Chapter 10
Option 1: Consumers
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.
Contract formation
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
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
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:
• 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.
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.
Government organisations
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.
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.
Contemporary Issue 1: Credit
• 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.
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.
Credit – legal responses
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 – 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.
Credit – responsiveness of the legal system
• However, it remains to be seen how effective this
statutory consumer protection will be when it comes
to enforcement against unscrupulous credit
providers.
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 selfregulatory bodies help enforce standards and bring unsafe
goods to the attention of the public.
Contemporary Issue 3: Marketing innovation
• 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).
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.
Marketing innovation – legal responses
•
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 – 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)
Technology – legal responses
• 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 – 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.