Proposed reforms to address unfair trading practices in Australia

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The Australian Government is consulting on options to strengthen protections for consumers and small businesses against unfair trading practices. Unfair trading practices refer to certain commercial practices that cause harm but are not prohibited by existing laws. The consultation paper released by Treasury in August 2023 explores options to amend the Australian Consumer Law (ACL) to introduce new protections from unfair trading practices.

What is proposed?

The options discussed in the consultation paper include:

  1. Retaining the status quo – no change to existing laws. The ACL would continue to protect against misleading or deceptive conduct, unconscionable conduct and unfair contract terms but would not specifically target unfair trading practices.
  2. Amending the statutory unconscionable conduct provision to expand its scope. This could involve expanding the list of factors courts must consider in determining whether conduct is unconscionable to include ‘unfair conduct’. It may also involve making the prohibition apply to conduct likely to be unconscionable.
  3. Introducing a general prohibition on unfair trading practices. This would be a broad, principles-based prohibition to capture unfair practices not addressed by existing laws. The definition of ‘unfair’ would need to be carefully developed.
  4. Combining a general prohibition with specific prohibitions on certain defined unfair trading practices. This combines the benefits of a principles-based approach with clear rules on specific harmful practices. The specific prohibitions could be updated over time.

Potential impacts

The options are aimed at deterring unfair business practices, empowering regulators to take action against a wider range of harmful conduct, and providing consumers and small businesses with greater protections and ability to seek redress. However, the options also pose risks and costs.

A general prohibition on unfair trading practices (Options 3 and 4) may create uncertainty for businesses and regulators in the short term until the courts have established precedents on its interpretation. It could also impose additional compliance costs on businesses. Regulators would also require additional resources to implement and enforce new laws.

Amending unconscionable conduct laws (Option 2) may provide useful clarification for courts and businesses but retains the focus on ‘unconscionability’ which has been shown to set a high threshold for finding against businesses. It may not effectively capture unfair conduct that falls short of unconscionability.

Retaining the status quo (Option 1) avoids imposing any new regulatory burden but would fail to address the consumer harms identified in various reviews and inquiries regarding unfair commercial practices. It risks Australia falling behind international peers who have adopted laws targeting unfair trading practices.

What it may mean for businesses

If new laws are introduced, businesses may face greater obligations to revise compliance practices, train staff, and ensure practices do not contravene broad and flexible provisions. However, clearly articulating acceptable business practices may also provide useful guidance. New penalties may deter unfair conduct and secure redress for consumer harm.

Overall the proposed options aim to balance the need to address unfair trading practices against burdening businesses with unclear or expansive new obligations. More work is required to refine and assess the options, and stakeholder feedback will inform Treasury’s decision on the preferred approach. The consultation process is open until 29 November 2023.

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