Product Liability - Australia

Background
Framework
New Australian Consumer Law
New Model for Regulation of Product Safety
Unfair Contract Terms
Reforms to Enforcement Powers
Implementation

On February 17 2009 Consumer Affairs Minister Chris Bowen announced that the federal government is fast-tracking the long-awaited reform proposals to harmonize Australia's consumer protection laws. The minister also released a discussion paper on the proposed new law by the Standing Committee of Officials of Consumer Affairs, entitled "An Australian Consumer Law: Fair markets - Confident Consumers". Comments in response to the discussion paper were sought by March 17 2009.

Background

Australia has consumer protection legislation at both federal (commonwealth) and state/territory levels. The proposed harmonized consumer protection laws will replace these with uniform legislation (ie, a national generic consumer law) to be enacted in each jurisdiction, based on the consumer protection provisions in the existing Trade Practices Act 1974 (Cth). (For further details of the genesis of the proposed reforms please see "Review of the Australian Product Safety System", "Productivity Commission Publishes Draft Report" and "Productivity Commission's Final Report on Review of Consumer Policy Framework".)

Framework

The proposed reforms have three key elements:

• the development of an Australian consumer law to be applied at both federal and state/territory levels;
• the introduction of a new national product safety regulatory and enforcement framework; and
• improved enforcement cooperation and information sharing between national and state/territory regulatory agencies.

New Australian Consumer Law

The proposed new Australian consumer law will be included as a schedule to the Trade Practices Act (which, it is also proposed, will be renamed the Competition and Consumer Act), and will be based on the existing consumer protection provisions of that act, with "changes based on best practice in state and territory laws".

Therefore, the new national consumer law will not only embody those provisions common to the Trade Practices Act and state/territory fair trading legislation, but will also modify or augment the existing provisions where it is generally agreed that they are inadequate. These 'best practice' reforms are yet to be agreed between the federal and state/territory governments, but proposals under consideration include:

• revisiting the scope of the existing Trade Practices Act definition of 'consumer', including the monetary threshold of A$40,000 (which has been in place without change since 1995 and which, if inflation were taken into account, would now be more than A$54,000);
• expanding the protection of existing consumer warranty provisions to cover a wider range of circumstances (eg, goods used in business contexts);
• possibly revisiting other definitions used in the Trade Practices Act;
• extending Section 51A of the Trade Practices Act to cover 'false' and 'deceptive' representations (Section 51A imposes certain evidentiary rules in relation to proceedings for unfair practices under Division 1 of Part V of the Trade Practices Act. This provision requires a corporation to show that it had reasonable grounds for making a representation with respect to a future matter; otherwise the representation is deemed to be misleading);
• provisions clarifying the relationship between Section 51A and the accessorial liability provisions of the Trade Practices Act;
• extending the scope of the existing prohibitions on false or misleading representations made in connection with the supply or possible supply of goods or services, or with the promotion of goods or services;
• regulating door-to-door trading and the telemarketing of goods and services;
• regulating lay-by sales;
• modifying the existing 'bait advertising' provisions to require that gifts or prizes offered to consumers be provided within reasonable time of making the offer;
• prohibiting the 'dual pricing' of goods; and
• requiring mandatory disclosure of a supplier's address in documents, statements or advertisements which are intended or likely to promote the supply of goods or services.

New Model for Regulation of Product Safety

The proposed Australian consumer law will also include a new model for the regulation of product safety in Australia, to be enforced by the Australian Competition and Consumer Commission (ACCC) and state/territory consumer regulators. The aim of the new model is to streamline and simplify the duplicative federal and state/territory responsibilities within the existing product safety legislative regime.

The main elements of the proposed new product safety regulatory model are as follows:

• The commonwealth will have the power to:
  • impose interim and permanent national product bans;
  • extend state and territory interim product bans;
  • order compulsory product recalls; and
  • mandate consumer product standards (in respect of both product safety and product information).
• The state and territory enforcement bodies will be able to impose interim product bans within their state or territory and refer issues to the ACCC seeking mandatory product standards and permanent bans.
• Suppliers conducting voluntary product recalls will be required to notify the commonwealth government only (thus doing away with the multiple federal and state/territory notifications which are now necessary) and the commonwealth will coordinate all recalls at a national level and then pass details onto all state/territory jurisdictions.
• A new independent review body will be established by the commonwealth government and will assume the ACCC's role of holding conferences (with suppliers) in respect of product bans and recalls.

Unfair Contract Terms

A further significant change in the proposed Australian consumer law relates to unfair contract terms. A contract term will be deemed unfair where "it causes a significant imbalance in the parties' rights and obligations arising under the contract" and it is "not reasonably necessary to protect the legitimate business interests of the supplier".

Examples of terms which might be considered unfair under the proposed new regime include clauses which:

• allow the supplier to vary the terms of the contract unilaterally;
• prevent the consumer from cancelling a contract;
• exclude liability for harm resulting from the supplier's or its agent's actions; or
• purport to limit the consumer's rights to take legal action against the supplier.

It is proposed that these provisions will apply only to standard-form, non-negotiated contracts. The onus will be on the supplier to prove that a contract is not a standard-form contract.

The proposed provisions will also extend to standard-form contracts entered into with businesses (and not just to contracts with consumers), and will therefore be relevant to standard trading terms governing the supply of goods or services.

Remedies to address an 'unfair term' will be available if the term results in detriment (to an individual or a class of consumers) or a substantial likelihood of detriment, including non-financial detriment.

Reforms to Enforcement Powers

The proposed Australian consumer law provides for the following extended enforcement powers for regulators:

• civil pecuniary penalty notices, which are imposed by the courts according to the civil standard of proof (ie, on the balance of probabilities) and will supplement the criminal penalties (imposed according to the higher standard of proof of beyond reasonable doubt) under the existing legislative regime;
• disqualification orders banning or restricting individuals from participating in specific activies for specific periods of time, including managing corporations or engaging in specific business conduct;
• substantiation notices requiring a supplier to provide a consumer regulator with the basis for representations that it makes regarding its supply of goods or services;
• a new power allowing consumer regulators to seek redress for non-parties to proceedings, where large numbers of consumers suffer "similar, identifiable detriment". The redress could take a number of forms, including a refund or an enforceable undertaking to honour representations that have been made; and
• public warning or 'name and shame' powers, the final form of which is yet to be determined.

Implementation

A number of specific questions are posed in the discussion paper, in relation to which submissions and comments (from the public and relevant stakeholders, including manufacturers, suppliers and consumers) on further suggestions for reform, and the financial and other implications of the reform proposals, were sought by March 17 2009.

The new regime envisages that there will be an inter-governmental agreement between the Australian federal government and the governments of the states and territories concerning the process for amending the Australian consumer law and the administrative architecture underpinning it.

The timeline for the implementation of the proposed reforms is as follows:

• By June 30 2009 the inter-governmental agreement (covering the Australian consumer law and including the proposed harmonized product safety regime) will be finalized.
• By June 30 2009 the legislative text for the Australian consumer law, including product safety reforms, will be finalized and agreed.
• By December 30 2010:
  • the commonwealth Parliament will have passed legislation for the Australian consumer law and to amend the Trade Practices Act;
  • the state and territory parliaments will have passed laws to apply the Australian consumer law in their own jurisdiction; and
  • the Australian consumer law will have become effective in all Australian (federal and state/territory) jurisdictions.

For further information on this topic please contact Tania Noonan, Moira Saville or Jocelyn Williams at Mallesons Stephen Jaques by telephone (+61 2 9296 2000) or by fax (+61 2 9296 3999) or by email (moira.saville@mallesons.com or tania.noonan@mallesons.com or jocelyn.williams@mallesons.com).