Treasury explores policy options for unfair trading practices
The government has released a consultation examining the harmful impacts of unfair trading practices on small businesses and individuals as well as potential reforms.
Treasury has released a consultation paper this week exploring potential policy options for addressing the issue of unfair business and commercial practices.
Unfair trading practices are particular types of commercial misconduct that are not covered by existing provisions of Australia’s consumer laws such as misleading, deceptive, or unconscionable conduct.
Evidence suggests that a large and growing range of commercial practices and business models fall into this category, including in the digital economy, the consultation paper stated.
Examples of potentially unfair trading practices include exploiting bargaining power imbalances in supply chain arrangements, the non-disclosure of contract terms including financial obligations until after a contract is entered into and providing ineffective discourse of key information.
It can also include omitting or obfuscating material information that distorts consumers’ expectations or understanding of the product or service being offered and exploiting or ignoring the behavioural vulnerabilities of consumers.
The consultation paper stated that in addition to causing direct harm to consumers, unfair trading practices can distort competition, which relies on consumers being able to make free and informed choices about the products and services that best suit their needs.
Through the consultation process, Treasury is seeking further evidence about the issue of unfair trading practices, where some of the gaps in the current law may be and whether there is a need for government intervention.
One of the four options explored in the paper is whether the prohibition on unconscionable conduct contained in section 21 of the Australian Consumer Law should be extended to include unfair conduct.
The paper proposes extending the prohibition to capture unfair conduct within subsection 21(3) or section 22 as a factor or element that must be assessed in determining whether conduct is unconscionable in connection with the supply or acquisition of goods or services.
“This policy option would seek to broaden the scope of sections 21 and 22 of the ACL to consider a range of misleading, harsh, oppressive or predatory conduct depending on how unfair conduct is defined,” the paper stated.
“However, this policy option intends to maintain section 20 of the ACL which is confined within the parameters of the unwritten law developed under equity. The prohibition on unconscionable conduct could also be made prospective, so it applies to conduct that is likely to be unconscionable. This would align with the misleading or deceptive conduct protections in the ACL.”
An alternative approach, the paper said, would be to add the concept of unfairness to the unconscionable conduct provision itself.
The rationale for this is that ‘unfair tactics’ are already referred to in the list of factors courts should take into account in determining unconscionability, and that elevating this to something courts must consider (as opposed to may consider) may not have a material effect,” it said.
In recent case law, judges applying the current prohibition have drawn a distinction between conduct that is unconscionable and conduct that is unfair.
“The intention of this option would be to clearly signal to courts that unfair conduct that falls short of the threshold for unconscionability should also be prohibited,” the consultation paper stated.
Another option explored in the paper is to introduce a new general prohibition on unfair trading practices which would apply to businesses across all sectors as a separate protection from the existing provisions of the ACL.
“It would be a broad and flexible principles-based prohibition which would align it with the largely principles-based nature of the ACL,” the paper said.
The paper also explores the idea of introducing a combination of general and specific prohibitions on unfair trading practices.
“The combination of a general principles-based prohibition against unfair trading practices with the addition of a list of specific prohibited practices would be the most comprehensive and targeted policy approach,” it said.
“These provisions would complement existing protections under the ACL, such as the prohibitions against unconscionable conduct and misleading or deceptive conduct.”
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