Need to know
- In October last year, the federal government vowed to ban unfair business practices
- Earlier this month, Assistant Minister Andrew Leigh announced that putting an end to subscription traps and drip pricing was the first order of business
- The government has also committed to introducing penalties for businesses that flout the Australian Consumer Law
The days of being mistreated by businesses nearly every time we transact online may finally be coming to an end. In October last year, the federal government vowed to ban unfair business practices (also known as unfair trading) in the digital realm and beyond.
These include what have become everyday annoyances in the consumer marketplace, such as:
- finding it impossible to unsubscribe from something
- having new charges thrown in right before you're prompted to pay (drip pricing)
- being pressured to hurry up and commit to a purchase
- not being able to contact a business you've paid money to no matter how hard you try
- having a free trial turn into a paid one without your consent.
Astonishingly, none of the above tactics or others like them are illegal, but we and our consumer allies across Australia have long believed that they should be.
Even more troubling are the limits of the Australian Consumer Law (ACL), which, among other things, gives consumers the choice of a refund, replacement or repair if a product has a major fault. But if a retailer chooses to ignore these rights, they currently face no penalty.
'Hotel California situation'
Earlier this month, Assistant Minister Andrew Leigh – whose portfolio includes productivity, competition, charities and Treasury – gave a press conference at Parliament House in which he committed to moving forward with the unfair trading ban.
"Specifically, we're going to be getting rid of two practices that have been a scourge for Aussie consumers: subscription traps and drip pricing," Leigh said, adding that subscription traps "are a problem for three out of four Australians who have subscriptions".
A simple rule for businesses is that if you can't cancel a subscription through the same process that you started the subscription, then perhaps there's a subscription trap going on
Assistant Minister Andrew Leigh
He cited examples of consumers subscribing to something online but being forced to call the business to unsubscribe. Or services that allow you to subscribe immediately but make you wait a month to unsubscribe. The Consumer Policy Research Centre (CPRC) has estimated that subscription traps are costing Australians $46 million a year.
"A simple rule for businesses is that if you can't cancel a subscription through the same process that you started the subscription, then perhaps there's a subscription trap going on," Leigh said, likening subscription traps to a "Hotel California situation", referring to the Eagles song which famously intones "you can check out any time you want, but you can never leave".
Being pressured to make a purchase with a false sense of urgency is just one of the many forms of unfair trading.
Surcharges that double the price
Leigh also pointed to cases of drip pricing where a concert ticket that was advertised for $89 ended up costing $129 by the end of the transaction, and a low-cost internet plan that included a $79.99 fee sneakily added in during the sign-up process.
"It's a matter of firms being honest with consumers. If there are unavoidable charges, they need to be advertised upfront. You can't pretend that you're offering a low price and then charge consumers a high price," Leigh said.
Under the proposed reforms, businesses will be required to notify customers before a free trial ends, remove unreasonable barriers to cancellation, and show all transaction fees upfront.
As for making violations of the ACL a punishable offence, Leigh said "businesses that don't comply will face tough civil penalties, and regulators will have expanded powers to enforce the laws. Manufacturers will be required to indemnify suppliers for the cost of providing remedies, so small businesses aren't left out of pocket for doing the right thing".
These reforms will shift the balance back towards fairness. This is the biggest uplift to the ACL in more than a decade
Consumer Policy Research Centre CEO Erin Turner
"A general prohibition on unfair trading will finally empower regulators to stop harmful conduct, and enforceable consumer guarantees will make it easier for people to get basic remedies without navigating complex, drawn-out complaints processes," says CPRC CEO Erin Turner.
"Australians are being harmed every day by business models designed to manipulate. These reforms will shift the balance back towards fairness. This is the biggest uplift to the ACL in more than a decade."
Consumer Action Law Centre CEO, Stephanie Tonkin says "we hear from people every day who are trapped in dodgy deals and unfair sales models, struggling to enforce their rights. Once implemented and enforced, we are certain the reforms will drive better business behaviour that helps all consumers and especially people experiencing vulnerability".
A timeline for the introduction of these overdue measures has yet to be announced.
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