19 Nov 2009

Second set of Australian Consumer Law reforms - product safety obligations and trading requirements

In preparation for the second tranche of the Australian Consumer Law (ACL) reforms (to be introduced into Parliament next year) the Treasury has released a consultation paper with draft Regulation Impact Statements (RIS) for public comment by Friday 27 November.

The draft RIS set out options for various wide-ranging reforms to the Trade Practices Act affecting everyday trade and commerce, and also for implementing some of the recommendations on product safety law made by the Productivity Commission in its 2006 "Review of the Australian Consumer Product Safety System".

As the RIS attempt to gauge the regulatory burdens and consumer benefits of each proposal, this is a limited but useful opportunity for business to identify any overly burdensome reforms and have its views considered as part of the consultation process.

Product safety - proposed changes

The proposed amendments to product safety laws canvassed in the draft RIS include:

Mandatory reporting: suppliers must report to the appropriate regulator products which have been associated with serious injury or death. This is potentially the most significant change for suppliers, including manufacturers, in terms of post market surveillance requirements and product reporting.

Unlike elsewhere, the proposed trigger for the duty to notify will only be serious injury or death. We consider that a report should only be required where a defect or potential defect has been identified, which will cause a substantial risk of injury to the public. Otherwise, auto manufacturers will be required to report all motor vehicle accidents involving serious injury or death, alcohol distillers will need to report incidents caused by intoxication and food manufacturers will need to report anaphylactic reactions - not withstanding that in each instance, the product concerned may be safe.

The Australian position would be far more onerous than that existing in the United States. Under the US Consumer Product Safety Act notification to the US Consumer Product Safety Commission must occur where a "substantial product hazard" has been identified. That is, where there has been a failure to comply with an application consumer product safety rule (or similar) that creates a substantial risk of injury to the public, or a product defect which creates a substantial risk of injury to the public.

A broader test for bans and recalls: currently, the Minister can ban or recall goods which are unsafe because of a defect in the product itself, but it is unclear whether he or she can do so if the threat to consumer safety arises only as a result of consumer misuse. Under these proposals, the threshold test for bans and recalls would cover all goods of a kind which, under normal or reasonably foreseeable conditions of use, will or may cause injury to any person.

In a country where self-regulation through reportable voluntary recalls are the norm, this change will force manufacturers and suppliers to give careful consideration to both anticipated consumer use and misuse, including so-called "off-label" use (ie. use other than for indicated or approved purposes).

Some services to be covered: consumer product safety provisions would be extended to cover services related to the supply, installation and maintenance of consumer products.

While the implementation of these recommendations would shift Australian product safety law further into line with the EU's General Product Safety Directive, important differences will still remain. Significantly, in 2006 the Productivity Commission considered, but declined to recommend, the enactment of a general requirement of safety on manufacturers and suppliers of consumer goods. As such, it does not form part of the proposed ACL. Given the limited nature of the proposed reforms, companies operating in international product markets will need to remain alive to both product based and legal differentials, especially if they supply consumer goods in Europe or the United States.

False or misleading representations - a uniform approach

Currently section 53 of the Trade Practices Act sets out certain representations which are prohibited if they are "false", or "false or misleading". The proposed changes will uniformly prohibit a representation if it is "false or misleading".

This change will have the effect of widening the scope of section 53. As the consultation paper notes, most false or misleading representations are also false or misleading conduct, and hence are already covered by section 52. The key difference, however, is that representations which breach section 53 can attract criminal penalties under the mirror provisions of section 75AZC.

The paper also proposes a specific prohibition on false or misleading representations concerning testimonials.

Information and standards of disclosure to consumers

The type and style of information provided to consumers is also being considered.

Currently, the Federal Minister can declare, by regulation, a standard to be a consumer product information standard, meaning that goods that fall within that category cannot be supplied without certain information being supplied. There are also State and Territory information standards applying to certain classes of goods. The result is that if something is not covered by a Commonwealth standard, it may be covered by a State and Territory information standard - but only in that jurisdiction.

Leaving aside specially regulated goods, including pharmaceutical products, comparatively few general consumer products are subject to a consumer product information standard. The issue has not been the power to do so, rather a question of regulatory willingness. The paper sets out two options:

  • incorporate the current Trade Practices Act information standards power without amendment into the ACL, but applicable to goods only; or
  • include a general power in the ACL to prescribe information standards in relation to both goods and services.

The paper confirms that government assessment currently favours the latter option. The paper also canvasses a proposal to require consumer information documents to follow the current Victorian requirement and be "clear and legible".

Other reforms proposed

Telemarketing and door-to-door: unsolicited offers and sales that occur in a non-retail environment, in person or via telephone, are currently regulated by different State and Territory laws, as well as certain Federal laws. Stakeholders were keen on harmonising the different compliance regimes. Three options are canvassed: a total ban, and two levels of regulation with different levels of compliance and consumer protection.

Bills and receipts: should business be required to provide receipts or itemised bills in certain circumstances, in addition to existing legal requirements to do so?

Lay-by sales: should there be national regulation of lay-by sales?

Dual pricing: should suppliers be prohibited from selling at more than the lowest appended price where multiple prices are indicated for a good?

Unauthorised advertisements or services: should the ACL ban asserting a right to payment for unauthorised advertisements? Should the recipient of unsolicited services should be liable to pay for them?

Offering gifts and prizes without an intention to provide them, or to provide them as offered: should the prohibition also impose a requirement that gifts and prizes offered are provided within a "reasonable time" and as ordered, thereby removing the need to show the offeror had an intention not to supply?

Accepting payment for goods or services without an intention to provide them, or to provide them as offered: should this be altered in a similar way - that is, a requirement should be imposed to provide goods or services within a "reasonable time" after payment is accepted?

Related Knowledge

Get in Touch

Get in touch information is loading


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.