The Australian Consumer Law (ACL) commenced on 1 January 2011. It is a single generic consumer protection law that applies across Australia and is to be reviewed this year. An Issues Paper published in March 2016 raises questions and matters for comment, but it is not an exhaustive list.
The ACL is a very important piece of legislation for Dealers as it applies not only to virtually all dealings with consumers but, additionally, in respect of some dealings with distributors.
Accordingly, Dealers and Dealer bodies should participate in and write submissions to the Treasury on any area of the ACL that affects Dealers. The closing date for written submissions is Friday, 27 May 2016.
Whilst the AADA will make a detailed submission on behalf of Dealers generally, based on its policy positions, some Dealers may consider it necessary to write individual submissions based on personal experiences and circumstances. The AADA encourages and welcomes any feedback or experiences that Dealers have had in relation to the ACL in order to assist it with the drafting of its own submission.
On what issues should Dealers focus?
‘Lemon laws’ are once again an issue under consideration.
How can Dealers demonstrate that there is no consumer benefit in lemon laws?
Dealers are encouraged to comment on their experiences of the effectiveness of the new consumer guarantee of ‘acceptable quality’; whether consumers are aware of their rights, and whether the distributors have also adopted a new approach since the introduction of the ACL which, significantly, already includes a right to a refund in some circumstances.
Is there evidence that the new consumer guarantees has led to better consumer outcomes negating the need for lemon laws? Do After Sales CSI scores evidence an improvement?
Dealers will need to consider whether there is scope to improve the current ACL provisions to provide more certainty as to whether there has been a breach of a consumer guarantee. For example, what is and is not a major failure is often a source of dispute.
Dealers should consider whether adjudicators in State-based tribunals, such as NCAT and VCAT, have sufficient technical expertise on issues relating to motor vehicles, or whether specialist adjudicators and assessors are required. If so, this should be advocated in submissions.
A ‘lemon’ in the US has different meanings depending on the State in which the vehicle is purchased. The terminology sometimes used is that a ‘lemon’ is a ‘defect or condition which substantially impairs the use, value or safety of the vehicle’. This definition does not seem to take us much further than our own legislation. Accordingly, it is far from clear that the introduction of a ‘lemon law’ is the magic bullet sought by consumers.
On occasion, I have personally advised Dealers that a consumer has a right to a refund and have encouraged those Dealers to immediately discuss with the distributor the possibility of a ‘buyback’. In most instances such advice has been heeded not only by the Dealer but also by the distributor. Accordingly, my own experience is that the consumer guarantee of ‘acceptable quality’ has worked well and consumers are conscious of their legal rights.
The Review represents a further opportunity for Dealers to make submissions in an area of the law that is of significant importance. The object is to persuade Parliament to extend the scope of the prohibition on unconscionable conduct. Over the last 30 years there has been a gradual extension of that scope, and from the perspective of Dealers that general trend should continue.
How can the scope be extended?
Currently, publicly listed Dealer groups are excluded from benefitting from statutory unconscionable conduct laws. The Review is an opportunity for those Dealers to make submissions as to why they are often not in any better position than any other Dealer in suffering from unconscionable conduct.
Dealers could endeavour to have specific forms of commercial practice deemed as unconscionable conduct. For example, providing company-owned Dealerships with preferential terms of business compared to independent Dealers should be deemed unconscionable.
Unfair commercial practices
Currently, the ACL does not contain a general prohibition against unfair commercial practices. The European Union’s Unfair Commercial Practices Directive 2005 provides a general prohibition against unfair commercial practices and lists 31 specific practices that are ‘black listed’. In the US, section 5 of the Federal Trade Commission Act prohibits ‘unfair or deceptive acts or practices in or affecting commerce’.
In 2013, the NSW State Government introduced legislation prohibiting unfair conduct by Dealers against consumers as well as in respect of distributors against Dealers. At the time, some legal commentators (acting for distributors) predicted the end of the independent Dealer network in NSW. Nothing of the sort occurred. What did occur was that some distributors reviewed their Dealer Agreements, removing clauses that could be susceptible to challenge, following which, generally, conduct improved. The State legislation has rarely been invoked by Dealers in NSW, with few cases to my knowledge being referred to the NSW Small Business Commissioner then, subsequently, to NCAT. This may be a consequence of improved conduct stemming from the introduction of the State legislation. Dealers should advocate that this demonstrates such laws would not dramatically open the floodgates or cause widespread industry change if they were expanded as part of the ACL.
Effectiveness of Remedies
The Review will also focus on the effectiveness of remedies and offence provisions.
Dealers should inter alia consider written submissions on the following issues:
- Whether the financial penalties are sufficiently high to deter future breaches. Currently, the maximum financial penalties under the ACL are $1,100,000 for companies and $220,000 for individuals. Should there be a stepped maximum penalty depending on the size of the business?
- The indemnity provisions of the ACL require a distributor to indemnify a Dealer who has been found liable to pay damages to a consumer under the consumer guarantees. How effective are those indemnity provisions? In practice, does the presence of this indemnity mean that consumer disputes are resolved earlier with the involvement of the distributor? If not, then this should be highlighted and alternative options ought to be suggested.
The ACL Review is a very significant opportunity for Dealers to communicate their views either personally, via their Dealer Council or the AADA Policy Director, Michael Deed (email [email protected]).
Automotive and Franchise Lawyer, Sydney