21 - John Carter Article On Competition and Consumer Act

The Commercial Side of Australian Consumer Protection Law
J W Carter*
This article discusses the reforms of Australian consumer protection law proposed in the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth) and other legislation which create a national consumer protection regime for Australia termed the Australian Consumer Law. The article argues that the Australian Consumer Law fails to meet the goals of consumer protection, for example, by providing the same protection for commercial acquirers of goods and services as is afforded to those who acquire goods and services for personal use.
Introduction Context
The Australian Parliament currently has before it the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth) (the Bill). The principal objective of the Bill is to replace the consumer protection provisions currently found in the Trade Practices Act 1974 (Cth) (TPA) and the Australian Consumer Law (ACL)1 with a new and greatly expanded ACL. As part of these changes, the TPA will be renamed the Competition and Consumer Act 2010 (Cth) (CCA). A key ingredient of the reforms is replacement of the implied terms provisions of Pt V, Div 2 of the TPA derived ultimately from the Sale of Goods Act 1893 (UK) with a regime of consumer guarantees. Various opinions have been expressed on how far the law will be changed if the Bill is enacted in its current form. The Explanatory Memorandum2 to the second reading of the Bill explains the basis on which the Regulatory Impact Statement (RIS) was prepared in relation to the replacement of the implied terms provisions with consumer guarantees:3
The RIS discusses the impact of implementing the [Commonwealth Consumer Affairs Advisory Council] recommendations, including the costs and benets of moving from a system of implied conditions and warranties to statutory consumer
* Professor of Commercial Law, University of Sydney; General Editor, Journal of Contract Law; Consultant, Freehills. This article draws on submissions made by Freehills to the Commonwealth Treasury in relation to some of the reforms discussed in the paper. However, the views expressed are my personal views and are not to be attributed to the University of Sydney or Freehills. An earlier version of this article was presented at the Law Summer School, University of Western Australia, 26 February 2010. I wish to thank the referee for the valuable comments on the article. 1 Unless otherwise indicated, references to provisions of the ACL are to the sections proposed by the Bill. 2 Parliament of the Commonwealth of Australia, Explanatory Memorandum: Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth), 2010 (Explanatory Memorandum). 3 Explanatory Memorandum, para 25.8.
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222 (2010) 26 Journal of Contract Law guarantees. Given that the proposal does not involve a change in the substantive rights and obligations of businesses or consumers, the only cost is transitional in nature. On the other hand, the benets of reduced complexity and uncertainty will be enduring, as will be the reduced costs of compliance for businesses, particularly those businesses that trade in more than one State or Territory of Australia.
Submissions by Treasury to a Senate Economics Legislation Committee appointed to consider the Bill apparently also expressed the view that there are no substantive changes.4 However, as explained below, it is clear that the Bill will have quite signicant effects.
Elements of the Current Regime

From a legal perspective, the principal source of consumer protection under Australian law is the TPA. Many of its provisions are direct sources of protection for consumers. At present there are six main sources of direct protection in the TPA: (1) various prohibitions on unfair practices (such as misleading or deceptive conduct) and three separate prohibitions on unconscionable conduct; (2) Pt V, Div 2 relating primarily to the implication of terms in consumer contracts; (3) Pt V, Div 2A relating to the liability of manufacturers;5 (4) an unfair contract terms regime stated in the ACL;6 (5) a private enforcement regime directed primarily to remedies in relation to contravention of the TPA; and (6) an extensive enforcement regime administered by the Australian Competition and Consumer Commission (ACCC).7 Each source will be included as redrafted in the ACL. Many provisions in the TPA have analogues in other legislation.8 There are also many specic pieces of consumer protection legislation, as well as consumer protection provisions in general statutes, at the state and territory level.9 Other provisions of the TPA such as those in Pt IV provide indirect protection through promoting competition in the marketplace. And, of course, the common law also has a consumer protection dimension. Although, by denition, this has been found wanting, it nevertheless provides part of the background against which the proposed Australian consumer protection regime as expressed in the ACL must be considered.
4 See Senate Economics Legislation Committee, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth), Canberra, May 2010, 2.6 (Treasury noted that there is nothing . . . different from the existing law). But see Submission by the Treasury to the Senate Economics Legislation Committee, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth), 11 May 2010, p 3 (in some key areas . . . the provisions (but not the policy intent) of the ACL differ). 5 This operates in addition to a product liability regime. 6 Inserted by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth). 7 Inserted by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth). 8 Principally, the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and the fair trading legislation of most, but not all, jurisdictions. 9 See, eg Pt 8 of the Sale of Goods Act 1923 (NSW).
The Commercial Side of Australian Consumer Protection Law 223
The ACL
At present, the scope of the ACL is limited to an unfair contract terms regime based on Pt 2B of the Fair Trading Act 1999 (Vic) and an extended (and coercive) enforcement regime administered by the ACCC.10 The Bill substantially increases the scope of the ACL. The ACL will include provisions based on the TPA and supplemented by what has been termed best practice11 of the fair trading legislation of the states and territories. The end result will be a single law which is also to be adopted by the states and territories in place of the current consumer protection provisions of fair trading legislation.12 The reforms in the ACL are based on various reports, most of which have been the subject of submissions by interested parties.13 Surprisingly, however, the Bill was rst made public when presented to Parliament. Given the absence of prior public exposure, and that the CCA is proposed to come into force on 1 January 2011, it might be said that the ACL has been presented to the Australian public as a fait accompli.14 At the same time, further reforms are already before Parliament.15
Issues
From a consumer protection perspective, the most surprising feature of the Bill is that it continues to treat many commercial transactions as worthy of consumer protection. However, the Bill is also disappointing from a genuine consumer protection perspective. The opportunity which was available to the Australian Government to enact a genuine and simplied consumer protection regime has been lost, to the detriment of business, consumers and the Australian economy. The principal purpose of this article is to consider what might be termed the commercial side of consumer protection which the TPA embodies. A secondary consideration is the extent to which (genuine) consumers are not adequately protected by the new regime. Space does not permit a full analysis of the Bill. This article therefore concentrates on three areas: (1) the prohibitions on misleading or deceptive conduct and unconscionable conduct;
10 The unfair contract terms regime will enter into force on 1 July 2010. 11 See Explanatory Memorandum, pp 1314 and 6.3, 23.3. 12 The need for a national cooperative approach arises from the constitutional limitations on the scope of the TPA which have required it to focus primarily on the contracts and conduct of corporations. 13 See, eg The Australian Consumer Law: Consultation on Draft Unfair Contract Terms Provisions, Canberra, 11 May 2009 (Consultation Paper); Commonwealth Consumer Affairs Advisory Council, Issues Paper, Consumer Rights: Statutory Implied Conditions and Warranties, Canberra, July 2009 (Issues Paper); Commonwealth Consumer Affairs Advisory Council, Final Report, Consumer Rights: Reforming Statutory Implied Conditions and Warranties, Canberra, October 2009 (Final Report). 14 The Bill is 388 pages long, and the Explanatory Memorandum runs to 669 pages. It may also be noted that major reforms are being proposed at a time when business must cope with no less fundamental reforms in the areas of consumer credit and personal property security. 15 Competition and Consumer Legislation Amendment Bill 2010 (Cth). Cf Competition and Consumer Policy Division Treasury, Issues Paper, The Nature and Application of Unconscionable Conduct Regulation: Can Statutory Unconscionable Conduct be Further Claried in Practice?, Canberra, November 2009 (Unconscionable Conduct Issues Paper).
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(2) the unfair contract terms regime; and (3) the consumer guarantees regime.
An Ideal Regime?
There is no doubt that the sources of consumer protection referred to above are high points of the Australian consumer protection landscape. That they do not achieve a satisfactory regime can be taken for granted since, otherwise, the government would not be debating the ACL. It is certainly timely that the Australian Government should be replacing major components of the TPA, including the implied terms provisions. Everyone will benet from the replacement of the various (and varied) state and territory fair trading legislation which currently reect the TPA. However, given that this reform is fundamental, it must be a great disappointment that the plan is to bring the legislation into operation on 1 January 2011. Clearly, there will be insufficient time for the commercial community to take account of the legislation in its contracting, marketing, purchasing, systems and insurance arrangements. What constitutes an ideal consumer protection is a matter on which no two people are likely to be in full agreement. However, at a minimum, any regime must go some way to achieving four goals: (1) dedicated operation achieved by a sensible denition of consumer; (2) a high level of intelligibility, so that it is capable of being understood by those beneted and burdened by the regime, as well as those who administer it; (3) the imposition of compliance standards which are reasonably capable of being met; and (4) in terms of rights and remedies, reasonably balanced. These goals form the basis for the discussion below. Unfortunately, the major ills of Australian consumer protection will not be cured by the Bill. Indeed, there is every reason to believe that the wrong treatment has been chosen and that the ACL does not come close to meeting any of the four goals.
Who Is a Consumer? Introduction

The reference in the title of this article to the commercial side of consumer protection ought, logically, to suggest a concern with the compliance impact of the ACL on suppliers (including manufacturers) of goods and services.16 It is, after all, counter-intuitive to think of a commercial party as being on the consumer side of the contract. Although the compliance impact on business is important, it has not been the way of the TPA for the concept of consumer to be restricted to persons who acquire goods or services for personal or domestic use. Nor will it be the way of the ACL. Ever since the consumer protection wave began to form in the 1960s, academics, law reform bodies and parliaments have all wrestled with the
16 The unfair contract terms regime also applies to contracts relating to land. That raises further implications with which it is not possible to deal in this article.
concept of consumer, and the correct denition for consumer protection purposes. It has for some time been recognised that a small business is in many contexts as much a consumer as Ms Carlill was at the end of the 19th century. A narrow denition of consumer is apt to shut out small business. But, of course, from an inequality of bargaining perspective, size is relative. Even a substantial corporation may suffer from the inequality of bargaining that offends small business when contracting with a large public corporation or a government. Nevertheless, it would seem self-evident that a desire to protect small business is no excuse for protecting big business, including in cases where they acquire goods or services from members of the small business community. It would seem equally self-evident that the protection afforded to small business cannot be the same as that afforded to corporations in general or the ordinary consumer. Yet, the TPA does all of this in the name of consumer protection. So also will the ACL. What has been missing is a dedicated regime which is restricted to consumers who do not acquire goods or services for commercial purposes.
Denition in the TPA and ACL

Section 4B of the TPA, which purports to dene Consumer17 for the purposes of the Act is often spoken of as if it stated a single denition. That is incorrect. Embedded within s 4B are a great many denitions. None are couched in terms of the characteristics of the consumer. Also incorrect is the assumption that whenever the TPA refers to consumer the intention is to invoke the s 4B denition.18 The primary relevance of s 4B is to the implied terms provisions. Other sections of the TPA are referenced to, state or employ their own consumer concepts.19 For the purposes of comparison with the ACL, four of the denitions embedded in s 4B of the TPA may be noted:20 (1) a contract for the supply of goods at a price which does not exceed $40,000 to a person (including a corporation) which does not acquire the goods for the purpose of resupply; (2) a contract for the supply of services at a price which does not exceed $40,000 to a person (including a corporation); (3) a contract for the supply (no matter what the price) of goods of a kind ordinarily acquired for personal, domestic or household use or consumption to a person (including a corporation) which does not acquire the goods for the purpose of resupply; and (4) a contract for the supply (no matter what the price) of services of a kind ordinarily acquired for personal, domestic or household use or consumption to a person (including a corporation). Under the Bill there is a substantial change. The denition is even more abstract than under the TPA. For the purpose of the consumer guarantees
17 I use the capitalised version of Consumer to describe any person who is a consumer for the purposes of the consumer guarantee provisions of the ACL or s 4B of the TPA. 18 Cf Issues Paper, p 11 (belief that denition of consumer same for implied terms and manufacturers liability provisions). 19 See further below, text at n 24. 20 Each has been simplied slightly.
regime (replacing implied terms), a consumer is a person who enters into a contract for the supply of goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption. From the perspective of a person who acquires goods or services for personal use, the result is a most peculiar regime. Four points may be made. First, the immediate impact is to delete the rst two denitions identied above. Therefore, where a person acquires goods or services which are not of a kind ordinarily acquired for personal, domestic or household use or consumption, that person cannot be a consumer. At a stroke, the ACL will deprive persons who acquire goods or services for personal use of protection simply on the basis that they happen to acquire a particular kind of goods or services. In the case of a supply of goods by sale, such consumers will be forced to look to the sale of goods legislation. But for other categories of supply including the supply of services consumers will need to know their common law of contract and be content with their common law rights. Second, the extensions achieved by denitions (3) and (4) will continue to apply under the ACL. If the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption commercial acquisitions of goods or services are protected to the same extent as a genuine consumer acquisition. The only signicant limitation is that (as under the TPA), in relation to goods, the acquisition must not have been for the purpose of resupply. From the perspective of any implicit concern to protect small business acquirers there are disturbing anomalies. For example, assume that Small Business Pty Ltd purchases 50 personal computers at a price of $50,000 from an importer for resupply. Small Business Pty Ltd is not a Consumer because it has acquired for the purpose of resupply. If it sells the computers to Big Business Ltd for $70,000 for use by its employees in the course of its business, Big Business Ltd is a Consumer. Like the implied term provisions of the TPA, the consumer guarantees of the ACL will therefore protect big business as much as small business, and allow Big Business Ltd to portray itself as a consumer when acquiring goods from Small Business Pty Ltd. The basis is a purely circumstantial consideration, namely, that the goods are of a kind ordinarily acquired for personal, domestic or household use or consumption. Third, where a commercial supplier wishes to contract on its standard terms, it may be impossible for the supplier to know in advance whether all customers will be Consumers. Apart from the uncertain meaning of personal, domestic or household use or consumption21 the supplier may be unaware which of its customers are acquiring for resupply. The concept of Consumer is linked with the ability to limit liability. If the supplier gets it wrong, the supplier may be liable to pay a pecuniary penalty.22 Fourth, the oddities of the application of the TPA in favour of Consumers may also have a direct adverse impact on consumers. If A hires a cement
21 See, eg Atkinson v Hastings Deering (Queensland) Pty Ltd (1985) 6 FCR 331; Cavalier Marketing (Australia) Pty Ltd v Rasell (1990) 96 ALR 375; Minchillo v Ford Motor Co of Australia Ltd [1995] 2 VR 594 at 61617. 22 See s 151(1)(m) of the ACL (replacing s 75AZC(1)(k) of the TPA). See further below, text at n 52.
mixer for a week in order to mix cement for a path at his or her house, A is not a Consumer. There are no direct statutory restrictions on the suppliers use of exclusion clauses.23 If nothing else, this overinclusive approach devalues the ACL regime as a consumer protection regime. People who acquire goods or services for personal use do not have the benet of a dedicated regime. Rather, it is one which they share with Australias largest corporations.
Other Denitions of Consumer

The ACL will continue the confused and confusing technique of having different denitions of consumer for different ingredients of the regime which was a feature of the TPA. Five illustrations may be given. First, there is a concept of consumer contract for the purposes of the unfair terms regime. This is expressed by s 23 of the ACL24 in terms of the acquisition of goods, services or an interest in land wholly or predominantly for personal, domestic or household use or consumption. Second, for the purposes of product liability provisions, consumer goods are dened by s 2 of the ACL as goods that are intended to be used, or are of a kind likely to be used, for personal, domestic or household use or consumption, and includes any such goods that have become xtures since the time they were supplied. Third, s 21 of the ACL refers to consumer in the context of the prohibition of unconscionable conduct as a person to whom goods or services are supplied.25 Fourth, s 22 which prohibits unconscionable conduct in business transactions refers to a concept of business consumer.26 Fifth, s 2 refers to a non-party consumer.27 This is, of course, all quite bewildering. Some very ne distinctions are drawn, for example, between goods of a kind ordinarily acquired for personal, domestic or household use or consumption and goods that are intended to be used, or are of a kind likely to be used, for personal, domestic or household use or consumption. The concepts are frequently counter-intuitive. Whatever lawyers may make of it, the concepts are well beyond the reach of ordinary consumers. For example: a consumer contract is not a contract entered into by a person who is a Consumer;
23 If the supply is made under a standard form contract the unfair terms regime of the ACL will apply. 24 Currently, s 2 of the ACL. 25 Section 21(5) then proceeds to dene goods or services as goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption; and s 21(6) states that a reference in this section to the supply or possible supply of goods does not include a reference to the supply or possible supply of goods for the purpose of resupply or for the purpose of using them up or transforming them in trade or commerce. The Competition and Consumer Legislation Amendment Bill 2010 (Cth) proposes deletion of the prohibition. 26 The concept has no content and is merely internal shorthand. 27 Currently dened by s 4(1) of the TPA (as added by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth)).
consumer goods are not goods supplied to a person who is a Consumer;28 a business consumer is not a Consumer who acquires goods or services in the course of a business; and a business consumer is not a person who acquires goods or services in the course of a business under a consumer contract.
A Simple Solution?
It is difficult, as a matter of principle, to understand why in a reform which makes fundamental changes to Australian law the decision was not taken to rationalise the central concept of consumer. Putting that obvious point to one side, there is simply no reason to treat the commercial acquisition of goods or services as acquisition by a consumer. The key consideration is whether the goods or services are acquired for personal use. There is, in fact, a very straightforward way in which substantial uniformity in the ACL could be achieved. The unfair contract terms regime of the ACL employs a much more constrained and more logical denition of consumer. Section 23 restricts the concept to an individual who acquires goods, services or an interest in land wholly or predominantly for personal, domestic or household use or consumption. This denition highlights the absurdity of using goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption as a sufficient basis for saying that a person is a Consumer. Adoption of the concept in s 23 as the general denition would remove the anomalies inherent in the concept of Consumer. It would also deliver consumer protection to consumers who acquire goods or services which are not of a kind ordinarily acquired for personal, domestic or household use or consumption. At the same time it would remove the consumer protection currently afforded to corporations. One source of confusion has been the desire to protect small business. The fact that Small Business Pty Ltd acquires goods or services in the course of a business is not of itself a basis for saying that it cannot be a consumer for some purposes. Thus, the overinclusive denition of Consumer may be considered necessary in order to protect Small Business Pty Ltd. What seems to have been ignored is that small business is protected only where it is an end-user. Where it all goes horribly wrong is that Small Business Pty Ltd must afford consumer protection to corporations who acquire goods or services for business use.29 There are and always have been good reasons to allow freedom of contract in dealings between commercial parties. There is simply no policy basis for giving all corporations large and small rights against a small business supplier on the basis that the corporations are Consumers. There are, of course, ways to protect Small Business Pty Ltd without also protecting business consumers who are not small business consumers.
28 Contrary to the view expressed by the Senate Economics Legislation Committee, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth), Canberra, May 2010, p 1 as part of its rst recommendation that the Bill be passed. 29 See further below, text before n 38.
Misleading or Deceptive Conduct

Section 52 of the TPA, which prohibits conduct in trade or commerce that is misleading or deceptive or is likely to mislead or deceive, appears in Pt V of the TPA. That part of the TPA has the heading Consumer Protection. It is, however, now a matter of history that by a bare majority the High Court of Australia held in Concrete Constructions (NSW) Pty Ltd v Nelson30 that the heading does not control the operation of s 52. Without doubt, the prohibition on misleading or deceptive conduct is one of the most important consumer protection measures of Australian law.31 However, the approach conrmed by the ACL of making the remedies for contravention of the prohibition available to business has done untold damage to the Australian law of contract.32 Its use as a consumer protection measure has been marginalised as business has used it as a means to relief in relation to complex commercial transactions such as a contract for the sale of a business,33 and as an alternative to the tort of passing off.34 As with the concept of Consumer itself, the prohibition on misleading or deceptive conduct is quite insensitive to the needs of small business. Although, in essence, the prohibition does no more than provide relief by way of damages in relation to innocent misrepresentation, by treating the prohibition as stating an inviolable norm of conduct, exclusions and limitations of liability have been deemed ineffective as contrary to public policy.35
Easily Understood? Introduction

A consumer protection regime is addressed to consumers. It ought therefore to be intelligible to consumers. If that goal is satised, the regime will also be easily understood by those burdened by the regime and those who administer it, in Australia the ACCC. So far as the TPA is concerned, there is incontrovertible evidence that it is not understood by any interested party. That the consumer protection regime of the TPA is incomprehensible to consumers is obvious. Consumers are unlikely to understand matters such as: the denition of Consumer in s 4B; the drafting of the implied terms provisions as conditions and warranties; the use in the implied terms provisions of concepts such as supply . . . by description, merchantable quality and supply . . . by sample;
30 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; 92 ALR 193. 31 Analogues of s 52 of the TPA are included in the fair trading legislation of the states and territories as well as the Australian Securities and Investments Commission Act 2001 (Cth) and the Corporations Act 2001 (Cth). 32 See David Harland, Misleading or Deceptive Conduct: the Breadth and Limitations of the Prohibition (1991) 4 JCL 107; David Harland, The Statutory Prohibition on Misleading or Deceptive Conduct in Australia and its Impact on the Law of Contract (1995) 111 LQR 100. 33 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; 120 ALR 16. 34 See Australian Medic-Care Co Ltd v Hamilton Pharmaceutical Pty Ltd (2009) 261 ALR 501 at 632; [2009] FCA 1220 at [591]. 35 See below, text at n 56.
the drafting, and sheer complexity, of the manufacturers liability provisions; and the concept of rescission in s 75A. Not only are consumers confused by the TPA, so also are most suppliers, particularly retailers. Contractual terms which contravene the TPA are in general use in suppliers standard terms. Many standard terms of business include provisions which are (at the very least) misleading. Retailers regularly refer Consumers to manufacturers for defects in goods for which they are liable in contract to the Consumer. It is not that all such suppliers are unscrupulous and aided and abetted by their lawyers. In most cases it is simply that people do not understand the regime. The same explanation must, of course, be given in relation to the efforts of those entrusted with law reform and law enforcement agencies. It is not difficult to nd illustrations of the expression of doubtful understandings of the TPA. Three will suffice. The rst appears in a statement about remedies made in one of the documents on which the Bill is based:36
If a good [sic] does not meet a statutory implied term after a consumer has owned it for some time or used it a lot, it is still a breach of contract. However, in these cases the consumer may not be entitled to claim a refund, but may still be entitled to another form of remedy from the seller for the breach of contract, such as: the replacement of the goods, or the supply of equivalent goods; or repair of the goods, or paying for the cost of repair.
There is a confusing ambiguity in the ugly statement has owned it for some time or used it a lot. In general, the time of delivery is the relevant time for determining whether the supplier has breached one of the implied terms. In addition, notwithstanding the statement quoted above, under the TPA there is no right: to have goods replaced; to the supply of equivalent goods; to have goods repaired; or to payment of the cost of repair. Surprisingly, the only right which the Consumer necessarily enjoys if an implied term has been breached to be compensated for breach of contract is omitted from the statement. The second occurs in an enforcement agencys attempt to explain the TPA consumer protection regime:37
If a seller of goods or services does not meet any one of the obligations [created by a term implied by the TPA], it is a breach of their contract with the consumer. When this happens, consumers are entitled to a remedy from the seller. The type of remedy depends on the circumstances but may include repair or replacement of goods, compensation for loss or damage, a refund or having an unsatisfactory service performed again.
In fact, nowhere does the TPA provide for repair or replacement of goods or having an unsatisfactory service performed again. Bearing in mind that the
36 Issues Paper, p 6. 37 Australian Competition and Consumer Commission, Warranties and Refunds: A Guide for Consumers and Business, Canberra, 2009.
document is intended to be a guide to both consumers and business, the statement says a good deal, including about how difficult it is to understand the TPA. Third, consider also the following statement, taken from a law enforcement agencys website:
Every effort is made to ensure that the material on this site is accurate and up to date. However, the [enforcement agency] does not guarantee or warrant the accuracy, completeness or currency of the information provided.
Is it appropriate that agencies whose task it is to protect consumers include on their websites express disclaimers addressed to those who are seeking to obtain guidance about the legislation which the agencies police? There is no commitment to consumer protection and the term seems more than questionable from the perspective of the unfair contract terms regime of the ACL. Small business is again prejudiced. It is possible to obtain reliable advice on the operation of the TPA, and to draft contracts in accordance with the Act. But that advice is very expensive to obtain. It is quite simply well beyond the reach of small business. There is, therefore, the spectre of Small Business Pty Ltd obtaining agreement from a commercial buyer to a given set of terms in circumstances where the commercial buyer has obtained advice that several of the terms in the contract are void as contravening the TPA. Knowing that they will not impact on any claim it is able to make as a Consumer, the commercial buyer is quite happy to agree to the terms. Small Business Pty Ltd is ignorant of its position, and its costings and insurance arrangements are therefore based on misconceptions.38 The same will be true under the provisions of the ACL proposed by the Bill.
Legislating on the Basis of Misconceptions

The ACL will simplify some aspects of the current regime. However, because it continues the TPAs inappropriate approach to consumer, the TPA has engendered drafting which is based on incorrect assumptions. Because it includes further protection for commercial and ordinary consumers alike which is based on reports which included a great many misconceptions, the ACL will add further confusion. Apart from the example given earlier,39 reference may be made to the belief that the unconscionable conduct provisions do not state norms of conduct. The assessment of the impact of privity of contract on consumers, and the need for further reform, also appear to be based on a misconception. It has been said:40
Consumers should not be forced to prove which rm in the supply chain is responsible for a fault or defect in the goods supplied. Manufacturers and retailers should assume joint responsibility for the quality of the goods and services they supply, and the common law privity of contract doctrine should not be a barrier to recovery by the consumer.
38 It cannot be misleading or deceptive conduct for the commercial buyer not to point out that Small Business Pty Ltds terms are contrary to the TPA. 39 Above, text at n 36. 40 Final Report, p 5.
This was used as part of the justication for a proposal to create joint liability for suppliers and manufacturers of goods.41 The concept of a manufacturer of services is a novel one. In relation to goods, under the common law a consumer is not required to prove who, as between retailer and manufacturer, was responsible for defects in the goods. So far as the claim against the retailer is concerned, because liability for breach of a term implied by the TPA in relation to a supply of goods is strict, the retailer will always be liable. Rights against a manufacturer under the manufacturers liability provisions of the TPA are additional rights. They are valuable indeed if the retailer does not have sufficient assets to meet a claim in contract. Since a consumer may have no privity of contract with a manufacturer of goods, the usual basis for suing the manufacturer at common law is the tort for negligence.42 In contrast, a Consumers contractual rights under the implied terms provisions of the TPA do not require proof that a retailer of defective goods was negligent. Except where the retailer is insolvent, the consumer does not need to claim against the manufacturer.43 Unless the manufacturer has made independent statements in relation to the goods, the prospect of a consumer having rights against the manufacturer but not against the retailer under the consumer protection regime of the TPA is remote in the extreme. And, of course, there is no reason why the retailer should be liable for the manufacturers independent statements.
The ACL as a Standard Form Contract

The unfair contract terms regime of the ACL includes an idea which is very relevant to the drafting of the ACL. The regime is concerned with terms in standard form contracts. One of the objectives is to ensure that standard form contracts are drafted in terms which are transparent, that is, expressed in reasonably plain language, presented clearly and readily available to any party affected by the terms.44 So far as both business and Consumers are concerned, the ACL (particularly in relation to the consumer guarantee provisions) is a standard form contract. It is intended to bind suppliers and Consumers. Individual suppliers and Consumers have played no role in the drafting of its provisions. It operates, like the standard form contracts to which the unfair contract terms regime is directed, on a take it or leave it basis. It would therefore seem quite proper for the government to subject itself to the standards to which it requires suppliers to conform in their standard form contracts. The ACL, or at the very least the consumer guarantee provisions, should be drafted in terms which are expressed in reasonably plain language, presented clearly and readily available to any party affected by its terms. Judged by those standards, the current regime of the TPA fails miserably. Whether the ACL is much of an improvement is in my view very doubtful.
41 Whether the ACL actually achieves that position is doubtful. 42 Grant v Australian Knitting Mills Ltd [1936] AC 85 is a classic example. 43 Nevertheless, the impact of Pt V, Div 2A is that a consumer will often be entitled to claim damages from a manufacturer without having to prove negligence. 44 See ACL, s 24(3). (The current provision is s 3(3).)
Simplication
One of the objectives of the Bill is to simplify the consumer protection regime which is currently expressed in the TPA on the familiar basis of implied terms. To that end, the states and territories will replace the corresponding provisions of their fair trading legislation so that, instead of nine separate enactments45 (17 if the sale of goods legislation is included), there will be only one. However, there is no guarantee of success, even in relation to the replacement of the condition-warranty distinction by the consumer guarantees regime. There are at least ve problems. First, as noted above, the various concepts of consumer will continue to be a source of complexity. Second, there is no current proposal (by state and territory legislation) to restrict the operation of the sale of goods legislation. Accordingly, unless it is clear that Consumers will always have better rights under the ACL, the eight statutes which comprise the sale of goods legislation will remain applicable and relevant as sources of rights and remedies. Third, the lack of commitment to a simplied denition of Consumer which does not embrace commercial transactions is itself a source of complexity. Indeed, given that it will be commercial Consumers who litigate their rights, the continued operation of the sale of goods legislation will necessarily lead to complex claims. Even the modest goal of reducing the range of relevant legislation will fail to be met. For those (including small business) who supply goods or services to commercial Consumers nine separate enactments may be relevant. Fourth, at face value the replacement of the condition-warranty distinction with a range of consumer guarantees is a positive step. Of course, the content of many of the statutory guarantees is fashioned by reference to the old implied terms, but they will not be drafted as conditions and warranties. However, the reform is largely window dressing. The problem is not just that guarantee is another lawyers word (effectively used as a synonym for warranty),46 it is also that there is no direct conferral of rights. There is still as under the current regime a three-step approach. The Consumer must: (1) identify the relevant guarantee; (2) determine that the guarantee has been breached; and (3) work out what rights and remedies are available. That leads to the fth point, which is in my view a crucial failure in the ACL. In practice, the only right which consumers care about is their right to return goods and obtain a refund or replacement goods. That right should be conferred directly. There is no need for a guarantee. Not only does the ACL fail to confer a direct right, where there is a failure to meet a consumer guarantee the consumer must determine whether the failure is a major failure. Thus, s 259 of the ACL states:
(1) A consumer may take action under this section if:
45 In fact, since the fair trading legislation in several jurisdictions do not include implied terms provisions, the number is somewhat fewer. 46 According to the Oxford English Dictionary, 2nd ed, OUP, Oxford, 1989, one derivation for warant is garante. And one meaning of warrant is To guarantee (goods, an article sold or made) to be of the quality, quantity, etc specied.
234 (2010) 26 Journal of Contract Law (a) a person (the supplier) supplies, in trade or commerce, goods to the consumer; and (b) a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2 (other than ss 58 and 59(1)) is not complied with. (2) If the failure to comply with the guarantee can be remedied and is not a major failure: (a) the consumer may require the supplier to remedy the failure within a reasonable time; or (b) if such a requirement is made of the supplier but the supplier refuses or fails to comply with the requirement, or fails to comply with the requirement within a reasonable time the consumer may: (i) otherwise have the failure remedied and, by action against the supplier, recover all reasonable costs incurred by the consumer in having the failure so remedied; or (ii) subject to s 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection.
This is, of course, analogous to the common law concept of fundamental breach of an intermediate term.47 That is, however, a concept more pertinent to commercial than consumer contracts. It seems patently obvious that adopting the analogy is not adequate from a consumer protection perspective. The approach of the ACL will therefore perpetuate the familiar scenario of retailers requiring Consumers to have goods repaired rather than replace them or accept a return of the goods. In this respect, the ACL is too narrow. Under the TPA, a breach of condition is a sufficient basis for rejection of goods and a refund of the price. The Consumer may choose to accept replacement goods, or indeed agree to permit the supplier to have goods repaired. But the Consumer is not obliged to do so. Under the ACL, some former breaches of condition will take effect as minor failures in respect of which the supplier is entitled to repair the goods. The Consumer is entitled to compensation, but Consumers do not care about rights to damages. Nor are they impressed with a right to have new goods repaired. Given that the sale of goods legislation will remain applicable, commercial buyers in particular are likely to continue to assert their automatic rights of rejection of goods for breach of condition. Consumers of goods for personal use should do the same.
Is Compliance Possible? Introduction

It goes without saying that it is impossible to comply with a consumer protection regime which is incomprehensible. For a supplier whose contract includes terms which are, for example, void under the TPA,48 the implications of an incomprehensible regime are serious indeed. At the very least, the
47 Derived from Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26. 48 See s 68 of the TPA.
supplier will have engaged in misleading or deceptive conduct. The supplier may also be liable in damages.49 And it may also be liable to a criminal penalty.50 The ACL continues this uncompromising approach to compliance. In addition to the coercive enforcement regime which already exists under the ACL, a consumer may claim damages if a supplier:51
[makes] a false or misleading representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2)
And the supplier commits a criminal offence one of strict liability by making such a false or misleading representation.52 The ACL adds another prohibition, namely, in relation to making:53
a false or misleading representation concerning a requirement to pay for a contractual right that: (i) is wholly or partly equivalent to any condition, warranty, guarantee, right or remedy (including a guarantee under Division 1 of Part 3-2); and (ii) a person has under a law of the Commonwealth, a State or a Territory (other than an unwritten law).
Again, the supplier commits a criminal offence one of strict liability by making such a false or misleading representation.54 Since it seems difficult to draft a service contract which does not contravene this prohibition, such contracts may well become a thing of the past for Australian consumers. Equally, however, those who achieve drafting which is consistent with the prohibition will have the luxury of being able to deny liability under the contract until the promisees consumer guarantee rights have been exhausted. Unfortunately, this is just the tip of the iceberg so far as the ability to comply with the ACL is concerned.
A Bridge Too Far

The prohibition in s 52 of the TPA has been embraced with enthusiasm by the courts. It has been described as a norm of conduct.55 And so it is. Unfortunately, however, it is a norm of conduct with which it is impossible to comply all the time. To make matters worse, s 51A, an evidentiary provision, states that where a corporation makes a representation with respect to any future matter; . . . the representation shall be taken to be misleading. And the nal nail was hammered in the coffin of Australian commerce by the decision
49 On the basis of contravention of s 53(g) of the TPA. See, eg Australian Competition and Consumer Commission v Bill Express Ltd (ACN 090 059 564) (in liq) (2009) 259 ALR 483 at 503; [2009] FCA 1022 at [86]. 50 Under s 75AZC(1)(k) of the TPA. 51 Section 29(1)(m) of the ACL (replacing s 53(g) of the TPA). 52 Section 151(1)(m) of the ACL (replacing s 75AZC(1)(k) of the TPA). The penalty is $1,100,000 ($220,000 if the person is not a body corporate). 53 Section 29(1)(n) of the ACL. 54 Section 151(1)(n) of the ACL. The penalty is $1,100,000 ($220,000 if the person is not a body corporate). 55 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 520; 158 ALR 333 at 353 per Gummow J.
of the courts to treat any provision of a contract which purports to exclude or limit liability for contravention of s 52 as invalid on the basis of public policy.56 Although the ACL continues the prohibition on misleading or deceptive conduct, s 51A has been replaced with a slightly more sensible provision. The presumption in relation to a representation with respect to a future matter remains, but s 4(2) of the ACL provides that a person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary. Most academics welcomed the prohibition on misleading or deceptive conduct, and have applauded the unyielding approach of the courts to its application. And, of course, it cannot be denied that not engaging in misleading or deceptive conduct is a standard of conduct to which we should all aspire. The problem is that, just as we cannot do so in our ordinary life, so it cannot be done in trade or commerce. A person engages in misleading or deceptive conduct if a statement which is false is made in trade or commerce. If loss or damage is suffered, damages may be claimed as of right under the ACL. It is irrelevant that there was no knowledge of the falsity and no intention to mislead. But nobody can be right all the time. Think of what it would mean if the in trade or commerce requirement were taken away from the prohibition on misleading or deceptive conduct. Politicians are apt to make various representations in relation to future matters in election campaigns. Imagine what fun could be had with the aid of s 51A on the basis that the politician was deemed to have engaged in misleading or deceptive conduct! And consider the position of those responsible for the reports which have inuenced the drafting of the ACL, and which contain a great number of statements about the law of contract and the operation of the implied term provisions of the TPA which appear to be misleading.57 Similar comments may be made in relation to the ACCC document referred to above.58 Consider also the following statement, taken from a law enforcement agencys website:
The contents of this web site are intended for informational purposes only. The . . . Government shall in no event accept any liability for loss or damage suffered by any person or body due to information provided on this site or linked sites. The information on the . . . Government web site is provided on the basis that persons accessing the web site undertake responsibility for assessing the relevance and accuracy of its content.
Again, it may be questioned whether it is appropriate for governments whose task it is to protect consumers to include on their websites express disclaimers to those who are seeking to obtain guidance about the legislation for which they are responsible. But from a misleading or deceptive conduct perspective, the use of the disclaimer must assume that the conduct does not occur in trade or commerce, or that the privileged position of the Crown
56 See, eg Byers v Dorotea Pty Ltd (1986) 69 ALR 715; Alan Davis Group Pty Ltd v Rivkin Financial Services Ltd (2005) 216 ALR 766 at 775; [2005] NSWSC 369 at [51]. 57 Above, text at n 36. 58 Above, text at n 37.
(under the TPA) permits the disclaimer. But it might at least be asked whether there is any justication for deeming users to undertake responsibility for assessing the relevance and accuracy of its content, particularly given that (for much of the information) users may nd it difficult to assess the accuracy of content. Without going into the details, four problems created by the prohibition on misleading or deceptive conduct may be mentioned. First, although it has a consumer protection purpose, a great many of the reported cases on the prohibition have concerned disputes between corporations.59 Second, because exclusion and limitation clauses are contrary to public policy, if a contract for the sale of a business for, say, $5 billion includes a warranty of the accuracy of the company accounts, but the accounts contain a material error, the agreed limitations of liability for breach of warranty do not bind the buyer in a claim for relief based on misleading or deceptive conduct. Therefore, although the buyer freely agreed to the limitations of liability, and notwithstanding that the seller agreed to the price on that basis, the buyer is free to renege on its agreement. The sellers damages liability is not limited by the contractual provision or by the principles of tort or contract.60 Third, there is an important difference between liability for fraud and liability for innocent misrepresentation. Under the common law, the only remedy for innocent misrepresentation is rescission of the contract.61 But, in cases of deceit, damages can be claimed. Not only does the prohibition on misleading or deceptive conduct remove that distinction, it also alters the test. Under the common law, the test for whether a representation is fraudulent is whether the statement, as its maker believed it would be understood, conveys a false impression. For the purposes of the ACL (as under s 52 of the TPA), the test is how a reasonable person in the position of the representee would interpret it.62 It is therefore no defence for the representor to prove that, in the sense that the representor believed it would be understood, the representation was not misleading. Although that may seem a minor point, it is actually a very signicant difference. In effect, an applicant for relief in respect of misleading or deceptive conduct has all the remedies of a person induced to contract by fraud. That includes the benet of the public policy rule in relation to exclusions of liability. In addition, not only is the applicant freed from the evidentiary burden of a claim for fraud, but honest mistake is not a defence for the respondent.63
59 Above, text at n 33. 60 One of the themes of the decisions (repeated time after time) is that little reliance can be placed on common law analogies. See, eg Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410 at 419; 75 ALR 271 at 280; Henville v Walker (2001) 206 CLR 459 at 501; 182 ALR 37 at 68; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at 407; 204 ALR 26 at 37; [2004] HCA 3 at [44]. Cf Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 510; 158 ALR 333 at 344. 61 Of course, under Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 a person may be liable in damages for an innocent misrepresentation made in breach of a duty of care. 62 See, eg Australian Competition and Consumer Commission v Bill Express Ltd (ACN 090 059 564) (in liq) (2009) 259 ALR 483 at 501; [2009] FCA 1022 at [76]. 63 Contrast the defences under the misrepresentation legislation: Civil Law (Wrongs) Act 2002 (ACT), s 174(3)(a); Misrepresentation Act 1972 (SA), s 7(2)(a).
Fourth, the courts have found it impossible to explain the operation of s 51A and the interaction between s 52 and the idea that a contractual promise may be a representation in relation to a future matter.64 Indeed, there are statements in some cases which suggest that, in Australia, where a contract is entered into in trade or commerce, there is a presumption that each and every express promise is misleading or deceptive conduct.65 That remains the position under the ACL.
Unfair Terms
Included in the current unfair contract terms regime of the ACL is a set of examples of terms which may be unfair. Although there is no presumption that such terms are unfair, that will be their impact in practice. Even if that is not correct66 and there would seem little point in having the examples unless they operated in that way it must still be correct to say that to have any utility for those affected by the regime the examples must be clear and to the point. To use the description in the ACL in relation to standard form contracts, the examples must be transparent.67 At various times in the discussion of the proposals for unfair terms reform, reference was made to Pt 2B of the Fair Trading Act 1999 (Vic) where an unfair terms regime was rst enacted in Australia and the derivation of the matters referred to in s 32X of the Fair Trading Act 1999 (Vic) from the examples of potentially unfair terms in the Unfair Terms in Consumer Contracts Regulations 1999 (UK).68 That is, however, something of a distortion. Although it is easy to see parallels between the list in s 32X and the Unfair Terms in Consumer Contracts Regulations 1999 (UK), the terms are radically different. Similarly, because the examples in the unfair contract terms regime of the ACL have been copied from the matters listed in s 32X, they also differ markedly from the Unfair Terms in Consumer Contracts Regulations 1999 (UK). Of course, there is no reason why an Australian consumer protection regime in relation to unfair contract terms should adopt the same examples as those applicable in the United Kingdom. Equally, however, it would be misleading to support this aspect of the ACL on the basis that similar legislation has been in force without apparent difficulties in other jurisdictions, if there are in fact major differences. There are major differences. And all those differences are contrary to the interests of both business and consumers. Three examples from the list set out in s 25 of the ACL69 may be given to illustrate the point. The rst example is stated in s 25(b): a term that permits, or has the effect of permitting, one party (but not another party) to terminate the
64 See J W Carter, Carter on Contract, LexisNexis Butterworths, Sydney, 21-050. 65 See Diane Skapinker and J W Carter, Breach of Contract and Misleading or Deceptive Conduct in Australia (1997) 113 LQR 294. 66 The Parliament of the Commonwealth of Australia, Explanatory Memorandum: Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2009 (Cth), 2009, 2.52 denies the existence of a presumption. 67 Above, text at n 44. 68 Itself derived from the European Directive of 1993. 69 The current provision of the ACL is s 4 (as enacted by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth)).
contract. The problem with the example is that it is indeterminate. Contracts inevitably contain termination clauses which are not bilateral. No-one could suggest that a term is unfair because it entitles the supplier but not the consumer to terminate for fundamental breach by the consumer. What is missing in the example is a statement of the focus of the termination clause, that is, the basis for termination. A corresponding example in the Unfair Terms in Consumer Contracts Regulations 1999 (UK) is:
authorising the seller or supplier to dissolve the contract on a discretionary basis where the same facility is not granted to the consumer, or permitting the seller or supplier to retain the sums paid for services not yet supplied by him where it is the seller or supplier himself who dissolves the contract.
Unlike the example in the ACL, this is not indeterminate. It has particular focal points which make sense from a consumer protection perspective. The second is the example stated in s 25(k): a term that limits, or has the effect of limiting, one partys right to sue another party.70 That example would apply to any exclusion or limitation of liability. The impact would seem to be that a supplier must be in a position to justify any exclusion or limitation of liability. A corresponding example in the Unfair Terms in Consumer Contracts Regulations 1999 (UK) is:
excluding or hindering the consumers right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, unduly restricting the evidence available to him or imposing on him a burden of proof which, according to the applicable law, should lie with another party to the contract.
Again, unlike the example in the unfair terms regime, this has specic reference points. It is only right that the supplier should be required to justify such terms. But the ACL is not so discriminating. The third example is expressed in s 25(i): a term that limits, or has the effect of limiting, one partys vicarious liability for its agents. The rst question which comes to mind is why on earth a consumer protection regime would include an example drafted in terms of vicarious liability. How many consumers are likely to understand it? More substantively, of course, the principal basis of liability for a corporation is an act or omission of an employee. Does the example therefore simply add another basis for challenging any exclusion or limitation of liability?71 The corresponding example in the Unfair Terms in Consumer Contracts Regulations 1999 (UK) is:
limiting the sellers or suppliers obligation to respect commitments undertaken by his agents or making his commitments subject to compliance with a particular formality.
70 See also the example in s 25(a) which refers to a term that permits, or has the effect of permitting, one party (but not another party) to avoid or limit performance of the contract. Compare the examples in s 25(h), (i), (l) and (m), all of which in one way or another relate to exclusion or limitation clauses and analogous provisions. 71 Contrast Australian Competition and Consumer Commission, A Guide to the Unfair Contract Terms Law, Canberra, 2010, p 20, which treats the example as limited to a disclaimer of liability or responsibility for representations made to prospective consumers by . . . agents at the point of sale.
That is, of course, a very different kettle of sh. The example suggests that a consumer can put in issue a provision under which the supplier is entitled to question contracts made on its behalf by its agents. Ultimately, the impact of the unfair contract terms regime of the ACL on exclusions and limitations of liability is somewhat limited. Most recipients of goods or services under consumer contracts to which the unfair terms regime of the ACL applies are also Consumers.72 As such, at present they have the benet of non-excludable rights under implied terms provisions of the TPA. Clearly, the supplier has no power to exclude or limit liability for breach of any of the implied terms. The upshot is that the principal relevance of exclusions and limitations of liability to contracts to which the examples in the unfair terms regime currently relate is where the exclusion or limitation applies to an express obligation of a supplier. It must be a considerable disincentive to suppliers who would otherwise be willing to undertake express obligations additional to those implied by law that any qualication to the express term will have to be justied. Matters will change when the Bill comes into force. The unfair contract terms regime will be the same as the current regime. However, under the ACL the implied terms provisions of the TPA will be replaced by the consumer guarantees regime. Of course, so far as implied consumer guarantees are concerned the impact is largely the same. However, the consumer guarantees regime also includes express guarantees.73 Contracting out of liability for the breach of those guarantees is prohibited in the same way as it is prohibited in relation to implied consumer guarantees. There is, therefore, no question of a Consumer having to establish that an exclusion or limitation of liability falling within one or more of the examples in s 25 is an unfair term. The exclusion or limitation is void.74 Since any limitations of a suppliers liability will in fact be void, examples referable to that concept will be irrelevant in relation to consumer contracts for the supply of goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption. This will lead to very odd situations: (1) if an individual Consumer acquires goods under a consumer contract any exclusion or limitation of liability is void and the unfair contract terms regime is irrelevant; (2) because individuals who acquire goods (or services) not of a kind ordinarily acquired for personal, domestic or household use or consumption under a consumer contract are not Consumers and have no statutory guarantees under the ACL they must establish that an exclusion or limitation of liability is an unfair term; and (3) where a corporation is a Consumer because it has acquired goods of a kind ordinarily acquired for personal, domestic or household use or consumption the corporation does not have the benet of the
72 As recipients of goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption. 73 This concept is very broadly dened. See below, text following n 84. 74 See ss 64, 276 of the ACL. See further below, text at n 85.
unfair contract terms regime but no question of fairness can arise because it has the benet of a statutory prohibition on all exclusions and limitations. The compliance burden for suppliers of goods and services to Consumers and under consumer contracts will be enormous under the ACL. Just how many suppliers will actually understand the impact of the various regimes which will be put in place by the ACL is impossible to judge. However, it will necessarily take some time. Unfortunately, suppliers have only until 1 January 2011 to work their way through the provisions and make the necessary adjustments to their contracting, marketing, purchasing, systems and insurance arrangements. If they get it wrong or simply fail to meet the deadline they will be exposed not only to claims for damages from Consumers, and be liable for criminal penalties, they will also be exposed to class actions and the coercive regime which the ACCC administers under the ACL. It is therefore worth making the point again that the compliance burden would be reduced considerably by the simple expedient of abandoning the denition of Consumer in favour of general application of the concept of consumer utilised (as consumer contract) in the unfair contract terms regime.
Unconscionable Conduct
There are various prohibitions on unconscionable conduct in the TPA: conduct which is unconscionable within the meaning of the unwritten law, from time to time, of the states and territories (s 51AA); conduct, in trade or commerce, in connection with the supply or possible supply of goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption, which is unconscionable (s 51AB); and unconscionable conduct in certain business transactions (s 51AC). The position under the TPA is dramatically different from the position under the general law. Under the general law of contract, unconscionable conduct is relevant in various contexts. The two main examples are estoppel (where unconscionable conduct is the basis on which a person who has reasonably relied on a non-contractual promise or representation may obtain relief), and the Amadio75 principle (under which relief is available against a person who takes unconscionable advantage of some special disability under which another suffers when entering into the contract). Three features are important. First, unconscionable conduct prevents a person from invoking their legal rights. Under the Amadio principle, although the contract is not void, the legal rights of the party who engaged in unconscionable conduct are qualied by the relief available to the other party. The rights of the party affected by the conduct are subject to the usual restrictions such as restitutio in integrum, affirmation of the contract, laches and so on. Similarly, in relation to estoppel, the legal rights of the party estopped are qualied by the equity of the case. In each case, but particularly in respect of estoppel, the person found to have engaged in unconscionable conduct has (by denition) acted in accordance with their legal rights.
75 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; 46 ALR 402.
Second, under the Amadio principle unconscionable conduct is a vitiating factor under which the party affected is entitled to rescind the contract and obtain consequential relief. In relation to estoppel, unconscionable conduct precludes a person from going back on a promise or representation, and relief is determined on that basis. There is an element of discretion in responding to the unconscionable conduct and the general law requires the courts remedial response to be proportionate to the conduct. Third, although there is an obvious public policy element in the control of unconscionable conduct, neither in the context of estoppel nor under the Amadio principle is it a legal wrong to engage in unconscionable conduct. Accordingly, there is no entitlement to common law damages. Indeed, compensation or restitution is not available as of right. The position is radically different under the TPA. Because the TPA prohibits unconscionable conduct, damages may be claimed as of right under the TPA in relation to loss caused by the conduct.76 The same is true under the ACL, where each of the three prohibitions referred to above will be replaced by provisions designed to make it easier to establish unconscionable conduct.77 Indeed, prior to the Bill the TPA was amended to make a pecuniary penalty payable for contravention of the unconscionable conduct prohibitions.78 That position will continue under the ACL, as amended by the Bill. It is not easy to justify the right to claim damages. It is even more difficult to justify the imposition of a pecuniary penalty for conduct which will generally amount to no more than the unconscionable assertion of legal rights. Under the general law it is always difficult to determine whether or not a person has acted unconscionably. It is no easier under the TPA. Consider ss 21 and 22 of the ACL. In relation to the former, ve specic factors may be taken into account (under s 21(2)). And in relation to the latter, there are no less than 12 such factors (under s 22(2)).79 How a person is expected to know that he or she is engaging in unconscionable conduct is anyones guess. When it is also borne in mind that the concept is ultimately subjective, and that corporations more often than not deal with their customers as members of a class, rather than as individuals, the prospect of a corporation knowing that it has engaged in unconscionable conduct is remote indeed.80 As if the right to damages, and the potential imposition of pecuniary penalties were not a sufficient deterrent, the ACCC has further enforcement powers in relation to contravention of the prohibitions on unconscionable conduct. These include:81 disqualication orders;
76 See s 82. Further orders are available (at the discretion of the court) under s 87. 77 See Pt 2-2 of the ACL. 78 See TPA, s 76E (added by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth)). 79 Section 21 will be repealed by the Competition and Consumer Legislation Amendment Bill 2010 (Cth). 80 The Competition and Consumer Legislation Amendment Bill 2010 (Cth) proposes an interpretation provision under which a person who engages in a system of conduct or pattern of behaviour may be found to have engaged in unconscionable conduct even though there is no victim of the conduct. 81 The relevant provisions were added by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth), Pts 2-6.
substantiation notices; obtaining orders to redress loss or damage suffered by non-party consumers; infringement notices; and public warning notices. In theory, commercial suppliers of goods and services can put in place procedures to ensure that they do not engage in unconscionable conduct. Whether that is possible in practice is difficult to know. But one thing is clear, to consider the actual position of each individual with whom a corporation deals is impossible. Even when dealing with other corporations, a supplier (or customer) may have hundreds of customers (or suppliers). The cost to business, and therefore consumers, must surely far outweigh any benet to the community. No pecuniary penalty is payable for contravention of the prohibition on misleading or deceptive conduct. Given the importance attached to that prohibition, it might be asked why contravention of that prohibition is not subject to the full rigour of the enforcement regime which applies on contravention of the prohibitions on unconscionable conduct. The answer, it appears,82 is that the prohibitions on unconscionable conduct do not state a norm of conduct. That is, obviously, not correct.83 However, if it was correct it would more logically justify the inclusion of misleading or deceptive conduct and the exclusion of unconscionable conduct, that is, exactly the reverse of the position under the ACL.
Is it Balanced? Introduction
In the discussion above there are several illustrations of lack of balance in the various regimes of the ACL. The denition of Consumer which determines the scope of the contractual protection afforded to consumers is unbalanced both in terms of whom it does protect and those that it does not protect. People are denied protection on the cirumstantial basis that they acquire for personal use goods which are not of a kind ordinarily acquired for personal use. Commercial consumers, including public listed companies, are protected as Consumers on a circumstantial basis, namely, that the goods or services acquired are goods or services of a kind that are ordinarily acquired for personal use. The approach of the ACL to misleading or deceptive conduct and unconscionable conduct also lacks balance. In relation to the former, the failure to draw any distinction between misleading or deceptive conduct in a commercial and a consumer context provides benets which are neither necessary from a consumer protection perspective nor reasonable in scope.
82 See the Ministers Second Reading Speech, Trade Practices Amendment (Australian Consumer Law) Bill 2009 (Cth). 83 See, eg Jefferson Ford Pty Ltd (ACN 005 629 897) v Ford Motor Co of Australia Ltd (ACN 004 116 223) (2008) 246 ALR 465 at 487; [2008] FCAFC 60 at [87]. Cf Unconscionable Conduct Issues Paper, p 7 which adopts the view that the concept refers to a pejorative moral judgment.
The coercive enforcement regime is also quite disproportionate to the seriousness of the conduct. However, the most signicant lack of balance lies in the consumer guarantees regime.
Consumer Guarantees Regime

The impact of the denition of Consumer in the ACL is most acutely felt in application of the proposed consumer guarantees regime. Lack of balance arises in several respects. Three points have already been made from that perspective: (1) it denies consumer protection to ordinary consumers who happen to acquire goods or services which are not of a kind ordinarily acquired for personal, domestic or household use or consumption; (2) it deprives consumers of the automatic right to reject goods (and terminate the contract) for what would formerly have been a breach of condition; and (3) it treats acquisition of goods and services for commercial use as being on a par with acquisition for personal use. It necessarily follows from the third point that commercial Consumers are in a privileged position, not only in dealings with their suppliers but also by comparison with commercial consumers who do not enjoy the benet of the ACL. The extent of this lack of balance has gone unnoticed.84 Two areas stand out. The rst is the approach to express warranties. Relevantly, s 2 of the ACL denes express warranty in terms of three elements: (1) an undertaking, assertion or representation relating to the quality, state, condition, performance or characteristics of goods; (2) that the undertaking etc was given or made in connection with the supply of goods, or in connection with the promotion of the supply or use of goods; and (3) that the natural tendency of the undertaking etc was to induce acquisition of the goods. It follows that, notwithstanding the presence of the prohibition on misleading or deceptive conduct, the ACL deems every representation having a natural tendency to induce a contract for the supply of goods to be an express warranty. The signicance of the approach can be seen in s 59(2) of the ACL, which creates a statutory guarantee that the supplier will comply with any express warranty. Two points follow from this. The rst is the application of s 64. That provision renders void any contractual term which purports to exclude, restrict or modify the consumer guarantee provisions of the ACL, a right conferred by such a provision or the liability of a person for a failure to comply with the
84 Virtually all the examples of the operation of the ACL in the Explanatory Memorandum concern the acquisition of goods or services for personal use. There is no attempt to explain the impact of the ACL on commercial contracts. The RIS was in fact prepared on the basis that the consumer guarantees regime has no impact on commercial contracts. See above, text at n 3 and further below, text at n 97.
guarantee.85 It would be a major step to declare void all exclusions or limitations of liability in contracts under which Consumers acquire goods for personal use. It is nothing short of remarkable that the freedom of contract in relation to such terms should also be denied to suppliers supplying to commercial acquirers of goods. On several occasions,86 those who have promoted the ACL have made the point that this aspect of the ACL is based on the Consumer Guarantees Act 1993 (NZ). The point has not however been made that s 43 of that Act permits commercial consumers to contract out of the legislation. Indeed, the Senate Economics Legislation Committee expresses87 the view that the impact of s 3(2) of the ACL is that s 3 will not apply if the goods are used in trade or commerce, so that the ACL has the same effect as the exemption under the New Zealand Act. However, that is clearly wrong. The relevant part of s 3(2) states that a person is a Consumer unless the acquisition is for the purpose of using the goods up or transforming them in the course of a process of production or manufacture or in the course of repairing or treating other goods or xtures on land. That is much more limited than the Consumer Guarantees Act 1993 (NZ). Moreover, under that Act express warranties by a supplier do not take effect as statutory guarantees.88 Lack of balance is also shown in another aspect of the ACLs consumer guarantees regime which has no counterpart in the Consumer Guarantees Act 1993 (NZ). Under s 259(4) of the ACL, a consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure. Accordingly, in place of the rule in Hadley v Baxendale89 Consumers are entitled to invoke the remoteness criterion applied under the tort of negligence. Although it has, of course, been debated whether there is any difference of substance between reasonably foreseeable loss and loss falling within the rst limb of the rule in Hadley v Baxendale,90 the High Court of Australia91 has agreed with the House of Lords92 in saying that there is! And it clearly follows that any thoughts of linking the extent of liability to
85 See also s 276 of the ACL. Section 139A(3) of the ACL (replacing s 68B of the TPA) creates an exception for recreational services. However, the exception applies only if the exclusion or limitation is limited to liability for death or physical or mental injury of an individual. Apparently, Australian public policy places a higher premium on the recovery of compensation in respect of economic loss than recovery in respect of death or personal injury! 86 See, eg Submission by the Treasury to the Senate Economics Legislation Committee, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth), 11 May 2010, p 22 (provisions are essentially based on similar provisions of the New Zealand Act). 87 The Senate Economics Legislation Committee, Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth), Canberra, May 2010, 4.79. 88 See s 13. Under s 6 of the Contractual Remedies Act 1979 (NZ), misrepresentations take effect as warranties for the purpose of damages assessment. 89 (1854) 9 Ex 341 at 354; 156 ER 145 at 151. 90 See H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791. 91 Astley v Austrust Ltd (1999) 197 CLR 1 at 23, 28; 161 ALR 155 at 170, 174. 92 Koufos v C Czarnikow Ltd [1969] 1 AC 350.
the risks voluntarily assumed by a contracting party,93 can be forgotten in the context of consumer guarantees. It might be pointed out that the liability for failure to comply with a consumer guarantee is statutory, not contractual. From that perspective there is no reason why the extent of liability should be dened by reference to principles of contractual damages. However, a guiding feature of the ACL was allegedly simplication and amalgamation, not major change. In any event, there seems no point in basing express guarantees on the concept of an express warranty if the principles of damages for breach of warranty are then side-stepped. Similarly, whatever the merits of the approach in relation to contracts with genuine consumers, the treatment of both express warranties and pre-contractual representations as statutory guarantees has no public policy basis in the commercial context.
Conclusions
If nothing else, the sketch of some of the important features of the Australian consumer protection in the ACL actual and proposed shows that the compliance burden on business is excessive and its scope misconceived. Consumer protection is important. But things must be put in perspective. Rights should not be given to corporations in the name of consumer protection. Acquisition of goods or services in the course of a business is not a consumer acquisition. Even if protection should be extended to small business consumers, the idea that a multi-million dollar contract should be a consumer contract because the goods or services are of a kind ordinarily acquired for personal, domestic or household use or consumption is nonsensical. Similarly, the idea which the regime in relation to misleading or deceptive conduct suggests, namely, that innocent mistakes should expose a person to unlimited liability just because the mistake occurs in trade or commerce is bad enough, but to call that consumer protection when no consumer may be involved is itself misleading. For the same reason, deeming all representations which induce a contract to be statutory warranties which cannot be excluded and which carry a potentially unlimited liability is out of place in the commercial context, and quite unnecessary even in a consumer protection regime because of the prohibition on misleading or deceptive conduct. The TPA is incomprehensible, not only to those who are protected by it and subject to it, but also, it appears, to those charged with administering it. The cost burden of such a regime is enormous and ever increasing as the screws are tightened with every piece of legislation which is passed. Consumers must, of course, ultimately pay the price of this. And, given the protection afforded to big business, the whole regime discourages competition.94 To say that the time has come for simplication and rationalisation is an understatement. There is no improvement under the ACL. Valuable rights are taken away while others are added to the ultimate benet of commercial Consumers. Whatever
93 See Transeld Shipping Inc v Mercator Shipping Inc (The Achilleas) [2009] 1 AC 61; [2008] UKHL 48. 94 Cf Nicola v Ideal Image Development Corp Inc (2009) 261 ALR 1 at 1516; [2009] FCA 1177 at [60].
simplication has occurred, the value is far outweighed by the increase in liability for suppliers. The compliance costs, in proportion to the total revenue of corporations, are disproportionate, favouring big business at the expense of small business. As under the TPA, there is no sign of give and take in the ACL. All consumers have bad experiences, and quite frightening statistics have been produced as to the cost of the imperfect regime of the TPA to business and consumers in relation to mobile phones and other electronic goods.95 Yet, anyone who takes a moment to consider their own consumer protection misfortunes in comparison to their total expenditure as consumers would nd it negligible both in terms of frequency and amount. Many of the consumers whose woes are the subject of statistics mobile phones and other electronic goods are in fact well-off. They purchase hundreds of dollars of goods and services every week. In the course of a year families spend many thousands of dollars, and in all but a few isolated instances the contracts are performed without mishap. Any comparison between the troubling statistics and total Australian consumer expenditure whatever the gure is would show that Australians do very well indeed. Consumers neither need nor desire extensive rights to a range of remedies. Nor do they want or need lawyers to draft consumer protection legislation which only lawyers can explain. What consumers want is the ability to return defective goods and get their money back. The ACL does not achieve that modest goal. The extended remedies of compensation count for very little. Those who are beneted are commercial Consumers. Given all differences between the ACL and the consumer protection regime of the TPA, it cannot be correct to say that proposal does not involve a change in the substantive rights and obligations of businesses or consumers.96 Accordingly, Parliament is considering the Bill without the benet of any RIS.97
Postscript
On 24 June 2010 the Australian Parliament passed the Trade Practices Amendment (Australian Consumer Law) Bill (No 2) 2010 (Cth) as an uncontentious Bill. Several amendments were made, and adopted without debate. The amendment most relevant to the article is the extension of the concept of consumer (for the purposes of the consumer guarantees regime) to include a person who acquires goods (other than for resupply) or services at a price which does not exceed $40,000.
95 See National Education and Information Advisory Task Force, National Baseline Study on Warranties and Refunds, October 2009. 96 See above, n 3. 97 Which appears to be contrary to the National Competition Policy See cl 5(1) of the Competition Principles Agreement.

21 - John Carter Article On Competition and Consumer Act

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21 - John Carter Article On Competition and Consumer Act

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The Commercial Side of Australian Consumer Protection Law

Elements of the Current Regime

The Commercial Side of Australian Consumer Protection Law 223

224 (2010) 26 Journal of Contract Law

Who Is a Consumer? Introduction

The Commercial Side of Australian Consumer Protection Law 225

Denition in the TPA and ACL

226 (2010) 26 Journal of Contract Law

The Commercial Side of Australian Consumer Protection Law 227

Other Denitions of Consumer

228 (2010) 26 Journal of Contract Law

The Commercial Side of Australian Consumer Protection Law 229

Misleading or Deceptive Conduct

Easily Understood? Introduction

230 (2010) 26 Journal of Contract Law

The Commercial Side of Australian Consumer Protection Law 231

Legislating on the Basis of Misconceptions

232 (2010) 26 Journal of Contract Law

The ACL as a Standard Form Contract

The Commercial Side of Australian Consumer Protection Law 233

Is Compliance Possible? Introduction

The Commercial Side of Australian Consumer Protection Law 235

A Bridge Too Far

236 (2010) 26 Journal of Contract Law

The Commercial Side of Australian Consumer Protection Law 237

238 (2010) 26 Journal of Contract Law

The Commercial Side of Australian Consumer Protection Law 239

240 (2010) 26 Journal of Contract Law

The Commercial Side of Australian Consumer Protection Law 241

242 (2010) 26 Journal of Contract Law

The Commercial Side of Australian Consumer Protection Law 243

244 (2010) 26 Journal of Contract Law

Consumer Guarantees Regime

The Commercial Side of Australian Consumer Protection Law 245

246 (2010) 26 Journal of Contract Law

The Commercial Side of Australian Consumer Protection Law 247

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