19 Fair trading legislation and consumer legislation States and Territories have enacted a range of legislation dealing with fair trading and consumer protection issues. This legislation regulates aspects of business conduct, including advertising, dealings with customers and the provision of information. Jurisdictions’ fair trading and consumer protection legislation falls into three broad categories: general fair trading legislation, which includes jurisdictions’ Fair Trading Acts; legislation regulating the provision of consumer credit, including the Consumer Credit Code; and trade measurement legislation, which deals with the measurement of goods for sale. Attempts have been made to achieve national uniformity in each of these areas, but variation between jurisdictions remains. A subset of legislation aimed at protecting consumers deals with the licensing of occupations. The review of such legislation is discussed in chapter 18. Legislative restrictions on competition Fair trading and consumer protection legislation imposes a wide range of restrictions on business conduct. Jurisdictions’ Fair Trading Acts, for example, regulate business conduct by prohibiting: misleading or deceptive conduct; the employment of harassment or coercion to win sales; and certain types of sales technique (such as pyramid and referral selling). These Acts and other related legislation also impose miscellaneous restrictions, including: price controls, mandatory cooling-off periods, requirements to disclose products from which goods are made, requirements to provide warranties, the banning of unsafe goods and the imposition of quality standards. Regulation relating to the provision of consumer credit generally involves licensing requirements and restrictions on the conduct of credit providers. Such restrictions may take the form of documentary and disclosure requirements, provisions allowing for the change of contractual arrangements, limits on commissions and the types of product that may be offered, and restrictions on advertising and methods of sale. Legislation dealing with trade measurement imposes restrictions on the method of sale of certain goods. These restrictions include labelling and licensing requirements, restrictions on the units of measurement in which Page 19.1 2001 NCP assessment certain goods may be sold, restrictions on the type of measuring instruments that businesses may use, and requirements relating to verification, certification and servicing of measuring instruments. Regulating in the public interest Fair trading and consumer protection legislation aims to protect consumers by addressing market failure, such as information asymmetries between businesses and consumers, which may lead to some businesses gaining an unfair advantage. The legislation may encourage competition, for instance by promoting consumer confidence. However, it may also impose some costs. In particular, restrictions on business activities contained in the legislation may, by restricting market entry and competitive conduct, result in increased compliance costs for businesses and have an impact on product innovation and consumer choice. Regulating to protect consumers’ interests requires governments to balance these considerations. In assessing jurisdictions’ compliance with the NCP, the National Competition Council looks for appropriate regulatory outcomes. In the Council’s view, such outcomes require restrictions on business activity to be as closely targeted to market failure as possible, to be proportionate to the market failure’s potential detriment, and to be the least restrictive means available of achieving the regulatory objectives. The Council has used these principles to assess jurisdictions’ review and reform activity against NCP obligations. Where restrictions in legislation generally reflect this framework, the Council has assessed the jurisdiction as meeting its NCP obligations in this area. Where legislation contains restrictions on competition in addition to those consistent with the principles of effective regulation, the Council’s assessment takes into account the relevant government’s public benefit arguments. With respect to jurisdictions’ Fair Trading Acts, the Council considers that they do not require NCP review where they essentially mirror part V of the Trade Practices Act 1974 (TPA). The Council has taken this view because the consumer protection provisions contained in the TPA are pro-competitive and do not act to restrict competition. The Council has considered all other restrictions in the Acts against the general principles for appropriate regulation. Page 19.2 Chapter 19 Fair trading and consumer legislation Review and reform activity Fair trading legislation Commonwealth, State and Territory consumer affairs Ministers agreed in 1983 to adopt nationally uniform consumer protection legislation, with the objective of promoting efficiency and reducing compliance costs. The model chosen for the uniform scheme was the consumer protection provisions (part V) of the TPA, which contains general prohibitions against misleading or deceptive conduct in trade or commerce, as well as a list of more specific prohibited practices. These provisions were adopted through mirror legislation in each jurisdiction. Table 19.1 outlines jurisdictions’ progress with reviewing their Fair Trading Acts. Jurisdictions also identified for review a range of legislation dealing with miscellaneous fair trading issues. Table 19.2 outlines jurisdictions’ progress with these reviews. Consumer credit legislation In 1993 State and Territory governments entered into the Australian Uniform Credit Laws Agreement, which provides for the adoption of a national Consumer Credit Code. The code, which came into effect in November 1996, replaced various State and Territory statutes governing credit, money lending and aspects of hire purchase. The code was developed to be applied equally to all forms of consumer lending and to all credit providers in Australia, without restricting product flexibility and consumer choice. It applies rules that regulate credit providers’ conduct throughout the life of a loan, generally relying on competitive forces to provide price restraint but providing redress mechanisms for borrowers if credit providers fail to comply with the legislation. Types of credit covered by the code include personal loans, credit cards, overdrafts, housing loans and the hire of goods. The code is enacted by template legislation, with Queensland being the lead legislator. All jurisdictions except Western Australia and Tasmania have enacted legislation applying the Consumer Credit Code as in force in Queensland. Western Australia has enacted alternative consistent legislation, which will require amendment by the Western Australian Parliament to remain consistent when the code is amended. Tasmania has enacted a modified template system. State and Territory governments are jointly undertaking an NCP review of the Consumer Credit Code legislation. In addition to this review, several jurisdictions have identified other consumer credit-related legislation for Page 19.3 2001 NCP assessment review, possible review or amendment. Table 19.3 outlines jurisdictions’ progress with reviewing this legislation. Some jurisdictions are also undertaking reviews of regulations of the business of finance brokers and credit providers. These reviews are noted in chapter 20, which deals with financial services regulation. Trade measurement legislation Each State and Territory has legislation that regulates weighing and measuring instruments used in trade and controls for pre-packaged goods. Instruments regulated include shop scales, public weighbridges and petrol pumps. Governments (except Western Australia) formally agreed to a nationally uniform legislative scheme for trade measurement in 1990 to facilitate interstate trade and reduce compliance costs. Participating jurisdictions have since progressively enacted the uniform legislation. The legislation places the onus on owners to ensure instruments are of an approved type and maintained in an accurate condition. Governments have identified that the national scheme involves legislation that may have an impact on competition. As a result, a national NCP review of the scheme for uniform trade measurement legislation is being undertaken. Some jurisdictions have indicated that they will review the Acts administering the national scheme, in addition to those applying it. Table 19.4 outlines jurisdictions’ progress with reviewing their trade measurement legislation. Page 19.4 Chapter 19 Fair trading and consumer legislation Table 19.1: Review and reform of Fair Trading Acts Jurisdiction New South Wales Legislation Key restrictions Review activity Combined review with Door to Door Sales Act 1967 underway. Terms of reference approved in 1997, steering committee formed in 1998. Issues paper released in August 2000, followed by public consultation. Final report being prepared. Act assessed against NCP principles at its Restrictive provisions introduction. Assessment recommended retained. retention of restrictions on the grounds that they are the least restrictive means of achieving the Act’s objectives, and so are in the public interest. Review to be commenced at the end of the legislation review period, to audit any reliance of other reformed legislation on common law safeguards housed within the Act. Reform activity Assessment Council to assess progress in 2002. Fair Trading Act 1987 Regulation of the supply, advertising and distribution of goods and services and the disposal of interests in land Fair Trading Act 1999 Mandatory five-day cooling-off period for contact sales, cooling-off period of less than 5 days for off-business premises sales deemed to be five days Fair Trading Act 1989 Quality/technical standards, business conduct restrictions, measures that confer a benefit Victoria Meets CPA obligations (June 2001). Queensland Council to assess progress in 2002. Western Australia Fair Trading Act 1987 Regulation of the supply, Review of the Act and the Consumer advertising and Affairs Act 1971 to be undertaken in the distribution of goods and second half of 2001. services Fair Trading Act 1987 Not scheduled for review. Council to assess progress in 2002. South Australia Council to assess progress in 2002. (continued) Page 19.5 2001 NCP assessment Table 19.1 continued Jurisdiction Tasmania Legislation Fair Trading Act 1990 Fair Trading (Code of Practice for Motor Vehicle Traders) Regulations 1996 Key restrictions Review activity Reform activity Restrictive provisions retained. Assessment Meets CPA obligations (June 2001) in relation to non-motor vehicle dealer provisions. Motor vehicle dealer provisions discussed in chapter 18. Council to assess progress in 2002. Act assessed as not Minor review of code of practice restricting competition. completed. code of practice requires manufacturers to provide warranties for motor vehicles and to establish a system for dealing with customer complaints Intradepartmental review commenced, covering the Fair Trading Act, the Door-toDoor Trading Act 1991, the Fair Trading (Consumer Affairs) Act 1973, the Lay-by Sales Agreements Act 1963 and the Sale of Goods Act 1954. Terms of reference developed. Review completed, recommending a number of pro-competitive changes. ACT Fair Trading Act 1992 Regulation of the supply, advertising and distribution of goods and services Northern Territory Consumer Affairs and Sundry provisions, Fair Trading Act including the regulation of advertising and the banning of potentially unsafe goods Government approved Council to assess recommendations except progress in 2002. in relation to the repeal of fair reporting provisions and motor vehicle dealers. The Government argued that the benefits of the fair reporting provisions outweigh the costs. Page 19.6 Chapter 19 Fair trading and consumer legislation Table 19.2: Review and reform of other fair trading legislation Jurisdiction New South Wales Legislation Key restrictions Review activity Review completed. Reform activity Act to be repealed. Repealing legislation passed and assented to, but not commenced. Assessment Meets CPA obligations (June 2001). Council to assess progress in 2002. Prices Commission abolished and prices regulation powers transferred to the Independent Pricing and Regulatory Tribunal. Act repealed. Retirement Villages Act 1999 introduced, retaining certain requirements for terminating the occupation rights of residents. Council to assess progress in 2002. Business Licences Act Licensing requirements 1990 Funeral Funds Act 1979 Prices Regulation Act 1948 Controls and regulations Review underway. Issues paper released in on contributory and pre- early 2000. Final report being prepared. arranged funeral funds Regulation of prices and rates for certain goods and services Review completed. Retirement Villages Act 1989 Regulates the termination of occupation rights of residents, confers jurisdiction over certain matters to the Residential Tenancies Tribunal Review completed. Council to assess progress in 2002. Victoria Funerals (Pre-Paid Money) Act 1993 Retirement Villages Act 1986 Scoping study showed that the Act does not restrict competition. Scoping study showed that the Act does not restrict competition. Meets CPA obligations (June 2001). Meets CPA obligations (June 2001). (continued) Page 19.7 2001 NCP assessment Table 19.2 continued Jurisdiction Queensland Legislation Funeral Benefit Business Act 1982 Key restrictions Limitations on the registration of corporations, business conduct requirements Price controls, restrictions on business conduct Entry requirements, statutory charges, reduced requirements for charitable organisations Stipulations relating to the sale or purchase of goods affecting rights and remedies of buyers and sellers Restrictions on business conduct Price controls, restrictions on business conduct Review activity Review completed. Reform activity Review report under consideration by relevant Minister. Legislation expected to be repealed. Assessment Council to assess progress in 2002. Profiteering Prevention Act 1948 Retirement Villages Act 1988 Reduced NCP review completed. Repeal of the legislation recommended because the legislation lacks contemporary relevance. Reduced NCP review completed. New Bill assessed against NCP obligations. Council to assess progress in 2002. New Bill passed in 1999, Council to assess retaining some restrictions progress in 2002. on competition. Sales of Goods Act 1896, Sale of Goods (Vienna Convention) Act 1986. Western Australia South Australia Retirement Villages Act 1992 Prices Act 1948 Review to be commenced at the end of the legislation review process, to audit any reliance of other reformed legislation on common law safeguards housed within the Acts. Departmental review underway. Discussion paper issued and public consultation undertaken. Review completed, recommending the removal of a number of restrictive provisions but the retention of price controls for infant foods, returns of unsold bread, towing, recovery, storage and quoting for repair of motor vehicles and the carriage of freight to Kangaroo Island. Council to assess progress in 2002. Council to assess progress in 2002. Government enacted Meets CPA amendments in line with obligations (June recommendations in 2000. 2001). (continued) Page 19.8 Chapter 19 Fair trading and consumer legislation Table 19.2 continued Jurisdiction Tasmania Legislation Door to Door Trading Act 1986 Key restrictions Review activity Reform activity Restrictive provisions retained. Assessment Council to assess progress in 2002. Definition of a prescribed Minor review of the Act completed. contract, prohibition of Restrictive provisions justified as being in contractual terms, the public interest. requirement for certain information to be incorporated under prescribed contracts, limitation on the hours in which a dealer may call on a person Requirement to mark or label prescribed clothing (children’s nightwear) with the flammability of the garment Requirement for manufacturers to disclose the materials from which textile products are made, provisions relating to safety footwear Prohibition on auctions where items are sold at a price lower than the highest bid Minor review of the Act completed. Restrictive provision justified as being in the public interest. Flammable Clothing Act 1973 Restrictive provision retained. Meets CPA obligations (June 2001). Goods (Trade Descriptions) Act 1971 Minor review of the Act completed. Requirement relating to textile products justified as being in the public interest. Restrictive provision Meets CPA relating to textile products obligations (June retained. New regulations 2001). made to replace safety footwear provisions. Mock Auctions Act 1973 Act repealed. Meets CPA obligations (June 2001). (continued) Page 19.9 2001 NCP assessment Table 19.2 continued Jurisdiction ACT Legislation Law Reform (Manufacturers Warranties) Act 1977 Key restrictions Review activity Reform activity Assessment Act assessed as not restricting competition Act to be repealed by the Meets CPA and removed from NCP review timetable. proposed Fair Trading obligations (June (Amendment) Bill 2001 2001). because it duplicates more extensive provisions in the TPA. Act assessed as not restricting competition and removed from NCP review timetable. Price controls, restrictions on business conduct Review completed, recommending the exercise of restrictions only at times of natural disaster, the specification of objectives and the regulation of monopoly behaviour under separate legislation. Review underway. Government agreed to review recommendations. Meets CPA obligations (June 2001). Council to assess progress in 2002. Law Reform (Misrepresentation) Act 1977 Northern Territory Prices Regulation Act Retirement Villages Act Regulation of the operation of retirement villages, court’s powers in respect of certain matters relating to retirement villages Council to assess progress in 2002. Page 19.10 Chapter 19 Fair trading and consumer legislation Table 19.3: Review and reform of consumer credit legislation Jurisdiction National Legislation Review of Consumer Credit Code Key restrictions Licensing requirements, restrictions on the conduct of credit providers Review activity Review underway. Consultant’s final report under consideration by relevant official bodies. Report to be forwarded to the Ministerial Council on Consumer Affairs for consideration and response. Scoping study showed that the legislation does not restrict competition. Retention of the court’s ability to reopen hire purchase agreements and order the return of goods repossessed from a farmer under certain circumstances Retention of the court’s ability to reopen hire purchase agreements and order the return of goods repossessed from a farmer under certain circumstances Restrictions on business conduct Victoria argued that there is benefit in using the restrictions to address rural sector difficulties in relation to hire purchase, while a more comprehensive policy is developed. Restrictive provisions retained. Reform activity Assessment Council to assess progress in 2002. Victoria Credit (Administration) Act 1984 Hire Purchase (Amendment) Act 1997 Meets CPA obligations (June 2001). Council to assess progress in 2002. Hire Purchase (Amendment) Act 2000 Victoria argued that there is continued benefit in the restrictions because further policy work is required to develop a comprehensive policy. Restrictive provisions retained. Council to assess progress in 2002. Queensland Credit Act 1987 Review of this Act and regulation will be carried out at the same time as the national review of the Consumer Credit Code but under a separate process. Review due for completion in the third quarter of 2001. Council to assess progress in 2002. (continued) Page 19.11 2001 NCP assessment Table 19.3 continued Jurisdiction Queensland (continued) Legislation Hire Purchase Act 1959 Key restrictions Restrictions on business conduct Review activity Reduced NCP review underway. Issues paper proposing repeal of the Act released and public consultation undertaken. Review expected to be completed by third quarter 2001. Departmental review completed, recommending licensing requirements and related provisions be repealed but disciplinary provisions be retained on public interest grounds. Departmental review completed, recommending the removal of a number of restrictions but the retention on public interest grounds of three provisions aimed at providing protection to farmers and small businesses. Reform activity Legislation expected to be repealed, effective October 2001. Assessment Council to assess progress in 2002. Western Australia Credit (Administration) Act 1984 Licensing requirements, restrictions on conduct of credit providers Government agreed to review recommendations and is drafting legislative amendments. Government agreed to review recommendations and has introduced amending legislation to Parliament. Act repealed. Council to assess progress in 2002. Hire Purchase Act 1959 Restrictions relating to surplus from sale of repossessed goods, equitable relief and farm goods purchases Requirements relating to the form and contents of hire purchase contracts Council to assess progress in 2002. Tasmania Hire-Purchase Act 1959 Meets CPA obligations (June 2001). Meets CPA obligations (June 2001). Council to assess progress in 2002. Meets CPA obligations (June 2001). (continued) Lending of Money Act Requirement that money 1915 lenders be registered ACT Consumer Credit (Administration) Act 1996 Credit Act 1985 Registration and conduct Departmental review underway. requirements Act substantially repealed, remaining provisions assessed as not restricting competition. Act repealed. Page 19.12 Chapter 19 Fair trading and consumer legislation Table 19.3 continued Jurisdiction Northern Territory Legislation Key restrictions Review activity Reform activity Assessment Meets CPA obligations (June 2001). Consumer Affairs and Negative licensing Fair Trading Act requirements, requirement for credit providers to abide by the Consumer Credit Code and to act properly, competently and fairly Review completed, recommending Government agreed to retention of the requirement for credit review recommendations. providers to act properly, competently and fairly. Restrictions imposed by the requirement to abide by the Consumer Credit Code are being considered in the national review. Page 19.13 2001 NCP assessment Table 19.4: Review and reform of trade measurement legislation Jurisdiction Legislation Key restrictions Review activity Reform activity Assessment Council to assess progress in 2002. National (except Review of trade Western measurement Australia) legislation Restrictions on the Review underway. Review report prepared method of sale of certain and under consideration by steering goods committee. Report to be considered by relevant official bodies before being forwarded to the Ministerial Council on Consumer Affairs for consideration and response. Review and reform contingent on outcome of national review. Review and reform contingent on outcome of national review. Restrictions on the Government to introduce new trade method of sale of certain measurement legislation in 2001 applying goods the uniform national legislation. NCP assessment to be undertaken, and drafting to take into consideration outcome of national review. Review and reform contingent on outcome of national review. Review and reform contingent on outcome of national review. Queensland Trade Measurement (Administration) Act 1990 Trade Measurement Administration Act 1993 Weights and Measures Act 1915 Council to assess progress in 2002. Council to assess progress in 2002. Council to assess progress in 2002. South Australia Western Australia ACT Trade Measurement (Administration) Act 1991 Trade Measurement (Administration) Act Council to assess progress in 2002. Council to assess progress in 2002. Northern Territory Page 19.14