Barnaby Joyce (Queensland, National Party, Shadow Minister for Finance and Debt Reduction) Share this | Hansard source

I rise to speak on the Trade Practices Amendment (Australian Consumer Law) Bill 2009. This bill implements changes to create a national consumer law, provide protection against unfair terms in standard form contracts and increase the range of powers of the Australian Competition and Consumer Commission, the ACCC, and the Australian Securities and Investments Commission, ASIC, in enforcing the Consumer Law. The Trade Practices Act will be amended to establish a new schedule called the Australian Consumer Law. The states and territories will then implement the Australian Consumer Law by way of mirror legislation.

These changes are the result of a process started in 2006. In that year the then Treasurer, Peter Costello, asked the Productivity Commission to undertake a broad-ranging review of Australia’s consumer policy framework. The changes in this bill reflect the recommendations of that report and the subsequent discussions between the current government and state and territory governments. At the outset, I would like to recognise the contribution made by Minister Emerson—and you would rarely hear me say that—in progressing these changes and the open and cooperative way in which he and his team have dealt with the coalition’s views and concerns—and he should treasure those comments as well.

The coalition broadly supports this bill but it retains concerns in some specific areas. I will go through the amendments that the coalition proposes. Australia’s consumer laws are generally sound and the vast majority of consumer transactions in this country are concluded satisfactorily, but significant changes in consumer markets over the past two decades necessitate the broad changes proposed in this bill. Foremost among these is the increasingly national nature of consumer markets. Around 50 per cent of consumer needs are now met by suppliers operating in multiple jurisdictions. Even small suppliers can now sell over the internet to people miles away. It therefore makes no sense to persist with differences between states in our consumer laws.

Secondly, the range of products that consumers now choose from have become increasingly complex. Standard form contracts now proliferate for mobile phones, credit cards, computer software and electricity and telecommunications services. Most of these products are recent inventions or, as in the case of utility services, until recently consumers could not choose between suppliers. The other marked characteristic of these types of products is their inherent complexity. The average consumer no doubt struggles to understand all of the clauses in these types of contracts, let alone has the wherewithal to negotiate for a better deal. It is likely that these changes to consumer markets will only accelerate over time as consumer markets become increasingly global in nature and the variety of products available grows. Accordingly, Australia can no longer afford a fragmented consumer policy framework divided along state boundaries. For this reason the coalition supports the creation of a national consumer law. This bill replaces the differing regimes currently operating in each state and territory across the country. Businesses and consumers bear the costs of these differing regimes; they create unnecessary compliance burdens for business, they can add to the costs or they restrict growth. Consumers are the ultimate losers in the resulting higher prices or reduced amount of choice. A national consumer law will bring benefits by reducing complexities, confusion and costs and providing more clarity about rights and obligations wherever goods and services are bought or sold.

As noted earlier, consumers are increasingly being offered non-negotiable, take-it-or-leave-it standard form contracts. At times these contracts include clauses that allow the supplier to unilaterally vary terms and conditions without the option for the consumer to subsequently rescind the contract. Another example is clauses that allow the supplier to cancel the contract before its term, which the consumer may find unreasonable. In any case, standard form contracts are increasingly lengthy and complex. No doubt consumers often enter such contracts without a full understanding of all the conditions. Standard form contracts would be more often signed than read.

Though it is clear that standard form contracts are widespread, it is less clear that they actually cause substantial amounts of consumer detriment. Clearly, standard form contracts can be beneficial to consumers. I certainly would not want to negotiate the terms and conditions of a contract every time I went out to buy a new mobile phone or hire a car. The reason we can generally be confident of entering standard form contracts is that there will always be a minority of consumers who take a ‘buyer beware’ approach and shop around for a better deal or a less onerous contract.

In principle, we would instinctively wish to strengthen the hand of consumers to discipline those businesses which provide inferior terms and conditions. In practice, though, there is not always the ability for consumers to shop around. Many standard form contracts are the same across an industry. There is little point in the buyer being aware and shopping around if the consumer has no alternative. In this context, laws that provide protection against clearly unfair terms and conditions have the potential to increase consumer confidence in entering these contracts. Equally, though, a too onerous imposition of constraints on standard form contracts may increase costs and prices. Under this bill, a term will be unfair where there is significant imbalance between the parties’ rights and obligations and the term is not reasonably necessary to protect the legitimate interests of the supplier.

I will point out three crucial aspects of the detail of the law. First, this bill allows particular terms to be prohibited by regulation, though no prohibited terms have been declared at this time. This would seem to run counter to other elements of the bill, which require courts to take into account the transparency of a specific term and the context of the term in the contract as a whole.

Second, this bill reverses the normal onus of proof that would apply. It will be for the party advantaged by a term, usually a business, to rebut the presumption that the term is not reasonably necessary to protect its legitimate interests. The business must also rebut the presumption that the contract is in the standard form. The coalition is concerned that these provisions subject businesses to the possibility of frivolous and vexatious claims.

Third, some have expressed concerns that there is no requirement in this bill for a consumer to show that actual detriment would occur. The coalition is sympathetic to industry views that the bill’s reference to ‘a substantial likelihood of detriment’ creates an unacceptable degree of risk and uncertainty for businesses and consumers. As the bill is currently drafted, there is no requirement that the term actually create detriment for it to be unfair. It will be unclear to those entering a contract which terms may be judged to be likely to cause detriment. The coalition has proposed amendments in response to these issues, which I will go through later.

The original proposal for this bill extended the application of the unfair terms law to business-to-business contracts. This had been agreed to by cabinet and was in accord with the recommendations of the Productivity Commission, but then Minister Emerson gained responsibility for the portfolio and within days he exempted business-to-business contracts. The minister’s reason for this was that, in his view, including business-to-business contracts would create uncertainty in business dealings, would potentially increase costs and would possibly jeopardise small business funding. All of these arguments could equally apply to business-to-consumer contracts, so there is a paradox in his change of position. The minister’s reasons are unconvincing and he has referred the matter to reviews of the Trade Practices Act and the Franchising Code of Conduct. The minister has now delivered an initial response to the Franchising Code of Conduct review and there is no mention of unfair terms provisions.

A broad section of the small business community was dismayed by the government’s change in direction. For example, 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 Limited, Fairfax and Hallmark Cards. In these contracts, 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. This example demonstrates that, in their dealings with larger businesses, small businesses face the same issues as individual consumers. Like individual consumers, they lack the resources to engage the legal and other expertise required to negotiate contracts. Even if they did, they lack the bargaining power to enforce their views. It is self-evident that there is an immense power discrepancy between small businesses and large businesses, which is similar to the discrepancy between consumers and businesses.

In summary, there is a compelling case for regarding small businesses in the same light as consumers when they are buying goods or services to consume themselves or to offer for resale. Small businesses have a dual role in consumer policy: not only do they supply goods and services, they are also consumers in their own right. Small businesses will be the losers in the government’s reversal. The coalition will therefore be taking an active interest in the outcomes of the reviews of the Trade Practices Act and the Franchising Code of Conduct and will wait for the government’s response to those reviews.

The bill will give the ACCC and ASIC broader powers to enforce the consumer law. Under this bill, the ACCC and ASIC will be able to seek civil pecuniary penalties for unconscionable conduct and participation in pyramid selling, and for breaches of product safety, product information and substantiation notices, as defined by the relevant provisions of the Trade Practices Act. The maximum penalty will be $1.1 million for corporations and $220,000 for individuals. The explanatory memorandum to this bill states that this will fill a significant gap in the range of enforcement options available to the ACCC and ASIC. Current consumer protection provisions are enforced through civil remedies such as injunctions and other orders and, in certain circumstances, criminal sanctions. Civil pecuniary penalties currently apply for breaches of the restrictive trade practices provisions of the Trade Practices Act.

The ACCC and ASIC will also be able to seek disqualification orders or issue substantiation, infringement and public warning notices. Where circumstances warrant it, disqualification orders will ban people who disregard the consumer protection laws from being a director of a company. When issued, substantiation notices will require a person to provide the relevant information and documents capable of substantiating claims or representations made by that person. Infringement notices will allow the ACCC and ASIC to deal with minor breaches of the law through the payment of an amount that avoids costly legal proceedings. Public warning notices will allow the ACCC and ASIC to warn the public about actual or likely harm that my result from suspected breaches of the consumer laws. The ACCC and ASIC will not have immunity from defamation actions in relation to these notices.

Finally, under this bill, a court will be able to order the payment of refunds and similar forms of redress without the need for all consumers affected to be named as parties to the regulator’s court proceedings. The enforcement provisions of this bill greatly increase the powers of the ACCC and ASIC to act not just as a cop on the beat but also as a judge and jury. The coalition has concerns about the way the ACCC may apply these powers in a quasi-judicial role. Its application last year of anti-cartel measures continues to cause some concern.

I note that, despite giving the ACCC and ASIC significant additional powers, the government has not trusted individual consumers with similar extensions. Under this bill, consumers will not be able to take action on unfair terms directly to the courts. Instead, they must first complain to the ACCC or ASIC, who will then decide whether to take the matters further. So they are once more precluded from taking a direct path to progress their case. This is a strange decision to disenfranchise individual consumers. Consumers and small businesses can already take action directly under the unconscionable conduct provisions and other parts of the Trade Practices Act. It is unclear why they have not been trusted with a similar scope in this instance. Further, in their submissions to the Productivity Commission’s inquiry, the ACCC was sceptical of introducing unfair terms legislation. How committed will they be then to taking further action under these provisions? The coalition favours measures that result in appropriate and timely redress, but will watch very carefully the operation of these new enforcement powers. We will also closely examine the appetites of the ACCC and ASIC for taking appropriate action against unfair terms in standard form contracts.

I turn now to the specific amendments that the coalition proposes. The coalition wants three amendments. Two of these have been agreed with Minister Emerson, working with my colleagues in the lower house, and we thank him for the open and cooperative manner in which he approached the negotiations. First, we propose to delete clause 6, which relates to the prohibition of prescribed terms. Second, we propose to change the wording of clause 6(2)(a), which asks the court to consider the detriment that a contract would cause.

However, we also asked for one amendment not agreed to by Minister Emerson and we will be moving this amendment to the legislation. We propose to delete clauses 3(4) and 7(1), which reverse the onus of proof in establishing that the term is in the legitimate interests of the supplier and that the contract is in standard form. As I mentioned earlier, the coalition is concerned about the reversal of the onus of proof. We consider that reversing the onus will allow litigation from consumers in circumstances where they merely do not like the terms of the contract and no longer wish to be bound by them. Forcing a party to prove the fairness of a contract against frivolous claims will open Australian businesses up to costly litigation. The costs of this litigation might flow on to the costs of goods and services. As such, the coalition thinks that reversing the onus will have unintended consequences on the Australian economy. Our amendments will improve the legislation to get a better outcome for consumers and business across Australia.

As I stated at the beginning of my speech, in general we support the bill, both in its general aim of creating a national Australian consumer law and its specific aim of strengthening the hand of the consumer, where the ability to choose is limited by the use of standard form contracts. With the coalition’s amendments, this bill promises to increase protection for consumers without jeopardising the lower compliance costs for businesses that will result from establishing a national consumer law.

In closing, I would like to also acknowledge the assistance given by those members in the other place and the continued support of the Senate Economics Committee—no doubt the most powerful and substantial committee in the Senate.