Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
Trade Practices Amendment (Australian Consumer Law)
bill 2009
SUPPLEMENTARY EXPLANATORY MEMORANDUM
AND
CORRECTIONS TO THE EXPLANATORY MEMORANDUM
Amendments moved on behalf of the Government
(Circulated by the authority of the
Minister for Competition Policy and Consumer Affairs,
the Hon Dr Craig Emerson MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 Explanation of amendments 5
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The following abbreviations and acronyms are used throughout this
supplementary explanatory memorandum.
|Abbreviation |Definition |
|ACCC |Australian Competition and |
| |Consumer Commission |
|ACL |Australian Consumer Law |
|ASIC |Australian Securities and |
| |Investments Commission |
|ASIC Act |Australian Securities and |
| |Investments Commission Act |
| |2001 |
|Bill |Trade Practices Amendment |
| |(Australian Consumer Law) |
| |Bill 2009 |
|Committee |Senate Standing Committee on |
| |Economics |
|TP Act |Trade Practices Act 1974 |
|Victorian FTA |Fair Trading Act 1999 (Vic) |
General outline and financial impact
Outline of amendments
On 24 June 2009, the Australian Government introduced the Trade
Practices Amendment (Australian Consumer Law) Bill 2009 ('the
Bill') into the Australian Parliament. On 25 June 2009, the Bill
was referred to the Senate Standing Committee on Economics ('the
Committee') for inquiry and report. The Committee reported on
7 September 2009 and recommended that the Bill be passed.
The amendments to the Bill relate to the unfair contract terms
provisions of the Bill, primarily set out in Schedule 1, Part 1 and
Schedule 3, Part 1. Specifically, these amendments:
. provide that a term in a consumer contract can only be
unfair if it would cause financial or non-financial
detriment to a party;
. remove the consideration of whether a term would cause
detriment, or a substantial likelihood thereof, from the
considerations that a Court must have regard to in
determining whether a term of a consumer contract is
unfair;
. remove the power for the Minister to prohibit terms by
regulation;
. provide that the Minister must take into account certain
factors in prescribing by regulation an example of an
unfair term;
. provide that the unfair contract terms provisions commence
on 1 July 2010 or, if the Bill is passed by the Parliament
on or after 1 January 2010, on a date to be proclaimed by
the Governor-General that can not be before 1 July 2010;
and
. clarify that the unfair contract terms provisions apply to
consumer contract terms varied on or after commencement as
varied.
The amendments to the Bill also include amendments to the power of
the Court in Schedule 2, Part 7 and Schedule 3, Part 8 of the Bill
to make a declaration that a term of a consumer contract is unfair.
Specifically, the amendments:
. clarify that individuals can apply to the Court for such a
declaration; and
. clarify that the Court may make a declaration that a term
is unfair in standard form consumer contracts only.
Minor and technical amendments are also made to the Bill in respect
of the application provisions of the Australian Consumer Law
('ACL') as a law of the Commonwealth in Schedule 1, Part 2, Item 11
of the Bill. Specifically, the amendments:
. remove subsection 130(2), which is redundant following the
Australian Government's decision to remove business-to-
business contracts from the application of the national
unfair contract terms law in Schedule 1, Part 1 of the
Bill; and
. amend subsection 131(2) to insert a reference to
'contracts that are financial products', which ensures
that financial services and financial products are dealt
with exclusively in the Australian Securities and
Investments Commission Act 2001 ('ASIC Act').
An additional technical amendment is also made to clarify that the
savings provisions in section 12AE of the ASIC Act apply to the
unfair contract terms provisions of the Bill.
Date of effect: The amendments to the Bill relating to the national
unfair contract terms law commence at the same time as the
provisions concerning the national unfair contract terms law - that
is, on 1 July 2010 or on a date to be proclaimed by the Governor-
General that can not be before 1 July 2010.
Financial impact: Nil.
Compliance cost impact: Nil.
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Outline of chapter
1. The Bill would create a national unfair contract terms law. The
amendments would alter the operation of that law in the ways
outlined below. In addition, the amendments include several minor
corrections and consequential amendments to the unfair contract
terms and other provisions in the Bill.
Application of the Australian Consumer Law in relation to corporations
2. The Bill amends the Trade Practices Act 1974 ('TP Act') to insert a
new Part XI. Part XI of the TP Act will apply the ACL as a law of
the Commonwealth, facilitate its application as a law in each State
and Territory, and make provision for its administration,
enforcement and amendment.
3. Subsection 130(1) of Part XI, Division 1 of the TP Act as drafted
in the Bill would provide that the ACL applies as a law of the
Commonwealth to the conduct of corporations. Subsection 130(2)
also provides that the ACL, which includes the national unfair
contract terms law, specifically applies to, and in relation to, a
consumer contract to which a corporation is a party.
4. Prior to the introduction of the Bill in the Australian Parliament,
the Australian Government announced that that national unfair
contract terms law would only apply to standard-form consumer
contracts. At the time, the Government announced that the question
of whether business-to-business contracts should be included in the
new law will be considered following the completion of the current
parliamentary inquiries into the Franchising Code of Conduct and
the unconscionable conduct provisions in Part IVA of the TP Act.
5. Given that the unfair contract terms provisions in the Bill do not
apply to business-to-business contracts, the inclusion of
subsection 130(2) is not necessary and the subsection is redundant
and would be removed.
Division does not apply to financial services
6. Currently, the consumer protection provisions of the TP Act do not
apply to financial services. Due to the nature of the referral of
powers from the States and Territories set out in the Corporations
Agreement 2002, the regulation of financial services at the
Commonwealth level is dealt with exclusively in the ASIC Act.
7. As a result, subsection 131(1) of Part XI, Division 1 of the TP Act
as drafted in the Bill provides that, despite the application of
the ACL as a law of the Commonwealth to the conduct of
corporations, but does not apply to the supply, or possible supply,
of financial services.
8. The national unfair contract terms provisions in the ACL will not
apply in relation to financial services and financial products at
the Commonwealth level.
9. Subsection 131(2) of Part XI, Division 1 of the TP Act as drafted
in the Bill also provides that Part 2 of the ACL does not apply to,
or in relation to, contracts for the supply, or possible supply of
services that are financial services.
10. The Government amendments revise subsection 131(2) to insert a
reference to 'contracts that are financial products' which ensures
that, in relation to the national unfair contract terms law,
contracts that are financial products are treated in the same way
as financial services - that is, regulated exclusively under the
ASIC Act, and not the ACL provisions in the TP Act. While this has
always been the policy intent, the amendment is necessary to ensure
that the policy intent is effected by the Bill.
Unfair and prohibited contract terms
11. The unfair contract terms provisions are included in the ACL (new
Schedule 2, Part 2 of the TP Act) and a new Part 2, Division 2,
Subdivision BA of the ASIC Act.
Meaning of 'unfair'
12. Section 3(1) of the ACL and subsection 12BG(1) of the ASIC Act
contain the test of whether a term in a consumer contract is
'unfair'.
13. A third limb will be inserted into the test of whether a term in a
consumer contract is unfair, in addition to the two elements
currently contained in the test.
14. New subsection 3(1)(c) of the ACL and new subsection 12BG(1)(c) of
the ASIC Act would require the Court to consider whether the term
would cause financial or non-financial detriment to a party if that
term were to be applied or relied upon.
15. This would involve a determination of whether any such detriment
does exist or would exist if the term was relied on. A claimant in
proceedings would be required to prove this element of the test.
16. Given the addition of this new element in the test of whether a
term in a consumer contract is unfair, the requirement in
subsection 3(2)(a) of the ACL and paragraph 12BG(3)(a) of the ASIC
Act, as drafted in the Bill, for a Court to consider the extent to
which a term would cause detriment, or a substantial likelihood
thereof, is no longer necessary and that provision would be
removed.
17. The amendments to the unfairness test in the Bill will more closely
align the unfair contract terms provisions with the existing
approach used in the Victorian Fair Trading Act 1999 ('Victorian
FTA').
Examples of unfair terms
18. Section 4 of the ACL and section 12BH of the ASIC Act contain a non-
exhaustive, indicative list of the types of terms that may be
considered 'unfair'. These provisions provide that the relevant
Minister may prescribe additional examples of terms of a kind, or a
term that has an effect of a kind, prescribed by the regulations.
19. The Bill will be amended to provide for three factors that the
relevant Minister must take into consideration prior to prescribing
additional examples of unfair terms:
. the detriment that a term of that kind would cause to
consumers;
. the impact on business generally of prescribing that kind
of term; and
. the public interest.
20. These amendments do not alter the operation of the provisions,
which is to provide statutory guidance on the types of terms that
may be regarded as being of concern.
21. Any consideration of a term similar to a type listed as an example
of an unfair contract term remains subject to the test set out in
section 3(1) of the ACL and subsection 12BG(1) of the ASIC Act.
Prohibited terms of consumer contracts
22. Section 6 of the ACL and section 12BJ of the ASIC Act contains
provisions concerning the definition and use of prohibited terms,
including provisions permitting the relevant Minister to prescribe
prohibited terms.
23. The regulation making power would be removed from the Bill.
24. A number of consequential amendments are necessary to remove the
regulation making power.
Application and transitional provisions
25. Schedule 1, Part 1, Item 2 and Schedule 3, Part 1, Item 8 of the
Bill provides that the unfair contract terms provisions will take
effect on the date on which Schedule 1 and Schedule 3, Part 1
commences, currently a day to be fixed by Proclamation.
26. The commencement of the unfair contract terms provisions would be
specified as 1 July 2010 or, if the Bill is passed by the
Parliament after 1 January 2010, a date to be fixed by proclamation
that can not be before 1 July 2010.
27. If the Governor-General has not proclaimed the commencement of the
provisions within six months of the date of the Royal Assent, then
the provisions will commence on the first day after a day six
months after the date of the Royal Assent.
28. The unfair contract terms provisions in the ACL and the ASIC Act do
not apply to consumer contracts entered into before the date on
which the provisions commence, unless such a contract is renewed or
a term is varied on or after that commencement.
29. In relation to consumer contracts varied on or after commencement,
the Bill clarifies that the unfair contract terms provisions would
apply to individual contract terms as varied on and from that day
on which the variation takes effect ('the variation day'), in
relation to conduct that occurs on or after the variation day.
30. The amendments will bring the unfair contract terms provisions into
line with the existing approach used in the Victorian FTA.
31. The amendments will also correct a drafting oversight in the Bill,
to clarify that subsections 12AE(1) and (3) of the ASIC Act apply
in respect of the unfair contract terms provisions of the Bill.
Enforcement and remedies relating to unfair and prohibited contract terms
32. The Bill amends the TP Act as proposed to be amended (new section
87AC) and the ASIC Act as proposed to be amended (new
section 12GND) to provide for the Australian Competition and
Consumer Commission ('ACCC') and the Australian Securities and
Investments Commission ('ASIC') to seek a declaration from a Court
that a term of a consumer contract is an unfair term.
33. The Bill would be amended to provide for a party to a consumer
contract to seek such a declaration from a Court and clarify that
the Court may make a declaration that a term is unfair in standard
form consumer contracts only. This amendment would ensure that
individuals can seek a declaration that a term is unfair under the
ACL in court and tribunal proceedings under state and territory
application legislation for the ACL.
Corrections to the Explanatory Memorandum
34. In clause 2.31 of the Explanatory Memorandum, replace the words
'has caused' with 'would cause', and replace the word 'exists' with
'would exist'.
35. In clause 6.16 replace the words 'by the agreement' with 'as stated
or agreed by'.
36. In clause 8.13 after 'alleged contravention' add 'by the ACCC, ASIC
or the Commonwealth'.
37. In clause 8.27 (first bullet point) replace 'nature of the ACCC's
or ASIC's case against it in relation to the alleged contravention'
with 'details of the alleged contravention'.
38. In clause 8.27 (fourth bullet point) replace the word 'person' with
'penalty'.
39. In clause 9.4 (first bullet point) and clause 9.6 (first bullet
point) replace the word 'believe' with 'suspect'.
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