Farewell Trade Practices Act. Welcome Competition and Consumer Act

27 January 2011

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Key Points

by Tara Michaels and Calum Henderson

  • From 1 January 2011 the Trade Practices Act 1974 (Cth) has been replaced by the Competition and Consumer Act 2010 (Cth)
  • Whilst most substantive amendments relate to fair trading and consumer protection, a broadening of the definition of a consumer means that many B-to-B transactions will be affected
  • The implementation of the national Australian Consumer Law has led to a restructure of some parts of the Act, meaning many sections have been moved and received new numbering. Further, State fair trading legislation has been repealed
  • As a consequence, all businesses should immediately review current agreements and their standard form contracts to ensure they are both compliant and refer to the correct legislative provisions.

Background

2 phases of change

The new year has ushered in phase 2 of a raft of changes to the consumer law landscape in Australia with the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) which commenced 1 January 2011.  This followed on the heels of the first phase of amendments commencing on 1 July 2010 with the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth).

Together, the two amending Acts create the Australian Consumer Law (ACL), a new, national regime for fair trading and consumer protection, set out in Schedule 2 to the newly styled Competition and Consumer Act 2010 (Cth) (CCA) (that is, the former household named Trade Practices Act 1974 (Cth)).

Phase 1 introduced into the then TPA and the Australian Securities and Investments Commission Act 2001 (Cth) a new prohibition on unfair contract terms in standard form consumer contracts. Unfair terms in such contracts will be void under the new national regime but a contract will continue if it is capable of operating without the unfair term.

While to a large extent the effect of the Phase 2 reforms is to harmonise the existing State and Federal consumer law, it does also implement some important substantive changes to the law of which all businesses ought to be aware.  Relevant changes have also been reflected in amendments to the ASIC Act.

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Key legislative changes from 1 January 2011

1. Renaming of TPA

The TPA has been renamed and is now known as the Competition and Consumer Act 2010 (Cth) (CCA).  For transactions that occurred up to 31 December 2010, the TPA will continue to apply.

2. Repeal of State and Territory laws

All States and Territories have enacted legislation repealing their respective fair trading legislation and adopting the national competition and consumer law regime For transactions that occurred up to 31 December 2010, the previous State or Territory consumer laws will continue to apply.

3. Consumer protection provisions now found in the ACL

The following Parts of the old TPA have been repealed and re-incorporated into the ACL found in Schedule 2 to the CCA.  In a number of cases the provisions have been modified:

  • Part IVA (“Unconscionable conduct” formerly addressed by sections 51AA – 51AC of the TPA is now dealt with in sections 20, 21 and 22 of the ACL)
  • Part V (“Consumer protection” provisions now appear in various places throughout the ACL. For example, the well known section 52 of the TPA is now section 18 of the ACL, while the former section 53 now appears at section 29)
  • Part VA (“Liability of manufacturers and importers for defective goods” is now addressed in Chapter 3 of the ACL), and
  • Part VC (“Offences” are now addressed in Chapter 4 of the ACL).

4. Infringement notices

Part VIC (infringement notices) of the TPA has also been repealed and moved to part XI of the CCA. Infringement notices can now be issued by the ACCC for alleged breaches of certain provisions of the ACL as an alternative to the commencement of legal proceedings.  A person is not obliged to comply with the notice and may instead elect to have proceedings commenced against it. However, in the event of compliance, the regulator is precluded from taking any further action.  

5. Consumer guarantees

Statutorily implied conditions and warranties have been replaced with new consumer guarantees.  Consumer guarantees are unlikely to create significantly different rights and obligations but are intended to set them out in a clearer way.

Importantly, a person is taken to have acquired goods as a “consumer” where the goods or services:

  • cost $40,000 or less, or
  • are of a kind ordinarily acquired for personal, domestic or household use, or
  • the goods are a vehicle or trailer for principal use for transport of goods on public roads.

Certain exceptions apply, for example, where the goods are acquired to be re-supplied or are to be used up in commercial production or manufacture.

This significantly broader concept of “consumer” under the ACL means that these guarantees will have a much wider application than the former implied conditions and warranties regime. Clearly, a significant number of business-to-business transactions will be subjected to the new statutory guarantees.

6. Product safety law and enforcement

The ACL provides a single national approach and enforcement tools for product safety in relation to consumer goods and product related services including safety bans, product recalls and reporting and notification requirements.

7. Unsolicited consumer agreements

The ACL includes a new, national law for unsolicited consumer agreements which replaces existing relevant State and Territory laws.  (Unsolicited consumer agreements include agreements formed through door to door selling, telephone sales and non-retail direct selling.)

The ACL sets limits upon the formation and negotiation of unsolicited consumer agreements including in relation to permitted contact hours, disclosure, the exiting of premises on request and cooling off periods.

8. Lay-bys

The ACL provides simple national rules for lay-by agreements.  

The ACL now requires all such agreements to be in writing and the provision of a copy of the written agreement to the consumer.  

9. Offences

The ACL implements a criminal offence regime for certain provisions of Chapter 3.

A corporation convicted of an offence under the ACL can have a criminal
conviction recorded against it and pay a fine of up to $1.1 million while an individual face a criminal conviction and pay a fine of up to $220,000.

10. Enforcement and remedies

The ACL introduces some new penalties, enforcement powers and options for redress of consumer grievances.

The enforcement measures available for breaches or suspected breaches of the ACL are:

  • infringement notices
  • enforceable undertakings
  • substantiation notices (the ACCC can issue notices requiring a person to substantiate a claim without having reason to believe that a contravention of the ACL has occurred.  Such notices must be in writing and may require persons to give information and/or produce documents that support the relevant claim); and
  • public warning notices (the ACCC can issue a public warning notice where there are reasonable grounds to believe that particular conduct contravenes the ACL.  To issue such a notice, the ACCC must be satisfied that one or more persons has suffered or is likely to suffer detriment as a result of the conduct and that it is in the public interest to issue the notice.  A public warning notice may be issued in response to a failure by a person to respond to a substantiation notice.)).

The remedies available under the ACL are:

  • Civil pecuniary penalties
  • Disqualification orders
  • Non-punitive orders
  • Adverse publicity orders
  • Declarations
  • Injunctions
  • Damages
  • Compensatory orders
  • Redress for non-parties (regulators may seek, pursuant to section 239 of the ACL, particular remedies such as refunds or contract variations to remedy a breach of the ACL in certain circumstances without first establishing the identity of exactly whom the breach affected).
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Navigating the ACL

For those of you who are familiar with navigating the familiar territory of the TPA, we have prepared the table below to help guide you as you familiarise yourselves with the new regime.

TPAACL (Schedule 2 to the CCA)
Parts IVA, V, VA, VCChapters 2, 3 and 4 of the ACL
Part IVA (s 51AA – 51AC)Chapters 2, 3 and 4 of the ACL
Part V, Div 1Part 3-1 ACL
s 51A*s 4 ACL
s 52 s 18 ACL
s 53* s 29(1) ACL 
Part V, Div 2 (s 66 – 74)**Part 3-2 Div 1 (s 51 – 68) and Part 5-4 ACL
Part VA*Part 3-5 ACL
Part VC, Div 2Chapter 4 ACL
Part VIChapter 5 ACL***

 * There are some differences between the new and old provisions.
** New consumer guarantees replaces old regime of implied conditions and warranties.
*** Chapter 5 of the ACL does not replace Part VI of the CCA-  Chapter 5 of the ACL now contains the enforcement and remedies provisions relating to contraventions of the ACL while Part VI of the CCA still sets out the enforcement and remedies provisions relating to contraventions of other parts of the CCA.

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Implications

Aside from familiarising yourself with the ACL, it is now important to review all relevant contractual documentation to ensure it is compliant with the new national regime. Issues to be particularly mindful of include:

  • terms that may attempt to exclude or limit the operation of the statutory guarantees in circumstances where it is unlawful to do so
  • terms and conditions that may be considered unfair, either as drafted or in their application
  • references to the TPA or particular sections within it that have now been repealed so that they now refer to the CCA and/or the ACL.
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