Ministers agree – penalties to go up and minor changes to be made to the ACL

Published On 07/09/2017 | By Stephanie Swan | Consumer protection, Enforcement, Reform

It seems that Fair Trading/Consumer Affairs Ministers across the country have put aside their political differences to reach agreement on recommended changes to the Australian Consumer Law (ACL).

The Commonwealth, State, Territory and New Zealand Ministers met in Melbourne on 31 August 2017 to consider and discuss the 22 recommendations from the Final Report on the ACL Review (see our summary here).

Snapshot of what was agreed

The Ministers considered the outcomes of the ACL review and:

  • agreed to 15 proposals to make minor amendments to the ACL to improve its operation;
  • supported public regulatory impact assessments of 7 proposals to amend the ACL and to report back to the Legislative and Governance Forum on Consumer Affairs (CAF) in August 2018 for subsequent decision; and
  • directed Consumer Affairs Australia and New Zealand (CAANZ) to place 7 research and policy projects on the forward work program and 2018-21 strategic agenda.

The Ministers noted that:

“the package of reforms represents a significant body of work that will help enhance consumer wellbeing and help ensure the ACL can adapt to the development of new markets and consumer issues over time.”

Amendments to be rolled out

The Ministers agreed to make amendments to the ACL to give effect to 15 proposals with minor regulatory impacts, including:

  • clarifying the mandatory text requirements for warranties against defects by developing text specific to services and services bundled with goods;
  • clarifying and strengthening voluntary recall requirements by introducing a statutory definition of ‘voluntary recall’;
  • strengthening ACCC powers to obtain information about product safety, by broadening the power to apply to any person (including a consumer) likely to have relevant information, rather than just the supplier;
  • extending the ACL and ASIC Act unconscionable conduct protections to publicly-listed companies;
  • enabling regulators to use existing investigative powers to better assess whether or not a term may be unfair; and
  • easing evidentiary requirements for private litigants through an expanded ‘follow-on’ provision enabling them to rely on admitted facts from earlier proceedings (consistent with changes being made to the commensurate competition law provision as part of the Competition Policy Reforms).

A big leap in penalties for consumer breaches

Perhaps one of the most notable amendments agreed to by the Ministers is the proposal to increase the maximum financial penalties available under the ACL by aligning them with the penalty regime under the competition provisions of the Competition and Consumer Act 2010 (Cth) (CCA).

Specifically, the maximum penalty for breach of the ACL provisions by individuals will be $500,000, and for companies, the greater of:

  • the maximum penalty of $10 million; or
  • three times the value of the benefit the company received from the act or omission; or
  • if the benefit cannot be determined, 10% of the company’s annual turnover in the preceding 12 months.

This is consistent with the recommendation by the Productivity Commission as a result of its study into Consumer Law Enforcement and Administration, which took place alongside CAANZ’s ACL review, (see our article here).

The Honourable Michael McCormack MP, Minister for Small Business, said that “these increased penalties will now serve as a severe deterrent for businesses which fail consumers through misleading behaviour or poor business practices. These penalties will hold those companies accountable and impose a real financial cost …”.

Given the Turnbull Government has stated its intent to increase the maximum penalties available under the ACL from 1 July 2018, the Ministers have identified this proposal as a priority. It is not clear however, whether financial penalties will become the subject of an expedited Bill to meet this proposed commencement date.

But wait and see on a new ‘safe products’ obligation

The most common type of problem experienced by consumers responding to the Australian Consumer Survey 2016 was faulty, unsafe or poor products. The Final Report recommended the introduction of a new general provision that obliges businesses to ensure the safety of a product before it enters the market, with pecuniary penalties for any breach.

However, the Ministers didn’t go so far as to agree to this proposal. Instead the Ministers supported a public regulatory impact assessment as further consultation on the proposal to introduce a general safety provision, including design and implementation issues, is required. So watch this space…

Where to from here?

The Chair of CAF will be seeking the approval of the Commonwealth Minister responsible for the Australian Securities & Investments Commission Act 2001 (Cth) in respect of a number of the proposed amendments which will also affect that Act, including the unconscionable conduct extension and the regulator’s investigative powers.

In the meantime, a draft bill will be prepared. Public comment may not be sought on exposure drafts of the proposed amendments given how comprehensive the ACL review process has been, with public consultation forming a core component of CAANZ’s review.

With only three months until the end of Parliamentary sittings for 2017, it will be a race to get a draft bill completed and before both Houses before the year is up. The Government is certainly pre-occupied at the moment with matters like retail energy pricing and the status of members of Parliament with dual citizenship, which could make it unlikely that any draft legislation will be considered this year. That said, the Government is keen for some quick runs on the board as it enters an election year and so a tidy up of the ACL, where it has a consensus of the parties, could deliver that.

By Stephanie Swan and Melissa Monks

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About The Author

is a Solicitor in the Melbourne office of King & Wood Mallesons.

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