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Australian Consumer Law to commence on 1 January 2011

Wednesday 28 July 2010

The Australian Consumer Law reforms are now complete with the Trade Practices Amendment (Australian Consumer Law) Act (No.2) 2010 (Act) receiving royal assent on 13 July 2010. The Act renames the Trade Practices Act 1974 (TPA) the Competition and Consumer Act 2010 and implements a long awaited national uniform consumer law in Australia.

The Act reforms consumer laws in Australia including:

the expansion of civil offences for consumer protection violations, which will now attract a range of pecuniary penalties and other remedies
the establishment of a national scheme for statutory "consumer guarantees" which will replace the implied conditions and warranties provisions in the TPA and State and Territory legislation – this is expected to enhance consumers' rights of action
the establishment of a nationally consistent scheme for product safety, product recalls and product liability.

The reforms commence on 1 January 2011.

Tranche 2 of the Australian Consumer Law

In summary, the Act amends the TPA (and the relevant equivalent sections in the Australian Security and Investments Commission Act 2001 (Cth)) to:

incorporate the general consumer protection prohibitions against unconscionable conduct and misleading and deceptive conduct which are currently contained in the TPA and State and Territory fair trading legislation but which largely reflect the existing provisions of the TPA (with some minor redrafting)
introduce new prohibitions on false or misleading representations relating to "testimonials", for example, advertisements which show well known identities giving a testimonial as to the benefits of a particular product
introduce a new requirement that where a product has multiple prices, the supplier must sell the product at the lower, or lowest, of the displayed prices, although the requirement is not intended to apply in circumstances where there has been a genuine pricing mistake
introduce regulation of lay by agreements, including requirements that these agreements must be in writing and transparent and any termination charges must reflect the reasonable costs to the business of the agreement being terminated
introduce provisions dealing with direct selling (for example, door to door and telesales marketing), which will replace existing State and Territory regimes and, amongst other things, regulate the times during which unsolicited sales approaches can be made and provide for a 10 day cooling off period
introduce a new system of statutory consumer guarantees to replace the implied warranty regimes in the TPA and State and Territory legislation. The consumer guarantees are that:
- the supplier has the right to sell the goods
- goods are free from any undisclosed security
- the consumer will have undisturbed possession of the goods
- goods are of "acceptable quality" (which is defined to mean that the goods must be fit for "all" purposes for which goods of that kind are commonly supplied and must be acceptable in "appearance and finish", "free from defects", "safe" and "durable")
- goods are fit for a purpose that the consumer makes known to the supplier
- goods match their description or a sample
- spare parts and facilities for the repair of goods are reasonably available for a reasonable period
- any express warranty is complied with.
introduce a new nationally consistent product safety regime.

Main departures from the original Bill

The Act addresses some of the concerns of businesses and the Senate Economics Committee and aims to prevent any unintended consequences arising from the provisions in the original version of the Bill. Some of the key amendments include:

the definition of "consumer" will cover all persons who purchase goods or services under A$40,000 and where the goods or services are ordinarily acquired for personal, domestic or household use or consumption. This will allow small business purchases to be covered under the legislation (and in particular will ensure small businesses are protected under the national scheme for statutory consumer guarantees)
the existing exemption for architects and engineers has been reinstated so that they remain exempt from the consumer guarantees relating to fitness for purpose. These professionals will therefore continue to be regulated by their industry bodies
replacing automatic termination of contracts for the supply of services that are connected with rejected goods with provisions that would provide consumers with the option of cancelling such supply contracts. This includes clarifying that the obligation upon a supplier to refund monies in respect of services when connected goods have been rejected extends only to services that have not yet been consumed
the definition of an "unsolicited agreement" will be expanded to include circumstances where consumers are contacted through indirect means such as entering a competition or a consumer contacting a dealer in response to a missed call.

Departures from the original Bill relating to the National Product Safety Scheme

Our summary of the key aspects of the new national consumer product safety law for consumer goods and product related services was featured in our eAlert! on 23 March 2010. In response to concerns raised by various stakeholders and the Opposition, the Senate also agreed to make some amendments to the original Bill to remove the uncertainties and unintended consequences arising from the original provisions in the Bill. Some of the key amendments now in the Act include:

the requirement for suppliers to report product related or service related incidents causing or associated with serious injury or death to the Commonwealth Minister has been narrowed. The amendments provide that suppliers will be required to report to the Commonwealth Minister when the supplier considers or becomes aware that another person considers that death, serious injury or illness was caused, or may have been caused by the use or foreseeable misuse of the goods in question. This obligation is not operative where it is clear or is very unlikely that the goods caused death or serious injury
ensuring reports to the Commonwealth Minister will be kept confidential unless it is in the public interest
the Commonwealth Minister will be allowed to accept a report from a body other than the supplier, where the Minister is satisfied that an effective industry specific reporting scheme is already in place (for example the automotive industry).

Implications and recommended action

Businesses should be reviewing their business practices and compliance procedures (particularly with respect to consumer protection, consumer guarantees, unsolicited selling, product safety and the enforcement powers of the regulators) to ensure they are ready for the 1 January 2011 commencement date.

For further information: