Could the party be over for direct marketers?

By Sharon Segal.

Key Points:
Australia’s top law reform body proposes a special privacy principle dealing with direct marketing.

Direct marketers could soon be governed by a new privacy principle to regulate the use and disclosure of personal information.

In September 2007, the Australian Law Reform Commission ("ALRC") released a Discussion Paper, "Review of Australian Privacy Law", which outlines the ALRC’s proposals for reform of Australia’s privacy laws.

The Discussion Paper was published as part of the ALRC’s terms of reference from the Australian Attorney-General for an inquiry into the extent to which the Privacy Act 1988 (Cth) and related laws continue to provide an effective framework for the protection of privacy in Australia.

Personal information and direct marketing

"Direct marketing" involves the promotion and sale of goods and services directly to consumers. Direct marketers typically compile lists of individuals’ names and contact details from many sources, including publicly available sources such as electoral rolls, telephone directories and land title registers.

Not surprisingly, in conducting its inquiry, the ALRC found that the issue of direct marketing was the subject of a strong response. On one hand, there was a strong push from consumer groups to make it more difficult for organisations to engage in direct marketing. On the other hand, business groups emphasised the importance of direct marketing for the economy generally.

In its Discussion Paper, the ALRC states that it is possible to balance these competing positions by recognising that while some forms of direct marketing can interfere with the privacy of individuals, if undertaken appropriately, directly marketing can be beneficial. Accordingly, the ALRC has proposed a regulatory regime which effectively balances these competing interests.

ALRC’s proposed privacy principle for direct marketing

The ALRC has proposed that the use of personal information in direct marketing should be regulated in a new, discrete privacy principle. The new direct marketing privacy principle would apply to the private sector and would provide that:

• direct marketing should only take place with consent (unless it is impractical to obtain that consent);
• sensitive information should not be used for direct marketing without express consent;
• organisations must present individuals with a simple means to opt out of receiving direct marketing communications at no charge; and
• organisations must comply, within a reasonable time, with an individual’s request not to receive direct marketing communications.

How far would it go?

The ALRC has proposed that the new direct marketing privacy principle should apply regardless of the primary purpose for which the information was collected.

This stemmed in part from submissions received by the ALRC that current privacy laws permit personal information collected for the primary purpose of direct marketing to be used "almost without restraint" by direct marketers. This is because the Privacy Act currently includes privacy protections for the use of personal information in direct marketing, but only when the information was not collected for the primary purpose of direct marketing (for example, when an organisation collects personal information for the conduct of a competition and later wishes to use the information for direct marketing).

If an organisation collects personal information for the primary purpose of direct marketing, then the Privacy Act currently permits the personal information to be used and disclosed for that purpose (although other laws – such as the laws on spam and the Do Not Call Register – may also apply depending on the circumstances).

According to the ALRC, this loophole may even apply when individuals do not know that their personal information has been collected for the primary purpose of direct marketing (for example, if individuals have been deliberately confused into thinking that the primary purpose of collection is to enter a competition to win a prize, but the real intention of the organisation collecting the information is to create a database for direct marketing).

Other laws affecting direct marketing

The ALRC has proposed that where there are separate, specific laws which apply to particular types or aspects of direct marketing – such as the Do Not Call Register Act 2003 (Cth) in relation to telemarketing, and the Spam Act 2003 (Cth) in relation to email and SMS marketing – those laws should continue to apply alongside the direct marketing principle. The ALRC’s view is that the direct marketing principle should set out general requirements with respect to direct marketing, but that those requirements should be able to be displaced to the extent that more specific legislation regulates a particular type or aspect of direct marketing.

Application of direct marketing principle to the public sector?

The Privacy Act does not currently contain any special requirements in relation to direct marketing by public sector agencies. The ALRC noted in its Discussion Paper that the application of a special direct marketing principle to the public sector could significantly impact the way in which government agencies communicate with individuals. Accordingly, any principle would need to be carefully expressed so as not to preclude the legitimate communication of important information by agencies.

The ALRC has asked for feedback on whether public sector agencies should be subject to a privacy principle dealing with direct marketing and, if so, what the content of such a principle should be.

What happens next?

The ALRC is seeking community feedback on its proposals in the Discussion Paper and will be conducting public consultations. The closing date for submissions is 7 December 2007.

The ALRC's final report and recommendations are due to be delivered to the Attorney-General by 31 March 2008. Once the report is received by the Attorney-General, it must be tabled in Parliament and publicly released within 15 parliamentary sitting days.

If you'd like any further information on how the proposed changes would affect your business, or help in preparing a submission to the ALRC, please contact our SEM team.