21 September 2005
Key Points:
Fundamental changes to the current system seem less likely but some key improvements are likely to be implemented.
In August 2005, the Productivity Commission published its preliminary findings regarding the options for consumer product safety reform proposed by the Ministerial Council for Consumer Affairs in August 2004.
Fundamental changes to the current system (such as a general safety provision) now seem less likely but some key initiatives (such as the harmonisation of product safety laws across the Australian States and Territories), which will have a positive impact on business, are likely to be implemented.
The Productivity Commission has invited interested parties to respond to its preliminary findings by sending their written comments to it by Friday 14 October 2005.
The Productivity Commission's final report will be released in early 2006 and changes to the system are likely to be made within the coming year.
Discussion paper released August 2004
In August 2004, the Ministerial Council for Consumer Affairs ("MCCA") released its Discussion Paper "Review of the Australian Consumer Product Safety System". Its purpose was to generate public comment about the current status of, and possible options for reform to improve, Australia's consumer product safety regulatory system ("the system").
The Discussion Paper proposed various new methods of improving and reforming the system. The centrepiece is a general safety provision ("GSP") which would involve the creation of an explicit legal obligation for businesses to market only "safe"(or not "unsafe") products. A GSP has existed in the United Kingdom since 1987, in the European Union since 1992 and is currently being considered in Canada. The impact of a GSP on business will depend upon the precise definition of the requirement and the way in which it is implemented.
Other measures proposed by the MCCA included revising the definition of unsafe goods, increasing monitoring and reporting requirements on businesses in relation to product safety risks, establishing product hazard early warning information systems, linking product safety information systems, requiring businesses to recall unsafe products and ensuring that the product safety laws across all jurisdictions are consistent.
Written responses to the Discussion Paper
Thirty one organisations, including the National Product Liability Association; the Australian Chamber of Commerce and Industry; the Australian Consumers' Association; the ACCC; the Therapeutic Goods Administration ("TGA"); the Pharmaceutical Society of Australia and Coles Myer lodged submissions in response to the Discussion Paper.
Many participants were concerned about the extent of inconsistencies between jurisdictions in relation to the administration, application and enforcement of the current rules. Other organisations raised issues which specifically related to their businesses or industries. For example, the TGA noted that their existing recall system works very well and noted that any review may impose additional and unnecessary requirements to the existing arrangements for therapeutic products.
Consultation workshop in February 2005
In February of this year, a consultation workshop involving business and consumer representatives was convened by the Treasury in Canberra. There was a general consensus that the current system needs to be simplified. However, consistent with the divergence of views contained in the various submissions, there was debate regarding whether a GSP (in its current form) is either necessary or appropriate.
Involvement of Productivity Commission
The Productivity Commission ("the Commission") was then directed to undertake a research study to examine the impacts of the proposed options for reform. The Commission is an independent agency and is the Australian Government’s principal review and advisory body on microeconomic policy and regulation. It called for submissions regarding the various options for reform and met with a range of organisations including consumer groups and industry organisations, professional groups and representatives of the Australian, State and Territory Governments.
Productivity Commission's Discussion Draft released August 2005
The Commission's Discussion Draft was released last month and contained 11 principal preliminary findings, including:
Productivity Commission's preliminary findings regarding proposed reforms
In addition to the principal preliminary findings, the Commission has also made a number of specific preliminary findings.
General safety provision
The MCCA Discussion Paper asserted that any reform of the system should place primary importance on the introduction of a GSP. Against this, the Commission notes that it is yet to be convinced that the benefits associated with a GSP would justify the significant costs associated with its implementation. It is currently of the view that, if the MCCA were to favour a GSP, it may be preferable to achieve improvements to consumer product safety by adopting definitions and standards of safety that are consistent with the Product Liability provisions of Part VA of the Trade Practices Act rather than requiring all businesses to place only "safe" products on the market. At the moment, consumers can already take action against suppliers under Part VA of the Trade Practices Act where "defective" goods have caused injury, loss or damage.
Interestingly, the Discussion Draft notes that the overseas experience with a GSP does not suggest a clear improvement in safety outcomes but does involve a significant increase in costs for business.
Harmonisation of product safety laws
The Commission noted the major inconsistencies between the different Australian jurisdictions in terms of product safety legislation and concluded that identical product safety legislation in each jurisdiction would deliver net benefits. If this cannot be established, the Commission is of the view that jurisdictions should agree on a core set of uniform provisions to be incorporated in all product safety legislation. This is good news for business as it will reduce compliance and administration costs.
Foreseeable misuse of products
The Commission would like to see "foreseeable misuse" included in the definition of "unsafe". However, in order to minimise the costs of such a reform for businesses, this should be limited to behaviour which is reasonably predictable and not unreasonable.
Coverage of services
It may be appropriate to ensure that national consumer product safety provisions cover services related to the installation and maintenance of consumer products. However, in the Commission's preliminary view, coverage of all services cannot be warranted.
Product safety information on the internet
An internet shop providing product safety information (including laws, regulations, standards and bans) would provide net benefits. Moreover, better information should be provided to businesses regarding regulatory requirements and targeted information campaigns should be directed to consumers where effective and efficient. This would reduce compliance costs for businesses.
Monitoring and reporting unsafe products
While the Commission is of the view that the costs associated with requiring businesses to monitor and report unsafe goods would outweigh the benefits, it has found that businesses should report goods which have been the subject of a successful liability claim or multiple out of court settlements.
Interplay between the findings of the Commission and the MCCA
Some of the Commission's conclusions, especially its preliminary finding regarding the introduction of a GSP, are incongruous with the views espoused in the MCCA Discussion Paper. As the Government now holds the balance of power in the Senate, it will be interesting to observe the MCCA's response to the Commission's final report and the weight that is attributed to it in the further development of the consumer product safety system in this country.
What next?
The Commission has invited interested parties to respond to its draft report by sending their written comments to it by Friday 14 October 2005. A series of roundtable discussions will then be held.
We will provide a further update when the Commission releases its final report early next year.
For further information, please contact Andrew Morrison and Sara Dennis.
