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In this chapter, you will study the nature and concepts of consumer law, methods of consumer redress and available remedies. You will also study some contemporary issues for consumer law, including credit, product certification, marketing innovations and technology.
The developing need for consumer protection • Historically, there was little recognised need for consumer law. • Pre-industrial markets were typically smaller and local, and vendors and buyers often knew each other. • The law was based a notion of caveat emptor (‘buyer beware’), where the buyer held the risk in the transaction. • The market was based on a laissez faire economy,with minimal intervention of laws or the state.
The developing need for consumer protection • With the Industrial Revolution, manufacturers and sellers were often wealthy, well-educated industrialists in large organisations. • Buyers were often poor, uneducated workers with little bargaining power. • The need to address imbalance and revise the law became clear.
The developing need for consumer protection • Today, consumer markets have become more complex. • Specialised product knowledge is often required when purchasing goods; consumers frequently rely on the seller’s expertise and that goods will be reliable for their stated purpose. • Safeguards have become essential in modern society to resolve conflict and protect consumers from exploitation.
The definition of consumer • A consumer is a person who buys or uses goods or services generated within the economy. • A ‘consumer’ is generally someone who buys the goods or services purchased for private use or consumption.
Objectives of consumer law Consumer law relates to the interaction between three categories of ‘actor’: • manufacturers or suppliers • the state (parliament and judiciary) • consumers. The primary objective of consumer law is to protect the welfare of consumers.
Contracts • A contract is an agreement made between two or more persons that is recognised by the courts as being legally binding on the parties. • Contracts can be: • written in a formal manner • oral • a mixture of the two.
Contract formation For a contract to exist, the following elements must be present: • the parties’ intention to create a binding contract • an offer by one party • acceptance of that offer by the other party • consideration (value or promise) from the promisee.
Other issues in forming a valid contract can include capacity to contract (eg a minor), illegal contracts, mistake, misrepresentation or duress, or special requirements (e.g. transactions for sale of land). Contract formation
Contract formation Other issues in forming a valid contract can include: • capacity to contract (e.g. a minor) • special requirements (e.g. transactions for sale of land) • free will and consent, including issues like mistake, misrepresentation, duress or undue influence • contracts for illegal acts or contrary to public policy.
Contract terms • conditions – fundamental terms that allow a party to terminate the contract if the other party breaches it • warranties – peripheral terms that do not allow termination, but can require the party to rectify or pay damages if the warranty is breached. Terms describe the content of the contract – they can appear in the form of a written document or may consist of oral statements. Terms are either:
Contract terms Contracts contain both:. • express terms – written into the contract or expressly agreed • implied terms – terms that are implied into the contract by common law or statute, or by the presumed intentions of the parties. Contracts also frequently contain exclusion clauses,which limit one party’s liability to the other in the event that something goes wrong.
Implied terms – common law The common law implies a number of terms and safeguards into a contract that can help shield consumers from exploitation. Some issues include: • protection from undue influence in making a contract • requirement for reasonable care in performing services • protection from duress in forming the contract • products must be of merchantable quality • products must be fit for the purpose for which they were sold/bought • products must match their advertised description • suppliers cannot engage in misleading and deceptive behaviour.
Implied terms – statutory Federal and state legislation also provides for a broad range of protections. The main legislation includes: • Competition and Consumer Act 2010 (Cth) (formerly Trade Practices Act 1974 (Cth), renamed from January 2011) – contains provisions on defective products, unfair contract terms, misleading and deceptive conduct and unconscionable conduct, among other protections • Fair Trading Act 1987 (NSW) – mirrors the federal legislation.
Negligence and consumer protection Where goods are manufactured or services provided without proper care, they may cause injury, damage or even death. There are a number of legal avenues a consumer can take to seek some form of compensation or redress, including: • action under the relevant federal or state legislation (e.g. Competition and Consumer Act 2010 (Cth) or Fair Trading Act 1987 (NSW)) • action for breach of contract or breach of an implied term • action in the tort of negligence for breach of a duty of care.
Regulation of marketing and advertising The Australian Consumer Law (Competition and Consumer Act 2010 (Cth) (formerly Trade Practices Act 1974 (Cth)) and relevant state law), contains various prohibitions on marketing and advertising practices, including: • misleading or deceptive conduct • false or misleading representations • unconscionable conduct • falsely offering gifts or prizes • bait advertising • referral selling • pyramid selling • unsolicited and unordered goods • coercion.
Regulation of marketing and advertising Other forms of regulation include: • mandatory cooling off periods required in certain situations • regulation of advertising and marketing administered by the Advertising Standards Bureau (ASB), through the Advertising Standards Board and the Advertising Claims Board.
Occupational licensing The imposition of licensing and registration is an attempt to guarantee that people employed in various occupations have attained the requisite skills and perform their roles honestly. Regulation of professions and occupations can take different forms, including: • registration • certification • licensing.
Occupational licensing Industries and professions may be regulated by: • self-regulation, through professional standards bodies, for example: • the Australian Medical Association • NSW Law Society • regulation by the state, for example: • state licensing of motor car dealers and repairers • state licensing of travel agents.
Consumer redress and remedies • Self-help avenues are usually open to consumers who feel they have been badly treated by suppliers or manufacturers. • The consumer can often seek redress by complaining directly to the supplier or manufacturer.
Government organisations State government bodies can also be approached for assistance in consumer complaints, including: • NSW Office of Fair Trading • Community Services Commission • NSW Legal Aid.
Federal bodies also deal with various aspects of consumer policy, regulation and advice, including: Commonwealth Department of the Treasury Consumer Affairs Advisory Council Australian Competition and Consumer Commission (ACCC) Ministerial Council on Consumer Affairs. Government organisations
Industry organisations Options are also available within some industries to assist with consumer issues and dispute resolution, including: • industry-based dispute resolution schemes • customer-focused corporate compliance • industry-based ombudsman.
Courts and Tribunals If other types of dispute resolution fail, the parties may seek resolution by a court or tribunal: • Consumer, Trader and Tenancy Tribunal (CTTT) – can conciliate or hear a dispute between tenants, landlords, traders and consumers in a timely and effective manner • courts – litigation in courts is usually a last resort; it can be more costly and time-consuming than other avenues.
Remedies Some possible remedies include: • damages for harm or loss to the party • rescission or modification of a contract • special orders – for example rectification or repair of the goods • injunctions – to require a party to do or not do something • specific performance of a contractual obligation.
Contemporary Issue 1: Credit • Credit in consumer law refers to the purchase of goods and services in advance of future payment. • In modern society, credit is very common and many consumers live well beyond their means.
Consumers using credit can risk exploitation by unscrupulous lenders or other issues such as: unfair contract terms inadequate procedures for handling complaints time delays in handling complaints too many difficulties in seeking legal redress. Contemporary Issue 1: Credit
Credit – legal responses The Council of Australian Governments (COAG) recently acted to revise and standardise Australia’s credit laws. The Uniform Consumer Credit Code applies nationally. It requires credit providers to, for example: • meet rigorous entry conditions and responsible lending standards before gaining an Australian credit licence • truthfully disclose all relevant information about the credit via written contract, including interest rates, fees, commissions and other information.
Other requirements include: not to enter into contracts with consumers who may find it difficult to make repayments to give a pre-contractual statement of mandatory details about fees and charges and an information statement explaining rights and obligations. civil penalties up to $500 000 and/or criminal charges may be imposed on providers for failure to comply. Credit – legal responses
Credit – non-legal responses There are a number of useful non-legal avenues available for consumers experiencing credit concerns, including: • NSW Office of Fair Trading • Community Justice Centres (CJCs) • Financial Ombudsman Service (FOS) • Consumer Credit Legal Centre (NSW) • Redfern Legal Centre (RLC).
Credit – responsiveness of the legal system • The UCCC guarantees standardisation of credit contracts across Australia and ensures: • credit information is presented in a clear and easy-to-understand format • credit providers inform consumers and truthfully disclose their rights and obligations • civil remedies for consumers against credit providers who breach the code • criminal prosecution for providers who breach the code.
However, it remains to be seen how effective this statutory consumer protection will be when it comes to enforcement against unscrupulous credit providers. Credit – responsiveness of the legal system
Contemporary Issue 2: Product certification • Product certification is the process of providing documented assurance that goods or services have passed performance and quality tests before they are marketed. • It is vital that goods meet certain minimum safety and performance standards before they can be sold to consumers.
Product certification – legal responses The Australian Competition and Consumer Commission and the NSW Office of Fair Trading enforce and inform about various product safety standards. These include: • product safety – suppliers and manufacturers have obligations to ensure only safe products are marketed • mandatory product standards – standards in legislation or published in the Government Gazette, including safety standards and information standards • product certification – certification based on performance and quality assurance tests according to an industry code and/or nationally accredited test standards.
Product certification – non-legal responses • Individuals can take action through independent consumer groups that advocate on behalf of consumers, lobby Parliament or act as consumer ‘watchdogs’. • The media can be a powerful tool for highlighting and publicising consumer safety issues.
Product certification – responsiveness of the legal system • The Australian legal system seeks to ensure products are safe and meet internationally recognised quality standards. • However, with thousands of importers across our country, it can be difficult to ensure unsafe products never enter the market, and sometimes unsafe goods are still sold. • Consumer watchdogs like the ACCC or various industry self-regulatory bodies help enforce standards and bring unsafe goods to the attention of the public.
Marketing is a process by which a business creates a ‘consumer interest’ in its products. Recent innovations in global marketing technologies are of particular interest to lawmakers, including: fraudulent overseas offers via the internet pyramid selling schemes phone calls from dubious investment advisors promoting suspicious share deals ‘phishing’ attacks spam (unsolicited commercial messages). Contemporary Issue 3: Marketing innovation
Marketing innovation – legal responses • Consumer protection agencies such as the ACCC and the NSW Office of Fair Trading regularly scan the internet, radio and TV for illegal offers designed to exploit consumers.
The Australian Consumer Law contains various provisions to prohibit such practices, including: prohibition on misleading or deceptive conduct it is illegal for suppliers to make false or misleading representations when marketing/advertising their goods or services it is illegal for suppliers or merchants to offer gifts and prizes with the intention of not providing the advertised gift the Spam Act 2003 (Cth) also prohibits unsolicited spam. Marketing innovation – legal responses
Marketing innovation – non-legal responses There are a number of ‘consumer watchdogs’, whose objectives include identifying fraudulent marketing practices and scams. These groups include: • Choice, an independent consumer website • SCAMwatch, operated by the ACCC • Australian Communications and Media Authority (ACMA) • the print and electronic media.
Marketing innovation – responsiveness of the legal system • Advances in electronic marketing allow fraudulent marketers to communicate easily with their victims. • The transnational nature of scams makes it very difficult for Australian authorities to catch the perpetrators, with problematic questions of jurisdiction and foreign law. • Domestic law has proved effective for Australians, but may prove less powerful when it comes to online purchases from foreign marketers.
Contemporary Issue 4: Technology • The use of new technology in the areas of computing and global communication is constantly changing the level and complexity of interaction between consumers and sellers. • One of the problems facing consumer law is that goods and services now available over the internet can sometimes operate in a less regulated environment.
Technology – legal responses In a global marketplace, the application of law is more complex. However, some legal responses that can help achieve justice for consumers include: • consumer laws and contract laws still apply to transactions completed in Australia; however, enforcing these is more difficult if the seller is based overseas • (continued next slide)
sites that are fraudulent or violate laws may be required to shut down a court order attempting to freeze the assets of an online supplier; however, this is difficult where the supplier is based overseas for criminal breaches, arrest warrants may be issued in Australia; however, for residents of a foreign country, Australia may need to rely on extradition treaties. Technology – legal responses
Technology – non-legal responses A number of organisations, both government and private, have a role in ensuring that technology is not misused, including: • Australian Communications and Media Authority (ACMA) • Australian Direct Marketing Association (ADMA) • Internet Industry Association (IIA) • Australian Securities and Investments Commission (ASIC).
Technology – responsiveness of the legal system • Generally, the Australian legal system affords consumers adequate protection against the misuse of technology provided that e-marketers are located within Australian borders. • However, cross-border e-marketing raises complex jurisdictional questions and the law’s evolution is ongoing. • Future consumer remedies may be dependent upon the existence of multilateral international treaties.
