The Minister for Competition Policy and Consumer Affairs described the Australian Consumer Law as the most comprehensive change to the Trade Practices Act since its inception in 1974. In this article, we summarise 10 key things that businesses should know about the introduction of the Australian Consumer Law.
1. What changes, and when?
The first part of the Australian Consumer Law (the Trade Practices Amendment (Australian Consumer Law) Act (No. 1) 2010) has already commenced. On 15 April 2010, the ACCC obtained a wide range of new enforcement powers. New laws on unfair contract terms commenced on 1 July 2010.
The main part of the Australian Consumer Law (the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010) commences on 1 January 2011. On that date, the existing consumer protection provisions in Parts IVA, V, VA and VC of the Trade Practices Act 1974 (TPA) will be repealed and replaced with the Australian Consumer Law. The TPA will also be renamed as the Competition and Consumer Act 2010. The States and Territories are also intended to amend their existing laws with effect from 1 January 2011 to adopt the Australian Consumer Law as a uniform national law, but the necessary legislation has not yet been enacted.
2. Unfair terms in standard form consumer contracts are now void
The first part of the Australian Consumer Law introduced new uniform rules on unfair contract terms. A term is void and cannot be enforced if it is:
- a term of a consumer contract;
- the contract is a standard form contract; and
- the term is unfair.
The unfair contract terms provisions are discussed in detail in our previous publication on the first part of the Australian Consumer Law. Click here to view the publication.
3. The ACCC has a wide range of new enforcement powers
The first part of the Australian Consumer Law also gave the ACCC new powers to:
- issue substantiation notices requiring a person to produce information and documents supporting its claims or representations;
- issue infringement notices;
- seek pecuniary penalties of up to $1,100,000 for corporations and $220,000 for individuals;
- seek orders disqualifying a person from acting as a director;
- seek orders to redress loss or require refunds to be paid to customers; and
- issue public warnings.
These new powers are also discussed in our previous publication, click here to view.
The ACCC has already started using these new powers. It recently issued its first infringement notices to cafes and restaurants that failed to comply with the 'single price' laws in relation to weekend and public holiday surcharges, and has issued Court proceedings against four businesses that failed to pay the amount required by the infringement notices.
4. Who is a 'consumer'?
The second part of the Australian Consumer Law will introduce new definitions of a 'consumer', 'consumer goods' and a 'consumer contract' that define when the new provisions apply. One of the main criticisms of the amendments is that these definitions are not consistent, so businesses will need to carefully consider when the new provisions will apply. The 'consumer' definition includes all goods or services where the amount paid did not exceed $40,000. As a result, some of the provisions, such as the new consumer guarantees and new rules on unsolicited consumer agreements, will apply to business-to-business transactions where the price of the goods or services was $40,000 or less.
5. The 'implied warranties' will become 'consumer guarantees' and their contents will change
The existing TPA 'implied warranties' will be replaced with new 'consumer guarantees'. The content of the warranties/guarantees will change, with some of them being reworded and some new guarantees being introduced. The 'merchantable quality' warranty has been replaced with a guarantee that goods are of 'acceptable quality', which is defined. A new guarantee applies in relation to compliance with any 'express warranties' that have been given by the supplier or manufacturer. 'Express warranties' are defined very broadly and will include many pre-contractual representations and statements that are made in connection with the supply or promotion of goods, and it will not be possible to exclude liability for those representations.
6. New remedies will apply to breaches of the consumer guarantees
The Australian Consumer Law will set out in detail the remedies that are available to consumers against suppliers and manufacturers if the consumer guarantees are breached. The remedies against suppliers distinguish between 'major' failures that cannot be remedied, and non-major failures. For a major failure, consumers will have an express right to reject the good and elect a replacement or refund. Consumers will also have statutory rights to bring damages actions for the reasonably foreseeable loss arising from the breach and (in certain circumstances) compensation for the reduction in value of the good or service.
7. Manufacturers will be exposed to broader direct liability to consumers
The Australian Consumer Law will introduce new provisions giving consumers a right to bring actions directly against manufacturers (and importers, where the manufacturer does not have a place of business in Australia). Manufacturers will also be required to indemnify suppliers for their liability to consumers for breach of the consumer guarantees in certain circumstances. Some of these provisions are significantly broader than the existing TPA provisions.
8. Suppliers will have a new obligation to report death, serious injury or illness
A new obligation will require a supplier to notify the Minister within 2 days if:
- it becomes aware of the death, serious injury or illness or any person; and
- either:
- it considers that the death, serious injury or illness may have been caused by the use (or reasonably foreseeable misuse) of goods or product-related services that it supplies; or
- it becomes aware that any other person considers that the death, serious injury or illness may have been caused by the use (or reasonably foreseeable misuse) of goods or product-related services that it supplies.
9. New laws apply to unsolicited consumer agreements, lay-by sales and providing receipts and itemised bills
The Australian Consumer Law will introduce new national laws on unsolicited consumer agreements. Those laws will regulate issues such as the hours for making unsolicited sales, conduct when making sales, the content and form of unsolicited consumer agreements, and cooling-off periods. New national laws will also apply to lay-by agreements. Suppliers will also be required to provide a 'proof of transaction' that meets specified requirements for all sales of goods or services to consumers where the price is over $75. Consumers will also have a right to require suppliers of services to provide itemised bills.
10. Amendments to the unconscionable conduct provisions are likely to be enacted in the near future
The Government also introduced a third Bill related to the Australian Consumer Law – the Competition and Consumer Amendment Bill 2010. That Bill was not enacted prior to the election, but is likely to be passed in the near future. It will introduce amendments to the current provisions regarding unconscionable conduct.
This list is not comprehensive, but is intended to highlight some of the most significant issues that will arise under the Australian Consumer Law. Please contact us if you require advice on how the Australian Consumer Law will affect your business.
We will be running client seminars on the Australian Consumer Law in our Sydney and Melbourne offices over the coming months. Please contact martin.ashton@dlaphillipsfox.com if you would like to be included in the invitation list for our upcoming seminars.
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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.
