Check against delivery

Thank you so much for the honour of delivering this year’s Ruby Hutchison lecture. I really appreciate the opportunity to rant on consumer issues, and to thank you all for the progress and satisfaction of the last nearly 11 years; but more on that later.

We all know Ruby’s story. My question is how did one person do all this? For example, she single-handedly raised 7 children, she was the first woman elected to the Western Australian Legislative Council and she founded the Australian Consumers’ Association in 1959. Thanks to her passionate advocacy, by 1970 the ACA had over 100,000 members who played an important role in the passage of the consumer focussed reforms in the 1975 Trade Practices Act.

Ruby is right up there with the true Australian heroes. She questioned and successfully challenged many things.

There are many issues that puzzle me.

I am constantly surprised that many economists do not see issues of income distribution as a key economic issue. How can an economist be concerned about economic growth and efficiency without having a deep interest in how the wealth they want to help create is shared? I think economics can contribute a great deal on these issues.

As an economist, I think the inequality of incomes across the world, and the absolute poverty in many countries, is one of a small number of key challenges facing the world. The first part of my career was devoted to playing a small part in addressing these issues. I spent nearly 10 years in developing countries helping them, for example, negotiate with multinational companies to ensure they received a fair share of the proceeds from the use of their natural resources. In one instance I went to Ghana around 15 times to help them force Kaiser Aluminium to pay a fairer price for the hydroelectricity they used post the early 1970s oil shock. The extra income made a huge difference to all Ghanaians and I am proud of that.

Further, many economists and business lobbies often seek to minimise all government intervention. But have they not yet worked out that when you have citizens who do not think that markets work in their favour, or for them, and who are skeptical about the powers of organisations such as the ACCC, that this invites demands for much more specific regulation from the voting public?

Then you have the big business groups that argue that any enhancements to the Competition and Consumer Act must be opposed because they will damage the economy. But the question of where you draw the line between the interests of the economy and of consumers is not only interesting in itself; it is also a question that must be constantly debated when you have the profit motive as the organising principle for the economy.

I am a strong believer in a market economy and a firm believer in the benefits of relying on the profit motive. But it can only work as intended if there are strong guardrails so that the actions of firms who are seeking to maximise their profits work for the greater good. This cannot happen in a vacuum; how can it?

Only with Adam Smith’s world of perfect competition is there a chance of that and we can all see we are an extremely long way from that. And even then, many laws would still be needed. Smith, of course, famously said that “the interest of the producer ought to be attended only so far as it may be necessary for promoting that of the consumer”. He certainly had a way with words.

Today, I will discuss 4 topics.

  1. I want to talk again about the fact that consumer law is still seen by some as the poor cousin of competition law. How did this ever come about? Ever since I arrived at the ACCC I have been fighting this perception, with some success
  2. I want to make the case again for the no-brainer reforms to the Australian Consumer Law that are all well overdue
  3. I want to propose the next phase of Australian Consumer Law reforms that we should now debate, and
  4. I want to highlight the importance of regulators engaging in appropriate policy debates.

The rightful position of the ACL in our economy

In my world I see the need for a simple and high-level hierarchy. Consumers need to be well informed and certainly not misled about what they are buying; they need to be able to buy from enough competitors seeking to serve them; and, where there cannot be competition, the monopoly player needs to be well regulated.

I do not understand why the first limb here is still given so little weight by some people.

It cannot be concern for consumers. We can all see examples where cartels raise prices by, say, 10-20%, but consumers who are misled pay double for a good or service whose qualities are misrepresented.

Further, the ACL is meant to deal with consumers not getting what they paid for or receiving faulty goods, and it is also meant to deal with goods that are unsafe. This all sounds a lot worse than the effects of collusion.

Some believe that if you have sufficient competition consumers will automatically be well looked after. This is not so. The profit motive gives an incentive to gain an advantage by misleading consumers or selling them unsafe goods. Effective competition and consumer law are both necessary.

In competition law there is currently a debate about whether the consumer welfare standard is the appropriate one; and the supporters of the consumer welfare standard are generally at the conservative end of the spectrum. How can you have a passion for consumer welfare yet not have a passion for the ACL?

Often the worst experiences that consumers have comes from a breach of consumer law, not competition law.

Please do not misunderstand me here. Competition policy and law is fundamental to the success of a market economy. It is a necessary ingredient.

My point is that so is consumer law.

Prior to 2011 Australia’s consumer laws were deficient and nationally inconsistent. I take my hat off to all those who contributed to the introduction of the ACL in 2011.

It brought many changes:

  • it created a national legislative scheme for consumer product safety, replacing the existing Commonwealth, State and Territory regulatory schemes
  • it created a national legislative scheme for statutory consumer guarantees, replacing the existing Commonwealth and State and Territory legislation concerning implied conditions and warranties in consumer transactions, and
  • it augmented the fair trading and consumer protection provisions of the Trade Practices Act with changes drawn from existing provisions of the consumer laws of the States and Territories that existed at the time.

But the key change was the introduction of penalties for breaches of the ACL. Without this, all else pales in my view. The penalties were set at a maximum of $1.1m per breach.

The essential point is that the ACCC can never pursue all or most breaches of the ACL. Our compliance model sees us take on certain cases and use these to spread wider deterrence messages to all other companies. Such messages depend crucially on penalties that reflect the seriousness of the breaches of the law.

In 2018 the law was changed to align ACL and competition law penalties. For breaches of both the penalties are now the higher of $10m or 3 times the gain made or, if the latter cannot be shown, 10% of company turnover.

When I arrived at the ACCC in 2011 a $1m penalty against a large company was celebrated. I then remember the positive reaction to Optus having to pay a penalty of $3.6m for a breach of the ACL in 2013.

Then in 2018 it seemed a milestone that Ford, Apple and Telstra faced $9-10m penalties.

In 2021 we saw Telstra pay a $50m penalty, VW pay $125m and AIPE, a vocational training company, hit with a $153m penalty.

What a change.

And these are all under the old penalty regime.

We will never know how much the new 2018 penalty regime helped convince everyone, including the courts, that penalties of around $10m for large companies were largely meaningless.

I think it was all part of the successful push the ACCC led, and of which I am most proud.

Despite these changes to consumer law we still have some glaring deficiencies to which I now turn.

The no brainer ACL reforms that must and will come

Can you imagine a situation where someone was caught stealing and the result of the police inquiries was that they simply had to give the money back? No penalty for the actual stealing to deter others.

But we have this in our product safety laws.

There is no law against selling unsafe goods; you are not breaching any act by doing so. You simply must recall the goods when they are seen to be unsafe.

Now there are significant costs in doing that, and sometimes reputational harm, but the law does not impose an obligation to check that the goods you sell were safe in the first place.

Think my stealing analogy is a stretch? You have just paid good money for a good that is unsafe to use!

And what do you think 95% of Australians think of this?

What about the situation where someone is caught stealing and the result is that they must not do it again? No recompense, nothing illegal, just stop it. This is the situation with our Unfair Contract Terms laws.

You are not breaching any act if your standard form contracts contain UCTs. If a Court finds against you then going forward that term of the contract is void.

Again, is the stealing analogy a stretch? Some UCTs allow the price you are paying to be unilaterally hiked! Others remove all redress if something goes horribly wrong with the good or service being provided.

Perhaps the best one is someone is caught stealing and they are allowed to keep doing it provided they do not mislead people about what they are doing. This is the situation with our consumer guarantee laws.

While consumers can take individual action, with great difficulty, the ACCC cannot act against a company providing faulty goods unless the offending company tells consumers that they are not entitled to a remedy. That is misleading; they are entitled to one if the consumer can take action themselves.

Again, my stealing analogy holds up. Imagine you have paid $30,000 for a lemon car, or triple that for a lemon caravan?

I realise that there are processes well underway to address all these defects in the ACL, but they are extremely long, drawn-out processes.

We are, however, only at the start of the campaign for a general law against unfair practices.

I would argue 95% of Australians would vote for the introduction of such a law.

Without such a law it is not illegal to increase significantly the cost of a vital service to repeat customers without telling them, causing them huge out of pocket costs for a vital service they only realise they have incurred once they get the bill.

It is also likely not illegal to use a customer’s data to target selling to vulnerable customers at inflated prices or to design interfaces to steer consumers to make choices that are not be in their best interests.

Further, the ACCC has received multiple complaints about subscription services that make it extremely difficult to cancel your service. Signing up is easy and could come with a generous free trial. But when you want to cancel, the process is completely different to the ease of signing up. For example, they make you write formal cancellation emails to send to no reply email addresses. Or they make you call a phone line where you sit on hold for a ridiculous amount of time, then they give you the hard sell not to cancel. Even where they do allow you to cancel online, they often employ specific design techniques known as ‘dark patterns’ that make it difficult to cancel, such as complicated navigation menus, multiple and confusing choices, and repeated nudging.

I recognise that the ACCC can sometimes act when consumers were misled by omission, or that the conduct was unconscionable, but we here know that such options are difficult.

Furthermore, business models and strategies are rapidly changing with new technologies and massive data harvesting, and these present new opportunities for manipulative and unfair practices by businesses. Many of these go unregulated because they were not envisioned when the ACL was created. A prohibition on unfair practices is a critical safety net to ensure consumers are not harmed.

Big business largely opposes a law against unfair practices, just as they opposed a law against misleading conduct.

I would say 2 things to big business. First, it is in your interest for consumers to have faith that a market economy works for them. Second, an economy wide law is much better than a huge array of specific laws seeking to right wrongs that would be captured under an unfair practices provision.

Australia will have an unfair practices provision. Hopefully it will be sooner than later.

The next phase of consumer law reforms

So you can see I have already banked all of the no brainer reforms.

What then?

I have 2 sets of suggestions.

First, the ACCC has just released its Discussion Paper as part of its digital platform work seeking views on what to propose to the Government in September of this year in relation to up front rules that would apply to digital platform markets. Other countries either have such rules, such as Germany, or are close to introducing them, such as the EC and the UK, or are debating them, such as in the USA.

What the ACCC wants to hear about, in addition to competition issues, is whether and what sort of up-front rules may be needed in relation to consumer law issues.

For example, are new rules necessary to protect consumers against the use of dark patterns that might trick people into buying what they otherwise would not, or paying excessive prices, or signing up for subscriptions they cannot relinquish? What should be required of platforms so that users are protected against online scams or malicious apps? How can we ensure consumers and small businesses can resolve disputes with large digital platforms?

The platforms must take more responsibility for what they have created; which is a data driven model which makes huge amounts of money by directing messages to you, the product they are selling.

Second, and closely related, can we learn from laws applying overseas and apply them in Australia?

In the EU, a recent update to the Consumer Rights Directive makes sure that consumers are ‘clearly and prominently informed’ when automated decision making and profiling of consumer behaviour is used to personalise the price for consumers, so that consumers can take that into account when deciding whether to buy from that supplier.

Another example is the EU’s Platform-to-Business Regulation which came into effect last year. It requires online platforms to put in place effective internal complaints-handling systems and agree to assistance from external mediators to resolve disputes. This is similar to the improved dispute resolution standards and external ombudsman scheme that the ACCC has consistently been advocating for to help small businesses and consumers resolve disputes with digital platforms since the Digital Platforms Inquiry.

In the UK they are also considering introducing a fairness by design duty in an enforceable code of conduct, which would aim to ensure that choices and defaults provided by the platform are presented in a way that facilitates informed consumer choice. They are also considering a requirement that certain large platforms give consumers a choice as to whether to share their data for personalised advertising.

Closer to home, South Korea already prohibits dominant businesses from engaging in abusive practices, including substantially undermining consumer interests. The Korea Fair Trade Commission can issue fines and order the business to stop the violation and take other measures to correct it.

Japan also prohibits the abuse of a superior bargaining position as an unfair trade practice, and the Japan Fair Trade Commission has clarified that this extends to business-to-consumer transactions, not just business-to-business transactions. Notably, and in contrast to Korea, it does not necessarily require a firm to be dominant.

Regulators should engage in policy debates in an appropriate manner

There are some who believe that regulators should only enforce the law as it is and not suggest publicly the need for law change. What a loss to the public debate this suggests. Indeed, I think it is an argument by conservative voices that want to minimise the effectiveness of Australia’s laws on business.

Regulators are often the best placed to form views on the effectiveness of the laws they enforce.  That is, are the laws meeting the objectives of the Parliament that introduced them; are there gaps that see the laws ineffective?  Voicing their concerns publicly can inform the public debate in ways it may otherwise not be.

Of course, care must be taken. Regulators must restrict their commentary to their area of the law, they must be respectful, and they should not place the government of the day in a difficult position. It is, however, easy to do this and still be a valuable voice.

The ACCC has long been a successful advocate for law change. We advocated for making Section 46 effective; we advocated for consumer law penalties to be the same as for breaches of consumer law; and we advocated for a News Media Bargaining Code; to name a few of the many changes we have helped bring about.

Law change is usually a long game. Continuing, careful advocacy is needed. This has been the ACCC’s approach, for example, on all the law changes I mentioned in Section 2, and in the proposals the ACCC has put forward for changes to our merger laws.

Concluding comments

It is, to me, amazing that there are still no penalties for breaches of consumer law in the USA and the UK. I remember chatting to a USA colleague who was taking action under competition law for conduct we would have reasonably easily taken under consumer law. When I asked him why he was trying to squeeze a consumer issue into competition law he said it was pointless taking consumer law action as there are no penalties applying to such breaches.

This is amazing, and a situation that in my view demands global advocacy.

So we do need to realise that the ACL is ahead of what most countries around the world have. I also suspect our ACL penalties are the highest available anywhere in the world.

We should all be proud of this; but aghast at how low the international bar is set in relation to penalties.

Much to do!

Can I urge you in your continuing advocacy for change that you work closely with small business and their organisations? The vast bulk of small business often feel as consumers do; without much say in their commercial transactions with larger businesses. They need effective Unfair Contract Terms and unfair practices laws often at least as much as consumers do. They can be a powerful ally, and a joint voice would count for a lot.

Finally, and most important, let me thank all of you for your work with the ACCC over the last nearly 11 years. What you do is so profoundly important. You do what you do simply because you wholeheartedly believe it is the right thing to do. In that you are an inspiration to us all.

In addition, there are so many actions the ACCC has taken only because of your work and commitment. You have made a profound difference to the ACCC’s work and therefore, I believe, to Australia and particular Australians.

This is not the last you will see of me. At heart I am a public policy advocate so we will have common cause on many issues, particularly those I have mentioned today.

Thanks to you all, and thanks for the huge honour of presenting the 2022 Ruby Hutchison lecture.