*On 1 January 2011, a new national Australian Consumer Law regime came into effect. Please see our article or go to http://www.accc.gov.au/consumerrights for information on these changes.
Do Australia’s consumer policy settings meet consumers’ needs in the 21st century? Do globalisation, the digital revolution and the increasing importance of services mean we need new ways to look at consumer markets?
Consumer policy should ensure that retail markets maximise benefits for consumers and provide effective protection from the risks and threats consumers cannot tackle as individuals.
The Productivity Commission has spent the last 18 months considering these and other issues. Its final report, released in May, delivers a model for a new generation of consumer policy making that will bring widespread benefits to Australian consumers.
The proposal will facilitate market efficiencies, elevate the consumer voice and deliver equitable protections to consumers across the country.
The next generation of consumer protection
The Productivity Commission makes 30 detailed recommendations to establish the next generation of consumer protection.
- A single national consumer law.
- Stronger enforcement powers for consumer regulators.
- Greater funding of legal aid and financial counselling services.
- National regulation of credit and product safety.
- Funding for a national peak consumer body.
- A new National Consumer Policy Research Body
The Commission also recommended a form of Unfair Contract Laws. However, CHOICE does not believe they go far enough to promote fair markets and has called for further changes.
The Productivity Commission proposes a new objective to guide the new consumer policy framework. Its central concern is to improve consumer wellbeing by fostering effective competition, confident consumers and fair trading environment. In shaping the objective, the Productivity Commission observes that "competition is a means to achieving an improvement in consumer wellbeing rather than an end itself."
The Productivity Commission recommends a new national consumer protection law including provisions to combat unfair terms in consumer contracts. Here at CHOICE we believe that laws promoting fair contracts increase consumer confidence and improve competitive outcomes. CHOICE is keen to work with governments to ensure that the Productivity Commission's proposals are turned into a law that effectively removes unfair terms from consumer contracts. The Productivity Commission draws on a new body of literature in behavioural economics to explain that "most people in society value fairness". We couldn't agree more.
Consumer regulators are set to have a stronger set of enforcement powers available to keep businesses in check. As well as requiring businesses to substantiate claims in marketing material, regulators will also be able to apply monetary penalties including recovering profits made from illegal conduct. This will ameliorate the present situation whereby redress options available to consumers vary depending on where they live.
Consumers are entitled to redress when things go wrong, but community need for financial counselling and legal aid services is currently not being met. As a result the Productivity Commission recommends more funding of financial counselling and legal aid services. Increased funding will keep justice within everyone's reach.
Throughout this review CHOICE has argued that specialised attention is needed to address emerging issues in consumer markets. The Productivity Commission recommends the establishment of a National Consumer Policy Research Centre to provide a richer information base on which to anchor future consumer policy development.
The Productivity Commission explains that "good consumer policy benefits businesses (and their shareholders) as well as consumers." It estimates that the reform package could provide a net again to the community of between $1.5 billion and $4.5 billion a year. Consumers are likely to experience the benefits of the reforms in fewer adverse outcomes and lower cost products and services.
What we want
In its May 2008 budget, the Government took its first step towards implementing the Commission's recommendations - it doubled its funding of financial counselling services. Now the Ministerial Council is considering how to move forward on a new national approach to consumer law and policy. CHOICE will be working with governments to progress the new model.
What we’re doing
CHOICE is actively engaging with the Productivity Commission on this important review. We provided a short paper to the Commission prior to our appearance to give evidence on 16 April 2007.
In June 2007 we presented our detailed submission to the review.
In September 2007, CHOICE worked with a coalition of consumer and community groups to outline the institutional reforms needed for consumer advocacy, research and policy development.
Following the release of the draft report in December 2007, we provided the following submissions:
February 2008 which identifies areas of improvement.
Joint Consumer Group Submission February 2008 which covers objectives, unfair contracts, unfair trading, supercomplaints and other matters.
March 2008 which covers the scope and nature of the proposed generic law; the need for a market inquiry process to be available to key regulators; home warranty insurance and an ongoing work plan for consumer policy.
CHOICE is working to ensure that consumers set the agenda for this review. Our recent letter to the Australian Financial Review argued that the starting point for the review should be the need to ensure that consumers have confidence and trust in markets (see More cohesive consumer policy needed, 4 October 2007).
What you can do
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(eNews) for updates on our activities including our forthcoming research on the enforcement effectiveness of Australia’s key consumer protection agencies and our submissions to this review.