Keynote Presentation: Australasian Consumer Law Roundtable 2015

Speakers: 
Mr Rod Sims, Chairman
Conference: 
Australasian Consumer Law Roundtable 2015: Australian Consumer Law 2.0 – 2016 & beyond
1 December 2015

Delivering the keynote address at the Consumer Law Roundtable in Canberra, ACCC Chairman Rod Sims discusses some of the Australian Consumer Law success stories. Mr Sims also flags some possible areas for consideration in the upcoming ACL review.

Transcript: 

Check against delivery

Introduction

The Australian Competition and Consumer Commission (ACCC) has a long association with the academic community. We have always welcomed your independent analysis and thoughts on the law, the courts and our actions.

The power of the profit motive very often works for the good of society, but only if it works within the boundaries set by our competition and consumer laws. The ACCC’s role is to explain where those boundaries are, both to act as a form of deterrence but also so that the wider community can have faith that a market economy works for them.

We must clearly signal our priorities and constantly talk about what we are doing and why. Indeed, we are in the middle of our annual review to decide our priorities for the year ahead. At the end of the process, around February, we will announce our areas of focus and the issues that we intend to explore. Given our very limited resources, of course, we must necessarily take a targeted approach to compliance and enforcement.

This year our competition laws may have stolen the spotlight in terms of the public debate, but it is difficult to upstage the Australian Consumer Law (ACL) in terms of results. In the past year, the ACCC has been involved in more than 35 ACL cases across several priority areas. I will mention a few stand-outs.

We had success in several unconscionable conduct cases, including Coles Supermarkets, Advanced Medical Institute and Lux Distributors.

In tackling emerging online issues, the court has provided clarification on the law around drip pricing. Drip pricing is where a headline price is advertised at the beginning of an online purchasing process and additional fees and charges, which may be unavoidable or applied in most transactions, are then incrementally disclosed.

Recently, the Federal Court found that both Virgin and Jetstar engaged in misleading and deceptive conduct and made false or misleading representations in relation to specific advertised airfares on their mobile sites in 2014, and for Jetstar, on its website in 2013. The ACCC alleged the companies failed to adequately disclose a Booking and Service Fee that was charged on bookings paid for using particular payment methods.[1]

We have been busy protecting consumers, competition and innovation by ensuring truth in advertising. Examples include par-baked bread, free-range eggs and online betting.

It has also been a high-profile year for consumer product safety. There was the recall of nearly a million faulty vehicle airbags as well as the continuing work to remove Infinity cables.

With these outcomes and activities fresh in our minds, today I will cover:

  • the general principles of the Australian Consumer Law and the flexibility they provide
  • interaction between regulators, and
  • the review of the Australian Consumer Law; what works and what areas could be improved.

The general principles of the Australian Consumer Law provide flexibility and are broad in scope

The general ACL provisions relating to misleading and deceptive conduct and unconscionable conduct have served us very well.

They provide the ACCC with agility and flexibility, unlike prescriptive provisions which can easily become outdated.

The general provisions enable the ACCC to think creatively when considering enforcement action and at times have enabled the ACCC possibly to push the boundaries.

The courts too, importantly, allow these general provisions to address new harms in new ways. There are a number of examples; my personal favourite is in relation to unconscionable conduct and its ability to reflect the norms of society at the time.

Lux Distributors

This year, the Federal Court ordered that Lux Distributors Pty Ltd (Lux) pay $370,000 in penalties for engaging in unconscionable conduct when selling vacuum cleaners to three elderly women in 2010 and 2011.

The penalty was the final chapter in a long running case that put the spotlight on pressure sales tactics directed at consumers in their homes.

The sales occurred after a Lux sales representative called on the women under the premise of providing a free vacuum cleaner ‘maintenance check’, but with the purpose of selling a new vacuum cleaner. The women were then subjected to unfair sales tactics, and pressured into purchasing an expensive vacuum cleaner.

On appeal, the Full Federal Court found that the primary purpose of each representative was to sell a vacuum cleaner, not to carry out a free maintenance check. The Full Court said the “initial deception, the ruse, was critical to the creation of the opportunity to sell and was the launching pad for all that followed.”[2]

In deciding whether Lux’s conduct was unconscionable, the Full Court said that the consumer protection laws “reinforce recognised societal values and expectations that consumers faced with direct salespersons will be dealt with honestly, fairly and without deception or unfair pressure.”

The Court’s recognition of society’s values and expectations has important implications for other unconscionable conduct cases. In fact, the Lux judgment is a major turning point in providing clarity around the scope and operation of our unconscionable conduct laws, with the principles repeated in subsequent judgments including in a very helpful discussion from the Chief Justice of the Federal Court in the matter of Paciocco v ANZ.

It means, among other factors, the courts will weigh up the standards of today’s society in making a value judgment.

Coles Supermarkets

In 2014, the ACCC instituted two cases against Coles Supermarkets in the Federal Court alleging unconscionable conduct.

Just before Christmas last year, Coles admitted it had ‘crossed the line’ in its dealings with several suppliers.

Following admissions by Coles and agreement on the facts, the Federal Court handed down a landmark judgment in both sets of proceedings, signifying widespread implications for grocery retailers, their suppliers and the broader business community.

The Court found Coles’ misconduct was “serious, deliberate and repeated” and ordered penalties totalling $10 million.

To resolve the matter, Coles also provided an undertaking, which was noted by and commented on by the Court, to establish a formal process, overseen by former Victorian Premier Jeff Kennett, which resulted in the supermarket refunding $12 million to suppliers in June.

The Coles case provides many legacies.

For smaller suppliers to large retailers, we hope that the nature of the investigation and the outcome will provide them with the confidence to approach us on a confidential basis with any concerns they have about unjust or unconscionable trading terms or conduct.

For the grocery industry, the legacy is that commercial negotiations between grocery retailers and suppliers should continue to be robust, but they must remain within the boundaries of the law, as reframed by the Federal Court decision.

For the law of unconscionable conduct, the judgment is significant in that it establishes clear judicial precedent that the unconscionable conduct provisions prohibit conduct against conscience by reference to the norms of society and apply to protect vulnerable businesses as well as consumers.

Woolworths Limited

The general prohibitions on misleading conduct also provide flexibility to address consumer harm.

While still before the Federal Court, we are alleging that Woolworths Ltd engaged in misleading and deceptive conduct and made false or misleading representations about product safety in relation to a range of home brand goods.

The ACCC alleges, among other things, that by continuing to sell products once it was aware these products may have caused serious injury, Woolworths engaged in misleading and deceptive conduct. In the case of some home brand goods, the ACCC also alleges that Woolworths made false and misleading representations that the goods were safe.

If successful, this will remind retailers that they must take some responsibility for what they sell; this will also be a demonstration of the versatility of the ACL to address consumer harm, in this case, addressing harms from unsafe products through the general prohibitions on misleading conduct.

Interaction between regulators to solve consumer issues

The ACCC strongly backs the ‘one law, multiple regulators’ model which underpins the Australian Consumer Law. The ACL is a single national law enforced in all jurisdictions by the various consumer regulators.

This model has fostered an unprecedented level of cooperation between consumer regulators. It has enabled jurisdictions to better coordinate action and speak as ‘one voice’ to industry, and has increased the effectiveness and responsiveness of consumer protection interventions.

We are constantly leveraging off and consolidating on the work of fair trading agencies. A recent example of co-operation and collaboration between regulators is the joint investigation by the ACCC and NSW Fair Trading into the conduct of private colleges.

After a five month joint investigation, which involved embedding investigators in a joint ACCC / NSW Fair Trading team in one location, the ACCC and the Commonwealth (as instructed by Department of Education and Training) instituted civil proceedings against Unique International College Pty Ltd[3] and separately against Phoenix Institute of Australia Pty Ltd and Community Training Initiatives Pty Ltd (CTI).[4]

Earlier this year, in another example of cooperation, the ACCC instituted proceedings in the Federal Court against We Buy Houses Pty Ltd and Rick Otton for alleged contraventions of the ACL.[5] Again, in bringing the case to court the ACCC was assisted by other regulators particularly NSW Fair Trading, Consumer Protection WA and ASIC. We also obtained a delegation from ASIC to institute proceedings under the ASIC Act to ensure that all the issues, including those that may fall within the financial consumer protection jurisdiction, could be ventilated in the proceedings.

We are also seeing fair trading agencies complement our enforcement work with significant interventions on national issues. This includes Consumer Affairs Victoria (CAV) venture into the Federal Court to obtain significant penalties against Dimmeys in 2013. CAV also took a successful Federal Court action against Qantas for supplying small, high-powered magnets that were subject to a permanent ban through its duty free program operated by Alpha Flight Services.[6]

Specialist regulators

While the general provisions of the ACL have a broad application, the ACCC of course cannot do everything. Indeed, often, industry specific regulators are better placed to handle some consumer issues.

Product safety is one such example. The ACCC has a broad mandate for taking action on safety issues associated with consumer goods. However, we don’t normally intervene in safety issues where there are specialist regulators responsible for those goods, or where the goods are not primarily consumer goods. This is consistent with Government’s Statement of Expectations.

Specialist regulators are responsible for building products, food products, drugs and therapeutic goods, motor vehicles, and industrial and agricultural chemicals.

The ACCC recently appeared before a Senate inquiry into non-conforming building products. We clarified that the ACCC does not regulate the supply of building products. Further, and despite the views of a number of people, the ACCC does not have a role in assessing building product conformity with building standards, compliance with regulations or their suitability for use in building work.

The ACCC seeks to avoid regulatory duplication. Where other specialist regulators exist, as is the case in the building sector, they are best placed to deal with conformity and compliance matters. Specialist regulators have the expertise and most importantly, they have the established industry relationships to quickly progress matters. This approach promotes an integrated regulatory framework and minimises compliance costs.

Infinity cables

The ACCC is taking a lead role in a taskforce of consumer agencies, building regulators and electrical safety regulators to coordinate the safety recalls of Infinity electrical cables. The ACCC became involved after:

  • it was established that a proportion of the cables were supplied directly to consumers by retailers and not restricted to trade customers
  • state and territory electrical safety regulators had advised that a national recall was necessary to ensure consumer safety
  • electrical safety and building regulations alone could not deliver a proportionate risk based nationally consistent remediation program.

The problems created by these faulty electrical cables are a national problem (except NT). The ACCC facilitated a national response to overcome the differences in state and territory electrical safety regulations.

Although ACCC involvement is consistent with our consumer protection charter, this approach is resource intensive, and therefore inefficient, in comparison to an action led by a single regulator. Importantly, the ACCC’s involvement in the taskforce has redirected resources from oversight of products more commonly regarded as consumer goods.

Samsung

The Samsung recall is an example of the specialist regulatory framework that is in place to manage product safety recalls. In this framework, washing machines are ‘declared electrical articles’ and require premarket approval to satisfy state government requirements.

In this case, the electrical safety regulator NSW Fair Trading liaised with Samsung about the recall on behalf of all state and territory electrical safety regulators, since the washing machines were approved via the NSW approvals scheme. As the lead agency on this matter, NSW Fair Trading secured an undertaking that provides national consistency.

The electrical safety experts at NSW Fair Trading liaised with Samsung about the technical repair under the recall. They have also taken the lead in encouraging Samsung’s efforts to promote the recall to consumers. Fair Trading has also informed the other electrical safety regulators about the recall via the Electrical Regulatory Authorities Council.

Aside from addressing the broader consumer guarantee issues arising, the ACCC’s role has been to support the efforts of NSW Fair Trading by promoting the recall on the recalls.gov.au website and assisting in the monitoring of the recall.

Review of the Australian Consumer Law, what works and what areas could be improved

As part of the process of developing the Australian Consumer Law, governments planned an implementation review. The time has now come. In 2016, Consumer Affairs Australia and New Zealand will conduct the review with a final report expected in March 2017.

The ACL review gives us a chance both to reaffirm the benefits of what we have, and to make the law even better. There are some areas where the ACCC will be suggesting improvements.

International safety standards

The Government has committed to reducing duplicative domestic regulation by discouraging the imposition of Australian requirements on systems, services or products that comply with a trusted international standard.

The aim is to reduce costs and delays for businesses, increase the supply of products into the Australian market and allow regulatory authorities to focus on higher priorities. This is to be welcomed.

However, there are challenges with referencing trusted international standards flexibly in mandatory safety standards within the current framework of the ACL.

For example, we recently determined that the European Standard for Motorcycle Helmets provides equivalent safety protection to that provided by the Australian Standard. Rather than being able to harmonise by simple reference to that European Standard we found we would need to replicate the text of the current version in a regulation and risk both infringing copyright and having that regulation become obsolete when the European Standard itself is modified.

The review provides an opportunity to address this type of situation.

Unconscionable conduct exclusions

As the Coles supplier case demonstrated, businesses, even large ones, can be subjected to unconscionable conduct. However, at present the unconscionable conduct provisions in section 21 do not apply to protect public companies.

The fact that a company is publicly-listed may not always be a good reflection of its size, level of resourcing or its ability to withstand unconscionable conduct. In certain business relationships, for example where a large difference in bargaining power exists, a listed public company could find itself subjected to conduct which goes beyond hard commercial bargaining and is so harsh that it goes against good conscience.

Consumer access to data

Thanks to the Harper Review and the Financial Systems Inquiry consumer access to data is already an issue on the table. The Harper Review recommended that ‘governments should work with industry, consumer groups and privacy experts to allow consumers to access information in an efficient format to improve informed consumer choice.’[7]

The ACL review provides an opportunity to find out from stakeholders how this can be achieved; what data would be most helpful; in what formats; as well as exploring any concerns consumers and businesses may have about progressing greater accessibility of data.

Penalties

The introduction of pecuniary penalties has been a game changer for us in terms of deterrence. The maximum penalty available for a breach of the ACL is $1.1 million for a corporation or $220,000 for an individual. Since the regime was introduced the courts have ordered a total of more than $44 million, with penalties at or above $1 million in 18 cases.

But are our penalties strong enough and are they keeping pace with deterrence? That has been the burning question since the Coles judgment in December 2014 when then Justice Michelle Gordon noted:

It is a matter for the Parliament to review whether the maximum available penalty of $1.1 million for each contravention of Pt 2-2 of the ACL by a body corporate is sufficient when a corporation with annual revenue in excess of $22 billion acts unconscionably. The current maximum penalties are arguably inadequate for a corporation the size of Coles.[8]

We also think there is a strong case to examine the merits of extending the reach of penalties to cover breaches of the general prohibitions against misleading and deceptive conduct (section 18). Penalties and other remedies already apply to false or misleading representations (section 29) and there is often overlap between the two. 

Sharing economy platforms

The sharing economy is a hot topic in consumer protection. The review provides an opportunity to consider how these emerging business models fit within the ACL as it currently stands. The sharing economy is an innovation that is here to stay, and we need to consider whether the ACL can adequately address any consumer protection issues that may arise within these transactions.

We also invite you to comment on a report we commissioned on the sharing economy and our competition and consumer laws. Deloitte Access Economics prepared the report and we are currently considering the issues outlined in the report.[9]

Phoenix companies

According to mythology, a phoenix is a bird reborn or regenerated. Some companies operate in the same way. They will go down in flames, often harming consumers and suppliers in the process, only to start-up again under a different business name while avoiding the liabilities of the old company.
We strongly believe there is scope to look at the extent to which the ACL facilitates consumers, including business customers, obtaining redress for contraventions of the ACL in such cases. 

Component pricing

Ensuring the correct communication of pricing information is an important aspect of the ACL in a number of ways. It can be difficult for consumers to compare prices of goods and services if pricing information is not presented in a clear and correct way.

Consumers may be misled into purchasing something that does not best meet their needs, or paying more than they would have paid if they were aware of the full price upfront. A lack of price transparency also has competitive effects as it can decrease the ability of businesses to compete on price.

We think the review provides an opportunity to see if there is any scope for the ACL to drive improved pricing transparency, with particular reference to component pricing.

Final thought

There also may be scope for the review to look at the success of the general provisions of the ACL identified earlier, and whether further principles based legislation might be warranted to tackle any currently unaddressed harms. Comparing and contrasting provisions in overseas jurisdictions – such as the US prohibition on unfair and deceptive practices – may provide an opportunity to address behaviour that might not be currently considered misleading but which is still considered harmful to consumers.  

Thank you for your time today, and there are exciting times ahead for our Australian Consumer Law.

 

[1]Australian Competition and Consumer Commission v Jetstar Airways Pty Limited [2015] FCA 1263 http://www.austlii.edu.au/au/cases/cth/FCA/2015/1263.html

[2] Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90
http://www.austlii.edu.au/au/cases/cth/FCAFC/2013/90.html

[3] https://www.accc.gov.au/media-release/accc-takes-action-against-unique-international-college-following-joint-investigation-with-nsw-fair-trading

[4] http://www.accc.gov.au/media-release/accc-takes-action-against-phoenix-following-joint-investigation-with-nsw-fair-trading

[5] http://www.accc.gov.au/media-release/coordinated-investigation-results-in-accc-taking-action-against-we-buy-houses-and-rick-otton-regarding-property-strategies

[6] https://www.consumer.vic.gov.au/news-and-events/news-updates/qantas-airways-limited-and-alpha-flight-services-pty-ltd-court-action

[7] Recommendation 21 http://competitionpolicyreview.gov.au/

[8] Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405
http://www.austlii.edu.au/au/cases/cth/FCA/2014/1405.html

[9] http://www.accc.gov.au/publications/the-sharing-economy-and-the-competition-and-consumer-act