Documents piled up

New Australian Consumer Law (ACL) laws released for comment

Rohan Harris

Direct selling businesses need to have a working knowledge and good risk management in place for ACL compliance.

The Commonwealth Treasury has released Exposure Draft Legislation and Regulations for the first batch of reforms to the ACL, which will implement 14 recommendations contained in the final report of the 2017 ACL Review.

A summary of the key proposed reforms to the ACL and the implications they may have in the direct selling industry is set out below.

Proposed New Law

What You Should Do

Unsolicited Consumer Agreements

The draft legislation clarifies that an unsolicited consumer agreement can arise where:

  • An independent sales person (ISP) (e.g. a consultant) makes a sale to a customer in a public place; or
  • the ISP could have entered the place without the consumer’s invitation.

This would, for example, include a shopping mall or a market environment.

ISPs who make sales in public places will be subjected to the unsolicited selling provisions.

You should have your policies and training materials provided to your consultants reviewed to ensure that:

  • they clearly identify examples of the places and circumstances in which unsolicited consumer agreements may arise; and
  • they contain the required information about an ISP’s ability to make sales in these environments.

Headline Price and Pre Selected Options

The current law is that a headline price for the supply of a good or service must include charges payable by a person, except a charge that is optional. 

The proposed new law is that the headline price for goods or services must include any optional fees or charges that are pre-selected or not de-selected.

If your online purchasing portal or a purchase form includes pre-selected options, these should be reviewed so that pre-selected (not optional) charges are also included in the headline price.

Please note that there is a general exception under the ACL which states that charges relating to sending goods from the supplier to a customer need not be included in the headline price.  However, where the seller is aware of the minimum shipping cost which applies to all transactions and which must be paid by a consumer, the seller must disclose that minimum shipping cost as either:

  • a separate component of the total price; or
  • include the minimum amount of such charges in the headline price.

For example, it would be equally acceptable for a product to be advertised as:

  • $30.00 plus $5 postage and handling; or alternatively
  • $35.00 including postage and handling.

‘Charges relating to sending the goods from the supplier to the customer’ is not defined under the legislation, however we can assume that this includes charges such as postage, courier fees and packaging that is appropriate for the goods being sent.

Product Safety

There are 3 major reforms proposed in relation to product safety:

  1. A clearer definition of ‘voluntary recall’ will be introduced, so to clarify that the recall notification obligations apply where an organisation has undertaken any corrective action to mitigate safety risks of a consumer good, including removing the goods from distribution or sale;
  2. An increase to the existing penalties that may apply where an organisation fails to meet its voluntary recall notification requirements by $33,000 for individuals and the greater of $165,000 or three times the benefit obtained for companies; and
  3. The ACCC’s information gathering powers regarding product safety will be extended so that the Commonwealth Minister or the ACCC can give third parties a disclosure notice to provide evidence, information or documents about potentially unsafe goods or services supplied by an organisation.  Third parties such as manufacturers, test laboratories, safety consultants, consumers who have purchased or been injured by an unsafe product or any other person injured by an unsafe product could be issued with disclosure notices.

You should ensure that:

  • your organisation’s training regarding product safety and voluntary recall is up to date;
  • there is a good understanding about the requirements in the case where a product safety issue is reported;
  • there is a clear procedure about how to deal with a product safety issue, including legal obligations and publicity strategy.

Unfair Contract Terms

The ACCC will be able to use their compulsory information gathering powers to investigate possible unfair contract terms.

The regulator will conduct investigations as it thinks appropriate for the purposes of determining whether or not to make an application to the court regarding unfair contract terms.

Any contract for the sale of goods or services by an organisation or a contractor to a consumer for personal, domestic or household use or consumption by the consumer that is a ‘standard form contract’ will be subject to the unfair contract term provisions in the ACL.

If you are a ‘small business’ you may also have rights against your suppliers under the business to business unfair contract term laws.  Read more about small business unfair contract term laws here

Consumer Guarantees

The consumer guarantees of due care and skill for service contracts do not apply to services that are supplied under ‘a contract for or in relation to the transportation and storage of goods for the purposes of a business, trade, profession or occupation carried on or engaged in by the person for whom the goods are transported.’

This exemption will be narrowed so that it only applies where the consumer is a business.

If your terms and conditions include limitations on liability for transport or storage, you should have these reviewed.

The draft legislation is subject to a feedback process, the closing date for which is 28 February 2018.  It is anticipated that there would then be a further period of consideration of that feedback before final legislation is introduced into the Parliament.

For further assistance regarding the ACL and the impact of the proposed new law, please contact Rohan Harris.

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