INSIGHT

Australian Consumer Law Review: what you need to know

By Rosannah Healy, Elise Rutherfurd
Food & Beverage Patents & Trade Marks

In brief 6 min read

A major review of the effectiveness of the Australian Consumer Law has now been completed with the release of the Final Report by Consumer Affairs Australia and New Zealand. Consumer Affairs Australia and New Zealand concluded that the Australian Consumer Law was functioning well but recommended a range of legislative and non‑legislative changes, particularly in the areas of product safety, consumer guarantees and unfair dealing. We take a look at five key findings that our food and beverage clients should be aware of and the implications for their business if the recommendations are adopted by Government.

New general safety provision

Consumer Affairs Australia and New Zealand (CAANZ) identified that the Australian Consumer Law (ACL) framework is largely weighted towards post‑market rather than pre‑market product safety controls and considered that the onus of managing product safety risk ought to be shifted from consumers and regulators to traders. To that end, CAANZ recommended introducing a general safety provision that would require traders to ensure a product is safe before it enters the market. Although not discussed in the Final Report, it appears that this provision would be in addition to existing obligations as to food safety imposed on traders under the Food Standards Code. The general safety provision would be subject to pecuniary penalties but would include a 'safe harbour' defence for companies which have complied with the relevant product safety standard. CAANZ has indicated that further consultation on the design and implementation of the proposed general safety provision will take place, including in relation to issues such as whether the provision should be cast as a positive or negative duty (to supply safe products or not supply unsafe products); and the amount of any applicable penalties.

The general safety provision will place a clear obligation on food and beverage suppliers not to supply unsafe products which the ACCC will be able to enforce without the need for a product to have caused injury.

Voluntary recall and mandatory reporting obligations

Traders can make voluntary recalls to remove potentially unsafe products from the marketplace and the ACL requires a trader to notify the relevant federal Minister of any voluntary recall to ensure that information about the recall can be coordinated and disseminated as effectively as possible. CAANZ was concerned that there is currently a lack of clarity in the ACL as to when a 'voluntary recall' occurs and that some traders can craft their remedial action so as not to trigger the voluntary recall notification requirements. Accordingly, CAANZ recommended clarifying and strengthening these requirements in two ways:

  • by introducing a statutory definition of 'voluntary recall' in order to clarify when a product is actually being 'recalled' (and therefore required to be notified to the Minister); and
  • by increasing the penalties for a failure to notify the Minister so that they are proportionate to other ACL penalties.

CAANZ also recommended that further regulatory guidance be provided on traders' mandatory reporting obligations in the event of death or 'serious injury or illness' as a result of the use or foreseeable misuse of consumer goods. Concerns were raised during the review that traders were uncertain as to when to make a mandatory report and that terms such as 'serious injury or illness' were difficult to apply in practice and could capture very minor injuries. CAANZ recommended that the ACCC's current guide to mandatory reporting (A guide to the mandatory reporting law in relation to consumer goods) be updated with practical guidance on how to apply the mandatory reporting triggers to real‑life scenarios.

While the legislative changes to the voluntary recall provisions will likely provide additional certainty to business, further regulatory guidelines on mandatory reporting obligations are unlikely to have any practical effect, given there is no proposal to change the statutory definition of 'serious injury or illness'

Consumer guarantees

CAANZ made a number of recommendations to strengthen and clarify the operation of consumer guarantees. Most relevantly, a key concern raised during the review was the difficulty faced by consumers when trying to assert a 'major failure' to meet the consumer guarantee of acceptable quality. CAANZ identified that there were two situations where refund rights should be readily available for a failure to meet this guarantee:

  • where a good is unsafe; and
  • where a good fails to comply with the consumer guarantees within a short period.

In relation to the first situation, CAANZ recommended that specific guidance be developed regarding the meaning of 'unsafe' goods and when 'unsafe' goods can amount to a major failure of the guarantee of acceptable quality. This would include guidance on how the consumer guarantees apply where a safety issue may not eventuate for some time or where the safety issue may not render the whole good unsafe.

This recommendation, if adopted, is a welcome development and will provide additional certainty to business about the application of consumer guarantees to potentially unsafe goods. In relation to the second situation, CAANZ recommended that where goods fail within a short specified period (eg 30 days), customers should be able to obtain a refund or replacement without needing to prove that there has been a 'major failure'. Importantly, in making this recommendation, CAANZ was focused on when high‑value goods fail within a short period and therefore suggested that perishable goods such as food and drink be excluded.

Unfair trading

One issue considered by CAANZ during the review was whether a general prohibition against unfair trading (such as that which exists in the UK) should be introduced into the ACL. CAANZ concluded that further consultation on this issue was required as it was unclear whether unfair business practices were sufficiently captured by existing protections contained in the ACL such as the provisions regarding misleading or deceptive conduct, unconscionable conduct, unfair contract terms, pyramid selling and unsolicited selling. CAANZ recommended that further action take place to explore how an unfair trading prohibition could be adopted within the Australian context.

CAANZ did not recommend introducing a definition of 'unconscionable conduct', concluding that it was appropriate that the courts continue to develop the meaning of the concept on a case‑by‑case basis in line with society's changing norms and values. CAANZ did recommend that the protections against unconscionable conduct be extended to publicly listed companies. This was on the basis that public listing is not necessarily a reflection of a trader's size, level of resourcing or bargaining position.

Another issue considered by CAANZ was the concern raised by stakeholders about systematic unfair contract terms involving repeated or widespread use within an industry or a particular business.

One response canvassed by CAANZ's interim report was the possible introduction of a prohibition against terms previously declared unfair by a court. Ultimately, CAANZ did not recommend this change, concluding instead that it was appropriate that terms be declared unfair and void on a case‑by‑case basis.

Penalties

CAANZ was concerned that the maximum penalties for contraventions of the ACL were too low to act as an adequate deterrent. CAANZ has recommended that these maximum penalties be increased to align with the penalty regime for contraventions of the competition provisions of the Competition and Consumer Act 2010 (CCA). For companies, the maximum penalties would increase from $1.1 million to the greater of $10 million, three times the benefit obtained from the conduct or 10 per cent of annual turnover for the past 12 months. For individuals, the maximum penalties would increase from $220,000 to $500,000.

The proposed reforms signal that contraventions of the ACL are increasingly regarded as seriously as contraventions of the competition provisions. The Chairman of the ACCC has indicated that seeking higher penalties is a priority for the ACCC.1

CAANZ did not recommend that penalties be introduced for contraventions of section 18 (misleading or deceptive conduct).