Expert panel on franchising and unconscionable conduct appointed

The Government has appointed an expert panel on franchising and unconscionable conduct.  Dr Craig Emerson MP today announced the establishment of the expert panel.  The expert panel comprises Professor Bryan Horrigan, Mr David Lieberman and Mr Ray Steinwall.

‘The panel will provide advice to the Government on some outstanding issues raised in recent parliamentary inquiries into the Franchising Code of Conduct and the provisions of the Trade Practices Act 1974 (TPA) that prohibit unconscionable conduct’ and follows the release of the Government response to those inquiries on 5 November 2009.  The full terms of reference are available online and include ‘considering the merits and the feasibility of introducing into the Franchising Code a list of examples of behaviours that are inappropriate in franchising relationships’.

An Issues Paper, prepared by Treasury, was also released by Dr Emerson, and interested parties are invited to make submissions by 18 December.  The Panel will report in January 2010.

Unconscionable conduct and franchising has now been the subject of multiple inquiries … lets hope this one proves more useful and conclusive than those that have gone before …

Unconscionable conduct provisions to be strengthened

The Government has announced that it will strengthen unconscionable conduct provisions in the TPA and the franchise code of conduct.  The Government has accepted the Senate Committee’s recommendations of the majority report, including adopting the ‘approach of clarifying existing provisions rather than creating uncertainty for consumers, businesses and the courts by changing the fundamental nature of the provisions’.  In this respect the laws will  be ’strengthened’ by ‘making it clear that protection from unconscionable conduct relates not only to the process of settling a contract but to the terms and conditions of the contract and the ongoing behaviour of the parties to the contract’.  In addition:

The Government will establish an expert panel [which will] consider whether a list of examples of unconscionable conduct or a statement of principles of what constitutes unconscionable conduct should be incorporated into the Trade Practices Act.

The panel will report by the end of January 2010 and will involve consultation with interested parties.

Various reforms to the franchising code are also proposed.  See discussion of Franchising Code proposals in The Age.

These reforms are in response  to the Senate Economics Committee’s Report on the Statutory Definition of Unconscionable Conduct, released in February, and the Ripoll Report on the Franchising Code of Conduct, released in October.  A more detailed version of the Government responses was tabled yeserday, but does not year appear to be available online.

Roll out of national unfair terms laws to be postponed

The Government is proposing an amendment to the Trade Practices Amendment (Australian Consumer Law) Bill 2009 that would delay the introduction of the proposed national unfair terms laws by at least 6 months.

See alert from Mallesons Stephen Jaques for more details

See also Alert and Summary from Allens Arthur Robinson

See also the Government’s ‘An Australian Consumer Law‘ website

Senate report on Consumer Law Bill

Last week the Senate released its lengthy report on the Trade Practices Amendment (Australian Consumer Law) Bill 2009 (quite a contrast to its flimsy little report on criminal cartel laws … but that is a separate issue)

Chapter 10 contains the Committee’s views and recommendations on key issues:

Uncertainty - Committee considered concerns that the bill would lead to greater business uncertainty were overstated, but did recommend that the ACCC and ASIC issue guidelines on the bill’s provisions

Insurance contracts – the bill does not apply to insurance contracts covered by the Insurance Contracts Act 1984 – the Committee found that ‘consumers are not provided with adequate protection in insurance contracts under existing law’ and recommended the Government address this through the insurance contracts legislation to ensure equivalent protection to that provided by the Bill.

Commencement date - Committee noted many had argued the proposed commencement deadline of 1 January 2010 was too soon – but Committee took the view that as the bill had been debated for many months business was aware of it and consumers should ‘benefit from the protection’ as soon as possible.

Although not a part of their recommendations in chapter 10, the Committee also addressed the issue of the exclusion of business-to-business contracts from the Bill, noting that it ‘gathered considerable evidence supporting the application of unfair contract terms laws to protect small business … and indicated that they though it was ‘important that the government responds to these concerns after completing its review of this committee’s December 2008 inquiry into section 51AC … and the Joint Committee on Corporations and Financial Services’ inquiry into the Franchising Code of Conduct.’

Statutory implied conditions and warranties issues paper released

Yesterday the Government released another issues paper Consumer rights: Statutory implied conditions and warranties

This follows a long line of reviews and reports into trade practices legislation (competition and consumer) over the last 18 months which include:

• Cartel review of draft law by Treasury (2008 – no report released)
• Review on the meaning of Understanding (submissions closed March – no report yet)
• Creeping acquisition discussion paper 1 (late 2008)
• Creeping acquisition discussion paper 2 (submissions closed 10 July)
• Review on an Australian Consumer Law (closed 17 March; separate from PC review of national consumer law)
• Unfair terms discussion paper (submissions closed 22 May)
• Review on Consumer advocacy and research (submissions closed 17 July)
• Issues paper on implied terms (released 26 July)

In addition there have been a number of Senate inquiries

• Cartel review by Senate (Report released February)
• Inquiry by Senate Economics Committee into the Trade Practices Legislation Amendment Bill 2008 (reported 26 August 2008 re: predatory pricing; unconsc conduct)
  
• Inquiry into the Unit Pricing (Easy comparison of grocery prices) Bill 2008 (not relating to TPA, but relates to consumer law generally)
• Senate Standing Committee on Economics Inquiry into the Trade Practices Amendment (Australian Consumer Law) Bill 2009 (sub’s due 31 July; report by 7 Sept)

No doubt I have missed some from this list.

Interested parties have less than a month to respond to this one – submissions close on 24 August.

Unfair terms … narrower than planned

The Trade Practices (Australian Consumer Law) Bill 2009 was introduced into Parliament last week and contains the new unfair terms laws which, if passed, will enter into force on 1 January 2009.  They are, however, considerably watered down from the original proposed unfair terms laws.

The original draft prohibited all unfair terms in standard form contracts – whether goods or services were to be supplied to individuals or businesses.  Then Chris Bowen announced some modifications as a result of ‘consultation’ – suddenly there was to be a ‘threshold’ of $2m, above which the laws would not apply.  The bill, however, curtails the law significantly – according to the new law, the unfair terms provisions apply only to consumer contracts, defined as contracts for ‘(a) a supply of goods or services; or (b) 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.’

Wow.  What a change.  The law is now NARROWER than the existing unfair terms law in Victoria; Victoria restricts the unfair terms prohibitions to consumer contracts, defined in a similar manner to that described above BUT it applies to ALL consumer contracts, not just standard form contracts.

There was no clear announcement of this monumental back-down on the breadth of the federal unfair terms law.  At least not until last week’s second reading speech by Dr Craig Emerson, where he stated (my emphasis):

“We have consulted, and we have listened. And this is reflected in the provisions set out in this bill, which differ in key respects from those that the government exposed in May, particularly in respect of the exclusion of business-to-business transactions.

In relation to the question of whether business-to-business contracts—and particularly those involving small businesses—should be included under the unfair contract terms provisions, the government is currently reviewing both the unconscionable conduct provisions of the Trade Practices Act and also the Franchising Code of Conduct.

Both of these reviews cover issues relating to the protections afforded to businesses in circumstances where they are dealing with other businesses with greater bargaining power and market power. In responding to these reviews, the government is seeking the views of businesses—large and small—about the effectiveness of our current laws. The government will further consider this issue when these reviews are completed.

The government has also indicated its intention that this bill should be referred to a senate committee, and this issue will—no doubt—be further considered as part of that process.”

So,the breadth may possibly expand again … we await yet another senate review (let’s hope it’s better than the last one dealing with cartels … maybe they will demonstrate some understanding of this law … then again, that might be being a tad optimistic).

I don’t really have much difficulty with the law being limited to consumers; it is consumers who are most likely to purchase in bulk using standard forms without reading their contracts or, even if they did, without having any bargaining power to make changes to blatantly unfair terms.  But this is quite a monumental change from the original draft provisions which captured ALL standard form contracts and a more adequate explanation from the government about the reasons for this change is needed.

See also the Government’s Australian Consumer Law Home Page.

Trade Practices (Australian Consumer Law) Bill 2009

The Trade Practices (Australian Consumer Law) Bill 2009 was introduced into Parliament today.  A second Bill will be introduced in 2010 to complete the move to a single national consumer law.

See Dr Craig Emerson’s Press Release.

See also the Government’s Australian Consumer Law Home Page.

More details to follow

Franchising Code of Conduct Options Paper Released

Today the government released an options paper, seeking comment on proposed amendments to the Franchising Code of Conduct. This is part of the government’s response to the report of the Parliamentary Joint Committee on Corporations and Financial Services inquiry into franchising (which the options paper states was tabled on 1 December 2009 – only a year out!) and follows earlier consultations on the issue.

The 16-page paper notes the four broad areas in need of regulatory reform that were identified by the Joint Committee’s report:

• “Issues impacting on franchisees in the event of franchisor failure (Recommendations 1 and 4).
• Establishment of a registration system for franchise businesses and collection of data on the franchising sector (Recommendation 2 and Recommendation 7).
• End of term arrangements (Recommendation 5).
• Insertion of a good faith clause into the Franchising Code (Recommendation 8).”

The paper provides background and brief discussion of each and then puts forward a series of questions for comment.  In releasing the options paper, Emerson noted that the Government was “particularly interested in any potential change to the code that may affect costs and risks faced by franchisors and franchisees”

The closing date for comment is 10 July 2009

See Press Release by Dr Craig Emerson

Craftmatic’s salespersons misled and unfairly pressured Senior Citizens

Craftmatic, which sells adjustable beds, has agreed to court declarations and injunctions against it relating to its door-to-door sales tactics with Senior Citizens.  Craftmatic admitted misleading and deceiving elderly consumers and unfairly pressuring them into purchasing a bed between 2005 and 2008.  Tactics included

* when initiating contact, stating that their purpose was not to sell them anything, but that they could win a free bed, when their sole interest was “to convince the consumer to agree to a presentation where the representative would try to make a sale”

* advising consumers the presentation would take no more than an hour when most took between two and three hours

* bringing cake or other gifts to a consumer’s home before asking questions.  Questions included health questions which consumers were told was to assist in determining an appropriate model of bed for their needs – in fact there was only one model of bed at the time

* where customers were reluctant to buy, offering discounts described as ’special’ or ‘limited’ or only available that day when this was not the case.

* where the consumer said they could not afford to purchase a bed they would try to sell the bed on credit

and more …

See ACCC Press Release.

Unfair Terms – Next Step Toward National Unfair Terms Law

Consumer Affairs Minister, Chris Bowen, today released a press release outlining further details for the implementation of national unfair term laws.  This follows the May 22 closing date for submissions on the draft legislation which has led to possible refinements that would set a threshold limit for the application of the laws of $2m and exclude standard form shipping contracts in some cases.  This is in contrast to the draft which would have applied to ALL standard form contracts regardless of the value of the goods or services involved.

The Government will now refer the legislation to the Senate Economics Committee (let’s hope they do a better job than they did on the criminal cartel laws) which will provide a further opportunity for community and business input (this will be at least the third formal opportunity for input into the development of these laws)