Consumer Law:
The developing need for consumer protection:
 Historically, consumer law was based on the principle of caveat emptor – ‘let
the buyer beware’, implying that consumers needed to exercise their own
knowledge to protect themselves against exploitation.
 Consumer markets were based on the laissez-faire economy, an economic
system in which the state refrains from interfering with markets by
regulation or other means.
 Until significant law reform, consumers were often poor and uneducated,
and the sellers and manufacturers were wealthy and powerful.
 There is a developing need for consumer protection in order to address the
imbalance between buyer, seller and manufacturer; that way there is a fairer
playing field between involved parties and therefore protects consumers
from exploitation.
Definition of a consumer:
 A consumer is defined as a person who buys or uses goods or services
generated within the economy.
Objective of consumer law:
 Consumer law relates to the interaction between manufacturers, the state
and consumer
 The primary objective of consumer law is to protect the welfare of
consumers. This is achieved by:
o Educating the public to make them aware of their rights – educated
consumers can protect themselves from exploitation
o Providing statutory and common law remedies for consumers
o Regulating contractual relationships between buyers and sellers,
especially unfair contract terms
Contracts – nature and function:
 A contract (known as a sale of goods implied contract) is an agreement
between two or more persons that is recognised by the courts as legally
binding on the parties. Contracts involve an offeror and an offeree, and can
be written in a formal manner, orally binding or a combination of the two
 Element of a contract: these are included in contracts in an attempt to define
the circumstances that the parties involved will be legally bound to. For a
contract to exist, four elements must be present:
o Intention to create a contract
o A contractual offer
o Acceptance of the contract offer
o Consideration from the offeree
 Terms of a contract: once a contract is made with particular terms, legal
obligation and right flow from them. Terms included in a contract may
appear either as a written statement signed by both parties, or in the form of
oral statements. Contracts also contain both express and implied terms,
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which are either written into the contract or incorporated into it to protect
consumers.
Certain standards must be upheld when parties enter a contractual
agreement, even if the standards are not stated expressly. Breaches of
contract can result in the end of the contract (conditions) or the suing for
damages (warranties).
Exclusion clauses are incorporated into contracts to limit a party’s liability for
conduct that would otherwise breach the contract or cause harm. These
terms limit or take away the other party’s right to claim damages. Such
clauses are almost always contained in a written document that may or may
not be signed.
Contracts – regulations:
 Standards implied by statutes regarding consumers are intended to protect
the welfare of the consumer. Such standards are found in the Fair Trading Act
1987 (NSW) and the Trade Practices Act 1974 (Cth), which led to the
formation of the Competition and Consumer Act 2010 (Cth).
 The statute also permits cooling off periods within contracts. Defined as a
period of time that gives buyers an opportunity to rethink their decision to
enter into a contract of sale, the law acknowledges the existence of highpressure tactics that can influence consumers to make purchases that they
otherwise wouldn’t. This allows consumers to re-evaluate their decision so
they don’t enter themselves into any exploitation.
Unjust contracts:
 When a contract is unjust or unfair as a result of a party’s unconscionable
conduct, the innocent party can take civil action against the contract, seeking
an end to the agreement. In some instances, a large number of consumers
may enter a class order concerning a faulty or unsafe product. Both common
law and legislation provide protection from unjust contracts.
 Most contractual terms implied by common law are now implied by statute.
 Within a consumer contract, the seller/manufacturer must honour the
following: the product must be of merchantable quality, fit for purpose and it
must match its advertised description
Example – Donoghue vs Stevenson (1928):
 Ms. Donoghue purchased a bottle of ginger beer, only to find a decomposed
snail inside the bottle. Donoghue’s lawyers claimed that Stevenson had a
duty of care to his consumers, causing injury through negligence. This case
set a precedent ruling in Donoghue’s favour, establishing the civil law tort of
negligence, which obliged manufacturers to observe a duty of care towards
consumers and their products.
Negligence and consumer protection:
 Negligence: breach of a duty of care resulting in harm that could be foreseen
 When goods are manufactured without the proper duty of care, the
consumer is entitled to bring an action against the seller/manufacturer under
the relevant legislation. They may have a cause of action for a breach of
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contract on the grounds of deceptive or misleading conduct. Another cause
of action is an action of negligence towards consumers. Both state and
federal governments in Australia seek to ensure that unsafe products are
kept from the markets and that consumers are informed of product safety
protocol.
Federal and state governments seek to ensure that:
o Unsafe products that reach the market are readily detected and
reported
o There is effective and timely removal of unsafe products from the
market
o Compulsory product recall occurs if required
o Compensation is available to consumers who purchase unsafe
products
o Breaches of consumer protection laws attract sanctions
Suppliers have a duty to warn consumers of products whose dangerous
characteristics are discovered after they are already on the market. They may
also be required to recall the product, under the Competition and Consumer
Act 2010 (Cth) or ss 34-35 of the Fair Trading Act 1987 (NSW).
Regulation of marketing and advertising:
Statutory protection: provisions protecting consumers from deceptive
advertisement and marketing practices are contained in both federal and state
consumer legislation.
 Deceptive or misleading conduct: s52 of the TPA 1974 (Cth) prohibited
corporations from engaging in conduct that is misleading or deceptive, or is
likely to mislead of deceive. s41 of the FTA 1987 (NSW) contains a similar
provision.
 False or misleading representations: in addition to the general prohibition of
misleading and deceptive conduct, the TPA 1974 (Cth) contained specific
provisions in s53 regarding representation. Suppliers breach the law by
making false representations to consumers about their products or services.
 Unconscionable conduct: the federal legislation (TPA s51AB and FTA s43)
also provides broad protection for vulnerable consumers against dishonest
suppliers who use their greater bargaining power to obtain an advantage.
 Offering gifts and prizes: s54 of the TPA and s48 of the FTA both say that
suppliers who entice consumers to buy their products by offering gifts, prizes
or other free items with the intention of not providing the advertised gift
breach federal law
 ‘Bait and switch’ advertising: the practice of advertising something at a
specific price, with the knowledge that it will not be possible to offer it at that
price for a reasonable time and in reasonable quantities. Such behaviour
breaches federal law (s54 of the TPA).
 Referral selling: s57 of the TPA 1974 (Cth) made it illegal for a supplier to
offer discounts, rebates or other benefits to consumers in return for
introducing other customers to the supplier.
 Pyramid selling: under s65AAC of the TPA, it is illegal for a cooperation to
participate in a pyramid selling scheme, an illegal form of selling whereby an
individual pays to become a distributor of a good in return for a reward for
recruiting new distributors
 Unsolicited and unordered goods: s63A of the TPA made it illegal for
suppliers to send unsolicited credit cards through the mail, with the
exception of credit card companies providing a replacement for an expired
card. Similarly, s64 prohibited suppliers from sending unsolicited goods and
then demanding payment
 Coercion: under s60 of the TPA, corporations may not use physical force,
harassment or coercion on consumers in connection with the sale or possible
sale of goods or services, or to obtain payment for goods or services
Non-statutory controls on advertising:
 The Advertising Standards Bureau (ASB) through the Advertising Standards
Board and the Advertising Claims Board administers Australia’s system for
the non-statutory regulation of advertising and marketing.
 These boards operate on the principle that advertisers share a common
interest in promotion consumer confidence in and respect for general
standards of advertising.
 The Advertising Standards Board provides a free complaint resolution
service to the public. It also makes determinations on complaints about most
forms of advertising and marketing.
 The Advertising Claims Board provides a complaint resolution service
regarding issues of truth, accuracy and legality of advertising. The
complainant bears the cost of the resolution process. Its primary purpose is
to resolve disputes between competitors through alternative dispute
resolution, rather than expensive and time-consuming litigation.
Occupational licensing:
 Allows a person to carry out a particular occupation with the approval of the
relevant authorities – usually a government or industry body.
 Three occupations that are licensed include professions, trades and
businesses. 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.
 Many industries and occupations find self-regulation attractive. It allows a
trade or professional body to:
o Establish standards that all its members are expected to meet;
important to maintain public confidence and support
o Restrict membership to suitably qualified persons
o Raise the professional profile of their group.
 However, consumers may lose confidence in a self-regulated industry if they
feel their complaints are not dealt with.
Possible reason for a refusal of a license: Possible reasons for revoking a license:
Inadequate training or education
Malpractice by the license holder
Inability to meet minimum industry or
Fraudulent, misleading or deceptive
professional standards
behaviour
A breach of the license holder’s fiduciary
duty with regard to trust funds.
Awareness and self-help:
 A remedy is defined as means by which redress or reparation is provided for
the breach of a legal right. Remedies can be in the form of raising awareness
or self-help avenues, which are open for all consumers.
 Self-help avenues are open to consumers who feel they have been badly
treated by suppliers or manufacturers. Self-help is a useful mechanisms for
consumer redress because it is resource-efficient and easily carried out. It
also can provide just outcomes for consumers without undertaking costly
litigation.
State government organisations:
 The NSW Office of Fair Trading provides advice and gives assistance in
dealing with consumer complaints. Similar bodies operate in other
Australian states. The Office of Fair Trading aims to educate the public about
consumer rights issues. As well as this, they work to investigate ongoing and
serious complaints as well as referring serious breaches of the law to
tribunals and courts.
 Other state government organisations include the Community Services
Commission and the NSW Legal Aid
Federal government organisations:
 The Australian Consumer and Competition Commission (ACCC) plays a major
role in ensuring that the consumer provisions in the Trade Practices Act
(1974) are enforced in consumer markets. They investigate matters involving
consumer complaints and decide what action to take on the matter. The
ACCC also takes action on behalf of all consumers if the Commission refers
the matter to a Federal Court.
 Other federal governmental organisations include the CCAAC (Cth Consumer
Affairs Advisory Council), the ASIC (Australian Securities and Investments
Commission) and the MCCA (Ministerial Council on Consumer Affairs).
Industry Organisation:
 There are a number of industry organisations that deal with consumer
complaints and assist with remedies.
 Industry based dispute resolution: some industry groups have developed
complaint handling and dispute resolution schemes designed to provide
consumer remedies, enhance business reputation and support claims that
these industries are self-regulating.
 Customer focused corporate compliance programs: these are internal selfregulatory programs that aim to ensure that a business meets its legal
obligations to consumers, and to remedy any breach.
 Industry based Ombudsman: takes complaints from citizens or consumers
about agencies, departments or providers and investigates those complaints
in order to reach a resolution that is fair to both sides.
Tribunals and courts:
 The NSW government created the NSW Consumer, Trader and Tenancy
Tribunal (CTTT), which deal with issues involving consumers, traders and
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tenancy. The CTTT allows consumers to bring an action against suppliers or
sellers of goods and services. The main advantages to using the CTTT as a
consumer remedy include the informality of the proceedings, the cheap cost
involved, the absence of legal representation and the quickness in which
matters are resolved.
If consumers are unable to obtain a remedy through independent avenues,
ADR or the relevant tribunal, the last resort is court-based litigation. The role
of the judiciary is to apply the law as made by the legislature, ensure that the
laws comply with the Australian Constitution and where necessary, interpret
the laws made by the legislature.
The role of non-government organisations:
 A variety of non-government organisations (NGOs) represent the interests of
consumers. Many of these are advocacy groups that attempt to influence the
legislative program of political parties in government. While peak bodies do
not generally take on and pursue individual complaints, they have links to
resources that do.
 Example: Choice, formally known as the Australian Consumers Association –
a non-profit organisation that researches and campaigns on behalf of
consumers and publishes Choice magazine. Choice provides consumers with
independent advice on product quality.
The role of the media:
 The media also plays a big role in informing the public about new products
and unfair practices employed by various suppliers. The media “names and
shames” sellers and manufacturers who sell faulty goods and services, raising
consumer awareness amongst the community.
Specific remedies:
 There are also specific remedies involved in consumer cases and can achieve
justice for the exploitation of the consumer. Court based remedies may be
rewarded to a successful complainant and include six types of remedies, such
as an injunction, rectification or rescission.
 Another specific remedy involves mediation and conciliation also known as
Alternative Dispute Resolution (ADR). These mechanisms provide an
alternative to court-based litigation. In mediation, a neutral party assists the
parties involved to resolve the dispute in a manner agreed to by those
involved. Conciliation allows a neutral third party to simplify communication
between the two parties to assist in reaching a conclusion. More often than
not, courts encourage the parties involves to pursue ADR rather than costly
processes in court.
Benefits to the individual and society:
 The promotion of social equality
 Safety
 Ethical conduct
 International cooperation
 Greater choice and quality
Effectiveness of consumer law:
 The effectiveness of consumer remedies is assessed using criteria involving
equity, access and enforceability.
 Legislative provisions make it illegal for sellers and manufacturers to treat
consumers unfairly. According to the TIO (Telecommunications Industry
Ombudsman), consumer complaints are at a six-year low, proving that sellers
and manufacturers are abiding by legislation and treating all consumers with
fairness in the market.
 Consumers have a variety of options in reference to consumer redress and
remedies, giving them access to rectify any consumer related issues. There
are cost-effective remedies and avenues consumers can use to achieve
justice. If consumers have any misconceptions, there are several groups
available to assist them, such as the Office of Fair Trading and the ACCC.
 Several pieces of legislation, like the Trade Practices Act and the Fair Trading
Act enforce consumer law, making certain activities illegal to use to
manipulate consumers. Those who aim to achieve justice through enforced
consumer law will do so through consumer remedies. Only 10% of consumer
complaints make it to courts, proving the enforceability of consumer
protection law is working effectively.
Contemporary issues concerning consumers:
Issue 1: Credit:
 Credit is the purchase of goods and services in advance of future payment.
 Many consumers live well beyond their means, and as a consequence, can
risk exploitation. As a result, they have trouble meeting their repayments;
and cars, household goods and even homes are repossessed.
- Consumers face other credit issues such as:
 Unfair contract terms
 Credit providers with inadequate procedures for handling complaints
 Time delays in the handling of complaints by credit providers
 Too many steps involved in the process of seeking legal redress and hence
only the most sophisticated consumers will persevere.
Legal Responses:
 A meeting of the Council of Australian Governments in 2008 determined that
there should be a transfer of consumer credit regulation powers from the
states and territories to the Commonwealth via the Trade Practices
Amendment (Australian Consumer Law) Act 2009 (Cth).
 The resulting standardization established a single uniform national law for
the regulation of consumer credit, while providing both enhanced protection
for consumers and stability for the consumer credit sector. One of the aims
of the Act was to ensure consistency between generic consumer protections
and those that specifically apply to financial services.
- The Uniform Consumer Credit Code (UCCC)
 The amendments to the Australian Securities and Investment Commission Act
2001 (Cth) absorb and strengthen the national Consumer Credit Code across
Australia. The objectives of the Code are to provide laws which apply equally
to all forms of consumer lending and to all consumer providers, and which
are uniform in all jurisdictions of Australia. The newer code not only
guarantees standardization; it also presents credit information in a clear and
easy-to-understand format.
 Credit providers are required to inform consumers of their rights and
obligations in any credit arrangement, as well as truthfully disclose all
relevant information about the credit arrangement via written contract.
 A national uniform consumer credit code has many advantages:
o Credit obligations and liabilities are transparent to all parties.
o It allows credit providers more freedom.
o Failure to comply with the Code can lead to civil penalties and/or
criminal charges
Non-legal responses:
 NSW Office of Fair Trading: provides free advice regarding the Consumer
Credit Code.
 Community Justice Centres (CJCs): provide free mediation and conflict
management services throughout NSW to help people resolve disputes.
 Financial Ombudsman Service (FOS): provides a free mediation service
specifically for resolving credit disputes between consumers and financial
institutions.
 Consumer Credit Legal Centre (NSW): provides free telephone and financial
counselling advice, particularly for low-income consumers
Responsiveness of the legal system:
 The uniform laws outlined above are designed to protect consumers entering
credit agreements, and also regulate credit providers.
 A national response to this issue is appropriate, so that all Australian
consumers are protected from unconscionable credit contracts to the same
extent and with the same consequences for breach.
- Responses of the legal system include:
 Criminal/civil penalties for licensee misconduct, including possible
imprisonment and fines up to 1.1 million dollars.
 Infringement notices enabling ASIC to act quickly to penalize breaches of the
law
 Remedies such as compensation, which aims to put aggrieved consumers
back in their original position prior to the financial loss suffered.
Conclusion:
 The UCCC guarantees standardization of credit contracts across Australia and
ensures that credit information is presented in a clear and easy-tounderstand format.
 Credit providers are now required to inform consumers of their rights and
obligations in any credit arrangement, and to truthfully disclose all relevant
information about the credit arrangement in a written contract incorporating
interest rates, fees and commissions.
 While the legislation can be enforced, we wonder whether the civil and
criminal penalties will be sufficient to deter some corporations from licensee
misconduct. Historically, there has been reluctance by courts to impose
criminal sanctions on the board members of corporations.
Issue 2: Product certification:
 The process of providing documented assurance that goods or services have
passed performance and quality tests before they are marketed.
 Consequently, it is vital that all products meet certain minimum safety and
performance standards before they can be sold to Australian consumers.
Legal responses:
 The ACCC enforces mandatory product safety and information standards and
bans unsafe goods under the TPA 1974 (Cth). The NSW Office of Fair Trading,
via the FTA 1987 (NSW), also has an important role in monitoring product
safety.
- Product Safety:
 Under Australian law, product suppliers and manufacturers have an
obligation to ensure that only safe products are marketed. This is done by
providing clear instructions for use, meeting industry standards and
developing product recall plans and procedures
- Mandatory product standards:
 A standard can be made mandatory by either a statutory regulation or a
notice published in the Commonwealth Gazette. The notice will refer to a
published Australian Standard and may contain variations to that standard.
There are two types of mandatory product standards in Australia, safety
standards (safety legal requirements) and information standards (providing
information to consumers).
- Product certification
 If a product gains certification, it has complied with a set of regulations
governing quality and minimum performance standards.
 Certification of products indicates their established suitability for specific
purposes.
 The certification process has varying levels of stringency. The greater the risk
of injury to consumers, the more demanding the certification process will be
for the manufacturer/supplier.
 Once a good is certified, it may be endorsed with a certification mark or logo.
Some common Australian and international certification marks include:
 The CE mark affixed to a product indicates that it can be legally sold within
the European Union
 The ‘Five Ticks’ StandardsMark is recognised as a symbol of safety and
quality, proving that the product and its production processes have been
assessed to recognised national or international standards.
Certification marks on goods provide the consumer with legal assurance that:
 There is a product certification agreement between the manufacturer of a
product and an organisation with national accreditation for both testing and
certification.
 The product was successfully tested against a nationally accredited standard
 The accredited certification organisation guarantees that the item tested is
identical to the one offered for sale
A certification listing indicates to the consumer that:
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The product is manufactured under a certification that exists between the
manufacturer and the certification organisation.
 The manufacturer’s packaging, literature and promotional information are
authorised to use the certification mark.
 Listing is a matter of public record and can be checked for validity.
In Australia, consumers are protected from unsafe or substandard goods and
services by a number of legal mechanisms:
 The Trade Practices Act 1974 (Cth)
 The Australian Securities and Investment Commission Act 2001 (Cth)
 Various state/territory Fair Trading statutes whose powers have been
absorbed into and/or ‘mirror’ the TPA 1974 (Cth). In NSW, this is the FTA
1987 (NSW)
 The Federal Treasury also provides advice to the government on the
consumer law provisions of the TPA in order to promote a safer market for
consumers.
Non-legal responses:
 Individuals may take action through one of the independent consumer
groups which advocate on behalf of consumers, lobby Parliament to
influence legislation, and act as consumer ‘watchdogs’ to highlight unsafe
products in the Australian market.
 The media can also be a powerful tool for highlighting and publicizing
consumer safety issues.
Responsiveness of the legal system:
 Federal and state governments enforce mandatory product safety and
information standards via the ACCC and the NSW Office of Fair Trading. Both
organisations play a central role in educating businesses and consumers
about product safety as well as publishing information on safety and
standards.
 Both organisations can prosecute suppliers who ignore their statutory
obligations
 Where problems do occur with a product, both the ACCC and the Office of
Fair Trading have powers to remove unsafe goods from sale, including
product recall or public warning of a particular defect.
Conclusion:
 The Australian legal system seeks to ensure that all products that consumers
buy are safe and meet internationally recognised quality standards. This is
achieved via product certification, which demonstrates that a product,
process, or service satisfies specified requirements.
 Without a product certification process in operation, there would be a very
real risk to the health and safety of Australian consumers, as a consequence
of inadequate quality assurance and safety measures.
 With thousands of importers across our country, it is very difficult to ensure
that unsafe products will not enter our market. While we have the requisite
laws in place to protect consumers, we have to rely upon consumer
watchdogs to bring unsafe goods to the attention of the public.