Which parts of the Australian Consumer Law are going to be amended? The Ministers decide

By Peter Sise

28 Sep 2017

Some important changes are on the way for the Australian Consumer Law, with more possible changes to undergo further assessment.

For nearly two years, we've been following the review of the Australian Consumer Law (ACL) by Consumer Affairs Australia New Zealand (CAANZ). CAANZ published its final report in April, which proposed 19 amendments to the ACL, 11 of which were "well-developed" and should be implemented without any formal regulatory impact assessment, provided consumer affairs ministers agreed to their implementation.

Well, the Ministers have now met and decided on what should be implemented. On 31 August 2017, Commonwealth, State, Territory and New Zealand Ministers for fair trading and consumer protection agreed that 12 amendments to the ACL should be implemented without any regulatory impact assessment, while the remaining seven should be subject to an assessment. We look at the most noteworthy proposals below.

Scope of exemption for goods damaged in transit

Currently, section 63(a) of the ACL states that certain consumer guarantees regarding the provision of services do not apply to services that are supplied under “a contract for … the transportation or storage of goods for the purposes of a business … carried on … by the person for whom the goods are transported or stored”. These “consumer guarantees” include a guarantee that services be supplied with due care and skill.

CAANZ noted this exemption has been interpreted as applying where either the buyer or seller of the goods is a business. This would mean a consumer who purchases goods from a business cannot rely on the consumer guarantees in relation to the transportation of those goods.

CAANZ recommended that the ACL be amended so that this exemption only applies if a business is the purchaser of the goods. It recommended that further development be conducted before this amendment is made or, alternatively, a regulatory impact assessment be conducted. The Ministers decided the proposal could be implemented without this.

Unconscionable conduct and publicly listed companies

Currently, the prohibition on unconscionable conduct in section 21 of the ACL protects individuals and corporations but not listed public companies. CAANZ recommended that this be altered so that a listed public company may avail itself of section 21. The Ministers agreed to this recommendation. 

Maximum penalties for ACL breaches

CAANZ recommended that tougher financial penalties be introduced for breaches of the ACL. The Ministers agreed that this should be implemented.

For companies, CAANZ recommended that the maximum penalty be increased to the greater of $10 million or three times the benefit arising from the contravention. If the benefit cannot be determined, CAANZ recommended that it be 10% of the annual turnover of the company in the 12 months preceding the contravention. For individuals, CAANZ proposed that the maximum penalty be lifted to $500,000. 

These penalties are consistent with those for the competition provisions in the Competition and Consumer Act, except that an individual may be imprisoned for involvement in cartel conduct while no prison terms are available for contraventions of the ACL (although community service orders and disqualification from managing a corporation are options).

Investigative powers for “unfair” terms

The ACL allows an “unfair” term in certain types of contract to be declared void. When the ACL was first introduced, only a term in a standard form “consumer contract” could be declared void but since November 2016, a term in a standard form “small business contract” may also be declared void. The ACCC has brought several proceedings concerning standard form “consumer contracts” and in September 2017, commenced its first two proceedings concerning standard form “small business contracts”. Despite bringing several proceedings, the ACCC’s investigative powers for potentially “unfair” terms are limited because they are linked to potential contraventions of the ACL and the mere inclusion of an “unfair” term in a contract does not constitute a contravention, although the term may be declared void.

CAANZ recommended that regulators’ compulsory information-gathering powers be extended to cover the investigation of “unfair” terms. The Ministers agreed with this. 

“Follow on” provisions

Currently, section 137H of the Competition and Consumer Act allows a private litigant to rely on a finding of fact in a proceeding previously brought by a regulator for a contravention of the ACL. The finding of fact is prima facie evidence of that fact in the proceeding brought by the private litigant. This is an example of a “follow on” provision. Section 83 has a similar effect for the competition law provisions of the Competition and Consumer Act.

Section 137H does not expressly state that it applies to admissions of fact made by a party. Legislation has been introduced into Parliament to amend section 83 of the Act so that it expressly applies to “an admission of any fact”, but no legislation has been introduced to amend section 137H. CAANZ recommended that section 137H be amended so that it also expressly applies to admissions of fact. The Ministers agreed with this proposal.

The proposals that will undergo regulatory impact assessments

The Ministers asked that regulatory impact assessments be conducted for seven amendments to the ACL proposed by CAANZ before a decision is made on whether to implement them. These included: 

  • the introduction of a “general safety” provision to the ACL;
  • modernising the exemption from the consumer guarantees for “sales by auction” so that the guarantees apply to online auctions; and
  • consumers be entitled to choose a refund or replacement if a good fails to meet a consumer guarantee within a “short” period after its purchase regardless of whether the failure is “major”; and
  • increasing the threshold for the definition of “consumer” from $40,000 to $100,000.

For the last of these, the definition of “consumer” is central to whether many provisions of the ACL apply; for example, the consumer guarantees only apply to a purchase of goods or services by a consumer.

Currently, section 3 of the ACL defines a person to have purchased goods or services as a “consumer” if

  • they paid $40,000 or less for the goods or services;
  • the goods or services were of a kind ordinarily acquired for personal, domestic or household use or consumption; or
  • they purchased a vehicle or trailer.

There is an exclusion for goods purchased for the purpose of re-supply, manufacturing and repair and treatment of other goods.

CAANZ recommended that the threshold of $40,000, which was set in 1986, be lifted to $100,000.

What next?

It is important to note that none of CAANZ’s recommendations have been passed into law yet. For the proposed amendments that the Ministers agreed to, amending legislation will need to be introduced into Commonwealth, State and Territory Parliaments. The Ministers asked that this be done “as soon as possible” with particular priority for the amendment to increase penalties. For the proposed amendments requiring regulatory impact assessments, the Ministers asked that a report on the impact be provided to them by August 2018.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.