Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

I welcome the opportunity to speak on the Trade Practices Amendment (Australian Consumer Law) Bill 2009. This bill forms part of the government’s intention to move towards a single national consumer law, which the coalition supports in principle. It seeks to provide increased protection for consumers by voiding unfair terms in standard form contracts between businesses and consumers. Standard form contracts typically cover mobile phones, bank accounts and gym memberships and are non-negotiable. If the consumer wishes to take advantage of the goods or services on offer, he or she has to accept the contract provided without negotiation.

A contract term will be unfair where there is a significant imbalance between the parties’ rights and obligations and the term is not reasonably necessary to protect the legitimate interests of the supplier. The bill also extends to enforcement options for the Australian Competition and Consumer Commission and the Australian Securities and Investment Commission for specified consumer protection matters. The government originally consulted on including business-to-business contracts as well as business-to-consumer contracts, but these provisions were removed.

Following the commencement of the bill’s second reading, it was referred by the government to the Senate Standing Committee on Economics, which reported on 7 September. Minister Emerson later explained that business-to-business provisions were removed because they would, among other things, create uncertainty—the same argument used by opponents of the fair contracts provision as regards consumers. Business-to-business contracts will now be considered as part of the review of the Trade Practices Act and the Franchising Code of Conduct. The legislation is intended to apply from 1 January 2010.

Some sections of the small-business community wish to see business-to-business provisions restored; however, many stakeholders believe the issues in this area are too varied and widespread to be dealt with in the way originally proposed. There are also major concerns about the effect of the bill, as it stands, on contract law creating widespread uncertainty and increasing costs. The coalition is on the record as supporting a single national consumer law, replacing differing regimes currently operating in each state and territory. This would bring benefits to both businesses and consumers, reducing costs and providing more clarity about the rights and obligations wherever goods are bought and sold.

Many goods and services are purchased by way of standard form contract. As I said earlier, they are typically goods and services such as mobile phones, bank accounts and gym memberships. The contracts are non-negotiable. If the consumer wants that particular good or service, he or she has to accept the contract as it stands. The contract includes clauses such as those which would allow the provider to vary the terms and conditions, as banks do when providing mortgages. The contracts may include clauses such as in relation to the cancellation of a contract before its term, which the consumer may find unreasonable. Consumers can, of course, use the principle of buyer beware. They can shop around for a better deal or a less onerous contract, or they may decide that, even though they do not like some of the terms and conditions in the contract, they will put up with them because the deal on offer is so good. In principle, we would instinctively wish to strengthen the hand of the consumer in these situations, but the consumer has, to some extent, the remedy in their own hands already by deciding whether or not to accept that particular contract.

In practice, we nearly all have bank accounts, we nearly all have mobile phones and many of us have gym memberships. Therefore, what has been lacking is some indication of the size of the problem that the government seeks to address. What is clear is that standard form contracts are widespread. Also, there is a strong similarity between contracts used in certain sectors such as mobile phones, thus diminishing the consumer’s ability to find alternatives. This point provides strong justification for some form of action. There is little point in the buyer being aware if that same buyer has no alternative.

Now I would like to consider the issue of business-to-business contracts, which were originally proposed to be included in this bill. A broad section of the small-business community welcomed the inclusion of business-to-business contracts and was dismayed when the government decided instead to refer the matter to the reviews of the Trade Practices Act and the Franchising Code of Conduct. There is clearly a case for regarding small businesses in the same light as consumers when they are buying goods or services to consume themselves, or when buying goods for sale when they have no ability to negotiate over the terms of purchase of those goods. For example, many members of this House will have received letters from newsagents, for example, in support of the inclusion of business-to-business contracts in this legislation.

The Australian Newsagents Federation has some 2,100 members, nearly all of whom employ fewer than 20 staff, and most of whom employ five or fewer. They are subject to standard-form contracts in their dealings with major companies, such as News Ltd, Fairfax Holdings and Hallmark Cards, and the majority of key contractual terms are presented on a take it or leave it basis. For major items of their stock they can go to no other suppliers. In addition, they may be subject to a standard-form contract covering the lease of their premises in a shopping centre. Like consumers, and other small businesses, they do not have easy or cheap access to legal advice or representation and, even if they did, their market position would not allow them to negotiate a better deal.

Small businesses acting as suppliers to supermarkets are often in the position of taking or leaving the terms that a particular supermarket has on offer. There is a wide range of possible problems here, not least of which is determining what constitutes a ‘small business’ for these purposes. The government consulted on the basis of contract value, contracts with a value of more than $2 million being exempt from the unfair contracts provisions.

It has been pointed out to the government that many consulting firms, particularly in the field of engineering, would generally be considered as small businesses but would routinely tender for contracts with a value far greater than $2 million. Furthermore, when dealing with government agencies and corporations, these firms are subject to contract terms relating to risk and liability which can only be described as onerous, if not unfair. One can see why many small businesses would jump at the prospect of legislation which tries to redress the commercial imbalance in this area and why they were dismayed when the change in tactic was introduced to remove business-to-business contracts through reviews of the Trade Practices Act and the Franchising Code of Conduct.

The government’s reasons for adopting this tactic were that the initial proposals would create uncertainty in business dealings, would potentially increase costs and would possibly jeopardise small-business funding, arguments which could equally apply to the business-to-consumer proposals. This is also the position taken by the big-business and legal communities in relation to this legislation. The Council of Small Business Organisations of Australia, in its submission to the Senate, has concluded that it can accept the removal of business-to-business contracts provided, firstly, that the TPA is amended to include business-to-government contracts; secondly, that all government procurement and contracting officers should allow suppliers to negotiate their own contractual terms; thirdly, that the government implements the Prime Minister’s commitment to introduce ‘fresh ideas for small business on government procurement’; and, fourthly, that consideration is given to a ‘fair contracts bill’ covering the area in which small businesses are unable to negotiate.

We should also bear in mind that small businesses use standard-form contracts in their dealings with consumers. So while the small-business lobby was very keen to have business-to-business contracts included under this legislation, they are also mindful of the fact that they would be businesses issuing such contracts to consumers. In the absence of business-to-business provisions in this bill, the government needs a clear and comprehensive strategy to address this wide range of concerns.

The legal consequences in relation to this bill are worthy of some note here. Some stakeholders, particularly in financial services, have grave concerns about the proposed contracts regime. Their reservations include, firstly, that there is no requirement for a consumer to show actual detriment in seeking to have a term of a contract declared void; secondly, that the burden of proof does not lie with the complainant; thirdly, that there is no provision for a court to consider the consumer benefit which may flow from an impugned term; and, fourthly, that there will be high compliance costs and confusion arising from the application of the law to existing contracts that may be renewed or varied after commencement of this legislation.

To a considerable extent, provisions of the Australian Consumer Law mirror the provisions of the existing unconscionable conduct regime in part IVA of the Trade Practices Act, and will overlap to a lesser extent with the consumer protection provisions of part V. The most notable difference is that, under part IVA, it must be shown that it would be unfair for a party to seek to rely on a term, whereas under the Australian Consumer Law a term may be voided whether or not its use would be unfair in practice.

The unconscionable conduct provisions have been in place for 20 years. There is no demonstrated argument that they are inadequate to protect consumers. Many contracts include terms providing rights and remedies to both parties. Only terms in favour of a business are prima facie examinable under the bill.

The Australian Consumer Law, as it stands, will create a great deal of uncertainty. The law of contract arose in order to give certainty to transactions—that certainty enables businesses to engage in other transactions, including credit transactions based on a business’s contract book. The introduction of a new standard of contractual review may have significant unforeseen consequences. The reforms may also result in frivolous and vexatious claims and in additional regulatory cost. The costs associated with this will ultimately be borne by consumers.

The application of the law to interests in land may be especially problematic. Existing property law recognises the uniqueness of any interest in land and applies special remedies, including forfeiture of deposits, specific performance, foreclosure, registration of caveats et cetera, which may be extremely difficult to characterise as necessary for the protection of the ‘legitimate interests’ of a business as opposed to other remedies. The uncertainty flowing from this could be immense.

The Law Council, in its submission to the Senate Economics Legislation Committee, raised the question of the definition of a ‘consumer contract’. It favoured using the definition in section 4B of the TPA which hinges on whether the good or service being supplied is ‘of a kind ordinarily acquired for personal, domestic or household use or consumption’. The benefits of this definition would be not to require an additional and potentially difficult inquiry into the purpose for which the good or service was acquired. It would also afford some protection to businesses when the goods or services were not being acquired for sale to a customer, such as retail electricity supply or phone services.

The definition in the bill applies only to ‘individuals’ which would exclude small business contracts. The Law Council also raised concerns about the government’s ability to ban contract terms outright. Its view is that whether a term is unfair or not depends entirely upon the circumstances of the case, and an ability to ban outright would mean that a case-by-case assessment would not occur. One example would be a clause that allowed a unilateral variation. Such a variation might seem fair but in terms of ongoing service contracts for, say, gas or electricity it would be reasonable to expect the supplier to vary the terms from time to time without having to separately negotiate and agree with potentially millions of customers. The Law Council also takes issue with the banning process, saying it lacks independent or stakeholder consultation, avoids parliamentary scrutiny, and thus lacks adequate safeguards for the exercise of a power that could have widespread detrimental effects.

The Senate Economics Committee spent much time discussing the exclusion of insurance contracts from the current legislation on the grounds that such contracts are covered by separate legislation under the Insurance Contracts Act. The industry representatives made the point that they were already subject to a high degree of regulation and that much of the anecdotal evidence provided related to what might be described as the unfair implementation of contract terms, rather than terms which might be unfair as proposed under the Australian Consumer Law. The coalition would not favour imposing another legislative layer on the insurance industry, however we support the committee’s view that a review of the Insurance Contracts Act would be timely, taking into account new measures on other standard form contracts, particularly with the reported entry of Australia Post and Coles into the market.

I would like to turn now to enforcement powers. Debate has concentrated on the unfair contracts provisions of this bill but the new enforcement powers of the ACCC and ASIC are also of some concern. The consumer protection provisions of the Trade Practices Act and the ASIC Act are currently enforced through civil remedies such as injunctions and other orders and, in certain circumstances, criminal sanctions. The explanatory memorandum states that the lack of availability of civil pecuniary penalties and disqualification orders for enforcement of consumer law represents a significant gap in the range of enforcement options available to the ACCC and ASIC. At present, the ACCC and ASIC are unable to obtain compensation for consumers when bringing criminal action alone. If a matter is serious enough to warrant a penalty the ACCC or ASIC must institute both civil and criminal proceedings in order to secure any type of compensation. Civil pecuniary penalties and disqualification orders are designed to provide an alternative to this duplicative process and provide timely and proportionate resolutions to instances of illegal conduct that do not call for criminal sanctions to be sought.

The proposed civil penalties will apply to unconscionable conduct, misleading or deceptive conduct, participation in pyramid selling, product safety and product information and substantiation notices as defined by the provisions of the sections of the Trade Practices Act. The maximum penalty will be $1.1 million for corporations and $220,000 for individuals. The enforcement provisions of this bill greatly increase the powers of the ACCC to act not just as a cop on the beat but also as a judge and jury. The coalition has not been impressed with the recent performance of the ACCC and there must be concerns about the way in which it would apply these powers in a quasi-judicial role. Its recent application of anti-cartel measures and the criminalisation aspects of the measures continues to cause some concern. There are existing legal remedies for most of these areas covered by the bill and the extended powers can be seen as unwelcome and unnecessary intervention by government agencies. Again, quoting the Law Council’s submission to the Senate Economics Committee:

… the new enforcement powers should only be introduced where there is a sound policy basis for doing so and where existing enforcement measures are clearly insufficient to achieve the same outcomes. The Committee—

the Trade Practices Committee—

remains unconvinced as to the policy justification for introducing some of the proposed enforcement powers.

Once again, the coalition favours measures that result in appropriate and timely redress but we will watch very carefully the operation of these new enforcement powers.

In conclusion, in general we support the bill, both in its general aim of unifying Australian consumer law and its specific aim of strengthening the hand of the consumer when the ability to exercise choice is limited by the dominant use of standard form contracts. However, we have some specific concerns and we will seek to have these addressed when the bill is debated in the Senate.

We would propose to have discussions with the government with regard to the following changes: firstly, the deletion of the provision for prohibition of contractual terms—that is, clause 6 of the bill; secondly, the deletion of both the provisions providing for the reversal of the onus of proof—that is, clauses 3(4) and 7(1); and thirdly, in clause 3(2)(a) the omission the words ‘or there is substantial likelihood that it would cause detriment (whether financial or otherwise)’, substituting the words ‘a significant disadvantage’.

We also have concerns with the implementation date and note that, given that it is currently late in the year, the implementation of standard form contract legislation will provide difficulties for many firms which have large numbers of standard form contracts. The government should give consideration to deferring the commencement date for those contractual terms until perhaps the middle of next year, 1 July 2010.

Given that we accept the principle of taking action on the use of unfair terms, an opportunity has been lost in this legislation to extend the protection to small business. Consideration should be given to amending the bill to adopt the definition of ‘consumer contract’ used in section 4B of the Trade Practices Act. Again, this would provide more clarity, avoid creating a second legal definition of such contracts and, crucially, provide protection to small businesses in contracts where they are, in effect, acting as a consumer. We also seek more clarity on the issue of ‘transparency’ and its bearing on the unfairness or otherwise of contractual terms. The explanatory memorandum suggests that a lack of transparency indicates a lack of fairness but it appears that a contractual term may be both transparent and unfair.

More precision on these issues would greatly assist the legal and business communities, small business in particular, and lead to a speedy resolution of the issues in the courts. The consultation process for this legislation has revealed a range of problems in the area of business-to-smallbusiness contracts and particularly in government-to-smallbusiness contracts. We note the government’s review of unconscionable conduct provisions of the Trade Practices Act and the Franchising Code of Conduct with regard to unfairness in business-to-business contracts. We also note the views of stakeholders that a similar review of the dealings of Commonwealth, state and territory governments with small business in particular with regard to unfair contract terms is necessary and we call on the government to set up such a review.

Certainly the coalition supports the broad thrust of this legislation and we look forward to ongoing negotiations with the government to further improve the legislation in the Senate.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I too rise to speak in support of the Trade Practices Amendment (Australian Consumer Law) Bill 2009. This bill implements the Council of Australian Governments national consumer law reforms agreed to by all the state and territory governments in October last year. It is yet another example of the Rudd Labor government’s commitment to cutting red tape, eliminating bureaucratic duplication and waste, and bringing about uniform laws across the country. And it has been done in a spirit of cooperation with state governments, not with the sledgehammer approach of past years. In fact, if we look at the history of Federation with the evolving of colonies into states into a federation with a capital that has more and more power and more and more control with more and more cooperation, we note the Rudd Labor government has certainly taken the federation to a new level, particularly in terms of coordinating things with the states and territories, whether they be Liberal, Labor or whatever, making sure we agree and work together for a healthier country. Like so many of the laws which criss-cross state, territory and federal jurisdictions, consumer protection laws have evolved into an unholy mess in recent years. It is a little bit like the many-headed hydra that Hercules had to fight. I do not want to start my speech by comparing the Hon. Dr Craig Emerson MP to Hercules and I do not want the Minister for Competition Policy and Consumer Affairs to get too excited, but that is what he has been fighting. He pushes down somewhere and then something else pops up. Obviously, companies and consumers move between the states and territories so much more readily so it is important that we have uniformity wherever possible. It makes good business sense and it looks after consumers. The various Commonwealth, state and territory laws have a similar intent. However, there are enough differences between these jurisdictions to create confusion for consumers, unnecessary costs for business and perhaps extra work for lawyers.

This bill is based largely on the recommendations of the Productivity Commission’s review and will bring about the biggest change to consumer law and policy since moustaches were compulsory in the public service. It is the biggest change since long socks, short-sleeved shirts and ties were de rigueur, even stylish, or, to put it in more precise terms for those people that follow rugby, it is the biggest change in the 30 years since the St George Football Club won a grand final. This bill amends the Trade Practices Act 1974 to introduce a new national unfair-contract-terms law and new penalties and enforcement powers, as well as redress measures for the Australian Competition and Consumer Commission and the Australian Securities and Investments Commission to help consumers put their situation right in the event of an unlawful contract. It applies only to business-to-consumer contracts, not business-to-business contracts. I take issue with some of the points that the previous speaker made but, rather than waste time on those, I will talk about the positive things given the fact that it is business-to-consumer contracts that we are addressing with this legislation. This bill defines a consumer contract as one entered into by an individual ‘for a supply of goods or services’ or for ‘a sale or grant of an interest in land’ in circumstances where the individual acquires the goods, services or interest ‘wholly or predominantly for personal, domestic or household use or consumption’.

Because of the level of business and consumer consultation that has gone into the drafting of this legislation, it strikes a healthy balance between protecting the rights of consumers and protecting legitimate business interests and practices. We have arrived at a very healthy balance. The major component of this bill is the introduction of unfair contract terms. Any contract that is deemed unfair will be void under this legislation. Where there is significant imbalance in the parties’ rights and obligations under the contract and it is not ‘reasonably necessary’ to protect a party’s legitimate interest, it will be deemed unfair. This is a commonsense approach to what any person in the street or any man on an omnibus would consider to be fair. The onus of proof will be on the business as to a term being not reasonably necessary. Businesses will receive infringement notices for minor breaches. However, for more serious breaches they will be required to substantiate claims. The bill before the House requires a court to consider the extent to which the terms cause detriment to a party who relies on the terms. But the unfair terms test does not apply to terms dealing with the main subject matter of the contract, the upfront price or any term expressly permitted by law.

I see that the bill also includes an indicative list of examples to help guide the courts in these matters. That will help as to the doling out of legal advice and that will also be a guide for the millions of small businesses and consumers when they are looking up what would be reasonable and appropriate in the circumstances. The bill also empowers the ACCC and ASIC to pursue civil penalties and disqualification orders for breaches of the law. A court may also award refunds to consumers as part of the redress measures in this bill. It is appropriate in 2009 that we have a range of enforcement actions. Gone are the days when if it was not criminal it was nothing. It is now much more appropriate that we accept that there will be all sorts of behaviour out there and that you do not start by bludgeoning as you can actually guide and move people towards sorting out their disagreements.

As I have said from the outset, these laws will offer greater clarity and protection to consumers and will also help reduce compliance costs for business generally but particularly for small business. This is a good Labor Party policy. It is a win-win situation that at least we on this side of the House can all be happy with. Sometimes I wonder what the spokesperson for small business on the other side of the House is doing, given the situation of those opposite at the moment: a shepherd without a flock in terms of looking for a constituency. They do not seem to be able to strike the situation of any legitimate voice for small business. When I go around my electorate and talk to a lot of small businesses covering a range from manufacturing to retail, I note they are more than happy with what the Rudd Labor government has done over the last two years, particularly in the last year, in some of the most difficult economic times that we have ever faced. In summary, I commend this piece of legislation to the House given the balance it has struck as to the protection that it will offer to consumers and also the guidance it will offer to business.

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

I am certainly pleased to rise to speak to the Trade Practices Amendment (Australian Consumer Law) Bill 2009. In principle, the coalition broadly supports this piece of legislation. As a number of speakers in this debate have already outlined, and as others will no doubt reiterate over the course of the next hour or more, there are two key limbs to this debate. The first is those aspects of unfair contracts concerning business-to-consumer transactions and the second is those that deal with business-to-business transactions. When the government first announced that it would introduce measures to deal with unfair contracts, this legislation was to embrace both business-to-consumer and business-to-business transactions, with an emphasis on small-business transactions. Ultimately, though, with the change of minister from Chris Bowen to the member for Rankin, Craig Emerson, the government moved away from its commitment to Australia’s 2.4 million small businesses with respect to business-to-business transactions so that now the legislation only embraces business-to-consumer transactions.

As the shadow minister for small business, independent contractors, tourism and the arts, I see this legislation from a number of perspectives. There is a need for increased scrutiny of the operation of standard-form contracts. This relates to situations where, for example, a consumer obtains a mobile phone, bank account, gym membership or some such service and is typically—and we all would be very familiar with this—faced with a standard-form contract. The terms and conditions are printed on the back. There is no negotiation and no discussion; just the standard terms and conditions. Typically, those standard-form terms and conditions include a number of elements that would be considered detrimental to the best interests of the consumer.

This legislation seeks to remedy that. It seeks to in some way empower consumers—and I must say that the coalition is certainly a very big believer in the empowerment of consumers. Insofar as this legislation and the relevant provisions within it pertain to empowering consumers over standard-form contracts, I think it is a step in the right direction, as indeed does the coalition. That is the reason we have indicated to the government that we want to work proactively, in bona fide good faith, with the government to ensure we pass the best possible piece of legislation.

Unfortunately, there is still a little uncertainty with respect to business-to-business transactions. Having spoken with a number of small business advocates, I know there are elements of the small-business community that retain the view that this legislation is deficient because it does not deal with business-to-business standard-form contracts. For example, the Council of Small Business of Australia, COSBOA, holds the view, and certainly made it very clear from the get-go, that it would like to have seen business-to-business transactions included in this legislation. And there are others who have expressed that point of view.

I am someone who feels that the best thing we can do is ensure that we impose as little regulation as possible on the marketplace and, where we do impose regulation, ensure that we do so in a light-touch way. Therefore the notion of a business-to-business transaction or a business-to-business standard-form contract being included within the ambit of this legislation was not immediately attractive to me. Rather, I thought that perhaps a more advantageous way to move forward—and I believe this viewpoint is shared by the Minister for Small Business, Independent Contractors and the Service Economy—is to look at remedying imperfections that exist under the Trade Practices Act, because at its core the Trade Practices Act is meant to deal with exactly these kinds of situations. At its core, the Trade Practices Act should deal with unfair contract provisions in business-to-business transactions. In that respect, especially when it comes to, for example, provisions such as unconscionable conduct, I would have thought that a more appropriate policy remedy would be to ensure that unconscionable conduct provisions work in a more adequate way to address any perceived or actual imbalance in business-to-business standard-form contracts.

I heard, and to some extent welcomed, the government’s comments that it will be looking at reviews of the Trade Practices Act and the Franchising Code of Conduct, but I urge Australia’s small-business sector to exercise caution. This government certainly has a very strong track record when it comes to reviews, but unfortunately that is not what counts. What counts is your track record with respect to reform and execution of recommendations from reviews. I have raised in this chamber on a number of occasions the great concern that exists over the small-business minister dragging his feet over reform of the franchising sector, one of the key and most fundamental small-business sectors in the Australian economy. People in that sector have been waiting for months and months for the minister to respond to a standing committee report into franchising—yet here we are, still waiting.

So I am a little concerned when the government says that it intends to deal with business-to-business transactions or standard-form contracts through reviews of the Trade Practices Act and the Franchising Code of Conduct. I implore the minister to acknowledge that this is too important to simply let through to the keeper. We should not allow a situation to arise, and on behalf of the coalition and other members I certainly will not allow it to arise, where this government drags its feet for another year or two years or longer, which it has form on when it comes to business-to-business transactions and, in particular, amendments to the Trade Practices Act and the Franchising Code of Conduct. That is why we will continue negotiating with the government in the Senate to get a workable series of amendments in place that make this legislation even better. That fits very nicely within the overall focus of the coalition to support the introduction of a single national consumer law that replaces the various regimes that currently operate in each state and territory. It is clear that the pursuit of this goal brings benefits to both businesses and consumers, helps to reduce costs and provides more clarity about the obligations on and rights of parties that exist wherever goods are bought or sold.

When it comes to these kinds of transactions I know there is a lot of angst in the community with respect to business-to-consumer standard form contracts. I regularly hold listening posts in my Gold Coast seat of Moncrieff for the opportunity to be out there on a weekend and to talk to my constituents. Most recently, I had a lady approach me at my listening post to outline her concern over some events that had taken place with her son. Her son was 17 years of age and had been, to use her information, bullied into purchasing five mobile phone contracts on one day. He was not bullied by the mobile phone operators; he was bullied by the peer group with which he was hanging out. That peer group encouraged him to go out and take a number of contracts across a number of different carriers for mobile phones, and he did. On that day, he took out five contracts. As he walked out with the five mobile phones at the end of this process, he was robbed. The phones were stolen from him and the phones no doubt were misappropriated for other purposes. But, that situation notwithstanding, we had a situation where the actual liability that existed as a result of these standard form contracts for this particular individual amounted to thousands and thousands of dollars, far beyond his and that of his household’s ability to pay.

As a matter of principle, this constituent came to see me to share with me her concern that this situation should be allowed to arise, but recognising at the same time that some fault of course did lie with her son, and in addition to express her dismay at the intransigence of the mobile phone carriers to waive certain charges and penalty charges that had been put in place notwithstanding the circumstances. I had a great deal of sympathy for her and worked closely with her through the Telecommunications Industry Ombudsman and others to try and resolve that matter. I think to myself that the legislation before the House today may address in some small way those kinds of circumstances should they arise again. In that way, I think it is a positive that the government is taking this initiative, and that is the reason why the coalition is certainly supportive.

There are, of course, some legal concerns that may potentially mount off the back of this legislation. For example, the financial services industry is particularly concerned about this proposed contracts regime. Reservations include there being no burden of proof with the complainant, that there is no provision for a court to consider the consumer benefit that may flow from an impugned term, that there is no requirement for the consumer to show actual detriment in seeking to have a term of a contract declared void and that there will be potentially high compliance costs and confusion that arises from the application of the law to existing contracts that may be renewed or varied after commencement. These are all matters that certainly the coalition would be looking for the government to provide clarity on.

It is important that the government displays a clear sense of vision and explanation around these kinds of issues. That has not been the case with this piece of legislation over the lead-in period to this bill before the House. As I said, there was a lack of clarity about whether or not business-to-business contracts would actually be included. It is very important when these legitimate concerns are raised about the potential legal ramifications of this legislation that the government puts it very clearly on the table exactly the situation with especially contracts entered into prior to the royal assent of this legislation which would then subsequently be reviewed or varied after the commencement period.

I simply wanted to raise those matters not only on behalf of my constituents on the Gold Coast but also on behalf of Australia’s small business sector. The coalition continues to work, and I as the delegate of the coalition continue to work, closely and collaboratively with Australia’s small businesses and small business advocacy groups to ensure that we develop a policy that reflects their very genuine needs and desires and to ensure that we do not unjustly increase compliance for small businesses. It is clear that there is a benefit that flows from unfair contracts legislation, but it is also clear that if it is wrong it will simply mean more red tape, more compliance and, potentially, lost sales for Australia’s small business sector. In that respect, I think it is important that we work in a proactive and bona fide way with the government to ensure that this legislation is made into the best possible piece of policy that can be achieved.

Dick Adams (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

The purpose of the Trade Practices Amendment (Australian Consumer Law) Bill 2009 is to amend the Trade Practices Act 1974 to establish Australian Consumer Law as a schedule to that act, including provisions to address unfair contract terms; to introduce into the Trade Practices Act new penalties, enforcement powers and consumer redress options; and to introduce into the Australian Securities and Investments Commission Act 2001 corresponding provisions that will apply to financial services in unfair contract terms, penalties, enforcement powers and consumer redress options. The legislation has come about as a result of a request in 2006 to the Productivity Commission to undertake an inquiry into the Australian consumer policy framework. The principal legislative provisions which regulate Australia’s consumer policy framework are contained in the Trade Practices Act and equivalent state and territory fair trading acts. On 17 February 2009, the Treasury issued a consultation paper entitled An Australian Consumer Law: Fair Markets—Confident Consumers which was intended to explain the nature and scope of the proposed reforms and seek views on some aspects of those reforms. The Treasury received 101 submissions, of which 87 were public submissions.

In addition to the consultation process about the broad issues surrounding the introduction of an Australian consumer law, the Treasury also launched a more specific consultation about unfair contract laws on 11 May 2009. The Treasury received 96 submissions, of which 88 were public submissions. The primary concerns expressed in the submissions to Treasury related to unfair contract provisions, particularly the potential effects of the applications of those provisions to business-to-business transactions. The basis of the bill introduces a national unfair contract terms law as the first element of the ACL and it will apply to business-to-consumer contracts. It will also apply as part of the as part of the ASIC Act. The government has taken account of stakeholder views in preparing the bill for introduction and has limited the scope of the unfair contract terms provisions to business-to-consumer transactions. It does not cover purely business-to-business transactions.

The provisions have a number of elements. A term in a consumer contract is void if the term is unfair, the contract is a standard-form contract and, in the context of the ASIC Act, the contract is a financial product or a contract for the supply or possible supply of financial services. A consumer contract is defined as a contract entered into by an individual for a supply of goods or services or a sale or grant in an interest in land in circumstances in which the individual acquires the good, service or interest wholly or predominantly for personal, domestic or household use or consumption.

In the ASIC Act, a consumer contract is defined as a contract at least one of the parties to which is an individual and whose acquisition of what is supplied under the contract is wholly or predominantly an acquisition for personal, domestic or household use or consumption. This would exclude all but sole trader businesses, which may operate on the basis of common personal and business use of goods and services. In relation to the ASIC Act, the provision may not cover certain businesses undertaken on a for-profit basis, such as investment in property, the share market, or borrowing for those purposes. Such activities would be covered, however, to the extent that they have a personal, domestic or household nature.

A term is unfair if it causes a significant imbalance in the parties’ rights and obligations under the contract and it is not reasonably necessary to protect the legitimate interests of the party who is advantaged by the term. A term is presumed to be not reasonably necessary to protect the legitimate interests of a party unless that party can prove otherwise. In applying the test, a court may consider any relevant matter, but must consider: the extent to which the term causes detriment to a party who relies on the term, or a substantial likelihood thereof; the extent to which the term is transparent; and the contract as a whole.

The unfair terms test does not apply to terms dealing with the main subject matter of the contract, the upfront price payable under the contract or a term that is required or expressly permitted by law. The upfront price is the amount paid for the goods, services or land supplied under the contract. It does not include further payments which depend on the occurrence or non-occurrence of a particular event. The bill sets out a non-exhaustive, indicative list of examples of unfair terms, which is a very good thing. The bill also allows for a power to prohibit terms which are considered unfair in all circumstances. No terms will be prohibited from the commencement of the unfair contract terms provisions.

The bill sets out the meaning of a standard-form contract. A contract is presumed to be a standard-form contract if a party to the proceeding alleges that a contract is in a standard form, and the onus is on the other party to rebut this presumption. A court must also have regard to a list of factors in determining whether a contract is in a standard form. The bill excludes certain contracts from the operation of unfair contract terms provisions, including certain shipping contracts and contracts that are the constitution of a company, managed investment scheme or other kind of body.

The exposure draft of the unfair contract terms proposed that these provisions would apply to business-to-business contracts as well as consumer contracts. This was in line with comments by the Productivity Commission that small businesses have a dual role in consumer policy and that, as well as being suppliers of goods and services, they are consumers in their own right. Indeed, in their dealings with larger businesses, small businesses can face many of the same issues as individual consumers, particularly relating to unequal bargaining power and the lack of resources to effectively negotiate contracts. That is so true. That has not happened in this bill, which applies the provisions only to business-to-consumer contracts. The removal of business-to-business contracts from the bill was largely in response to the submissions from business to the Treasury consultation paper. Many of those submissions indicated that applying the proposed unfair contract provisions to business-to-business contracts would create widespread commercial uncertainty and would undermine the efficiencies to big business brought about by the use of standard-form contracts. That is a pretty standard response that one always seems to get when one is dealing with this sort of law.

There may be some difficulties for some small business. However, it may be that they will get some protection from the proposed pecuniary penalties also contained in the bill and which will apply to, amongst other things, the prohibition against unconscionable conduct. It has come to my attention that many franchise and licensed agents have contracts in which it would be hard to run a case of unconscionable conduct as there is no definition clearly stated. So there may be some more attention to be paid to the language in some of the legislation that pertains to these most difficult of contracts.

It would be useful, too, if we could help the many ordinary people who run small business and who have franchise type arrangements to understand more clearly how these contracts work and what to look out for. There are many in my constituency of Lyons who have little knowledge of how to deal with contracts, despite having lawyers look at them and advise. I guess lawyers have to specialise in their own areas of law and there do not seem to be too many that specialise in franchise law or give good advice. That is what I have found in the cases that have come before me in my work as an MP.

There needs to be clearer instructions, advice et cetera—perhaps from consumer affairs offices—to help small business operators look out for the pitfalls of contracts and to help them understand what to look for in get-out clauses and termination payments, because a lot of franchisees seem to get caught at the end of a term. I believe that some franchises—like those for United Petroleum which operate in my electorate—have some very questionable practices and bias in their contracts for their agents. In my electorate I have seen franchise arrangements used to exploit very vulnerable people. I am sure that there are also many franchises that work extremely well, where people have mutually good opportunities and get good business from them.

I believe this bill goes some way in addressing some of the problems raised, but it would certainly be useful to have some plain language interpretation of this type of legislation as it could be circulated as a simple guide to contract signing before they send it off to a lawyer for checking. As the Productivity Commission stated:

There is persuasive evidence that notionally unfair terms are commonplace in Australian contracts.

So even the Productivity Commission is saying that there are a lot of unfair terms within Australian law. The commission continued:

However, the rationale for action principally rests on the unreasonable use of unfair terms, not their existence. This is because, perceptions of their inherent unfairness aside, dormant unfair terms often do not cause detriment to consumers.

But the evidence that the commission had to go through was often anecdotal and of a great variety so it is obvious that those who have been caught have not been able to prove ‘unconscionable conduct’ because of the difficulty in defining it. I think we really have to come to grips with that term and define it in a way which is fair.

So I support the bill and I am very pleased that my colleague from Western Australia has arrived. I look forward to her contribution to the debate. I believe that we should work on some ideas for simplifying the language to make it available for many of the people who operate small businesses, because they wish to operate their businesses but get caught up in some very nasty contracts and cannot achieve what they wish to achieve in business. I support the bill.

Sharryn Jackson (Hasluck, Australian Labor Party) Share this | Link to this | Hansard source

I am pleased to speak in support of the Trade Practices Amendment (Australian Consumer Law) Bill 2009. This bill is the first component of the Australian consumer law, which will deal with a patchwork of 13 pieces of legislation scattered across the nation and establish a single national consumer law. I think it is a wonderful change to see a national law that simplifies the system as well as strengthens protections for Australian consumers.

The legislation seeks to achieve two very important things. Firstly, it considerably strengthens the ability of the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission to protect consumers. Secondly, it voids terms in business-to-consumer standard-form contracts if those terms are unfair.

Generally speaking, I would say that contracts are an excellent way of doing business—to record in writing the agreement between the parties—and it is even better if companies are prepared to use their resources to prepare written contracts properly so that all a consumer has to do is to sign. We have seen the introduction of many of these standard-form contracts in many industries. They are called ‘standard form’ because they are generally drafted by one side—ordinarily the business, ordinarily by a lawyer—and generally to protect the interests of the side doing the drafting. There should not be anything wrong with that, except that, as the previous speaker pointed out, many ordinary consumers are not necessarily in a position to, or are highly unlikely to, seek legal advice. Indeed, in some cases consumers may not even read the contract but rely on some general notions of good faith between the consumer and the supplier. This is despite stories of buyer beware and all of the rest.

What we have seen develop in Australia in some circumstances is an evolution of standard-form contracts that have got to the point where risks, rights and/or responsibilities are being shifted to an unreasonable and indeed unfair extent onto one party only. In these circumstances it is usually the consumer.

I think if there is a strong message in the Trade Practices Amendment (Australian Consumer Law) Bill 2009 to businesses in Australia it is this: if you are going to insert self-serving or unfair terms into your contracts, be prepared to defend them in court.

I know that there was some criticism of the legislation despite the fact that there has also been a call from many representatives of business in Australia for a seamless economy and for standard consumer laws across the country. We saw, for example, the Business Council of Australia, in March 2008, protest the multi-jurisdictional regulation imposed on businesses in Australia and call on the government to allow business to operate in a consistent environment.

This particular legislation—very sensible proposed legislation—has still managed to create, it seems, in some quarters, the need to run fear campaigns about what the legislation may mean. For example, the legislation has been criticised for creating uncertainty in a challenging economic climate. Frankly, I think that overstates things a bit. The contracts will stand; it is just that any unfair term of a contract will be void. The legislation provides clear guidance as to whether a particular term will be unfair and the circumstances in which it would be voided, and that is if the term causes a significant imbalance in the party’s rights and obligations under the contract and if the term is not ‘reasonably necessary’ to protect the legitimate interests of the supplier.

So I think you can draw two points from this. First, guidance as provided in this bill is not about creating uncertainty but about requiring business to take some care in the contracts they offer and to assess their risk properly. Second, it provides better protection for consumers from unfairness, and this is a very positive outcome in challenging economic times. Rather than creating uncertainty, it puts in place the groundwork to create greater certainty and greater surety about these consumer contracts.

Another argument raised by business representatives is that increased uncertainty will be an inevitable outcome of these new laws, but I think if you are in business and asking yourself, ‘Will I get away with this particular clause?’ rather than, ‘Do I need to include this clause to protect my legitimate interests?’ you can expect that this legislation will get you unstuck—and I think that is a very good thing.

The Western Australian treasurer has also criticised the legislation, if we accept the recent article in the Australian Financial Review indicating that he had written to the minister complaining that business-to-business contracts had been removed from the bill. Whilst I can accept that in some circumstances business-to-business contracts could be covered—or should be covered, and hopefully it may get to that point—the minister has made it very clear that there are better ways to protect small business, in particular, than with this law. It seems to me that in some circumstances the definition of ‘consumer’ is pretty broad and there may indeed be some independent contractors or subcontractors that may fall within the definition of ‘consumer’.

This bill, however, is primarily about consumer protection. The nature of the body of contracts between business and consumers is vastly different, in the main, from the collection of contracts between businesses. Consumer contracts span the range from the purchase of whitegoods, mobile phone contracts, gym memberships, rent-now-buy-later contracts, hire car insurance and car purchases to home loans and home building contracts.

However, as I have said, I think there are better and more specific ways of dealing with business-to-business contractual issues which avoid unintended consequences such as access-to-finance problems. Access to finance is already challenging for small business. Labor is not about to make it more difficult for small business to access critical finance by imposing ill-fitting, broad-brushed legislative obstacles. Labor is trying to do its job properly by looking at the specific issues facing small and medium enterprises, making sure that any legislation is appropriate to the needs of small business rather than lumping them in with the broader category of consumers. The government has undertaken an extensive consultation process on this legislation which has highlighted these differences.

In relation to the scope of business contracts, the government has identified that it is appropriate to further examine the unconscionable-conduct provisions within the Trade Practices Act that need to be considered along with a franchising code of conduct, and I support that course of action.

I think it is also fair to say that it would be unreasonable to have further consumer protection delayed while the specific issues affecting small business are considered. Some people have asked why consumer reform is necessary. I have heard many anecdotal stories in Western Australia from agencies and organisations such as the Consumer Credit Legal Service in WA, which provides advice and assistance to consumers. I have heard of consumers being charged as much as $20,000 to get out of their current credit contracts. What is worse, the formulas often used to calculate these exit fees are utterly incomprehensible. There is no way that a consumer can have an understanding of their likely cost at the time they sign the contract.

The unilateral change clauses are also cause for some concern, and we have seen this increasingly in some consumer contracts in Western Australia. These clauses are increasingly being entered into standard-form consumer credit contracts, which allow businesses to radically change the contents of the contract without having to reach or have specific agreement from the consumer. This is something that is unfair and needs to be made unlawful or improper.

There are also concerns in Western Australia about rent for purchase agreements or ‘rent try buy’, where a consumer can rent a product and then purchase it if they like. This can often be an attractive proposition, except where the consumer ends up paying more than double the market price for the particular item. It really is critical to put in place legislation that ensures that if consumers are going to enter into standard form contracts for these kinds of purchases then the contracts are transparent and fair. It should also be stressed that this bill exercises our constitutional powers to cover postal, telegraphic or telephonic services and, in particular, mobile phone contracts. I know a number of my constituents will be very pleased to see this included in the general law regarding consumer protection. Anecdotally, we have been advised that the Telecommunications Industry Ombudsman has a large volume of complaints and that the industry does not seem to be improving, so I think it will be a really powerful improvement to bring the telecommunications industry, and mobile phone contracts in particular, under the umbrella of this legislation.

The other limb to this bill for which the government ought to be congratulated is the additional powers being given to the national regulators—the Australian Securities and Investments Commission and the Australian Competition and Consumer Commission—to protect consumers. Until recently the existing ACCC powers were described in a brochure available on its website, and I have to say it did not necessarily describe a comprehensive system of consumer protection. Indeed, whilst it did deal with issues such as unconscionable conduct and misleading or deceptive conduct as well as bait advertising, the brochure went on to say:

In enforcing consumer protection laws, the ACCC generally acts only against conduct that is industry-wide or that affects many consumers. This ensures it uses its resources effectively.

The brochure then explained in the next section, which was entitled ‘Private action’, that a consumer had the ability to take a company to court if they believed they had been ripped off. This seemed to be a fairly clear signal, I think, to unscrupulous operators that there were a lot of obstacles to ordinary consumers taking action against unfair or unconscionable conduct. The bill introduces a number of sensible, practical measures to enable the ACCC and ASIC to better protect consumers.

I note the introduction of infringement notices. The national regulators will now be able to deal with the minor breaches of the law which unfortunately seem to be partly ignored at present. The infringement notices provide a simple mechanism to impose a penalty before and potentially in substitution for legal proceedings, rather like a traffic infringement—something I am of course not that familiar with, I might say! I understand that, like with a traffic infringement, the accused can either choose to cop the penalty, for want of a better description, or defend the charge in court. This simple fact seems to have been overlooked by those who criticise the ACCC’s new ability to punish minor breaches of the law without tying up large amounts of resources. I think the critics believe that the ACCC will suddenly embark upon a spree, issuing infringement notices with gay abandon. Of course, that is not what is intended by the legislation, and I am confident that is not going to be the conduct of the ACCC.

The bill will also allow the ACCC and ASIC to impose substantiation notices. This gives the ability to require a person to substantiate claims advertised or represented—for example, in the real estate industry, or the ability of the supplier to supply goods or services advertised. This is sometimes described as ‘bait advertising’, where an item is advertised for sale but when the consumer goes into the shop the consumer is informed that the item is out of stock and is offered a similar, more expensive replacement. I note that substantiation notices, which will protect against bait advertising, have been criticised for enabling regulatory authorities to go on ‘fishing expeditions’. I suspect this criticism is only coming from those who might have a different idea of what is fair and proper conduct in the business world, and it is not a serious concern for people who are conducting their business in a fair and appropriate manner.

The bill will also allow the regulatory authorities to issue public warnings which have been christened ‘name and shame’ warnings. This is a sensible and, I believe, powerful measure to protect consumers without needing to have resource-intensive recourse to the courts. There is also the capacity for ASIC or the ACCC to apply to the courts on behalf of non-party consumers for the remedy of redress but not for damages. They cannot go for claims where the merit of the individual claim needs to be assessed, which is why damages are not available. This is an exceptionally practical tool for consumer protection. It creates a real threat against parties who rip off large groups of consumers for amounts which are relatively small enough that individual consumers will not take legal action to recover the sum. We also have the introduction of disqualification orders: ASIC and the ACCC are empowered, where a person disregards consumer protection laws, to seek a ban on that person being a director of a company if circumstances warrant it.

I think this is fantastic consumer protection legislation and I am pleased to support it. It reflects a broader package which will see the ACCC taking up leadership of the International Consumer Protection and Enforcement Network. It enhances the ACCC’s ability to protect Australian consumers in the global marketplace, such as from online deceptions. The government has also increased emergency relief funding and funding for more financial counsellors, with an extra $80.4 million over the next two years. I am delighted to see additional resources going into that area. Unit pricing becomes mandatory from 1 December 2009 for food retailers with areas of 1,000 square metres or more, and the Retail Grocery Industry (Unit Pricing) Code will be of great assistance to consumers.

We also have the review of implied warranties and ‘no cash refunds’. This will implement a legislative regime where the states agree that the Commonwealth legislation will apply, and therefore any amendments at Commonwealth level will automatically apply to the states. That way, it is hoped that we will not end up with a hash of inconsistent consumer laws operating across the Commonwealth.

As I said, I am delighted to speak in support of the Trade Practices Amendment (Australian Consumer Law) Bill 2009. I look forward to it being passed expeditiously by the parliament and to Australian consumers enjoying the benefits that it contains.

Brett Raguse (Forde, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Trade Practices Amendment (Australian Consumer Law) Bill 2009, a historic reform to consumer laws across Australia. This bill combines into one system the 13 different sets of consumer laws that are in place across Australia. As members would be aware, this national consumer law is to be called the Australian Consumer Law. This is important on the basis that it is a historic reform. It is about having one national system. There has been broad consultation with stakeholders, in collaboration with the state and territory governments. This is about balancing effective provisions and business concerns and it is part of the generational overhaul of Australian consumer laws.

A national consumer law system is not a new concept. Incredibly, the last attempt was back in 1983. It took seven years to implement, before each jurisdiction began to make changes and diverge. Clearly, it is no easy task to combine all of the different priorities, issues and concerns that can be found across the country. For this reason, these reforms have been on the way for some time. An inquiry into Australia’s consumer policy framework began back in December 2006. The Productivity Commission presented its final report, ‘Review of Australia’s Consumer Policy Framework’, in April 2008. This report was tabled in parliament in May 2008 by the then Minister for Competition Policy and Consumer Affairs. The Council of Australian Governments became involved from March 2008, and detailed recommendations for a new consumer law and enforcement mechanisms were ratified in October 2008.

After all this work, the bill before us today is only the first of two substantial reform bills. The second bill is expected to be debated in the parliament in early 2010. The goal, as described in the COAG National Partnership Agreement to Deliver a Seamless National Economy, is for the national system to be in place by the end of 2010. For this to occur, the states and territories will also put in place legislation and repeal relevant existing provisions in their jurisdictions.

In his second reading speech, the Minister for Small Business, Independent Contractors and the Service Economy, Minister Assisting the Finance Minister on Deregulation and Minister for Competition Policy and Consumer Affairs noted that a single national law is a means to achieve better results for both consumers and business. This is about drawing a line in the sand and putting in place a clear set of national standards that all consumers and businesses can operate by, irrespective of where in the country they reside.

My electorate of Forde, in Queensland, is one of 10 electorates that share the Queensland to New South Wales border. The other electorates are Farrer, Calare, Parkes, New England, Page and Richmond, in New South Wales, and Maranoa, Blair and McPherson in Queensland. With its close proximity to New South Wales, many Forde residents often do business in New South Wales. For residents of areas like Running Creek, travelling to a town could just as well mean Beaudesert, in Queensland, as Casino in New South Wales. Many Forde residents are originally from interstate, particularly Melbourne and Sydney. As a result, many residents retain interstate business relationships and/or travel interstate regularly to catch up with friends and family. Technology has changed how people do business in this country, certainly in my electorate. The internet and related technologies have brought us all closer together and, to a large extent, have overcome the vast distances.

Consumer affairs issues within Queensland are simple enough. The Queensland Office of Fair Trading provides helpful advice and assistance. Yet interstate consumer law issues can be complicated, certainly if you are used to one particular state’s system. Since laws and arrangements differ between states, it is not easy for people to know where they can go and what rules apply to their situation. It gets even more difficult to explain when individuals are aggrieved by laws which are under the jurisdiction of a minister in another state.

It is not just consumers that will gain from having one national set of rules. Businesses that operate throughout the country, or in cross-border situations like the Gold and Tweed coasts, currently have to tango with multiple different consumer law arrangements. Having just one set of consumer law arrangements to comply with will save time and money for businesses. Businesses will face lower levels of complexity, resulting in lower compliance costs. Growing businesses will also face fewer barriers to growth beyond their state or territory borders. Cross-border issues are a nightmare for business efficiency, and this reform is a firm step in the right direction.

The Productivity Commission believes that a national consumer law could benefit consumers to the tune of $1.5 billion to $4.5 billion per year. The benefits would accrue through a number of important mechanisms, including increased consumer confidence through consistent consumer laws and clearer contracts, and businesses passing on to consumers part of the savings from lower consumer law compliance costs. And on many other occasions in this chamber the Rudd government has looked at how we can break down the barriers in terms of cross-border arrangements. We remember well the debates in this chamber about national measurements and other processes and effects of trade.

To implement the Australian Consumer Law, the bill seeks amendments to the Trade Practices Act 1974 and the Australian Securities and Investments Commission Act 2001. The ACL is proposed to be a schedule to the Trade Practices Act. Provision is made for the application and amendment of the ACL. Within the ACL, provisions are made to address unfair contract terms. New penalties, enforcement powers and consumer redress options are built into the revised Trade Practices Act.

The Australian Securities and Investments Commission Act modifications are similar but they are for financial services. These provisions also cover unfair contract terms, penalties, enforcement powers and consumer redress options. The formation of one national law has allowed extensive consultation and the positive cherry-picking of the best consumer law practices around Australia. It is a credit to the Victorian government that the reforms are heavily influenced by those implemented in Victoria.

While I am aware of the debate surrounding business-to-business contracts, the laws currently apply only to consumer contracts. A consumer contract is defined as ‘a contract for the supply of goods or services or a sale or grant of an interest in land to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption’. A consumer contract is to be considered void if ‘the term is unfair and the contract is in a standard form and, in the context of the ASIC Act, the contract is a financial product or a contract for the supply, or possible supply, of services that are financial services’.

The references to contract terms being ‘unfair’ make it important to define and understand what constitutes ‘unfair’. An unfair contract term is therefore defined as one that causes a significant imbalance in the parties’ rights and obligations under the standard-form contract and is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the term. When a court is considering whether a contract term is unfair or not there are three specific issues that must be considered. Firstly, detriment: the court must consider the existence of any detriment, or substantial likelihood of a detriment, on the claimant. Secondly, transparency: the level of transparency of the term, which is reflected by characteristics such as its prominence in the contract. Thirdly, contract context: terms must be viewed in the context of the overall contract, given the diversity of contract types in existence. These measures strike an important balance between effective provisions and business concerns by giving business clarity in how the ACL will operate.

In conclusion, this bill represents 13 sets of consumer laws that are being combined into one national system—the first of two parts of a substantial and important overhaul of Australia’s complex consumer law system. It provides certainty, efficiency and lower costs for businesses, and it provides certainty, lower costs and simpler resolution of issues for consumers. I therefore commend the bill to the House.

Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Trade Practices Amendment (Australian Consumer Law) Bill 2009. This bill will give the Australian Competition and Consumer Commission new powers, but not powers to assist small business in business-to-business contracts. The coalition supports a move toward a single, national consumer law, replacing the 10 or so separate laws currently operating in each state and territory. It is intended that this legislation will bring benefits for both businesses and consumers by reducing costs and providing greater clarity about rights and obligations, wherever the goods are bought or sold. However, the coalition has specific concerns relating to this bill which we will seek to have addressed in the Senate.

The use of standard-form contracts in Australia is widespread. A majority of constituents in my electorate of Forrest have a mobile phone, a bank account, gym membership or one of any number of other standard-form contracts—often contracts that consumers do not think about too much, other than when they want a particular product and sign the contract to access the product. These contracts, which are presented to consumers on a take-it-or-leave-it basis, are non-negotiable. If the consumer wants the good or service, he or she must accept the contract as it stands. Many constituents in my electorate have told me they have tried in certain circumstances to shop around for a better or a less onerous contract; however, there is often a reasonably standard type of contract with very little flexibility and, in real terms, no choice or no better contract on offer. This demonstrates the consumer’s diminished ability to source actual alternatives, which highlights the weak position of consumers when confronted with standard-form contracts.

The Financial Review reported on 19 September that the Australian Competition and Consumer Council has recognised the power Coles and Woolworths have in shopping centres and have brokered a deal to stop them abusing these powers. The deal between the two supermarket giants and the ACCC will see the restrictive clauses in 750 existing leases being phased out over five years in an attempt to encourage competition and lower prices. In the same article the Chief Executive Officer of the National Association of Retail Grocers of Australia, Ken Henrick, stated that creeping acquisitions laws were needed in Australia as we have the most concentrated supermarket industry in the world.

In its submission to the Senate Economics Legislation Committee, the Law Council of Australia raised the question of the definition of a ‘consumer contract’. The Law Council favoured using a definition which hinges on whether the good or service being supplied is ‘of a kind ordinarily acquired for personal, domestic or household use or consumption’. The coalition believes the benefit of this definition would be that it would remove the need for an additional and potentially difficult inquiry into the purpose for which the good or service was acquired, therefore removing some of the burden and limiting the potential unintended consequences of this bill. It would also provide some protection to businesses when the goods or services were not being acquired for sale to a consumer.

Another part of this bill is about the issue of insurance contracts. The coalition does not support the imposition of a further legislative layer on the insurance industry. However, we support the Senate Economics Legislation Committee’s view that a review of the Insurance Contracts Act would be timely, taking into account the new measure on other standard-form contracts. In general, this bill aims to assist in alleviating these contract issues by providing increased protection for consumers through voiding unfair terms in standard-form contracts between businesses and consumers—for example, the unfair contracts component of this bill, where a new provision will be incorporated in the new national generic consumer law that voids unfair terms in standard-form contracts. This legislation will prevent the use of unfair terms in a very broad range of circumstances. The bill also extends the enforcement options for ACCC and the Australian Securities and Investments Commission for specified consumer protection matters, effectively increasing the powers of the ACCC.

The coalition has concerns with the new enforcement powers and potential unintended consequences of this bill. I understand that the lack of availability of civil financial penalties and disqualification orders for the enforcement of consumer law represents a significant gap in the range of enforcement options available to the ACCC and ASIC. The enforcement provisions of this bill greatly increase the powers of both of those agencies. I have been unimpressed with the recent performance of the ACCC and will watch the operation of these new enforcement powers very carefully. Having directly been through a process with the ACCC, I have a sound reason for this lack of confidence.

Another area that affects my electorate of Forrest, which was originally linked to this legislation, is the business-to-business as well as business-to-consumer contracts. The government originally agreed to include small business and consulted on the application of unfair-contract provisions of this bill on both business-to-business contracts and business-to-consumer contracts. However, it was only after the majority of stakeholders had made their submissions that the government removed the business-to-business provisions. Why? This is just another example of the devil in the detail, with the Labor government and a minister being unwilling or unable to deal with the tough issue of small business and their capacity to challenge what they believe to be unfair contracts. Small businesses need an affordable, effective process to use to deal with market concentration and market power issues.

As we know in the coalition, so many businesses are family owned and run, which means family members are taking on the cost, the risk and the majority of the work in the business, as well as employing nearly half of Australia’s workforce. They are physically engaged in that small business on a daily basis—for instance, the newsagent behind the counter, the franchisee in a bakery or in a kitchenware shop, the farmer milking the cows, the fruit grower picking and packing the fruit, the accountant with their practice and the home business operators. The majority are hands-on with their business on a daily basis. When they have a serious problem with a contract, how do they effectively and affordably manage it and who do they go to for help? Is there also incapacity on the part of the ACCC and the Labor government to deal with the issues faced by small business in Australia? Everyone but the government, it seems, is aware that small business has been struggling since the introduction of the government’s flawed bank guarantee terms—the terms of which did not consider the impact this measure would have on banking competition and, in particular, its flow-on impact on small business—and its support for the four major banks. A recent article in the Financial Review stated:

… the average cost of bank finance to small business before the rate rise earlier this month was 7.2 percentage points, a margin over the cash rate of 4.2 percentage points. The margin for large business was 2.4 percentage points while mortgage customers are borrowing at only 2.15 percentage points above the cash rate.

Later, the same article quotes a banker as saying:

There’s a sense that because of political pressure and because householders vote, much of the attention is on making sure the mortgage holder gets the best deal …

The lack of clarity in this complex bill before the House is a reminder of the rushed and impractical legislation such as the Youth Allowance, home birthing, Grocery Watch, Fuelwatch and the CPRS that the Labor Party continues to put forward. The CPRS legislation will significantly increase costs to small businesses, many of whom do not have the capacity to pass on increased costs.

A number of small businesses in my electorate have very serious issues with business-to-business contracts. As I said, this is an issue that the government originally agreed to include in this legislation but has now walked away from. Unfortunately for the nearly 14,000 diverse small businesses in my electorate of Forrest—many of whom are affected by business-to-business contracts —the Labor Party has failed them yet again in this legislation. I am referring to the small businesses that are dealing with and making contracts with major multinationals and other corporations. From my experience, the ACCC does not have the capability and it will certainly not have any increased capability through this bill to address these issues.

Effectively, the minister and the Labor government have walked away from the issues concerning small businesses. For instance, my electorate has a number of farmers—horticulturalists and winemakers—and other small businesses. The majority of them often enter into business-to-business contracts to sell their products. When many of these businesses are entering into these contracts with supermarkets and processors, they are presented with a ‘take it or leave it’ situation. In addition, for many items of stock and required inputs, growers have only one or a few limited business options to choose from when entering into a contract. The Western Australian Farmers Federation President, Mike Norton, said:

Farmers operate from a weak negotiating position which is often severely compromised when entering into contracts with other businesses. Furthermore when prices are increased or demand is low, the business these growers are supplying their product to can increase the price they sell the product for, to cover the additional costs. However, farmers and horticulturalists are unable to pass these costs on to anyone.

We have seen this clearly demonstrated in the dairy and horticultural industries—the fruit and vegetable growers find themselves in the same position.

An article in the Weekly Times on 30 September discussed the problems that farmers face with monopoly and oligopoly power. The article quoted farmers as saying ‘not only are our views not taken into account, we are not even part of the debate’. The article suggests that farmers, like other businesses, should use template contracts to help ensure that the power is more balanced and also to use processes that are already available to resolve disputes when they arise. So here we have farmers needing to be educated on the ways available to try to ensure that there is balance between themselves and those to whom they are selling their products. It is of concern that the writer of the article, who is a producer, states ‘when disputes arise’ not ‘if disputes arise’, therefore implying that this is a commonly occurring problem facing growers, such as those in my electorate. This has had and will continue to have a detrimental impact on the businesses in my electorate and throughout Australia. This is why I am encouraging all those in the dairy industry to make submissions to the Senate Economics References Committee inquiry into milk price contracts and the composition of the market in Australia.

As we all know, dairy farmers are price takers and, at times, they are forced to take prices close to or even below their costs of production, or to take prices that force them into greater and sometimes unsustainable debt levels and to lose equity in their businesses—as we saw for many years following deregulation. Very importantly, the Senate inquiry will look at the market concentration in Australia—the amount of retail share controlled by Coles and Woolworths, the generic milk tendering system and its impact on the prices paid to farmers. Market failure is where there are a few selective buyers and a multitude of sellers with limited or no options to sell their product or to supply to an alternative buyer.

Other small businesses, such as the newsagencies in my electorate, have serious problems with the legislation for business-to-business contracts. Like consumers and other small businesses, they do not have easy or affordable access to legal advice or representation and, even if they did have access, their market position would not allow them to negotiate a better deal. In the absence of a business-to-business provision in this bill, the government must release a clear and comprehensive strategy to address and manage the wide range of concerns of small businesses. These issues must be addressed in the government’s review of the unconscionable conduct provisions in the Trade Practices Act and the Franchising Code of Conduct with regard to fairness in business-to-business contracts.

The coalition supports this bill in its general aim of unifying Australian consumer law and its specific aim of strengthening the hand of the consumer when the ability to exercise choice is limited by the dominant use of standard contracts. I am concerned about the potential unintended consequences of this bill. Also, the coalition has very specific concerns, as I said, with the bill, which we will seek to address when the bill is debated in the Senate.

Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I take this opportunity to speak on this bill, even if it is earlier than planned on the Notice Paper. I am always glad to assist the House and to speak at any time. I am particularly pleased to speak on the Trade Practices Amendment (Australian Consumer Law) Bill 2009 bill because I think it forms part of any decent government’s progressive way forward in dealing with consumer protection, with industry policy and with a range of business matters, all in concert and in a proper manner, and delivering to the Australian economy. That should always form the basis of these types of bills. For the Rudd government, since coming to government, this is not new. This bill, along with a number of bills, forms part of the first step in bringing Australia forward into the future in implementing much-needed reforms on consumer protection and ensuring that, while ordinary Australians enjoy the benefits of an open and free economy, the worst of market abuse or abuse by individuals is measured in a proper way through law and through legislation. For this to be achievable, there must be cooperation at a number of levels—it is not something which can just be dictated by governments at the Commonwealth level. There needs to be cooperation right across and filtering through the economy. None is more important than the cooperation of the state and territories. Of course, I am speaking of the Council of Australian Governments process.

Quite importantly, the government is implementing a new national consumer policy framework and it is doing that in partnership with the states and territories, regardless of their political colour or persuasion. I believe and I know that this government believes it is important to have uniform, consistent and fair laws and frameworks which apply right across this country of ours. This was agreed by COAG in October last year. I think it is fair to say that these reforms will mark what will be heralded in the future as a generational change in the approach that governments take to consumer law and to consumer protection and policy, and also in the way that large corporations and businesses act towards their customers and clients. I think this is particularly important.

I acknowledge that the work I am currently undertaking through the Joint Committee on Corporations and Financial Services looking at the financial services sector is particularly relevant in the case of this legislation because many of the issues are similar. They are issues of consumer protection—how it should work, how it should be implemented. I am always conscious in mentioning the fine balance which needs to be struck between providing a regulatory framework protection consumers and their rights and the regulation placed on business. There is an appropriate level at which the two meet and an efficient point where you can say that a balance exists—somewhere between enough regulation, the appropriate regulation and the correct regulation, all of which provide that consumer protection, and enough freedom, flexibility and openness of our economic system, our markets and the ability for people to trade and do business, so that everybody enjoys the fruits of their labour and feels there is a fair system in place that operates for everyone concerned. That is the approach that I take not only in the inquiry which my committee is undertaking but also, very importantly, in the type of legislation we are debating tonight.

Providing a program which delivers a seamless national economy, which is being coordinated by business, regulation and competition working groups, all part of COAG, is a key part of the success of any type of new program that any government would want to implement. I am pretty happy to say that we have that balance as close as possible to right as you would want to hope. I am confident of that because I know that we have had an open process. I know that we have consulted with the community and with business. I know that we have dealt with a range of people across different sectors. The states and territories all have separate regulations and laws for consumer protection or fair trading which offer a level of bureaucracy and complexity to business. I know they want them to become uniform and consistent across the country. This will provide a great reduction in regulation for a lot of businesses in Australia. If nothing else, the mere fact of having these changes at the Commonwealth level will reduce the regulatory burden on business in this country.

This bill marks the first step in implementing these vital reforms. It has been developed in close consultation with the states and territories and our national consumer regulators, the twin peaks system which we enjoy in this country—the Australian Competition and Consumer Commission and the Australian Securities and Investment Commission. They are part of the success of this country’s economy. Australia’s having been able to minimise the impacts of the global financial crisis better than any other country in the world is a reflection of the good regulatory system existing in this country.

Credit must go to past governments—the reform years of the Hawke-Keating governments and the good sense of the previous government—for not going too far in allowing unmeasured or unfettered competition or allowing regulatory constraints to be removed. You hear plenty of loud voices in the boom years and the good economic times, when people say that we no longer need those regulatory restrictions or those competition measures in place because the market is able to be the regulator; the market is able to deal with issues of competition and it is best left to the market. In good economic times it is hard to resist those voices but I am very cautious when it comes to reducing those barriers because when the economic tide turns, as we saw in 2007-08, those measures become vital. They become critical to our economy to ensure that we can sustain the global forces that are dealt to us. There would not be too many voices today that would speak against many of Australia’s regulatory processes, against its competition policy, against its restrictions to unfettered competition or, in fact, against the view that our twin peaks regulatory system of the ACCC and ASIC is vital to the way in which we have managed our economy.

Credit must go to those governments for all those reasons and for all the good work that has been done over 20 years of progressive reform in a range of areas. I cast my mind back to those early days of vital reform in this country and some of the basic principles of our competition and regulatory policy: the four pillars policy in the banking sector; the creation of ASIC, and the many challenges it faces in dealing with a very large consumer base; and the ACCC and the very difficult circumstances it faces in trying always to provide equal justice in a competitive environment where everyone is always trying to take full advantage of their own circumstances, as they are entitled to do within the rules and regulations.

This bill will introduce a national unfair contract terms law and new penalties. It will introduce enforcement powers and consumer redress options for both of our regulatory bodies, the ACCC and ASIC. It will make provision for an application of law scheme to give effect to the Australian Consumer Law and will allow the states and territories to apply the new unfair contract terms provisions from its commencement. I would say that every member of parliament receives in their electorate offices weekly, if not daily, complaints of somebody being robbed in a particular manner through some unscrupulous operator or some unfair clause in a contract, whether it be a mobile phone contract or a banking term contract for a loan, which they did not quite understand because it was so complex; or perhaps a franchise agreement that had some unfair clause that tied them into an event or set of circumstances that they could not fully appreciate and which was completely unfair both at the time and when a situation arose. I think there is no better way of dealing with it than by regulating so that when those situations arise we can do something about it in law and give clarity to people, so they know when they are entering into a contract that just because it is a complex, detailed, lengthy contract that involves lots of legal terms and lots of clauses that they may not be able to appreciate fully at the time they sign—they might do it in good faith but might not be able to appreciate the impact of that contract until they discover how unfair a particular clause is—their interests will be at least to some extent protected. I do not think that it is right or fair for any country or system to allow this sort of unfair action to take place.

What takes place is that one person, who has full knowledge, takes advantage of another person, who does not have full knowledge. That should not be the basis of doing business. People should be able to make a profit and they should be able to take advantage of their own knowledge but they should not do it at the expense of another person in an unfair or abusive manner. This is particularly so in relation to contracts because they are so complicated and so costly to redress. One of the key areas in which this legislation will make a big difference is that it provides for upfront redress for people rather than their having to seek some compensation or redress through the court system, which is very expensive to do.

When we talk about unfair contract terms we are not breaking new ground. This is not some sort of innovative program that we have just dreamt of. What we are doing is following the suit of other great democracies such as the United Kingdom. Similar legislation currently exists in Victoria, for example, and in the European Union, South Africa, Japan, the United States, Canada and a range of other countries around the world. This is not new. This is something that is much needed and has been proven to work, and I think will form the basis of a new culture. It will form a new approach to how people do business: you may not simply take advantage of someone through a complex legal contract just because you can. You need to approach contracts with fairness. These laws will cover business-to-consumer transactions and will protect consumers by making contracts clearer. It will remove terms that are not needed to protect legitimate business interests. It will enhance competition by letting consumers make real choices based on clear information. In a way, it will redress the power imbalance that exists. This is often an information imbalance between the people who offer a particular service or product that is very complex or that is contained in a particular contract that the consumer has no possible way of understanding unless it is specifically explained to them or written in a way that they can understand.

These reforms will introduce new enforcement powers, which are necessary. There is no point in having regulations if there is no means of enforcing them or there are no penalties attached or there is no mechanism to make it clear that these are not just regulations for the sake of regulations but carry some weight of law. I think that is exceptionally important. Regulators, in having these new powers and by implementing them, will be able to issue infringement notices for minor breaches and will also be able to issue substantiation notices requiring businesses to substantiate claims, putting the onus back on a business: if your contracts contain a clause which is disputed as unfair you will need to substantiate it; you will need to prove that it needs to be there. I think that is an important part of dealing with this. It will keep the regulatory burden to an absolute bare minimum while having a clear focus on consumer protection.

There will be a new power for redress for consumers who are not party to proceedings, so where there is a contract to which they are not a party. It will allow the courts to order refunds in situations where many consumers are affected. There are many examples right across the community of where this is vitally needed, whether it is to do with young people or older, more vulnerable people who might be harassed into entering particular contracts or handing over money, in cash or cheques. There is specific protection for those members of the community. The bill will also enhance consumer protection to allow for more effective enforcement. It will reduce regulatory complexity by making clear what is acceptable and what is not. At the same time it will reduce business costs. Business will be able to get on with doing what it does—making products and selling them to consumers or providing services to consumers—in a clearly understood way.

It will also encourage the development of a seamless national economy. I cannot emphasise enough how important this is in a regulatory sense, given the efficiencies that are created, the savings to the economy and the savings to consumers and to businesses. Also there are the productivity gains or increases that can be achieved. I think one of the great pillars of this government, the Rudd government, and something that will be seen as a great achievement in many years to come, is its ability to work in partnership and cooperation with the states and territories, through the Council of Australian Governments, to deliver uniform consumer protection laws. This applies to other areas, working in the regulatory environment and being able to provide, for example, a uniform consumer credit code and being able to provide uniform licensing regimes across the country, transport systems and rail networks. It is about looking at where we as an economy and as a country are able to provide better services, better assistance and better consumer protection and a whole range of other systems in a cooperative manner. While it is important to acknowledge the role the states play, I know and understand that the states are more than willing to participate and play their role in having a more effective, efficient and productive national economy. So tonight this government is putting forward, as part of the Trade Practices Amendment (Australian Consumer Law) Bill 2009, much more than just simple consumer protection, as vital as that is and as important as that is and as critical as that is to a body of work that has been taken very seriously in this parliament. A greater good will come out of this, which will be different to measure immediately but I know that such work is done by a range of organisations which will be able to measure the national impact or effect of these types of uniform regulatory changes.

As I said at the outset, this is a new national consumer policy framework in cooperation with the states and territories. It really will be a generational change. I think it will mark for the first time in Australian history a significant progression towards having a seamless economy, with all the benefits that can be derived from that. It will cover the most basic of services and products that are provided to people—what we take as very simple today as perhaps being mobile phone contracts or simple services that may be provided to consumers in the home or agreements that are struck between consumers and tradespeople providing particular services—right through to more complex matters such as mortgages, particular loans or other dealings with lending institutions and banks. These are often the subject of complex contracts and agreements where normally either the only remedy ordinary consumers might have is through an ombudsman’s office—or, more often than not, no remedy exists and the consumers find themselves in a difficult legal predicament of either not following through their complaint as to a particular unfair clause that affects them directly or having to take very expensive legal proceedings. I do not think that is an effective mechanism by which an economy should operate.

In summing up, I congratulate the government and the minister responsible for implementing this much-needed reform. I wish well all those who will now take a different cultural approach and look at this regulation in a positive sense, the sense in which its benefits are meant to be delivered, which is, most important and foremost, to protect ordinary people and consumers and also to provide for a seamless national economy.

Judi Moylan (Pearce, Liberal Party) Share this | Link to this | Hansard source

I recognise the late hour and that I have perhaps just a couple of minutes in which to begin to participate in the debate on the Trade Practices Amendment (Australian Consumer Law) Bill 2009, in which case I will look forward to continuing my remarks at another hour. I am very pleased to follow the member for Oxley in this debate. I acknowledge the work that he has done in chairing the committee that looked into franchising. While this bill is not about that, I was interested in the comments he made about fair and equal justice. I could not agree more. I would certainly like to see his labours and the labours of that committee come to fruition in a similar way to look after the interests of the franchising sector.

It is not often that we consider legislation which has such a substantial effect on Australian consumers as the legislation that we are considering this evening. It has far-reaching and comprehensive changes designed to protect consumers from so-called ‘unfair contract terms’. Similar legislation, as the member for Oxley alluded to, has existed in Victoria for six years. What is significant is that this bill starts a reform process which will hopefully see uniformity in all consumer protection across all Australian jurisdictions. This reform process started back in 2006, when the member for Higgins commissioned the Productivity Commission review which has been instrumental in shaping this legislation that we are debating in this place tonight. While on the face of things it might appear that the 13 separate consumer laws currently in place in Australia are similar, in reality even small differences can have a substantial compliance cost for businesses and can create confusion amongst consumers. Australian businesses are increasingly operating across state and territory boundaries and as such it is of growing importance that there be uniform national consumer protection laws. It is hoped that having nationally consistent laws will reduce long-term compliance costs.

Dick Adams (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

Order! It being 8.30 pm, the debate is interrupted in accordance with standing order 34 and will be made an order of the day for the next sitting. The member for Pearce will have leave to continue speaking when the debate is resumed.