Australlian Consumer Act Review 2011

In January 2011 the Australian Consumer Act came into force. For all the fanfare that accompanied its enactment, the reality is that the Act is cumbersome and difficult to apply, does little to help consumers and small businesses, and there is real doubt that its goals are realistic or even practicable. Discuss

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The? Trade Practices? Act? (TPA) will indeed cease to exist from 31 December this year but on 1 January? 2011 the? Competition and Consumer Law Act? (CCA) took effect. But there is a? lot more to this than simply a name change.
Although the TPA competition provisions? simply migrate across to the CCA it radically reshapes Australian consumer law by? setting? up a national consumer law regime.
The need for a national consumer law scheme to replace the current overlapping and sometimes inconsistent laws which operate at federal, state and territory level is? widely acknowledged. The then Federal Government??™s 1995? Justice? Statement? noted? that it was difficult to justify the expense associated with local variations in consumer? laws but it was? ? the Productivity? Commission??™s? comprehensive 2008 report which? provided the catalyst for reforming the current? dysfunctional? arrangements.
In July? 2009 the nine governments settled an intergovernmental agreement to govern the development and administration of a single national consumer law to be known as the Australian Consumer Law (ACL). It was implemented through? the? same model? that was used to implement a national competition law for Australia. The? constitutional complexities that currently require nine bodies of law will be bypassed? by the ACL being contained in a schedule to the CCA and applied? by each state? and? territory pursuant to the intergovernmental agreement.
The? ASIC Act? and the? Corporations Law? will be similarly amended to give effect to the NCL. The? Productivity Commission has suggested that these reforms will save Australian? business about? $4.5 billion per year.
The ACL has been introduced in two instalments. The first ??“ which creates a national? unfair contracts terms regime and introduces new penalties, ACCC enforcement? powers and consumer redress provisions ??“ has already been passed by? both Houses? of? the federal parliament.
The second ??“ which implements general and specific consumer? protection substantially similar to that currently contained in the TPA ??“ was? introduced on 17 March. The Bill has bipartisan support and should pass through? parliament without? complications.
Implications for franchisors. The major threat has already been? removed. The original draft of the national unfair consumer terms law applied to? franchise agreements. The power to set aside unfair terms in standard form? contracts? goes far beyond the reach of the business unconscionability provisions? and would? have had very significant ramifications for the sector.
The new law ??“ based on the? Victorian law ??“ now applies only to traditional consumer contracts. Franchise systems? whose franchisee use standard form documents in contracting with franchisees will? need to audit, and possibly redraft, their? standard? form contracts.
Most significant for franchisors? is the introduction of civil pecuniary penalties for unconscionable conduct and false? representations (but not for misleading conduct or contravention of the Franchising Code of Conduct) and the? increased? powers of? the? ACCC? to? issue substantiation, infringement and public warning notices and to? conduct random audits.
The balance of the provisions, which are closely based on? existing and familiar provisions, are unlikely to cause much concern although? referring to our old friend s52? (misleading conduct) as s18, or to s51AC? (unconscionable conduct) as? s22, will? take some adapting to.
Most Australians believe it is corrupting our values. Public awareness of the cost of consumer lifestyles has given rise to an inner conflict between what we do daily and what we believe is right for us and our society. A large majority of Australians believe that escalating materialism has harmful effects. According to a survey taken in December 2004, 80 per cent agree with the proposition, ???Most Australians buy and consume far more than they need: it??™s wasteful??? and 75 per cent of Australians agreeing with the proposition ???Too many Australians are focused on working and making money and not enough on family and community???.
Australians seem particularly troubled about the corrupting effect of materialism on children. Four in five believe strongly that Australia??™s materialistic society makes it harder to instill positive values in children. This explains why 86 per cent believe greater limits should be placed on advertising to children. If Australians were able to vote on a referendum o ban advertising to children I have no doubt it would be carried by a large majority.
Consumerism
Consumerism? is a social and economic order that is based on the systematic creation and fostering of a desire to purchase goods and services in ever greater amounts. Consumerism fuels purchases of things that are actually not essential. The idea puts emphasis on hedonism and self-fulfiment.
Consumers have sought protection through legislation because the general laws and market forces have failed to provide it. Many consumer protection laws either relate to the terms and conditions of contracts that consumers make with suppliers for the supply of goods and services, or to conduct intended to encourage the making of such contracts (marketing, packaging, advertising and provision of information). Previous laws, especially the law of contracts, assumed that the parties to contracts are legally equal in terms of power and information. In substance, in real markets, almost invariably consumers have markedly less power and information than suppliers. The law deems the action of a consumer in buying a commodity to be the making of a contract – in theory a free, consensual act. In practice, the legal consequences are attributed to the action by the law without any consideration of what the consumer actually knows or wants. The common law of contracts simply cannot afford consumers the protection they probably would seek if they were rational, fully informed, and equal in economic power to the supplier. Because contract law offers an inadequate basis for an equitable legal transaction, it must be modified by legislation in order to afford greater protection to consumers than they can negotiate individually for themselves.
The Australian Consumers law
Historically, the protection of consumer rights in Australia was provided through various legislative frameworks ??“ from the? Trade Practices Act 1974? (Cth) (the ???TPA???) to the various fair trading laws applicable in each State and Territory. The variations between the Commonwealth, State and Territory legislative schemes resulted in uncertainty for both businesses and consumers in determining their respective rights.
The? Australian Consumer Law (ACL)? is a part of a system a regulatory reform conducted jointly by both the Commonwealth and State governments to provide for uniform laws across all Australian states and territories. The ACL replaces provisions in over 17 State and Territory Acts and the TPA.
The? Australian Consumer Law? is uniform legislation for consumer protection, applying as a law of the? Commonwealth of Australia? and of each of Australias? states and territories. The law commenced on 1 January 2011, replacing 20 different consumer laws across the Commonwealth and the states and territories.? The text of the law is a schedule to the Commonwealth? Competition and Consumer Act 2010,? which is incorporated into the law of each state and territory by reference in separate fair trading? acts.
The law was developed by agreement of the? Council of Australian Governments.
The provisions of the Australian Consumer Law broadly reflect the provisions previously afforded by the? Trade Practices Act 1974, although some additional protections have been added. The Australian Consumer Law also generally reflects most of the consumer protection provisions of the fair trading legislation in each state and territory.
Implementing identical consumer protection laws at Commonwealth and state/territory levels promotes consistency between jurisdictions. It will also make it easier for the? Federal Parliament? to amend the provisions which will then be reflected in the laws of the states and territories without the parliaments of each jurisdiction needing to debate and enact the amendments separately, although the states and territories reserve the right not to implement any amendments within their own jurisdiction
The ACL introduces new protections for consumers, including:
* consumer guarantees, which are a comprehensive set of rights and remedies regarding the supply of goods and services
* the ability to ask a court to remove unfair terms in standard form consumer contracts
* Increased protection from unfair and unethical business practices.
* A national product safety regime was also introduced as part of the ACL.
The major elements of the new law, which? apply from 1 January 2011,
* consumer guarantees
* sales practices
* avoiding unfair business practices
* product safety
* Unfair contract terms.
Consumer Guarantees
The consumer guarantee provisions of the ACL are a new comprehensive set of statutory rights and remedies for defective goods and services that replace the implied warranties and conditions under the TPA. Consumer guarantees apply to any type of domestic or household goods or services costing up to $40,000.
The concept of ???merchantable quality??? under section 74D of the TPA has been replaced by a new legal standard of ???acceptable quality??? under the ACL.
In relation to the supply of goods, the guarantees are:
* a guarantee as to title;
* a guarantee as to undisturbed possession;
* a guarantee that the consumer will acquire the goods free from any security, charge or encumbrance that was not disclosed to the person before the sale;
* a guarantee that the goods are of acceptable quality;
* a guarantee that the goods are fit for a purpose disclosed, either expressly or by implication, by the consumer;
* a guarantee that the goods supplied by a description, sample or model are the same as described, sampled or modeled;
* a guarantee as to repairs and spare parts; and
* A guarantee as to express warranties.
In relation to the supply of services, the guarantees are:
* a guarantee as to do care and skill;
* a guarantee that the service and any products relating to that service are fit for a particular purpose; and
* A guarantee as to reasonable time for supply.
These guarantees cannot be excluded by contract; however, a failure to comply with a guarantee will not constitute a contravention of the ACL. Instead, the ACL provides for a number of specific remedies that may be sought against the supplier and/or manufacturer of goods or the supplier of services. In relation to actions against a supplier, the nature of the remedy will also depend on whether the failure to comply with the guarantee is a major failure.
Certain types of goods and services are not covered by the consumer guarantees. These include goods bought before 1 January 2011, goods sold at auction (where the auctioneer is the sellers agent) and goods bought to be unsold. Transportation or storage of goods as part of a consumers business or occupation and insurance contracts are also not covered.
Unfair contract terms
Unfair contract laws came into effect under the TPA on 1 July 2010 and are continued without change in the ACL. They only apply to standard form ???consumer contracts??? for the supply of goods or services which are wholly or predominantly for personal, domestic or household use or consumption. A standard form contract typically refers to a contract prepared by one party to the contract and is not subject to negotiation between the parties.
A term is regarded as? ???unfair???? if it:
* would cause a significant imbalance in the parties??™ rights and obligations arising under the contract;
* is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term (i.e. the supplier); and
* Would cause financial or non-financial detriment to a party if it were applied or relied on.
In determining whether a term is ???unfair???, a court may take into account any matters it thinks fit, but must have regard to the transparency of the term and the contract as a whole.
Product Safety
The ACL introduces a national, uniform product safety regime under which governments can regulate consumer goods and product related services.? ???Consumer goods???? are goods that are intended, or are of a kind likely, to be used for personal, domestic or household purposes.? ???Product related services???? are services that relate to the installation, maintenance, repair, cleaning, assembly or delivery of consumer goods of a particular kind.
Under the ACL, only the Commonwealth Minister can make safety standards for consumer goods or product related services.
The ACL includes a new requirement that suppliers must notify the Commonwealth Minister within two days of becoming aware that a consumer good or product related service they have supplied has, or may have, caused serious injury, illness or death
Law Enforcement
The ACL will be enforced and administered by the Australian Competition and Consumer Commission (ACCC), each State and Territory??™s consumer agency, and, in respect of financial services, the Australian Securities and Investments Commission (ASIC).
Benefits for consumers and Businesses
One law
* The ACL will replace 20 existing State, Territory and Commonwealth laws with? one law.
* At present the law that applies to a consumer transaction differs across each State and Territory of Australia.
* The ACL will make it easier for consumers to understand and enforce their rights because they will be the same across Australia.
Businesses will benefit from? one law? applying to consumer transactions across Australia.
* Businesses that trade in more than one State or Territory will only have to comply with one law.
* Regulatory complexity is often a deterrent for businesses when they consider expanding.? The ACL will remove a barrier to interstate expansion of businesses.
Better enforcement
* Consumers will benefit from? better enforcement? of the ACL.
* A single law will be uniformly enforced across Australia. A memorandum of understanding between regulators will ensure that this is the case.
* Courts and Tribunals across Australia will apply the same law to consumer disputes, allowing for cheaper and clearer avenues of redress.
* Uniform enforcement powers will be available to all consumer agencies across Australia.
Businesses will benefit from? better enforcement? of the ACL.
* Even when State and Territory laws are similar, differences in enforcement approaches can lead to additional compliance costs for businesses.
* Improved co-operation between consumer agencies applying the ACL will give businesses comfort that it will be applied consistently across Australia.
Clear rights
* Consumers will benefit from? clear rights? under the ACL.
* Consumers will have the same rights under the ACL across Australia, no matter where they live, where they buy goods or services or where a supplier is located.
Business will benefit from? clear obligations? under the ACL.
* The existing law imposes different obligations on businesses depending upon where in Australia a particular business or a particular part of a business is located.
* The ACL will impose the same obligations on businesses across Australia, making compliance easier for businesses that trade in more than one jurisdiction.
Minister??™s Speech on Consumer Law
Consumers are key to ensuring the ongoing robustness of Australia??™s economy. Empowered consumers drive competition and encourage innovation and choice. In May 2008 the Ministerial Council on Consumer Affairs welcomed the publication of the Productivity Commission??™s Review of Australia??™s Consumer Policy Framework, which provided a much needed analysis of Australia??™s existing consumer policy framework and considered recommendations for reform. COAG??™s 2 October 2008 agreement to introduce a national consumer law implements recommendations by the Commission and follows on from the detailed policy proposals that we agreed at the Ministerial Council on Consumer Affairs in August 2008 to enable these recommendations to be practically implemented.
An Australian Consumer Law will significantly enhance consumer protection, reduce regulatory complexity for businesses and encourage the development of a seamless national economy. Greater enforcement cooperation will mean that consumers will benefit from these laws through consistent national approaches to consumer problems.
The reforms have three key elements:
??? the development of a consumer law to be applied both nationally and in each State and Territory, which is based on the existing consumer protection provisions of the Trade Practices Act 1974, and which includes a new national provision regulating unfair contract terms, new enforcement powers and, where agreed, changes based on best practice in state and territory laws;
??? The implementation of a new national product safety regulatory and enforcement framework, as part of the national consumer law; and ??? the development of enhanced enforcement cooperation and information sharing mechanisms between national and state and territory regulatory agencies. To assist the Ministerial Council in implementing these reforms, I am pleased to release this information and consultation paper as an important step in the reform process to develop a new national consumer law for Australia.
This paper, which has been developed by the Standing Committee of Officials of Consumer Affairs (made up of officials from all Australian governments), sets out further detail on COAG??™s agreed reforms, legislative proposals and suggested reforms.
I welcome the views of all those interested in, and concerned with, consumer policy in Australia.
The Hon Chris Bowen MP
Assistant Treasurer, Minister for Competition Policy and Consumer Affairs

The structure of the law
As recommended by the Productivity Commission, the existing provisions of the? Trade Practices Act? will be the stepping off point for the new Law. As part of this process the existing provisions of the Act dealing with unconscionable conduct, unfair practices, pyramid selling, enforcement powers, penalties and remedies and definitions will form the core of the new Law.
With the scale of amendments, the Service has been renamed? Trade Practices Law: Competition and Consumer Law. For 1 January 2011 its structure reflects the reconfigured regime with the following loose-leaf volumes:
* Preliminaries
* Competition Law Commentary
* Australian Consumer Law Commentary
* Commonwealth Legislation
* State Legislation and Related Materials
In addition to new guiding commentary for the reform program, the majority of commentary chapters will be updated during 2011. Throughout the New Year, important and relevant Bills, reports and discussion papers will be added to the New Developments. Responding to the development of the law, the online and loose-leaf service continues as the indispensible work for those practicing in or needing to understand the complexities of Australia??™s Competition and Consumer Law.
Innovations and Changes
In considering the move to a single law, it is worth considering the complexity that it will start to replace.
At the moment, Australias general consumer laws consist of 13 Acts which cover the same broad subject matter, including two national laws in the form of the consumer provisions of the? Trade Practices Act 1974? and the? ASIC Act 2001? and eight state and territory? Fair Trading Acts,? plus ??“ in three jurisdictions ??“ another three more laws which deal with generic consumer protections. There are also some general consumer provisions in another eight state and territory laws about the sale of goods.
Based on a count of substantive consumer provisions, the Australian Consumer Law has replaced at least 850 sections in these Acts, not including many of the ancillary enforcement and other provisions that support them. As an economist, and one that has only recently moved into this area of policy,
From 1 January 2011 the Trade Practices Act 1974 is now called the Competition and Consumer Act 2010
Changes which will impact credit professionals include:
* Returning the definition of a ???consumer??™ (which applies to provisions of the ACL dealing with consumer guarantees, unsolicited consumer agreements, lay-by sales, the provision of itemized bills, continuing credit contracts and linked credit contracts) to apply to any person that purchases goods and services below $40,000 in value;
* As a consequence of the aforementioned amendment, allow suppliers and manufacturers to limit their liability in respect of goods not ordinarily acquired for personal, domestic or household use or consumption that fail to meet the standards required by consumer guarantees (in line with existing sections 68A and 74L of the TP Act);
It should be noted that these changes will mean that credit providers will need to ensure that their business purpose declarations address these new provisions.
* Clarifying that a consumer may choose to terminate a contract for the supply of services that are connected to goods that have been rejected;
* Clarifying that the obligation upon a supplier to refund monies in respect of services when connected goods have been rejected extends only to services that have not yet been consumed;
* Clarifying that a supplier is entitled to recover certain amounts from a consumer if an unsolicited consumer agreement is terminated
There are also changes to Australian Consumer Law regarding unfair contract terms in consumer contracts in relation to the supply of goods and services. ? Amendments relate to what could be considered to be unfair contract terms and may require revision of standard contracts to ensure potential breaches minimized.
* a new, national unfair contract terms law covering standard form contracts;
* a new, national law guaranteeing consumer rights when buying goods and services, which replaces existing laws on conditions and warranties;
* a new, national product safety law and enforcement system;
* a new, national law for unsolicited consumer agreements, which replaces existing State and Territory laws on door-to-door sales and other direct marketing;
* simple national rules for lay-by agreements; and
* New penalties, enforcement powers and consumer redress options, which currently apply nationally.

Conclusion
The Australian Consumer Law represents an opportunity for a new approach to consumer policy, drawing on the widest range of consumer policy and enforcement experience and expertise. A new uniform national fair trading and consumer protection regime, new product safety laws and new enforcement powers? and penalties.? ?
Particularly if you are? looking at? preparing your business for sale, now would be a good time to conduct an audit of? your existing contracts and standard terms and conditions of sale.?
For example, the implied warranties in relation to sale of goods and services have now been abolished and replaced with ???legislative guarantees???.? ? However, many standard terms and conditions? documents? are based on the old implied warranties regime,? and not? upon these new guarantees.? So, if you do not update them,? your standard terms and conditions may not protect your business as well as they should.? This is something that a purchaser??™s lawyer would? quickly? identify? when conducting? due diligence on your business.

Refferences
* http://www.accc.gov.au/content/index.phtml/itemId/142
* http://www.consumerlaw.gov.au/content/Content.aspxdoc=consumer_policy/SCOCA_Steven_Kennedy_Speech.htm&pageid=004
* http://www.consumeraffairs.govt.nz/legislation-policy/policy-reports-and-papers/disscussion-papers/consumer-law-reform-a-discussion-paper
* http://en.wikipedia.org/wiki/Australian_Consumer_Law#cite_note-2
* http://www.afairerworld.org/_The_global_economy/consumerism.html
* http://www.articlesbase.com/law-articles/consumerism-688072.html
* http://en.wikipedia.org/wiki/Consumerism
* http://www.propertyoz.com.au/wa/Article/NewsDetail.aspxp=16&id=4064
* http://www.aitken.com.au/news-blog/blog/archive/201103/changes-australian-consumer-laws-part-2-consumer-guarantees
* http://www.swaab.com.au/publications/New-Australian-Consumer-Law-guarantees-what-do-they-mean-for-your-business.html
* http://www.dcstrategy.com.au/articles/legal-articles/the-end-of-the-trade-practices-act/
* http://www.lawhandbook.sa.gov.au/print/ch08s03.php
* http://www.thomsonreuters.com.au/catalogue/productdetails.aspid=11519
* http://www.australiancompetitionlaw.org/reports/2011pricesignal.html
* http://www.aar.com.au/pubs/comp/focompfeb11.htm
* Julian Watford quoted in ???A Thirst for Prestige???, Vive magazine, October-November 2005, p. 98
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