Significant reforms proposed to address unfair trading practices

The Australian Government is currently considering expanding consumer laws to address unfair trading practices. This review is expected to result in new or amended laws which capture a broad range of “unfair” conduct not specifically prohibited under current laws. These changes, if made, will affect any dealings that businesses have with consumers or small businesses, and are likely to result in increased regulatory uncertainty, and additional compliance costs and risks.

The Government is currently seeking stakeholder feedback on four different policy options for these new or amended laws, including the possible costs and benefits of those options. The benefits include bolstering protection for individual consumers and small businesses, but, in terms of costs, they will likely also increase compliance costs and risks for businesses. Interested parties have until 29 November 2023 to make a submission on the proposed options.

 

What are unfair trading practices?

Unfair trading practices, also known as unfair business practices or unfair commercial practices, are types of commercial conduct that can result in significant harm to consumers and small businesses but are not specifically prohibited under current Australian consumer laws.

The Government’s Consultation Regulation Impact Statement (CRIS) includes the following non-exhaustive list of potentially unfair trading practices:

• Inducing consumer consent or agreement to data collection through concealed data practices;
• Exploiting bargaining power imbalances in supply chain arrangements, including by unilaterally varying supply terms at short notice;
• Omitting or obfuscating material information which distorts consumers’ expectations or understanding of the product or service being offered;
• Using opaque data-driven targeting or other interface design strategies to undermine consumer autonomy;
• Exploiting or ignoring the behavioural vulnerabilities of consumers that are present in the ‘choice architecture’ of products or services (digital or otherwise);
• Adopting business practices or designing a product or service in a way that dissuades a consumer from exercising their contractual or other legal rights;
• Non-disclosure of contract terms including financial obligations (at least until after the contract is entered into);
• All or nothing ‘clickwrap’ consents that result in harmful and excessive tracking, collection and use of data, and don’t provide consumers with meaningful control of the collection and use of their data; and
• Providing ineffective and/or complex disclosures of key information when obtaining consent or agreement to enter into contracts.

The Government states in its CRIS that it considers there to be difficulties in fitting these types of practices within current prohibitions and, accordingly, there are “gaps in existing protections” in Australia’s current consumer laws. The Government also observes that many other countries have a specific prohibition against unfair trading practices.

 

What options is the Australian Government considering?

The Government has outlined four policy options for addressing unfair trading practices:

1. No change to existing consumer laws. Existing prohibitions, such as misleading or deceptive conduct, unconscionable conduct and unfair contract terms, would continue to operate and regulators would continue to monitor and enforce those laws. The Government has indicated that this is not a preferred option, stating that “unfair trading practices not covered by existing laws would likely continue, with consumers and small businesses bearing financial and non-financial costs as a result of these practices, with no effective options for redress.”
2. Expand the current prohibition against unconscionable conduct to cover unfair trading practices, even where such conduct falls short of the current threshold for unconscionability. This might be done by adding unfair conduct as a factor or element that must be assessed in determining whether conduct is unconscionable or by adding the concept of unfairness to the unconscionable conduct provision itself. Consideration is also being given to making the prohibition on unconscionable conduct prospective, so it applies to conduct that is likely to be unconscionable.
3. Introducing a new general prohibition on unfair trading practices. This prohibition would either establish a norm of conduct about fair dealing and fair trading, which would then adapt to technological and commercial change, or rely on a specific definition of what constitutes an unfair practice. No specific definition has yet been proposed, rather it would be determined through the policy development process if this option is preferred.
4. Adopting a combination of a general prohibition with a list of specific prohibited trading practices that commonly result in harm to consumers and/or small businesses. The list of specific prohibited practices would be updated over time as business models and strategies change. Consumers and small businesses would be protected against the list of prohibited practices, but also have the protection against unidentified or emerging unfair trading practices through the general prohibition.

 

What are the next steps?

Three of the four options the Government is considering would constitute a material change to Australia’s consumer laws and it is critical that businesses use the opportunity to have their views heard. Businesses have until 29 November 2023 to make a submission to Treasury about the proposed reforms. In particular, the Government is seeking further evidence of the extent of consumer and small business harm arising from any gaps in current consumer laws, as well as feedback on the four policy options to address unfair trading practices in Australia.

Businesses may want to comment on:

• Any concerns they have about whether there is sufficient certainty around the concept of unfairness and the consequences for them in seeking to comply with the law.
• Whether there are material gaps in current legislation, such that reforms are needed to protect consumers and small businesses against unfair trading practices.
• What consequences should apply for businesses found to have engaged in unfair trading practices.
• The extent to which it is appropriate to justify reforms on the basis that such a prohibition exists in other counties, without first undertaking a more comprehensive comparison of the consumer protection regimes in those countries and Australia.
• If you would like further information, or assistance in drafting a submission, please contact us.

Following the consultation period, the Government will produce a Decision Regulation Impact Statement (DRIS) that will discuss the results of the consultation and identify a preferred policy option. A timeframe for publishing that document has not yet been established but it is likely to occur during 2024. In the likely event that the DRIS identifies one of options 2 to 4 above as the preferred policy option and associated changes to law are introduced to the Federal Parliament, businesses will need to review their policies and procedures for interacting and contracting with consumers and small businesses, against the background of uncertainty as to the precise scope of the prohibited practices.