Working together to cement and improve the Australian Consumer Law

Speakers: 
Mr Rod Sims, Chairman
Conference: 
National Consumer Congress
20 March 2015

With a review of the Australian Consumer Law on the horizon, ACCC Chairman Rod Sims provides the National Consumer Congress with an update on recent consumer protection activities. He also outlines priorities for 2015 and explains the ACCC's increased focus on market analysis.

Transcript: 

Check against delivery

Introduction

I am delighted to be here today at the 2015 National Consumer Congress.

The ACCC relies on being a visible enforcement agency and what we achieve for consumers relies on the support of everyone in this room. Whether it is providing input on priorities, providing us with well thought through leads, working with us to disrupt scams, or helping publicise the work of regulators, we depend upon your work.

With a review of the Australian Consumer Law (ACL) on the horizon, today’s Consumer Congress provides an opportunity to get the conversation started and take stock of our activities.

The Australian Consumer Law has proven to be excellent. It has taken consumer protection to new levels in terms of the laws that underpin it, awareness and recognition among consumers and businesses, and the way in which regulators act to deliver compliance.

Such new levels of consumer protection are absolutely necessary in a market economy; without appropriate consumer laws our market economy, quite simply, will not work as it should.

The review of the ACL gives us all a chance both to reaffirm the benefit of what we have, and to make it better. As we focus on the latter, please do not let anyone here lose sight of the former.

Today, I intend to focus on:

  • the year that was
  • our compliance and enforcement priorities for 2015, and
  • our increasing focus on using market analysis.

The year that was

We at the ACCC are particularly proud of what we achieved in 2014. Our, and certainly my, major focus was to get our finances in order; a key requirement was a 12.5 per cent reduction in our staff.

To do the many things required to achieve this, plus streamline a number of our practices, involved and affected everyone at the ACCC. Our greatest achievement was to do all of this without operationally missing a beat. To many of you observing us from the outside it may well have appeared as business as usual.

Last year, we investigated many matters and instituted proceedings in eight new competition cases and 20 consumer protection matters in the Federal Court. We accepted 14 consumer protection-related undertakings and issued 15 infringement notices which resulted in more than $300,000 in penalties being paid.

In 2014, our actions under the Australian Consumer Law netted a total of $14.5 million in pecuniary penalties.

To jog your memory, some of the new consumer actions were:

  • Bet365 (alleged misleading and deceptive conduct around ‘free’ bets and ‘bonus’ offers)
  • Chrisco Hampers Australia Ltd (alleged unfair contract terms over lay-by agreements)
  • Europcar Australia (alleged unfair contract terms, and more, regarding the liability cover provided to car hire customers)
  • Lyoness Australia Pty Ltd (alleged pyramid selling scheme)
  • Virgin Australia Airlines Pty Ltd and Jetstar Airways Pty Ltd (alleged misleading ‘drip pricing’ in relation to airfares), and
  • EnergyAustralia Pty Ltd & Bright Choice Australia Pty Ltd (alleged misrepresentations in telemarketing).

These matters remain before the Court at various stages with results expected during the course of this year.

There were some notable results that I will spend a little more time on.

Coles unconscionable conduct

The Coles Supermarkets Australia Pty Ltd unconscionable conduct outcome stands out. The judgment sends a clear signal to larger businesses about appropriate conduct in commercial dealings with smaller suppliers.

In late December, the court made declarations, by consent, under the ACL and ordered Coles to pay total pecuniary penalties of $10 million, as well as costs. Coles also provided an undertaking to establish a formal process via an independent arbiter, Jeff Kennett, to provide options for significant financial redress for over 200 suppliers referred to in the proceedings.

In her judgment, 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.

For our part this year, we will be continuing to advocate for the courts to impose penalties of appropriate deterrent value in each case. Penalties should not be seen as simply a cost of doing business. They need to be at a level which achieves both specific and general deterrence.

Without the ACCC’s dual consumer and competition focus, the “serious, deliberate and repeated” misconduct may have fallen through the cracks. An agency with a single-track focus on competition law would not have found grounds to take action; an agency with a sole consumer protection ambit may have decided not to get involved in a business-to-business matter. The outcome is a testament yet again to the benefits of having one agency responsible for both competition and consumer functions.

Consumer guarantees

In the area of consumer guarantees, last year we took action and saw outcomes on several fronts. There was:

  • $200,000 in penalties ordered by the Federal Court, by consent, against Fisher & Paykel Customer Services Pty Ltd and Domestic & General Services Pty Ltd for false or misleading representation in offering extended warranties.
  • A string of court results against Harvey Norman franchisees for misrepresentations made to consumers in-store.
  • Court enforceable undertakings provided by group buying site, LivingSocial Pty Ltd, to resolve concerns over terms in consumer contracts and other representations including as to refund rights.
  • Court proceedings instituted against Valve Corporation, one of the largest online gaming companies in the world, for allegedly misleading gamers about their refund rights.

Credence claims

Last year, we covered much ground in pursuing misleading food promotional claims. Again, we were able to present a strong case by arguing both the detriment to consumers and competitors.

For example, the courts findings in the Coles ‘Freshly Baked’ and ‘Baked Today’ case were a welcome outcome for consumers as well as bakeries who make their bread from scratch on a daily basis.

Still on food labelling, we have done a lot of work on ‘free range’ eggs. This is important work because free range eggs account for around 38 per cent by volume or 47 per cent by value of eggs sold in Australia.[1] The Pirovic Enterprises Pty Ltd outcome should leave a lasting impression on the egg industry. The judgment provided a common sense definition of the term ‘free range’. The court ruled, by consent, that free range means birds can and do go outside on most days.

We still have a couple of matters before the courts. In the case against Derodi Pty Ltd and Holland Farms Pty Ltd we are alleging that their use of ‘free range’ in relation to their Ecoeggs, Field Fresh and Port Stephens egg brands was false and misleading. Our proceedings against WA egg producer Snowdale are continuing as are other investigations.

‘Discount off what’

We have continued to make our presence felt in the energy retail sector. Previously, we wrote to energy retailers to put them on notice about misleading promotions around energy plans; in what we termed ‘discount off what?’ In the past year, we backed words with action. The Federal Court ordered, by consent, that Origin Energy Limited and two subsidiaries pay penalties totalling $325,000. The court found Origin made false or misleading representations about the level of discount that residential consumers in South Australia would receive under a ‘DailySaver’ energy plan.

The Federal Court also found, in a contested hearing, that AGL South Australia Pty Ltd (AGL SA) made false or misleading representations and engaged in misleading or deceptive conduct concerning the level of discount residential consumers would receive under AGL SA’s energy plans, with relief yet to be considered by the court.

Product safety

From cots to cables, our product safety work covers an amazing breadth of issues. To give you some context, between 1 October 2014 and 31 January 2015 we monitored around 90 recalls of consumer products. We conducted 1700 site surveys and inspected more than 5000 products.

Not only is the breadth wide but the level of difficulty in our product safety work can be high. Last year, we grappled with some very complicated issues; the most significant being the recall of faulty Infinity electrical cables which potentially affects some 40,000 homes and buildings across Australia.

Our concerns about quality assurance also extended to cots. Toys ‘R’ Us Australia Pty Ltd paid an infringement notice penalty of $10,200 and provided a court enforceable undertaking to resolve concerns after its ‘Nantucket 4-in-1’ cots failed to meet the mandatory safety standard. The outcome followed two other matters involving smaller online traders (New Aim Pty Ltd and Le Tian, trading as SavingForAussie) who supplied cots in breach of the standard. They also paid infringement notices and provided undertakings.

A perhaps path-breaking matter is the proceedings in the Federal Court where we allege 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 made false or misleading representations that these products 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.

Partnerships in consumer protection

Our head of Consumer Enforcement will be on a panel later today on the effectiveness of the ACL. I expect he will also mention the benefits the ACL has brought in enhanced coordination between regulators.

This has manifested through joint projects to examples much closer to joint investigations such as those revealed in our recent action against Mr Otton and We Buy Houses.

But it also occurs in a complementary way. We are constantly leveraging off and consolidating on the work of fair trading agencies. We are also seeing fair trading agencies complement our enforcement work with significant interventions on national issues. This includes Consumer Affairs Victoria venture into the Federal Court to obtain significant penalties against Dimmeys and successful action against Qantas, and DOCEP in WA leading the way with enforcement action against property spruikers.

The ACL has fostered and supported these experiences. And the partnerships to deliver benefits to consumers, of course, importantly extends to consumer groups.

We rely heavily on your input on setting priorities and identifying issues to pursue. We have seen this from ACCAN’s referral of unfair contract term issues with internet contracts that led to our first UCT enforcement outcome, to ICAN’s referral and assistance in dealing with specific unsolicited selling matters in Indigenous communities such as our action against Titan Marketing Pty Ltd.

We also benefit from your public support where our actions align with your concerns. Whether it be by media statement or public comment, it is helpful for the public to hear multiple voices on important issues. Recent support from CHOICE for our action against Reckitt Benckiser (Australia) Pty Ltd in relation to representations about its Nurofen products or CALC’s support for our energy door to door work are good examples. We do not expect blind support, nor will we always have the same agenda, but when you think we are on the money then it is great to hear that publicly.

Compliance and enforcement priorities for 2015

Turning to the year ahead, we again have a mix of established and new compliance and enforcement priorities.

Competition

We continue to take a strong line to ensure consumers benefit from competition. Cartel conduct, anti-competitive agreements and practices, and misuse of market power remain three of our four enduring priorities. This year we also are focusing our activities to detect and deter cartel activity in government procurement.

Product safety

Product safety is our fourth enduring priority. For reasons I just described, we will be working with industry to minimise the supply of unsafe goods. We want to encourage good practice in the manufacture, sourcing and quality assurance of consumer products. Cheaper products are all well and good, but they should never come at the expense of consumer safety.

Truth in advertising

We believe truth in advertising is fundamental to the proper functioning of a market economy. Our action in this area serves a dual purpose. When advertising is untruthful consumers are misled, and honest traders are put at a competitive disadvantage. There can then be a downward spiral.

We will prioritise those matters where misleading claims are made by large businesses with the potential to result in significant consumer detriment, or where the conduct is likely to become widespread if the ACCC does not intervene.

The recent Nurofen action falls into this basket. We are alleging false or misleading claims that Nurofen specific pain products were each formulated to treat a specific kind of pain, when the products are identical.

Finally, I want to highlight the Court’s comments in the recent Coles par baked bread matter in which his Honour commented:

Advertising should not be parsed and analysed in the fashion of a 19th Century equity draftsperson. Nevertheless, the courts should be astute and careful not to permit consumers to be misled on available meanings or connotations of phrases deliberately chosen to sell products on the basis that everyone takes advertising with a pinch of salt. To place emphasis on advertising licence that bends the truth will not only degrade the language, but lead to a culture of deception in the market.[2]

We completely agree.

Vulnerable consumers

This year we will focus on issues affecting Indigenous consumers, older consumers, and consumers who are newly arrived in Australia. This is an area where will be drawing on partnerships.

For instance, we have a partnership with the Tiwi Island community, which I recently visited, to develop ‘Your Rights Mob’ You Tube videos to help inform and empower Indigenous consumers to stand up for their consumer rights. Last year we extended the ‘Your Rights Mob’ social media activities on a national basis.

Our wider Indigenous outreach work has also helped us detect consumer law problems in several communities.

Later in the congress agenda, one of our investigators, whose feet are firmly on the ground with our Indigenous consumer protection work, will give a short account of our work in this area. It is a point of pride for the ACCC and when you hear the genuine passion and interest that is demonstrated, and the real benefits that can be delivered, I am sure you will see why.

In the past couple of years, we have taken action where unscrupulous sales people have targeted older consumers. The Lux case is one example. By concentrating our efforts, we would like to give older consumers and their carers some extra confidence that their rights are being protected.

Consumers who have recently arrived in Australia also face many issues and are vulnerable to deceitful operators. These consumers are often from culturally and linguistically diverse backgrounds and their understanding of consumer rights under Australian law is understandably lacking.

We will not hesitate to take appropriate enforcement action against businesses that attempt to exploit these communities for commercial gain.

We are also working jointly with other ACL regulators to understand and address conduct that affects consumers, particularly the vulnerable, in the training and education sector. This includes undertaking a number of our own investigations to address possible breaches of the ACL.

In particular, we are concerned about unscrupulous marketing tactics and the potential for consumers to be misled, leaving them with large debts they will never pay, for courses they are unable to complete. Where there is sufficient evidence of non-compliance by training providers, marketers, or brokers, we will investigate with a view to enforcement action.

Online

Online issues were a major focus for this congress last year and have been on our radar since at least 2011. This year, we will concentrate on emerging systemic consumer issues in the online marketplace. One problem is significant delays by online businesses in addressing consumer complaints about either the product itself or delivery.

We and other ACL regulators will be working with industry to improve responsiveness to consumer concerns.

Scam disruption

With the assistance of other agencies, our commitment to disrupting dating and romance relationship scams continues. This project currently involves using financial intelligence to identify Australians who are sending funds to West African nations. We then write to them and advise that they may have been targeted by a scam and offer confidential advice.

We have seen some early indicators that our approach is having some success. Approximately 76 per cent of those receiving the ACCC's warning letters stopped sending money overseas for at least six weeks.

Now that we have a better idea about what works, we will be looking to expand our program to those states and territories that do not currently have a similar program in place, namely Victoria, Tasmania and the Northern Territory.

We are also working with intermediaries such as dating sites and financial institutions to make it harder for scammers to connect with victims and for money to be sent to scammers.

Medical and health

Competition and consumer issues in the medical and health sector are a new priority area. On the competition side, for example, we have received allegations about attempts to limit access to products, patients, procedures or facilities.

On the consumer side, we are aware of a range of allegations including unconscionable conduct and misleading and deceptive conduct by medical professionals. Our aim is to increase awareness within the medical profession and the broader health industry about both rights and obligations under the law.

As usual though, you can expect our approach to be underwritten by enforcement actions in appropriate cases such as the Nurofen matter mentioned earlier and others already under investigation.

Industry codes

Industry codes of conduct are another priority. We are bedding down changes to the Franchising Code of Conduct, and the new Food and Grocery Code of conduct will be a major focus for us in 2015.

Carbon tax repeal

Ensuring that carbon tax cost savings are being passed through to consumers is, of course, a continuing focus. This activity will culminate in our April and July reports this year which will assess the full pass through of the carbon tax removal.

Market analysis

Market analysis needs to play a larger role in supporting our compliance and enforcement approach. To be effective across all our functions we often need to understand industry practices and dynamics, and explain these to the public.  We have previously done such work, for example, with our study of door-to-door selling practices in 2013 and the comparator website industry in 2014.

We now believe we should do more of this work, and will do so, albeit that it must come with some cost to our enforcement efforts.

This year we will begin a new program of reviews of selected industry sectors. The sectors we are currently reviewing include debt collection and private health insurance. We are also taking a new approach to petrol.

Debt collection

In conjunction with our Consumer Consultative Committee members, we have commissioned research into the scale, scope and structure of the debt collection industry. As part of our work, we are looking to gauge the industry’s understanding of and compliance with their obligations under the ACL. Identifying problematic behaviours, specific issues and industry best practice will enable us to better address debt collection issues.

Private health insurance

We have also commenced a review of the private health insurance industry. This work will inform a report, which we are already required to produce each year for the Senate. This review assesses the adequacy and transparency of information about private health insurance and the impact it may have on consumers and competition more broadly.

Petrol

Finally, we have also been directed by Minister Billson to monitor and analyse fuel markets in a more regular and in-depth way. As well as quarterly reports looking at petrol price movements, we will conduct ‘deep dive’ studies. These studies will look at ‘micro’ issues, including analysing the price drivers of petrol in some regional markets, starting with Darwin.

Closing remarks

The ACCC’s approach to the Australian Consumer Law involves a mix of enforcement, education and partnerships.

We are proud of our consumer record and our achievements in the past year, given the resources we have available to us.

Thanks to the input from the people in this room, we have set our compliance and enforcement priorities and the stage is set for another big year.

We look forward to working with you all.

[1] Australian Egg Corporation 2013/14 Annual Report page 3