Making markets work for consumers

Speakers: 
Mr Rod Sims, Chairman
Conference: 
National Consumer Congress, Sydney
16 March 2016

Opening the National Consumer Congress in Sydney, ACCC Chairman Rod Sims discusses possible areas of focus for the Australian Consumer Law review. Mr Sims also provides some recent success stories and outlines the ACCC's priorities for 2016.

Transcript: 

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Introduction

The National Consumer Congress is of fundamental importance: it allows us to hear about emerging consumer issues as well as current campaigns and new priorities. This year’s Congress takes on extra significance with the first review of the Australian Consumer Law (ACL) only weeks away.

Commentators sometimes see our consumer protection laws as the softer of the market place regulations. This is silly; they are an essential economic underpinning to a successful market place.

In a recent consumer case, the court said:

It is important that sellers in the market recognise that consumers are entitled to reliable, truthful and accurate information. Confidence in such is a matter of importance for the Australian community and economy. It is an important factor in market efficiency.[1]

To put the point differently, how can you put cartel behaviour above selling unsafe goods? And, do Australians worry more about a substantial lessening of competition, causing higher prices, or being deceived about the goods they buy?

Our consumer laws underwrite confident consumer participation in commerce, enhance transparency and inform choice. They also ensure that businesses compete on merit and not falsehoods, and protect all consumers and small businesses from unfairness that has no place in a properly functioning market.

The ACL developments over the summer show the law at work:

  • we saw the recalls of unsafe hoverboards; our safety investigation to determine whether more needs to be done is well under way
  • the court declared Nurofen’s packaging misleading, supporting competition on the merits
  • there was further court action on private training colleges following joint investigations with ACL regulators; involving allegations of unconscionable conduct that we believe has no place in the market place; and
  • the Government introduced new laws banning excessive payment surcharges, providing transparency in costs.

Consumers are likely to have strong views on each of these issues, and rightly so.

It is essential that the ACCC and state agencies are visibly enforcing the law, to define the boundaries and maintain consumer confidence.

To help set the scene for the excellent line-up of speakers, today I will provide some thoughts on:

  • Some possible areas of focus for the Australian Consumer Law review
  • Some recent success stories for consumer protection, and
  • Some of the ACCC’s new priority areas.

Possible areas of focus for the Australian Consumer Law review

Just as the introduction of the ACL built on previous laws and regimes, we are confident that the 2016 review will confirm this new and improved base while taking steps to advance consumer protection. We expect the review will test whether consumer protections suit the modern market place and whether the regulatory tools and sanctions are delivering compliance.

The review is intentionally an open one; and presenters and panels through the course of today will no doubt express views about the topics and options that might emerge. The ACCC is just one voice in this exercise, though we do come with the experience of an active regulator that sees the breadth of ACL issues drawn to its attention; many by you in this audience.

At the ACL roundtable in December, I set out some of the topics we expect to emerge as part of the review and it would be remiss not to summarise them again this morning. In no particular order:

  • In the area of international safety standards, the review provides an opportunity to reduce duplicative domestic regulations while accommodating the flexibility required to protect consumers. Our product safety framework needs to support rather than constrain the growing consumer interest in products they can purchase online that are certified to standards in Europe and the United States though not to Australian Standards. The strong consumer interest in lighter European certified motorcycle helmets that provide equivalent safety and cause less fatigue is a current example.
  • With significant progress in the court’s consideration of unconscionable conduct, surely now is the time to consider equal application of these important provisions to dealings with all companies including those publicly listed; a test no longer determinative of size.
  • The review has the chance to capitalise on recent inquiries that encourage consideration about the ways consumers can be given access to information in an efficient format to improve informed consumer choice.
  • We have often commented that the introduction of $1.1 million pecuniary penalties has been a game changer for regulators in terms of deterrence. But is it enough to deter larger companies? In the Coles supplier cases, the Court made the same query noting that “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.”
  • 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.
  • There are also real questions about the capacity of the ACL to stop and prevent recurrence of bad behaviour with businesses or individuals less likely to be deterred by loss of funds than to penalty or the associated reputation. Among other things, we will ask the review to consider the challenges of businesses that morph or re-emerge, often referred to as a form of phoenix, and whether the ACL is well equipped to tackle this.
  • 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 review will no doubt also look at current laws to see if they are working as intended.
    • For example, the ACCC would point to ensuring the correct communication of pricing information and whether there is scope for the ACL to drive improved pricing transparency, with particular reference to component pricing.
    • Whether unfair contract terms allow regulators to get to the heart of unfairness in standard form contracts in all circumstances.
  • As a final thought, there may also be scope for the review to look at the success of the general provisions of the ACL, 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. We may also want to consider the merits of a need for a general obligation to supply safe products.

Some recent success stories

We achieved two significant outcomes in the past couple of months that expand the ways in which the law can deliver consumer protection. One was a consumer case and the other a competition case, but both will leave a lasting legacy in making markets work for consumers.

Woolworths unsafe products

In February, the Federal Court declared that Woolworths Limited engaged in misleading and deceptive conduct and in some cases made false or misleading representations about the safety of five house-brand products:

  • a deep fryer with a faulty handle
  • drain cleaner with a defective cap
  • safety matches which give off sparks
  • a padded flop chair
  • a folding stool which failed to bear the maximum load stated on the packaging.

In some cases, Woolworths was aware of serious injuries resulting from defects in these products, but did not remove the products from sale or recall the products. Woolworths subsequently removed the products from sale and recalled them, but not always before further injuries.

In these cases, the Court found that Woolworths had misled consumers about the suitability of the products.

The Federal Court ordered Woolworths to pay just over $3 million in penalties for breaches of the ACL.

The case highlights the importance of good product stewardship at each point of the supply chain; an issue that the ACCC is actively pursuing.

The outcome also shows the versatility of the ACL to address consumer harm; in this case, addressing harms from unsafe products through the general prohibitions on misleading conduct.

The outcome stands out in terms of deterrence. It shows that companies must do more to detect unsafe products and remove them from their shelves or face significant penalties. Indeed, getting this message across is one of our priorities for 2016.

Informed Sources

The second breakthrough occurred in resolving our long-running concerns about the petrol price information exchange service operated by Informed Sources (Australia) Pty Ltd.

Following a lengthy investigation, we took court action in 2014 against Informed Sources and several petrol retailers that subscribe to the service, including:

  • BP Australia Pty Ltd
  • Caltex Australia Petroleum Pty Ltd
  • Woolworths Ltd
  • 7-Eleven Stores Pty Ltd.

We alleged the pricing service allowed retailers to communicate with each other about their prices, which had the effect or likely effect of substantially lessening competition for the sale of petrol in Melbourne.

In December, we resolved the court proceedings. I am pleased to say we have new undertakings that will provide greater transparency and reduce the potential for any adverse effect on competition.

The undertakings provide that Informed Sources and the petrol retailers will make pricing information available so that consumers have access to it, for example via phone apps, at the same time as the retailers receive it.

This will help consumers make better and more informed decisions about where and when to buy petrol by helping them identify the best time to buy and the sites with the lowest price.

More important, it will encourage price discounters by bringing them more business in response to any discount.

Another key outcome is the availability of the retail price information to third party service providers. This will promote innovation in providing petrol price information to consumers.

Some new priorities for the year ahead

We recently announced our new priorities and some continuing areas of focus in protecting consumers and small businesses.

We receive between 160,000 and 200,000 contacts per year, which means we need filters to help us direct our resources.

To assist with this process we publish a Compliance and Enforcement Policy.

Each year we review the policy seeking input from many of you here today. This year we also made the survey available for public comment.

Thank you for your contributions, and your continued support as our compliance and enforcement activities rollout.

Partnerships are fundamental to our success, and our work in protecting vulnerable and disadvantaged consumers is a case in point.

We have elevated Indigenous consumer protection to an enduring priority as long as the challenges faced remain. This is a significant change to our policy recognising that Indigenous consumers, particularly those living in remote areas, continue to face challenges in asserting their consumer rights. We will also continue to prioritise activities to protect older consumers and consumers who are newly arrived in Australia.

In the area of express or extended warranties, we are cracking down on representations made by larger businesses. This has been a focus in the past and its re-emergence as a priority reflects the important foundation consumer guarantees play in consumer protection.

On the back of the Fiat Chrysler Australia investigation, we are calling on vehicle manufacturers and new car retailers to invest in aftersales care to ensure their consumer guarantees obligations are met. And, we will be shortly concluding our important investigation into emission issues involving VW.

I have mentioned part of our product safety work. Another big job involves working with our state electrical safety and ACL colleagues to continue our efforts to get more than 2,300km of dangerous Infinity cable removed from homes. I am often asked about timelines for mergers reviews and court cases, but no timeline is as important as the deadline for Infinity cables. Experts predict that the insulation surrounding the Infinity cable will start to become brittle in 2016; that is, this year! This could lead to electric shock or fires.

We are continuing our focus on competition and consumer issues in the health and medical sector, including consumer protection issues arising from health claims by large businesses and our 2015 report to the Senate on the private health insurance industry, with likely action in this area shortly. We also have focussed on misleading health claims in relation to certain food products, and we have some well-advanced investigations.

We have named two priority areas aimed squarely at protecting small firms; new laws protecting small businesses from unfair terms in standard form contracts and industry codes of conduct.

In combatting scams, we will continue our Fraud Week and Scamwatch activities. We will continue our attempts to disrupt relationship scams by writing to people who are sending money to overseas scams hot spots, and by working with intermediaries such as financial institutions and social media sites where scammers connect with their victims.

In my personal view, the ACCC has not done enough competition advocacy and market studies in the past. Promoting competition and pro-market reform should not wait for a Hilmer or a Harper Review.

We are using market studies to ‘shine a light’ on the competitiveness of particular agricultural supply chains, regional petrol prices and Australia’s east coast gas market. In the past year, we have used market studies to take a detailed look at the debt collection industry and private health insurance.

Competition and consumer issues in the agriculture sector are a new priority and will be a primary focus for our market studies.

Finally, as you would expect, we will continue to take a strong line on cartel conduct, anti-competitive conduct and practices, and where we can, misuse of market power.

Before the Court, we have the alleged laundry powder cartel case, involving Colgate and Cussons. A lengthy trial will take place in the middle of the year. We have also appealed the Federal Court decision finding that egg producers did not attempt to induce a cartel arrangement. As you know, we took this action because we were concerned that, if successful, actions to reduce the supply of eggs would ultimately increase the price to consumers and other businesses.

Closing remarks

Before, I handover to Gerard Brody [Consumer Action Law Centre] and Nicole Rich [Choice] and the Minister, I would like to encourage you all to participate vigorously over the course of the day and over the course of the year, particularly with the ACL review now before us. Just as regulator actions are required and should be seen, a broader consumer voice also needs to be very loud and clear.

[1] Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330