporting requirements upon becoming aware that the use or foreseeable misuse of a consumer product or product related service supplied by them has caused or may have caused the death, serious injury or illness of any person. A supplier must notify the Commonwealth Minister within 2 days of becoming aware of such an incident.

Under the CCA the ACCC will be given new power to undertake product recalls directly, where no supplier can be found. The CCA also requires a person to provide information, documents or evidence to the ACCC when investigating breaches of the Act upon request and allows the ACCC to enter premises under a search warrant to conduct more thorough product safety investigations.


4. UNSOLICITED SALES

Unsolicited sales practices include telephone sales, door-to-door sales and other forms of direct selling that take place outside of the traditional retail context. The CCA consolidates the various State and Territory laws that deal with these transactions and introduces a new national law that regulates these unsolicited consumer agreements.

The new law mandates the time of the day and the manner in which businesses may interact with consumers through the use of direct selling, including in particular, disclosing the consumer’s right to a cooling-off period. The new law also regulates the content of agreements made with consumers using direct selling. Companies will be held vicariously liable for any breach by their employees or agents.


5. LAY-BY SALES

The new lay-by sales provisions introduced by the CCA consolidate the current lay-by sales provisions contained in some of the State and Territory Fair Trading laws. Examples of the obligations imposed on businesses under the new national law include:

• that lay-by agreements must be in writing;
• that a consumer is allowed to terminate a lay-by agreement at any time before the goods are delivered to the consumer; and
• that monies paid under a lay-by agreement where a consumer elects to terminate the agreement must be refunded.

6. PENALTIES, ENFORCEMENT AND CONSUMER REDRESS

The CCA empowers the ACCC to issue infringement notices for specified contraventions of the ACL and strengthens enforcement arrangements for prescribed industry codes of conduct.

Contraventions of the consumer protection provisions

A breach of many of the consumer protection provisions in the CCA will attract a civil pecuniary penalty.  The maximum civil pecuniary penalty is:

• $1.1 million for a corporation; and
• up to $220,000 for an individual.

Many of the consumer protection provisions carry with them corresponding criminal offences.  The maximum criminal fine that can be imposed for a breach is:

• $1.1 million for a corporation; and
• up to $220,000 for an individual.

The CCA introduces a single regime of enforcement powers, penalties, remedies, defences and redress provisions applicable to the consumer protection provisions that will apply nationally. Enforcement of the new law will be administered jointly by the Commonwealth Government and State and Territory Governments with the assistance of the ACCC, ASIC and State and Territory Offices of Fair Trading.

Enforcement of prescribed industry codes of conduct

There are currently four prescribed Industry Codes of Conduct:

1. The Franchising Code of Conduct;
2. The Retail Grocery Industry Unit Pricing Code;
3. The Horticulture Code of Conduct; and
4. The Oil Code.

In addition to the present enforcement and redress provisions contained in the TPA, the CCA introduces new enforcement and redress measures that are expected to significantly strengthen the ability of the ACCC to detect and pursue breaches of the codes. The ACCC now has the ability to:

• request a corporation to provide information or documents to the ACCC that the corporation is required to generate or publish under one of the relevant industry codes;
• apply to a court to have orders made which redress loss or damage suffered by a person who is not party to the relevant proceedings; and
• issue public warning notices relating to suspected breaches of an industry code.

Given the significance of the strengthened enforcement and redress powers of the ACCC, those businesses operating in industries covered by a code of conduct must be aware of the serious penalties that can arise from breaching a code.

SUMMARY OF THE KEY CHANGES

1. A new unfair contracts regime
2. The introduction of statutory consumer guarantees
3. A new consumer product safety law for consumer goods and product related services
4. A new national law dealing with unsolicited sales practices
5. A new national law applying basic rules to lay-by sales transaction
6. Increased powers of the ACCC in relation to penalties, enforcement and consumer redress

LAUREN DRAGICEVICH
Law Clerk
Litigation and Dispute Resolution