Revolutionary changes in Consumer Law now in effect reports Thomson Playford Cutlers

New laws are in effect from 15 April 2010 which will fundamentally alter the enforcement and application of laws relating to how business relates to consumers.

The key changes are: 

• National enforcement regime - The Commonwealth and State and Territory bodies (such as the Fair Trade authorities) will now work co-operatively. 
• Penalties - Previously, penalties were only criminal penalties. Only the Commonwealth Director of Public Prosecutions could undertake such enforcement and it was rare for a case to be brought by the DPP. The standard of proof was based on the criminal standard. Now penalties are civil pecuniary penalties and may be enforced by the ACCC and State bodies at the lower standard of proof, thus making the regulators’ chances of success much greater. Under the new legislation, the ACCC can seek financial penalties up to $1.1million for corporations and $220,000 for individuals. (These penalties do not apply to s52 which prohibits engaging in conduct which is misleading or deceptive). 
• Expansion of penalties - Civil penalties now apply to breaches of the unconscionability provisions. Previously, there were no pecuniary penalties for breaching those provisions. Penalties range from up to $1.1million for corporations and up to $220,000 for individuals. 
• Power to issue substantiation notices - Such notices will require the recipient to be able to provide information requiring substantiation of their representations. In the past the Commission’s information gathering powers were more limited. 
• Power to issue infringement notices - Rather like a speeding ticket – you may pay up upon receipt of the notice or require the ACCC to take the matter to court. As with a speeding ticket one suspects that many companies will just pay up rather than take their chances with a legal battle against a well funded regulator. The penalties payable under infringement notices range from $6,600 for corporations and $1,320 for individuals. 
• Orders - Disqualifying persons from managing corporations.
• New powers - For the ACCC to conduct random audits of franchise systems.
• New naming and shaming powers - Called Public Warning Notices.

In addition and soon to come into effect will be laws about “unfair contract terms”. These laws will commence on and from 1 July 2010.

A term will be regarded as “unfair” if it:

• causes a significant imbalance in the parties’ rights and obligations under the standard form contract; 
• is not reasonably necessary to protect the legitimate interests of the party who would be advantaged by the terms; and 
• it would cause detriment (financial or otherwise) to a party if it were applied or relied on.

Advertising

• If you are involved in advertising, or otherwise make claims about your products, services or systems you must ensure that you can substantiate those claims made in advertisements. This may require you in some circumstances to have readily available scientific support which you obtain directly or which you require your supplier to provide. 
• You may need to independently test supplier claims if you have any reason to doubt the validity of their statements. You will most certainly need such information prior to making any claims so that you are able to promptly respond to requests for substantiation. 
• Alternatively you may need to tone down the claim or display prominently any disclaimers. Make sure you are not “trumpeting the benefits and whispering the limitations”.

• The substantiation provisions might apply to you if you are supplying information to your franchisees. 
• Could you stand up to a random audit by the ACCC to demonstrate compliance with the code? For example, can you produce all your disclosure document receipts and prove that franchisees were given a proper disclosure document at least 14 days prior to entering into the franchise?

• Might you be subject to the Franchising Code? The ACCC is actively looking to find companies who should be complying with the Franchising Code but do not. 
• Review your compliance policies and procedures in respect of all areas relating to consumer protection and to unconscionable conduct (which is not limited to consumers). 
• Start reviewing your contracts under the Unfair Contracts terms legislation.

• Check now whether the Unfair Contract terms legislation might apply to your dealings. 
• If so, review your terms and conditions now in anticipation of the law coming into effect.

• Review your compliance policies and procedures including training to ensure that your organisation has identified risks and remedied those policies and procedures that are defective or out of date.