Consumer policy framework

While Australia's consumer policy framework has considerable strengths, parts of it require an overhaul.

• The current division of responsibility for the framework between the Australian and State and Territory Governments leads to variable outcomes for consumers, added costs for businesses and a lack of responsiveness in policy making.
• There are gaps and inconsistencies in the policy and enforcement tool kit and weaknesses in redress mechanisms for consumers.
• These problems will make it increasingly difficult to respond to rapidly changing consumer markets, meaning that the associated costs for consumers and the community will continue to grow.

Addressing these problems will have significant direct benefits for consumers. Also, by better engaging and empowering consumers and furthering the development of nationally competitive markets, reform will enhance productivity and innovation.

A set of clear objectives and supporting principles is required to anchor the future development of consumer policy.

• The overarching objective should be to improve consumer wellbeing by fostering effective competition and enabling the confident participation of consumers in markets in which both consumers and suppliers can trade fairly and in good faith.

A pressing need is to put in place institutional arrangements that are more compatible with the increasingly national nature of Australia's consumer markets and which will deliver more timely and effective policy change than the current regime.

• In keeping with many of the other key policies governing commerce in Australia, greater responsibility for consumer policy development and enforcement should reside with the Australian Government.

The first step in this process should be the introduction of a single generic consumer law applying across Australia, based on the consumer provisions in the Trade Practices Act (TPA), modified to address gaps in its coverage and scope.

• The Australian Government, through the Australian Competition and Consumer Commission (ACCC), should be responsible for enforcing the product safety provisions nationally, though possibly with scope for States and Territories to implement, time limited, interim product safety bans.
• The remaining provisions should be jointly enforced by the ACCC and State and Territory consumer regulators, though individual States and Territories should have the option to refer their enforcement powers to the Australian Government.
• The new law should include a provision voiding 'unfair' contract terms that have caused consumer detriment.
• In addition to the enforcement tools currently in the TPA, it should provide for civil pecuniary penalties, banning orders and substantiation and infringement notices.

Responsibility for regulating the provision of consumer credit and related advice by finance brokers and other intermediaries should also be transferred to the Australian Government as soon as practicable, with ASIC as the primary regulator.

CoAG, in consultation with the Ministerial Council on Consumer Affairs, should oversight a general reform program for industry-specific consumer regulation to:

• identify and repeal unnecessary industry-specific consumer regulation, with an initial focus on removing regulations that apply in only one or two jurisdictions;
• identify other areas of specific consumer regulation where divergent requirements and/or lack of policy responsiveness are particularly costly; and
• determine how these costs should be reduced, including explicit consideration of the case for transferring policy and, where appropriate, enforcement responsibilities to the Australian Government.

In addition:

• Some particular regulatory requirements for consumer credit, utility services and home building should be modified.
• Consumers' access to remedies where they suffer detriment from breaches of consumer law, should be enhanced by consolidating some ombudsman arrangements; streamlining small claims courts' procedures; making it easier for regulators to bring representative actions; and increasing funding for legal aid and financial counselling services.
• Mandatory disclosure requirements should be improved by more 'layering' of the information provided to consumers and greater testing of its comprehensibility and relevance to them.
• Subject to appropriate governance arrangements, there should be additional public funding for consumer advocacy and for policy related research, including to enable the establishment of a National Consumer Policy Research Centre.

Many of the Commission's proposals would benefit vulnerable and disadvantaged consumers, with some being primarily designed to assist these groups. However, for some groups, specific additional strategies may be required.

The proposed changes would also further the economic integration goals of the Australian and New Zealand Governments.

Though only very broad quantification is possible, the Commission's reform package could provide a net gain to the community of between $1.5 billion and $4.5 billion a year.

A tabular representation of the Commission's individual proposals, and the benefits they would provide, is presented at the end of this summary.

Volume 1

Preliminaries
Cover, Copyright, Signing page, Preface, Terms of reference, Extension Letters

Key points

Summary

Why this inquiry?

How has the Commission approached the task?

How well does the current regime measure up?
Some important strengths
Significant weaknesses
There is scope to do much better

Objectives for the future consumer policy framework

More effective and responsive institutional arrangements
Shared responsibility has benefits
But the division of responsibility needs to change
A more nationally coherent approach is needed
A single national generic consumer law should be implemented
A dedicated review program for industry-specific consumer regulation
National regimes for credit and energy services
Other initiatives in some key specific areas
Some supporting changes to institutional arrangements

Dealing with 'unfair' contract terms that cause detriment
What is the concern?
A new national provision is warranted
How should the new provision operate?

Guarding against unsafe and defective products
Improving awareness of the implied warranty provisions
Where next on consumer product safety?

Improving access to remedies and enforcement
A layered system of redress
Encouraging proportionate and effective enforcement

Empowering consumers
More useful disclosure requirements
Better consumer information and education programs
Enhancing consumer input into policy making

Helping vulnerable and disadvantaged consumers

Other considerations bearing on the future framework
Facilitating economic integration with New Zealand
Responding to developments in electronic and mobile commerce
Small business considerations

How big is the prize?
The net gains would appear to be considerable
Some experimental estimates support this conclusion

An eye to the future as well as the present

Volume 2

Preliminaries
Cover, Copyright, Contents, Abbreviations

A summary of the Commission's proposals

Recommendations

1 Why this inquiry?
1.1 Setting the scene
1.2 The Commission's task
1.3 The Commission's approach
1.4 A road map to the rest of the report

2 Overview of the current consumer policy framework
2.1 Background
2.2 The current framework
2.3 What happens in other countries?
2.4 What problems need to be addressed?

3 Objectives for a future consumer policy framework
3.1 The role of consumers, effective competition and consumer policy
3.2 When should governments intervene?
3.3 Government intervention is not costless
3.4 Objectives for the consumer policy framework
3.5 Identifying and evaluating policy instruments

4 Generic consumer regulation
4.1 The need for a more nationally coherent approach
4.2 The case for a new national generic consumer law
4.3 Who should enforce the new generic law?
4.4 Other matters

5 Industry-specific consumer regulation
5.1 When is an industry-specific approach warranted?
5.2 Reviewing specific consumer regulation
5.3 National regimes for credit and energy services
5.4 Other issues in key specific areas

6 Supporting institutional changes
6.1 Elevating the importance of consumer policy
6.2 Any potential role for financial incentives?
6.3 Facilitating timely and effective policy changes

7 Unfair practices and conduct
7.1 Introduction
7.2 A general provision relating to unfair practices?
7.3 Variations and a national generic consumer law
7.4 Misleading or deceptive conduct
7.5 Unfair contracts legislation

8 Defective products
8.1 Introduction
8.2 Merchantable quality and fitness for purpose
8.3 Product liability arrangements

9 Access to remedies
9.1 Introduction
9.2 Criteria for assessment and some principles
9.3 Making a complaint
9.4 Alternative dispute resolution
9.5 Court action
9.6 Consumer representation

10 Enforcement
10.1 Introduction
10.2 Outline of the current enforcement landscape
10.3 Suitability of current enforcement powers
10.4 Regulatory consistency

11 Empowering consumers
11.1 Introduction
11.2 Disclosure issues
11.3 Consumer information and education initiatives
11.4 Consumer input into policy making
11.5 Consumer policy research needs
11.6 Institutional arrangements for funding consumer advocacy and research

12 Vulnerable and disadvantaged consumers
12.1 What is consumer vulnerability and disadvantage?
12.2 Current approaches to the needs of vulnerable and disadvantaged consumers
12.3 Improving outcomes for vulnerable and disadvantaged consumers

13 Other considerations for the future framework
13.1 Consumer policy and trans-Tasman economic integration
13.2 E-commerce
13.3 Small business considerations

14 How big would the net benefits be?
14.1 Placing the costs and benefits into a framework
14.2 Looking at the impact in more detail
14.3 Some implications of the qualitative analysis
14.4 Quantifying these costs and benefits
14.5 Experimental estimates of the costs and benefits of the suite of reforms
14.6 The judgment in perspective

A Public consultation

B Behavioural economics and consumer policy

C International approaches

D Unfair contract terms

E Credit regulation

F Utility services

G Occupational licensing

References