PC News - May 2017
Consumer law enforcement and administration
A Commission study released in April has identified several reforms to strengthen consumer protection.
Consumer protection in Australia comprises a complex web of laws and institutions spread across different levels of government, which augment the commercial incentives for businesses to operate fairly and supply products with the safety and quality that consumers demand.
Although there is only one body of Australian Consumer Law (ACL) (box 1), 10 different regulators — one from each State and Territory and two from the Commonwealth — administer and enforce it. This 'multiple-regulator' model has been in place since the introduction of the ACL in 2011.
Box 1: What is the Australian Consumer Law?
The ACL is set out in the Competition and Consumer Act 2010 (Cwlth). It applies generically to virtually all consumer goods and services but is confined to narrowly defined consumer protection issues, such as:
- consumer rights to not be misled or treated unconscionably when buying goods and services
- consumer rights in relation to door-to-door and telephone sales, and lay-by agreements
- consumer guarantees of acceptable quality for goods, and due care and skill for services
- 'unfair terms' in standard form contracts (for small businesses as well as consumers)
- consumer product safety matters
- penalties, enforcement powers and consumer redress options.
The provisions in the schedule do not apply to financial matters, but there are broadly parallel provisions dealing with these matters in the Australian Securities and Investments Commission Act 2001 (Cwlth).
Complementing the ACL is a plethora of commonwealth, and state and territory, specialist consumer protection regimes and regulators (such as for electrical appliances, therapeutic goods and motor vehicles). There are also various mechanisms for consumers to resolve disputes (figure 1).
Figure 1: The Australian consumer protection landscape is complex
This complex regulatory system to protect consumers confronts some obvious challenges. There are risks of gaps or overlaps in investigations and enforcement, and of inconsistent approaches to interpreting, administering and applying the law.
The Commission has examined whether the system's complexity is causing problems for consumers, businesses and the regulatory agencies themselves. In April 2016, the Government asked the Commission to report on:
- the effectiveness of the 'one-law, multiple-regulator' model and ways to strengthen it
- how well the ACL regulators interact with the specialist safety regulators
- what progress has been made in addressing the issues identified in the Commission's last (2008) consumer policy report, which was the catalyst for the ACL.
A health check for the multiple-regulator model
The Commission found that the multiple-regulator model generally appears to be operating as intended. The ACL regulators have taken steps to adopt or maintain good regulatory practices, and have robust mechanisms to collaborate and coordinate effectively. Study participants largely expressed support for the multiple-regulator model or, at least, indicated that the ACL regulators have reduced the potential for problems to arise.
Notwithstanding a handful of problem cases (mainly to do with bans or recalls of faulty electrical products), the study found little evidence of problems with the interaction between the ACL regulators and specialist safety regulators. The regulators generally have a clear understanding of their own and others' remits, although inevitably there is scope for some difficult 'boundary' issues to emerge — for example, should 'bath milk' be considered food for regulatory purposes?
And although consumers and suppliers are sometimes unsure about which regulators are responsible for a particular matter, the regulators have adopted a 'no wrong door' approach that generally sees complaints or queries directed to the most appropriate body in a timely manner.
Room for improvement
While the study concluded that the multiple-regulator model is operating broadly as intended, it also found that there are potential inconsistencies and other concerns with the way the ACL is being administered and enforced. There are also some broader concerns about aspects of the consumer protection landscape, including that several of the recommendations from the Commission's 2008 consumer policy report have not been implemented or fully progressed.
Among other problems, the study found that:
- retaining state and territory government powers (in addition to those of the Commonwealth government) to issue interim product bans and compulsory recalls can cause confusion for businesses and increase compliance costs
- a dearth of data hinders robust analysis of the activities and performance of the state and territory ACL regulators
- maximum financial penalties are small relative to the commercial rewards businesses can gain by breaching the ACL; and high-level enforcement action (including prosecutions) is limited by resources and, in some cases, a risk averse regulatory culture
- the mechanisms in place for sharing data and information between ACL regulators are relatively slow and resource intensive
- some industry-specific consumer regulation continues to differ across jurisdictions, and, particularly in the case of electrical products, can hamper a national response to safety concerns
- the system for resolving consumer disputes is not as effective as it should be.
Summary of findings and recommendations
The Commission made recommendations in four areas:
- The generic national product safety regime — State and ACT governments should relinquish their powers to impose compulsory recalls or interim bans. This should be accompanied by a mechanism for the states and ACT to provide input on product safety matters to the Australian Competition and Consumer Commission.
- Performance reporting — ACL regulators should publish a comprehensive and comparable set of performance metrics and information to enhance their public accountability and enable improved regulator performance.
- Industry-specific regulation — State and Territory governments should move to agree on nationally consistent laws on electrical goods safety.
- Consumer redress — Australian governments should establish an independent review of consumer alternative dispute resolution (ADR) mechanisms.
The Commission also made a range of findings, including on:
- exempting interim product bans from the Commonwealth government's regulatory impact assessment requirements.
- a national database of consumer complaints and product safety incidents, and a public register of consumer complaints
- enhancing the ACL regulators' enforcement tools and penalties
- improving the interaction between the ACL and specialist regulators
- public funding for consumer research and advocacy
- enabling designated consumer bodies to lodge 'super complaints'.
Consumer Law Enforcement and Administration
- Read the Study Report released April 2017