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2000
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF
REPRESENTATIVES
TRADE PRACTICES AMENDMENT BILL (NO 1) 2000
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Financial
Services and Regulation,
the Hon Joe Hockey, MP)
ISBN: 0642 439524
Table of Contents
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1. The object of the Trade Practices Act 1974 ('the TPA') is to enhance the welfare of all Australians through the promotion of competition and fair trading and provision for consumer protection (section 2 of the Act).
2. The Australian Law Reform Commission reviewed the operation of the Act in Australian Law Reform Commission Report No 68: Compliance with the Trade Practices Act 1974 (1994), with particular emphasis on the enforceability of its provisions. The ALRC concluded that while the TPA generally operated well, there were a number of areas which could be amended to improve access to appropriate redress, and assist the Australian Competition and Consumer Commission (the ACCC) in enforcement of the Act.
3. The amendments to the Act update the enforcement and remedies provisions to ensure that the Act continues to deliver appropriate protection to Australian business and consumers and moreover promote competition and fair trading.
4. The Joint Select Committee on the Retailing Sector, in its August 1999 report, Fair Market or Market Failure? (the Baird Report), also considered the provisions of the TPA and the protection it provides. The Committee recommended amendments be made to the TPA to enhance the protection provided to small business and consumers.
5. The Bill will amend the TPA to clarify and expand the types of sanctions a Court may impose. The Courts will be able to make 'community service orders', 'probation orders', 'corrective advertising orders' and 'adverse publicity orders' where they find the Act has been breached. The maximum level of fines that a Court may impose for offences under the consumer protection provisions of the Act will also be increased.
6. The Bill amends the Act to improve access to the available remedies. The limitation period in which a person must commence legal proceedings will be extended to 6 years from the date that a cause of action accrued. The Courts will also be required to ensure that the victims of a contravention are compensated in preference to a fine or penalty being recovered.
7. The ACCC's power to commence representative actions will be extended to include a contravention of Part IV of the Act. The Bill will also simplify the requirements the ACCC must satisfy before they may commence representative actions. The operation of the TPA will be clarified by allowing the ACCC to intervene in private proceedings which raise an issue of public interest, and by providing the ACCC with the power to seek declarations under section 163A. The annual reporting requirements of the ACCC will also be enhanced.
8. A person who has suffered loss or damage as a result of a contravention of Part IVA (Unconscionable Conduct) will now be able to recover damages under section 82 of the Act. Greater protection for business from unconscionable conduct will also be achieved through an increase in the transactional limit in section 51AC from $1 million to $3 million.
9. The definition of 'goods' for the purpose of the product recall provisions will be clarified, as will the definition of 'market' for the purpose of section 50. A technical amendment will also be made to the Act to ensure State and Territory laws are not excluded or limited by Part IVA (Unconscionable Conduct) or IVB (Industry Codes) of the Act.
10. The Bill does not change the substantive provisions of the TPA or create new legal obligations. Rather, the amendments enable the TPA to operate more efficiently where the Act has been contravened. The reforms are directed at improving the way in which the TPA delivers protection to Australian business and consumers.
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There is no financial impact to the Commonwealth as a result of these measures.
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The problems addressed by this Bill are:
• the objectives of the Act, to promote competition and fair trading in the Australian marketplace, are not being fully realised;
• deficiencies in the Act's compliance and redress mechanisms;
• lack of appropriate remedies for business and consumers;
• the available remedies are not effective in encouraging future compliance with the Act and remedying the harm brought about by the contravening conduct; and
• barriers to the institution of proceedings under the Act.
The objective of the proposed amendments is to improve the enforcement aspects of the regulatory regime contained within the Act and address the shortcomings in present legal remedies to encourage compliance with the obligations under the Act.
This option would involve no change to the current regulatory regime.
This option would involve encouraging business to develop voluntary industry specific codes of conduct directed to improving compliance with the law.
This option would involve the Government undertaking an education campaign directed at informing individuals about their legal rights and remedies under the Act.
This option would involve a series of legislative amendments to be made to the Act to address the identified problems.
Groups likely to be affected by the proposed regulatory amendments include business, consumers, the government (including Commonwealth, State and Territory Governments and the Australian Competition and Consumer Commission), the courts and the community generally.
Option 1 - No action - The ALRC documented that business (particularly small business) and consumers are unable to access appropriate legal remedies under the Act. The ALRC noted that the cost of bringing proceedings was a substantial impediment to bringing an action. The Act currently provides that a person may seek legal or financial assistance in relation to proceedings under the Act (section 170). However, a grant of legal assistance is only made in limited circumstances and does not adequately address the broader problem of attaining redress.
Where legal proceedings have commenced, the sanctions that may be imposed may be inadequate to secure future compliance or inappropriate to address the nature of the contravention. The Act currently provides that the Courts may impose a range of sanctions where the Court determines that the Act has been contravened. Section 76 of the Act provides for the imposition of pecuniary penalties where Part IV (which deals with restrictive trade practices) has been contravened and section 79 of the Act provides for the imposition of a fine for offences involving Part V (which deals with consumer protection). Sections 80 and 80A provide that Courts may make certain orders where there has been a contravention of the Act. The Act does not currently explicitly provide that the Courts may make orders which instruct the contravening party to undertake certain activities which will encourage future compliance with the law.
If no action is taken, the difficulties associated with accessing legal remedies and the inability to impose appropriate sanctions under the Act will remain. Where the Act has been contravened and private individuals are unable to commence their own legal proceedings (and thereby punish contravening parties for their misconduct), the ACCC will be required to carry a greater share of the enforcement burden and associated costs. Maintenance of the status quo will mean that businesses (particularly small business) and consumers will continue to be denied the protection purported to be offered by the Act and hence will bear the costs of the loss or damage produced by the unlawful conduct. This may be particularly costly for small businesses wishing to compete with businesses that successfully gain market share through unlawful conduct. The flow-on from this is the creation of inefficient and uncompetitive markets, which will produce a negative result for the community generally.
Option 2 - Voluntary codes of conduct - Business would be encouraged to develop voluntary industry specific codes of conduct which will set down practices that are directed at improving compliance with the Act. Where a Code secures compliance with the Act, the ACCC will benefit from a reduction in the resources spent on enforcement. Businesses and consumers and the community generally will also benefit from compliant conduct.
The development of codes of conduct will impose costs on participating business and Government as it oversees Code development. Consumers and businesses would only benefit from Code development if industry participants chose to sign on to the voluntary codes and operate in accordance with the conduct set down in the Code. Voluntary Codes may be problematic as they may not be able to provide industry with a sufficient incentive to participate and if a Code cannot encourage industry participation, the Act will continue to be breached. (Some mandatory Codes which have a legislative underpinning provide that signing onto the Code is a pre-requisite to being able to conduct business within that industry). Furthermore, voluntary Codes may not be able to provide a system of sanctions that are sufficiently severe to deter breaches of the Code and hence the Act. This would be particularly true where breaches may result in lucrative gains for the contravening parties.
Therefore, whilst voluntary Codes may be developed, consumers and businesses may still suffer loss or damage from continued contraventions of the Act.
Option 3 - Education campaigns - The Government would conduct an education campaign to inform individuals of their legal rights and remedies under the Act. A business person or consumer who is aware of their legal rights may be able to negotiate a more beneficial outcome where there is a contravention of the Act and therefore would be less likely to suffer the harmful effects of possible contraventions of the law. There would be significant costs for Governments associated with conducting an education campaign. The costs would depend on the scale and scope of such a campaign, however it is anticipated that an education campaign would need to be Australia wide and cover all business sectors.
Businesses and consumers would benefit from an increased awareness of legal rights and remedies. This solution does not however remove the problems of accessing legal remedies and the problems with inadequate sanctions where there has been a contravention of the Act. Therefore, businesses and consumers would still be subject to the costs documented under option 1 – no action.
Option 4 - Legislative amendments - A series of legislative amendments would be made to the Act to clarify and expand on the types of sanctions that may be imposed where the Act has been contravened, and provide consumers and small business in particular with greater access to legal remedies such as the right to recover damages under section 82 of the Act. The proposed set of amendments is to be included in Part VI of the Act and relate to the operation of Parts IV, IVA, IVB and V of the Act.
The Trade Practices Act 1974 (the TPA) would be amended to provide the Courts with a discretion to impose probation orders (for example an order that the contravening party establish an advertising approval committee which for the period of the order, would be responsible for vetting all major advertising campaigns undertaken by the corporation), community service orders (for example an order to undertake a community education campaign that would rectify misunderstanding within the community brought about by the contravening conduct), adverse publicity orders and corrective advertising orders, where it has been established that there has been a contravention of the Act. These proposed amendments would enable a Court to make an order directing a contravening party to inform the public of their unlawful conduct, correct the harm that they have inflicted upon the community as a result of their contravention, or engage in activities that are aimed at altering the internal business operations of the contravening party. Orders of this nature would be regarded as putting in place mechanisms to foster an environment of legislative compliance by changing incorrect business practices and correcting the misallocation of resources brought about by and evident in the breach.
The fines that may be imposed where offences under section 79 of the Act have been established would also be increased from $40,000 to approximately $200,000 for an individual and from $200,000 to approximately $1,000,000 for a corporation. The current level of fines is inadequate for serious breaches of the Act, which have been known to cause millions of dollars worth of harm in the community. The proposed new penalty levels will provide the Courts with sufficient flexibility to impose an appropriate sanction to deter conduct of this nature.
The TPA would also be amended so that the ACCC has the capacity to intervene in private proceedings and seek declarations on questions of law as they arise under the Act. Permitting ACCC intervention in private proceedings and giving the ACCC the capacity to seek declarations on questions of law as they arise under the Act would enhance the enforcement capabilities of the ACCC but in a cost effective and fair way for other parties involved in the legal proceedings. This cost-effective element is achieved by ensuring that the Courts have the discretion to decide whether ACCC intervention is appropriate and by having the discretion to make appropriate cost orders. The TPA will also be amended to require the ACCC to report on specific issues, including the matters in which they have intervened and sought declarations. This will ensure that the ACCC is accountable for it’s actions and provide greater transparency in the enforcement of the TPA.
The general problem of access to legal remedies under the Act would be addressed by ensuring that the ACCC has clear powers to enable it to bring representative proceedings on behalf of businesses and consumers. Amending the Act to provide individuals with a sufficient period of time in which to determine whether they wish to bring an action (extending the limitation period within which a party may bring an action to six years) would go some way towards addressing the general problem of access. In addition to this, the court would have the discretionary capacity to order that where a defendant does not have sufficient funds to pay a fine and also pay an award for damages, compensation be paid to a party before the contravening party pays the fine. Amending the Act so that a party can bring proceedings to recover damages where Part IVA has been breached will increase access to remedies and in particular, allow awards for damages under the Act where there is a clear breach of legal obligations relating to unconscionable conduct. Increasing the transactional limit in section 51AC from $1 million to $3 million will also increase small business' access to the unconscionable conduct provisions of the Act.
There may be some initial costs for Government in implementing the amendments. In particular, the Courts would incur some costs as they develop procedures for the application of the new orders. However, as the new sanctions trigger increased compliance with the Act, there would be a reduction in costs for the ACCC (less time and resources would be needed to ensure legislative compliance and the removal of costly and unnecessary procedural hurdles would reduce the ACCC’s legal costs). It would also mean that the ACCC, as the government regulatory body, would be more able to deliver on its function of enforcing the provisions of the Act. Improved sanctions should also see a reduction in the costs to businesses and consumers, with fewer contraventions of the law anticipated. Consumers and businesses that are presently unable to recover compensation for their loss would benefit from improved access to legal remedies. This correction of market processes will produce a more competitive environment for business and hence enhance the welfare of the community.
The proposed measures have been subject to broad consultation. The amendments were originally contained within the Australian Law Reform Commission Discussion Paper 56: Compliance with the Trade Practices Act 1974. The submissions to this Paper were considered and a position developed and documented in the Australian Law Reform Commission Report No 68: Compliance with the Trade Practices Act 1974.
The ALRC consulted with peak business organisations, consumer groups, the judiciary, government departments, enforcement agencies and academia.
The former Minister for Customs and Consumer Affairs, the Hon Chris Ellison MP released the Legislative Outline: Amendments to the Trade Practices Act 1974: A Better Deal for Consumers and Small Business in September 1997. This discussion paper drew on the recommendations for reform made by the ALRC. The public submissions expressed general support for the legislative amendments proposed under Option 4.
The proposed measures were also considered by Joint Select Committee on the Retailing Sector, in its August 1999 report, Fair Market or Market Failure? The Committee consulted with peak business organisations, enforcement agencies and government departments.
The Department of Employment, Work Place Relations and Small Business, the Attorney-General's Department, the Department of Prime Minister and Cabinet, the Department of Industry, Science and Resources, the Department of Transport and Regional Services, the Department of Finance and Administration and the Australian Competition and Consumer Commission have been consulted.
The preferred option is to amend the Act to implement a series of reforms which will give the Courts the capacity to impose a broader range of sanctions for contraventions of the law, will give the ACCC the capacity to intervene in private proceedings, seek declarations on the operation of the provisions under the Act and to commence representative actions for a breach of Part IV as well as facilitating a private individual's access to legal remedies through reforming the procedures for bringing representative actions, extending the time period within which a cause of action may be commenced, providing the Courts with a discretion to make an award for damages before ordering payment of a fine or pecuniary penalty and increasing the transactional limit for unconscionable conduct in business transactions.
If there is no action, the Courts will be forced to rely on the existing legislative provisions which will perpetuate the problems currently experienced by enforcement agencies, businesses and consumers. The introduction of codes of conduct, because of their voluntary nature, would not guarantee increased compliance with legislation, particularly where a company or individual willfully engages in illegal conduct, and hence there would be some doubt whether business, consumers and the community overall would benefit from their development. Whilst an education campaign may inform individuals of their legal rights, it will be a costly task for the Government and fails to address the fundamental problems of obtaining redress in the Court when the Act has been breached.
Implementation of the preferred option will occur through amendments to the Act, and will be the responsibility of the Minister for Financial Services and Regulation. The Government has announced its response to the ALRC Report and the Joint Select Committee Report, and has informed the public of the intention to amend the Act in the media.
As the Act has fundamental effects on the business environment and establishes the parameters within which Australian business operates, it is subject to continuing evaluation and assessment by the Treasury to ensure its continued effectiveness.
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1. This clause provides the short title by which the Act may be cited.
2. Subclause 1 provides that Schedule 1 commences 28 days after the Bill receives Royal Assent.
3. Subclause 2 provides that Items 4 and 5 of Schedule 2 commence 28 days after the Bill receives Royal Assent, or on the commencement of Item 2 of Schedule 1 to A New Tax System (Trade Practices Amendment) Act 2000, which ever occurs later.
4. Subclause 3 provides that the remaining items of Schedule 2 commence immediately after the commencement of item 260 of Schedule 1 to Treasury Legislation Amendment (Application of Criminal Code) Act 2000.
5. This clause makes it clear that the Acts specified in the Schedules are amended or repealed as set out in the Schedules, and that the Schedules may also contain other provisions.
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Trade Practices Act 1974
6. Item 1 amends the definition of 'market' in subsection 50(6) to now include a substantial market in a region of Australia, for the purpose of section 50.
7. Section 50 prohibits mergers or acquisitions which would have the effect or likely effect of substantially lessening competition in a substantial market for goods or services. Subsection 50(6) currently provides that the term 'market', when used in section 50, means a substantial market for goods or services in Australia or in a State or Territory of Australia.
8. The ACCC's June 1999 Merger Guidelines state that the relevant substantial market can be a regional market. Item 1 confirms the current practice of the ACCC and the courts in considering the competitive impact of proposed mergers or acquisitions on substantial regional markets. The amendment to the TPA was recommended by the Joint Select Committee on the Retailing Sector (the Baird Report).
9. Section 51AC currently extends the unconscionable conduct provisions of the Act to business transactions involving the supply, or acquisition, of goods or services of under $1 million, or such other amount as is prescribed.
10. Item 2 increases the transactional limit referred to in section 51AC from $1 million to $3 million by amending subsections 51AC (9) and (10).
11. The increase in the transactional limit was recommended by the Joint Select Committee on the Retailing sector, as a means of enhancing small business access to the unconscionable conduct provisions
12. Regulations prescribing the increase have also been made to take effect from 1 July 2000. However, given the magnitude of the increase in the transactional limit, it is appropriate that the increase in the transactional limit also be incorporated in the Act.
13. Item 3 inserts a new section 51ACAA, which allows the laws of the States and Territories to operate alongside the unconscionable conduct provisions of the Trade Practices Act 1974 (the TPA).
14. Item 3 is being inserted to overcome a possible constitutional inconsistency that would prevent the States and Territories from 'drawing down' the unconscionable conduct provisions of the TPA to their legislation. The absence of an express savings provision might lead to an assumption that the Commonwealth intended to "cover the field". A State law could therefore be inconsistent with the Commonwealth and thus invalid, pursuant to section 109 of the Constitution.
15. Item 4 inserts a new subsection 51AEA, which also allows the laws of the States and Territories with respect to Industry Codes to operate alongside the provisions of the TPA.
16. Item 5 makes it clear that that the sections 51ACA and 51AEA apply in relation to laws of the States or Territories that are made before, on or after the commencement of the sections, thereby ensuring the validity of existing as well as future State and Territory laws.
17. Item 6 inserts a new subsection in section 65F to amend the definition of 'goods' in respect of which the Minister has the power to order a compulsory recall. The definition of 'goods' will now include things that were goods when they were supplied but have since become fixtures.
18. In Theo Holdings Pty Ltd and Barok Industries Pty Ltd v Hockey and Australian Competition and Consumer Commission 2000 (unreported), the Federal Court held that the Minister may publish a compulsory recall order in accordance with subsection 65F(1) only in connection with 'goods'. The Court further held that the subject goods had changed from 'goods' to 'fixtures' at the time the recall order was issued, and therefore the Minister did not have the power to issue a recall order.
19. The Federal Court decision has significant implications. Goods which become fixtures after installation could include some major household items. The judgement means that a large number of dangerous goods that have been the subject of voluntary recall in the past might presently beyond the reach of both the requirement to notify the Minister of voluntary safety related recalls (section 65R(1)) and the Minister's power to order a recall (section 65F(1)). The new definition in item 6 clarifies the original intention of the provision, that the Minister's recall power should apply to 'goods' which were goods at the time of supply, regardless of whether they have subsequently become fixtures.
20. Item 7 inserts a new subsection in section 65R to clarify the definition of 'goods' in relation to the notification of voluntary recalls, to ensure consistency with section 65F.
21. Item 8 makes it clear that the amended definition of 'goods' in section 65F and 65R only applies to goods supplied on or after the commencement of the amendments.
22. Item 9 amends section 79 to increase the maximum penalties a Court may impose on a party for an offence arising out of a contravention of the provisions of Part V (Consumer Protection). A Court may now impose a maximum monetary penalty of 2000 penalty units for an individual and 10,000 penalty units for a corporation.
23. The ALRC reviewed the current level of penalties and concluded the current maximum penalties were insufficient to reflect the community's disapproval of actions that constitute a contravention of the TPA. The Commission considered that the $10 million maximum penalty for a contravention of Part IV of the TPA was not an appropriate maximum penalty for a contravention of Part V because of the different operating environments for the two parts. An increase to penalties approximating $1 million for corporations and $200,000 for individuals was recommended in light of the public submissions commenting on the operation of Part V.
24. Item 10 makes it clear that the increased penalties in subsection 79(1) will only be applicable in relation to conduct that is engaged in on or after the commencement of the amendment.
25. Item 11 inserts a note at the end of subsection 79(1) to explain how the maximum penalty in dollar terms can be calculated and what the maximum penalty is for a body corporate convicted of an offence.
26. This item makes a consequential amendment to paragraph 79(4)(b) as a result of the repeal of section 80A and the insertion of sections 86C and 86D. Subsection 79(4) allows the Court to grant an injunction or make an order under sections 86C or 86D in proceedings commenced under section 79 for a contravention of a provision of Part V (Consumer Protection) of the Act.
27. Item 13 makes it clear that orders under section 86C or 86D may only be made in proceedings under section 79 arising from conduct which occurred after the commencement of the amendment.
28. Item 14 inserts a new section 79B that directs to the court to give preference to compensation. A person who contravenes the TPA may be required to pay both a fine or pecuniary penalty and compensate those who have suffered loss or damage as a result of the contravention. Where the person who has contravened the Act has insufficient financial resources for both, the Court is to give preference to compensating those who have suffered loss or damage.
29. The ALRC noted that compensation was an important objective of an enforcement action under the TPA but that this was not always achieved. Where the defendant does not have the financial resources for to pay both compensation and a court imposed fine or pecuniary penalty, the plaintiff may conceivable fail to receive compensation even though a fine or pecuniary penalty has been paid into consolidated revenue.
30. The new section is not directed to allowing the Court to waive or reduce the fine or pecuniary penalty where it considers the defendant does not have sufficient financial resources, thereby allowing the defendant to avoid punishment. A Court may still impose a fine or pecuniary penalty. The provision allows the Court to order that a person who has suffered loss or damage will be compensated before a fine or pecuniary penalty will be paid into consolidated revenue. Where a fine or pecuniary penalty is not paid, proceedings for enforcement and recovery may be commenced under sections 77 or 79A.
31. Alternatively, it would be open to the Court to make an additional order under section 86C or 86D. For example, the Court may make a Community Service or Adverse Publicity Order where it feels the defendant's financial resources would prevent a fine being recovered.
32. Preference for compensation helps give effect to the objectives of the TPA, to protect consumers and provide a remedy where they have suffered loss or damage because of a contravention of the Act.
33. Item 15 makes it clear that section 79B does not apply to proceedings under the Act where the Court has made an order for the payment of a pecuniary penalty by the person or imposed a fine on the person before the commencement of the section.
34. Item 16 repeals section 80A which gives the Courts the power to make an order requiring a person who contravened the Act to disclose information within their possession, or to publish an advertisement as specified in the order. The Courts will now have the power to make these orders under sections 86C and 86D.
35. Item 17 makes it clear that an order made under section 80A before the repeal of the section will continue in force as if the repeal had not been made.
36. Item 18 amends section 82(1) to allow a person who has suffered loss or damage as a result of a contravention of Part IVA (Unconscionable Conduct) to seek damages. Currently a contravention of the unconscionable conduct provisions will only give rise to an action under section 80 (injunctive relief) or section 87 (ancillary orders).
37. In effect, section 87 currently makes provision for a compensatory order similar in nature to an action for damages. Subsection 87(2) contains a non-exhaustive list of orders a Court may make under section 87, including an order that a person in contravention of the Act pay the person who suffered loss or damage the amount of the loss or damage (section 87(2)(d)). The amendment to section 82 clarifies that damages are available for a contravention of Part IVA.
38. The ALRC noted that damages were not recoverable under section 82 for a contravention of Part IVA, but were recoverable as a compensatory order under section 87. The Commission considered that there was no logical reason to exclude damages for Part IVA from section 82, and recommend that the Act be amended to clarify that a contravention of Part IVA would give rise to an action for damages under section 82.
39. Item 19 makes it clear that damages for a contravention of Part IVA under section 82 will only be available for conduct that is engaged in on or after the commencement of the amendment.
40. Item 20 amends subsection 82(2) to extend the period within which a person who has suffered loss or damage must commence an action for damages. A person may now commence an action to recover for loss or damage where there has been a contravention of the Act within six (6) years from the date the cause of action accrued.
41. The present short limitation period can create difficulties for some potential litigants, particularly where they are waiting for the outcome of lengthy ACCC investigations. The short time period may also create difficulties for litigants as they have a limited time to determine if they have an actionable loss and to then institute proceedings.
42. The extended limitation period is aimed at improving access to remedies for people who have suffered loss or damage as a result of conduct in contravention of the TPA. The amendment also seeks to provide a consistent / uniform limitation period under the TPA. Currently, the applicable limitation period varies according to the provision contravened.
43. The ALRC recommended that the Court be given a discretion to extend the limitation period on a case by case basis. However, the conferral of a discretion would substantially increase levels of business uncertainty. The amendment in item 20 seeks to extend the limitation period without fundamentally changing the method by which the period is determined.
44. Item 21 makes it clear that the extended limitation period in section 82(2) will apply to all conduct engaged in on or after the commencement of the amendment. The extended limitation period will also apply to conduct engaged in before the commencement of the amendment where the limitation period in relation to the conduct that applied before the commencement of the amendment has not ended when the amendment commences.
45. Item 22 makes a consequential amendment to section 83 as a result of the repeal of section 80A and the insertion of sections 86C and 86D. Section 83 provides that a finding of fact in proceedings under sections 77,80, 81, 86C or 86D that a person has contravened, or been involved in a contravention, of Part IV, IVA, IVB or V is prima facie evidence for proceedings for damages under section 82 or other orders under section 87(1A).
46. Item 23 makes it clear that a finding of fact in proceedings under sections 86C or 86D may only be relied upon in relation to conduct occurring after the amendment commences.
47. Item 24 inserts new sections 86C and 86D, which make available to the Court an extended range of remedies.
48. Section 86C allows the Court to make a Non-Punitive Order where a person has contravened the Act. A non-punitive order includes:
a. a community service order;
b. a probation order;
c. an order requiring the disclosure of information; or
d. an order requiring an advertisement to be published.
49. It will be open to the Court to make a non-punitive order on application of the ACCC, where a person has engaged in contravening conduct, that is, has contravened a provision of Part IV (Restrictive Trade Practices), IVA (Unconscionable Conduct), IVB (Industry Codes) or V (Consumer Protection), or section 75AU (Price Exploitation in relation to the New Tax System). The Court may also make a non-punitive order where a person has been involved in a contravention of these provisions.
50. A community service order is an order that requires a person who has contravened the Act to perform a service for the benefit of the community, or a section of the community. As the order is non-punitive in nature, the service the contravening party is required to undertake should be reasonably related to the conduct that contravened the Act. The order is directed at redressing the harm caused in the community as a result of the contravention, and at encouraging future compliance with the TPA.
51. An example of a community service order is an order that requires a person who has made false representations to make available a training video which explains advertising obligations under the TPA or an order that requires a person who has engaged in misleading or deceptive conduct in relation to a particular product to conduct a community awareness program to address the needs of consumers when purchasing that product.
52. A probation order is an order which is designed to impose control over aspects of the conduct of the party in contravention of the Act. It is directed at achieving a change in the organisational or corporate culture to prevent a repetition of the contravention and to ensure future self-regulation. A probation order is aimed at the internal operations, management and environment of the corporation in addressing the areas of non-compliance. As the order is non-punitive in nature, it should be directly or reasonably related to the conduct that contravened the Act. A probation order may not exceed three (3) years.
53. Examples of probation orders include:
• An order requiring a corporation to develop a compliance plan;
• An order requiring the provision of education and training for employees and managers as to their obligations and responsibilities under the TPA;
• An order requiring the corporation to undertake a revision of their internal operations and control methods to address the contravention of the TPA.
54. The terms 'probation order' and 'community service order' are terms of convenience only and will be administered separately from the orders of the same name that may be imposed on federal offenders pursuant to the sentencing provisions of the Crimes Act 1914.
55. An order requiring the disclosure of information requires a person who has contravened to Act to disclose information in relation to the contravention that they may have in their possession, or may have access to. An order requiring the disclosure of information is directed at redressing the harm caused by a contravention of the Act by providing information to business and consumers.
56. An order requiring an advertisement to be published, or a corrective advertising order, requires a person who has contravened the Act to publish an advertisement which addresses the contravention of the Act. A corrective advertising order is directed at redressing the harm caused by the contravention.
57. The orders in paragraphs 86C(2)(c) and (d) restate the orders which previously could be made under section 80A.
58. Section 86D allows the Court to make an Adverse Publicity order, which is a Punitive order, where a person has contravened the Act and has been ordered to pay a pecuniary penalty under section 76 or is guilty of an offence under section 79.
59. An adverse publicity order requires a person to disclose information that they have in their possession, or have access to, and publish at their own expense, an advertisement. An example of an adverse publicity order is that the corporation is ordered to publicise the fact that it has breached the TPA, and details of what it has been ordered to do. The order is punitive in nature, and is aimed at deterring future contraventions and encouraging compliance.
60. The ALRC concluded that the award of a fine or pecuniary penalty was not appropriate in all circumstances and may fail to prevent a repetition of a contravention of the Act. Probation, community service and corrective advertising orders were seen as one way in which the Court may be able to further the objectives of the Act, to provide protection for consumers and a remedy where the Act has been breached. The orders allow the Court to tailor a remedy to redress either some or all of the harm that was suffered in the community as a result of the contravention and serve to instruct the contravening parties to change their practices to ensure future compliance with the Act. The orders reflect the unacceptability of a breach of the TPA.
61. The introduction of clearly defined powers dealing with Punitive and Non-Punitive orders is designed to ameliorate any present reticence of the Courts in relation to the making of mandatory injunctions. The orders do not prevent the Court from imposing the traditional sanctions currently available under the Act, but address the needs of a changing judicial culture. The new orders indicate to the Court that they have additional powers to be used in appropriate circumstances.
62. Item 25 makes it clear that orders under sections 86C or 86D will only be available in relation to conduct engaged in on or after the commencement of the section.
63. Item 26 makes a consequential amendment to subsection 87(1) as section 80A is being repealed and replaced by sections 86C and 86D.
64. Item 27 makes it clear that amendment only applies to conduct engaged in on or after the commencement of the item.
65. Item 28 repeals subsections 87(1A) and (1B) and substitutes new provisions. Subsection 87(1A) allows a person or the Commission to seek orders from the Court which the Court considers is appropriate to compensate a person who has suffered loss or damage, or will prevent or reduce the loss or damage that occurred as a result of the conduct of a person in contravention of Parts IVA, IVB or V of the Act. Subsection 87(1A) is amended to allow the ACCC to also seek such orders where there has been a contravention of Part IV of the Act.
66. Subsection 87(1B) prescribes the conditions the ACCC must satisfy before they may commence a representative action on behalf of a person or persons who have suffered loss or damage, or likely to suffer loss or damage, as a result of conduct in contravention of the TPA. Subsection 87(1B) is amended to remove the requirement that the Commission must commence an action under sections 79 or 80 before they may commence a representative action under section 87. The Commission may now commence proceedings on behalf of a person or persons who have suffered, or are likely to suffer, loss or damage by conduct which contravenes the Act where the written consent of those persons has been obtained.
67. Item 29 makes it clear that representative actions for contraventions of Part IV may only be commenced in relation to conduct that occurred on or after the commencement of the amendment. The amendment to subsections 87(1A) and (1B) does not, however, impact on the ACCC's powers under section 87 before the commencement of the amendment. The ACCC may therefore continue investigations and commence proceedings in relation to contraventions of Part IVA, IVB or V in relation to conduct that occurred before the commencement of the amendment.
68. Item 30 makes a consequential amendment to subsection 87(1C) to insert Part IV as subsection 87(1A) is also being amended to include a reference to Part IV. Subsection 87(1C) allows an application to be made under section 87(1A) without needing to commence an action under another provision of Part VI, for example section 80 or section 82.
69. The ALRC recommended that the ACCC's power to commence representative proceedings be extended to matters involving a contravention of Part IV of the Act. The Joint Select Committee on the Retailing Sector (the Baird Report) also recommended that the ACCC be given the power to undertake representative actions and seek damages on behalf of third parties under Part IV of the Act. The Committee concluded that small business may not have the time, resources or legal expertise to engage in lengthy legal proceedings, and that the ACCC is better placed to initiate proceedings on behalf of small business for significant and broad-ranging breaches of the competition provisions in the Act.
70. The ALRC also recommended that the ACCC should be able to commence representative action on behalf of a person or persons who has suffered loss or damage without first having to commence an action under section 79 or 80. This was seen as an unnecessary complication that causes delay to the institution of proceedings and places an administrative burden on the ACCC. The amendments seek to simplify the procedures so that the ACCC can bring a representative action where the consent of the person or persons who have suffered loss or damage, or are likely to suffer loss or damage, has been obtained.
71. Item 31 repeals and substitutes a new subsection 87 (1CA) which will extend the period in which a person must commence an action for other orders under subsection 87(1A). A person may make an application for orders under subsection 87(1A) where there has been a contravention of the Act within six (6) years from the date that the cause of action accrued.
72. The amendment in item 31 also seeks to provide a consistent limitation period under the TPA. Currently, the applicable limitation period subsection 87(1CA) differs for actions under Part IVA and for all other actions. The extended limitation period is aimed at improving access to remedies for people who have suffered loss or damage as a result of a contravention of the Act.
73. The ALRC recommended that the Court be given a discretion to extend the limitation period on a case by case basis. However, the conferral of a discretion would substantially increase levels of business uncertainty. The amendment in item 31 seeks to extend the limitation period without fundamentally changing the method by which the period is determined.
74. Item 32 makes it clear that the extended limitation period in subsection 87(1CA) will apply to all conduct engaged in on or after the commencement of the amendment. The extended limitation period will also apply to conduct engaged in before the commencement of the amendment where the limitation period in relation to the conduct that applied before the commencement of the amendment has not ended when the amendment commences.
75. Item 33 inserts a new subsection which will allow the ACCC to intervene in private proceedings instituted under the TPA. The Commission may only intervene with leave of the Court. Where the ACCC does intervene, it will become a party to the proceedings and as such, the Court may make a costs order against it.
76. The right to intervene, subject to the Court’s leave, will allow the ACCC to intervene in matters where the case raises issues of public interest which have not been fully addressed by the parties. In particular, the ACCC may seek the Court's determination of untested areas of the TPA, to clarify the operation of the Act. Intervention by the ACCC will also allow the Court to make a more balanced judgement in cases which have a significant impact on the community at large.
77. The ACCC will develop guidelines which will outline when it may intervene in private proceedings.
78. Item 34 makes it clear that ACCC may only intervene in proceedings that are instituted on or after the commencement of the amendment.
79. Item 35 makes a consequential amendment to paragraph 157(1)(d) as a result of the repeal of section 80A and the insertion of sections 86C and 86D.
80. Section 157 requires the ACCC, on application by a corporation or person, to disclose certain documents where the corporation has made an application to the Commission under sections 88, 91A, 91B or 91C; the Commission propose to revoke, or substitute, an authorisation under subsection 91C(3); a proceeding is instituted under section 77, 80 or 81; or an application is made for an order under sections 86C or 86D or subsection 87(1A) against the corporation or person.
81. Item 36 makes it clear that disclosure of information by the ACCC in relation to an application for an order under sections 86C or 86D will only apply to conduct engaged in after the commencement of the amendment.
82. Item 37 repeals and substitutes a new subsection 163A(3) which will allow the ACCC to seek a declaration in relation to a matter arising under this Act. Section 163A currently allows a person, but not the ACCC, to seek a declaration on the operation of the provisions of the TPA (with limited exceptions) and for a determination of the validity of an act or thing done under the TPA. The ACCC currently only has to right to intervene in proceedings brought by another person under section 163A(1)(a). Item 37 extends this right of the ACCC to the right to seek a declaration in its own right.
83. The ACCC will use the power to seek a declaration to assist in the interpretation and enforcement of the TPA.
84. Item 38 makes it clear that the ACCC may only seek a declaration under section 163A in relation to matters arising on or after the commencement of the section.
85. Item 39 inserts a new subsection 171(3) which specifies a number of matters which must be included in each annual report of the ACCC. The Commission will be required to report on:
- the notices and nature of the notices given by the ACCC under section 155 (power to obtain information, documents and evidence); and section 155A (power to obtain information and documents in New Zealand relating to Trans-Tasman markets);
- the authorisations and nature of the authorisations given under section 155(2) (power to authorise entry into premises and inspection of documents);
- the number of proceedings brought to challenge the validity of notices or authorisations given under sections 155 and 155A;
- the number of entries on to premises pursuant to an authorisation to enter premises under subsection 155(2);
- the number of complaints received by the ACCC in relation to its operations, enforcement activities or any other issue, a general summary of the kinds of complaints received and how the Commission dealt with them;
- a general description of the major matters investigated by the ACCC; and
- the number of times the ACCC has intervened in proceedings and a general description of the reasons for doing so.
86. The ACCC is required, under the TPA, to furnish to the Minister an annual report (section 171). However, section 171 contains a very limited list of matters which must be included in the annual report. The inclusion of an expanded list which the ACCC must report on seeks to ensure the Commission is accountable for its actions and provide greater transparency to the operation and enforcement of the TPA.
87. Item 40 amends subclause 50(6) of the Schedule version of Part IV to reflect the amendment to the definition of 'market' made by item 1.
Trade Practices Act 1974
88. Items 1, 2, 6 and 7 make a further consequential amendments to give effect to the commencement of the Criminal Code Act 1995 (the Criminal Code) and Treasury Legislation Amendment (Application of Criminal Code) Act. The Treasury Legislation Amendment (Application of Criminal Code) Act will insert a new Part VC in the TPA to maintain the existing interpretation of the provisions of the TPA when the Criminal Code commences on 15 December 2001.
89. Items 3 and 8 make it clear that the amendments in 1, 2, 6 and 7 only apply to conduct that is engaged in on or after the commencement of the Treasury Legislation Amendment (Application of Criminal Code) Act.
90. Item 4 makes an amendment to the definition of 'contravening conduct' in subsection 86(4) on the commencement of the A New Tax System (Trade Practices Amendment) Act 2000. The definition of contravening conduct will included conduct which contravenes section 75AYA, which is inserted by A New Tax System (Trade Practices Amendment) Act 2000. This will allow the Courts to make a non-punitive order under section 86C where a person has contravened section 75AYA.
91. Item 5 makes it clear that the amendment in item 4 only applies to conduct engaged in on or after the commencement of the A New Tax System (Trade Practices Amendment) Act 2000.