HG Alert: Federal Government Launches Online Consumer Protection Consultation - 30 July 2009

As part of its broader review into the adequacy of current laws on implied terms in both federal and State/territory legislation, the Commonwealth Consumer Affairs Advisory Council has this month released an issues paper entitled Consumer rights: Statutory implied conditions and warranties. The paper aims to stimulate discussion and seek the views of interested stakeholders in relation to the rights and obligations of consumers and businesses under contracts for the sale of goods and services and, in particular, those contracts entered into using the internet.

The review stems from a recommendation by the Productivity Commission in 2008 that the adequacy of existing legislation related to implied conditions and warranties (implied terms) should be examined. Although the focus of the review is on implied terms (their adequacy and the need for any amendments), the CCAAC is required under its terms of reference to consider any other means for improving the operation of existing statutory conditions and warranties in Australia. This may be achieved, for example, through the introduction of new laws such as so-called “lemon laws” - laws to protect consumers who purchase goods that continually fall below expected performance and quality standards - and laws dealing specifically with selling goods and services over the internet. The aim of the consultation is to “inform the development of the Australian Consumer Law led by the Ministerial Council on Consumer Affairs”.

Except for in Victoria (pursuant to the Victorian Fair Trading Act), there is no Australian federal or State/territory jurisdiction which provides specific protection for consumers (and the corresponding obligations on sellers) with respect to implied terms in online transactions. Existing regulation is based on a combination of both existing consumer protection legislation regimes across each Australian jurisdiction and voluntary codes such as the Australian Direct Marketing Association’s Direct Marketing Code of Practice.

Additionally, in relation to express terms (such as the express terms which are to apply to an online transaction as set out in the supplier’s website terms of use, which constitutes the contract of sale), Australian suppliers are free to determine the manner in which they “agree” their contracts of sale with customers - for example, by the use of “click-wrap” or “browser-wrap” terms and conditions. It is clear that the CCAAC views the information online traders provide on their websites as an important source of central influence to a consumer’s purchasing decisions and the fairness of a supplier’s trading practices, and the consistency of those practices with consumer rights.

Against the background of these terms of reference of the CCAAC consultation, it seems likely that as part of the proposed Australian Consumer Law the Federal Government may seek to introduce specific regulations in some form aimed at improving the operation of existing statutory terms in Australia in the context of online transactions.

There are some existing models that the CCAAC will no doubt assess. The regime under the Victorian Fair Trading Act requires sellers to provide certain information to consumers before an online sales agreement can be made, including any rights the consumer has to cancel the agreement and how these rights can be exercised, and the full name and contact details of the supplier. The regime that applies in the United Kingdom is pursuant to the implementation of the European Union’s Distance Selling Directive (2000/31/EC) in the Consumer Protection (Distance Selling Regulations) 2000, and requires online traders to disclose the main characteristics of the product and other information.

Of potential concern to online traders in Australia would be the introduction of a cooling-off period of the type provided in the UK, which in general allows a consumer to return certain goods within seven working days after receipt of those goods. The CCAAC’s issues paper cites this as a way of helping to address some of the issues which are unique to consumers shopping online, such as the inability of consumers to examine the products before purchasing or to disclose to a salesperson a particular purpose for which they are buying the product and seek advice on the suitability of the product.

In this context, suppliers should also take note that the CCAAC’s view, as expressed in the issues paper, is that attempts to exclude the statutory condition that goods must be fit for their purpose are likely to be misleading and deceptive, and contrary to law under sections 52 and 68 of the Trade Practices Act. This is not controversial or novel, although the Paper goes on to say that clauses which state that the online trader cannot ensure, and has no responsibility for the accuracy of information on their website (including product descriptions), may be inconsistent with consumers’ rights (under sections 68 and 70 of the Trade Practices Act). Such clauses are not uncommon and may require revision, particularly after the outcomes of the review are implemented.

The issues paper can be found in full online. Responses to the issues paper are requested by 5.00pm on Monday 24 August 2009.

If you would like more information about any of the issues outlined here, or would like assistance formulating and lodging a response to the issues paper, please contact HopgoodGanim’s Technology, Intellectual Property and Outsourcing team.