Compliance Enforcement Guide

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Compliance and enforcement How regulators enforce the Australian Consumer Law


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This publication was developed by:

– Australian Capital Territory Office of Regulatory Services

– Australian Competition and Consumer Commission

– Australian Securities and Investments Commission

– Consumer Affairs and Fair Trading Tasmania

– Consumer Affairs Victoria

– New South Wales Fair Trading

– Northern Territory Consumer Affairs– Office of Consumer and Business Affairs South Australia

– Queensland Office of Fair Trading

– Western Australia Department of Commerce, Consumer Protection

Copyright© Commonwealth of Australia 2010

This work is copyright. You may download, display, print and reproduce this materialin unaltered form only (retaining this notice) for your personal, non-commercial use oruse within your organisation. Apart from any use as permitted under the Copyright Act1968, all other rights are reserved.

Requests and inquiries concerning reproduction and rights should be posted at theCommonwealth Copyright Administration website at ag.gov.au/cca or addressed to:

Commonwealth Copyright AdministrationAttorney-General’s Department3-5 National CircuitBarton ACT 2600ISBN 978-0-642-74657-3


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Compliance and enforcement 3

Contents

Introduction 5

1. Elements of compliance and enforcement 7

– Reducing consumer detriment 7

– Compliance 7

– Enforcement 7

– Dispute resolution 7

2. Approaches to compliance and enforcement 8

– Risk-based approach 8

– Outcome-focussed approach 8

– Guiding principles 8

3. Applying the law 10

– Setting priorities 10

– Compliance and enforcement options 11

– Regulator actions 11

4. Impact on traders and consumers 12

– Regulator independence 12– Common questions 13

– Where to get more information 13

Contacts 14


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4 Compliance and enforcement


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The Australian Consumer Law (ACL) isa new national consumer law, replacingCommonwealth, state and territorygeneric consumer protection laws.The law applies at the Commonwealthlevel and in each state and territory.

Compliance and enforcement with thelaw will be on a ‘one-law, multiple-

regulators‘ model, with existingconsumer regulators enforcing theuniform law.

It is the responsibility of traders tocomply with the ACL at all times.

About this publication

This document sets out the principlesthat guide the compliance andenforcement approach of thegovernment consumer agenciesthat administer the ACL.

These agencies are listed on page14 and are referred to as ’the ACLregulators’. This document outlineshow they:

> respond to consumer issues andevidence of consumer detriment

> use their compliance andenforcement powers

> approach ACL compliance.

The ACL regulators have endorsedthis publication, which will guide

their compliance and enforcementefforts for the new law.

The approach outlined in thisdocument does not apply to otherlaws administered by the consumeragencies. It complements any generalpolicies relating to complianceand enforcement used by theACL regulators.

Other guides in this series

This publication is part of a seriesof Australian Consumer Law guides.Others cover:

> consumer guaranteesexplains supplier, manufacturerand importer responsibilities when

there is a problem with goods andservices; refunds, replacements,repairs and other remedies

> product safetycovers safety standards, recalls,bans, safety warning notices andmandatory reporting requirements

> unfair business practicescovers misleading or deceptiveconduct, unconscionableconduct, country of origin, falseand misleading representations,information standards

> unfair contract termsoutlines what an unfair termis and which contracts areaffected by the law

> sales practicesoutlines unsolicited supplies,unsolicited consumer agreements,pyramid schemes, pricing, lay-by agreements, referral selling,harassment and coercion, proofof transaction and itemised bills.

For more information, visit the

Australian Consumer Law website,consumerlaw.gov.au, or contact therelevant ACL regulator – see Contactson page 14.

The Australian Treasury also publishesinformation about the ACL – seeThe Australian Consumer Law –a guide to provisions, availablefrom the Australian Treasurywebsite at treasury.gov.au.

Introduction


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About the AustralianConsumer Law

The ACL is the law governing consumerprotection and fair trading in Australia.From 1 January 2011, it appliesnationally and as a law of each stateand territory. The ACL also incorporatesthe national unfair contract terms law.

It is a key part of regulatory reformsinitiated by the Council of AustralianGovernments (COAG) to deliver aseamless national economy, andimplements recommendations madein 2008 by the Productivity Commissionin its review of Australia’s consumerpolicy framework.

The Intergovernmental Agreement forthe Australian Consumer Law statesthat the objective of the new nationalconsumer policy framework is to:

> improve consumer wellbeingthrough empowermentand protection

> foster effective competition, and

> enable the confident participationof consumers in markets in whichboth consumers and supplierstrade fairly.

This is supported by six operationalobjectives:

> to ensure that consumers are

sufficiently well informed tobenefit from and stimulateeffective competition

> to ensure that goods and servicesare safe and fit for the purposesfor which they were sold

> to prevent practices that are unfair

> to meet the needs of thoseconsumers who are most vulnerableor are at the greatest disadvantage

> to provide accessible andtimely redress where consumerdetriment has occurred, and

> to promote proportionate,risk-based enforcement.

The ACL replaces previously separateCommonwealth, state and territorylegislation. This means that:

> a trader who operates across jurisdictions will have a single setof rules and responsibilities tocomply with (in addition to any jurisdictional legislation that coverstheir particular industry); and

> a consumer moving between jurisdictions or buying frominterstate will have the same setof protections that they are usedto in their home jurisdiction, andconsumers that transact across

Australian jurisdictional bordershave uniform protections.

Legal structures

The ACL is contained in a schedule tothe Competition and Consumer Act

2010 (CCA). Aspects of the ACL arereflected in the Australian Securitiesand Investments Commission Act

2001 (Cth), to protect consumers offinancial products and services.

As a law of each jurisdiction —Commonwealth, states and territories— the ACL will be enforced by courtsand tribunals in each jurisdictionsubject to the specific rules thatapply to enforcement processes,courts and tribunals in each stateand territory jurisdiction.

One law, multiple regulators

COAG has agreed that the ACLwill operate under an arrangementdescribed by the ProductivityCommission as a ‘multiple regulatormodel’. The ACL is a single nationallaw enforced in all jurisdictionsby the various jurisdictions’

consumer regulators.Under this arrangement ACLregulators work to:

> ensure that marketplacemisconduct is addressed

> employ the most effective means ofaddressing consumer harm throughcooperative and complementaryenforcement action

> avoid unnecessary duplicationof effort in the effectiveadministration of the ACL, and

> ensure, wherever appropriate,a consistent approach todispute resolution andenforcement action.

The ACL regulators coordinatetheir activity through the StandingCommittee of Officials of ConsumerAffairs (SCOCA).

Private rights

Aside from compliance and

enforcement by ACL regulators,the ACL creates private rightsthat persons can enforce throughCommonwealth, state and territorycourts and tribunals.

Introduction


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Reducing consumerdetriment

ACL regulators use a range of activitiesand powers to encourage and enforcecompliance with the law.

A core issue for regulators is tominimise consumer detriment.

Consumer detriment is:> the direct financial or material

loss or disadvantage from atrader not complying with thelaw (for example, goods damagedor not delivered)

> costs incurred in seeking aremedy to the loss (for example,time lost in repeated trips to atrader to seek a refund).

ACL regulators may act to addressactual detriment or the risk or

potential of detriment.

Compliance

ACL regulators aim to promote ahigh level of compliance with thelaw. For this, consumers as well astraders need to be aware of theirrights and responsibilities, and howto obtain redress. Providing informationand advice to consumers and tradersfor this purpose is a key functionof ACL regulators.

Our compliance efforts will includea focus on consumer and tradereducation, working with business andindustry to promote compliance withthe law. We will use market intelligenceto improve our knowledge of marketconditions and the experiences ofconsumers and traders.

Enforcement

To be effective, compliance measuresmust be supported by a range ofescalating enforcement options thatcan be used if a trader fails to complyor when there is a serious contraventionof the ACL.

ACL regulators have a range of civil,administrative and criminal enforcementremedies at their disposal under theACL and supporting legislation.

When enforcing the law, ACL regulatorsseek to:

> stop the unlawful conduct

> undo the harm caused by thecontravening conduct (for example,by corrective advertising or redressfor those adversely affected)

> ensure future compliance

with the law

> deter future offending conduct

> encourage the effective use ofcompliance systems

> when warranted, punish thewrongdoer with penalties or fines.

ACL regulators will choose the mostappropriate enforcement tools toachieve these outcomes in a timelyand proportionate manner.

Dispute resolutionState and territory ACL regulators playan important role in resolving disputesbetween consumers and traders aboutgoods and services covered by the ACL.Each regulator provides information onits website about dispute resolution.

Even if a dispute is resolved betweenthe consumer and trader, the regulatormay still take compliance andenforcement action. In these cases,the regulator does not take the sideof either the consumer or the trader.

Elements of complianceand enforcement01


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Risk-based approach

To make the best use of resourcesand maximise public benefit,compliance and enforcement activitywill target areas of strategic priority,and incidents with evidence orlikelihood of consumer detriment.

The ACL regulators cannot pursueall complaints. They considercomplaints carefully and exercisediscretion, directing resources tomatters that provide the greatestoverall benefit for consumers.

As these matters may vary within a jurisdiction or between jurisdictions,priorities for enforcement actiondiffer accordingly.

Outcome-focussed approach

ACL regulators can use a range ofadministrative, civil and criminalenforcement remedies. A regulatorwill choose from a range of tools tosuit the individual case and to achievea range of outcomes, which can gobeyond just punishing wrongdoing.

This means regulators can design anenforcement strategy to achieve oneor more of the following:

> make a trader aware of how thelaw affects their operations – forexample through education,

advice, warnings or reprimands

> get a fair remedy for the individualconsumer (or class of consumers)concerned – for example, throughobtaining redress, an injunction(an order for the trader to do, orcease doing, something) or anenforceable undertaking (wherea trader agrees to an ongoingobligation to do something)

> stop a pattern of continuingconduct and deter futuremisconduct – for examplethrough injunctions, enforceableundertakings or prosecution.

Guiding principles

ACL regulators use the followingguiding principles when undertakingcompliance and enforcement activity.

Transparency

ACL regulators will deal with consumersand traders in an open and transparentmanner. This means consumers andtraders will understand what is expectedfrom them and what they can expectfrom the regulator. Transparency hastwo aspects:

> compliance and enforcementtakes place within appropriatecorporate governance processesand can be reviewed by appropriatecourts, tribunals and public

administration review agencies(such as public service ombudsmenand auditors-general)

> the ACL regulators do not makeprivate arrangements — matterstaken to enforcement action(for example, matters dealt withthrough litigation or formalresolution) will be made public.

02 Approaches to complianceand enforcement


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Confidentiality

Enquiries into complaints andinvestigations are undertakenaccording to the appropriate legalprivacy requirements of the jurisdictionand according to each regulator’sspecific policies and procedures. ACLregulators balance confidentiality

requirements and the need to informthe public when in the public interest.

Timeliness

Complaint handling, disputeresolution, investigation processesand the resolution of enforcementmatters should be conducted asefficiently as possible. This will helpto avoid costly delays and businessuncertainty, and to minimise detrimentto consumers while maximising theeffectiveness of the activity.

Proportionality

Any enforcement action should be inproportion to the level of consumerdetriment and to the seriousness ofthe breach. More serious offences —those involving deceit, dishonesty orunconscionable conduct; the potentialfor death and injury; the targeting ofvulnerable groups; wilfully repeatedconduct; a significant impact on marketintegrity; and those resulting in wideconsumer detriment — will result in

more serious enforcement action.

Targeted

ACL regulators should make effectiveuse of limited resources by targetingissues and traders in line with risks, newand emerging issues, and enforcementpriorities. Each year, ACL regulators willundertake coordinated and targetedcompliance activity on a limited number

of national projects. The ACL regulatorsmay make public reference to thosenational projects as appropriate.

Accountability

All ACL regulators are accountableto the public for their complianceand enforcement activity. The specificmechanisms will vary between jurisdictions depending on the:

> public administration legislation

> regulator-enabling legislation, and

> governmental, departmental andagency codes of conduct.

National awareness

ACL regulators make decisions mindfulof the national implication of actionsand the public interest. Compliancepriorities in state, territory and regionalmarkets have regard to the broadernational environment.

ACL regulators balance confidentialityrequirements and the need to inform thepublic when in the public interest.


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Setting priorities

Each ACL regulator exercises itscompliance and enforcement powersindependently, in the public interestand with integrity and professionalism.

An ACL regulator will choose howit will use its resources to pursue

particular cases to achieve themost effective outcomes for bothindividual consumers and consumersin general, having regard to all thecircumstances of the case.

To assist with this determination,ACL regulators will give enforcementpriority to matters that demonstrateone or more of the following:

> conduct of public interestor concern

> conduct resulting in significant

consumer detriment> conduct affecting disadvantaged

or vulnerable consumer groups

> conduct that suggests apattern of non-complianceby the trader or is indicativeof a risk of future misconduct

> conduct involving a significantnew or emerging market issue

> conduct that is industry-wideor likely to become so

> a significant impact onmarket integrity

> whether action is likely tohave a worthwhile educativeor deterrent effect

> conduct demonstrating ablatant disregard for the law.

When appropriate, an ACL regulatormay also pursue matters that test orclarify the law.

An ACL regulator is less likely topursue matters that:

> are one-off, isolated events

> are more appropriately resolveddirectly between the parties underan industry code (for example, bymediation or an industry disputeresolution body)

> involve issues more effectively dealtwith by another agency, or

> are best dealt with betweenprivate parties (the ACL providescomplainants with a private rightof action in these circumstances).

Litigation is costly compared toother compliance and enforcementactions. Where breaches are blatant,repeated and/or cause significantdetriment, the regulator will targetthose traders for prosecution. ACLregulators have a range of other toolsavailable, which may be used as analternative to prosecution.

03 Applying the law


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Regulator actions

The compliance pyramid belowsummarises the general approach tocompliance and enforcement under theACL. It shows the range of enforcementremedies available to ACL regulators.

While criminal prosecution is reserved

for a smaller number of significantcases, ACL regulators use the range ofdifferent compliance and enforcementtools that can be applied more broadlythan criminal prosecution.

Compliance andenforcement options

Criminal prosecution for breachesof the law is only one of a range ofapproaches ACL regulators may taketo ensure compliance with the law.Other tools and strategies include:

> education, advice andinfluencing good practice

> voluntary industryself-regulation codes

> ‘without prejudice’ discussions

> dispute resolution

> formal written warnings

> infringement notices

> enforceable undertakings

> public warnings

> court orders

> injunctions

> compensation orders

> civil penalties, including pecuniary

penalties and disqualification orders.

Criminalconviction,

fines

Disqualificationorders, civil

pecuniary penalties

Non-party redress orders,adverse publicity orders,

non-punitive orders,

public warning notices

Declarations, injunctions, damages,compensation orders

Infringement notices, court enforceable undertakings

Education, advice and persuasion, voluntary industryself-regulation codes, formal written warnings


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Regulator independence

The ACL is one national law withmultiple regulators. Each regulatoris independent, has its own enablinglegislation and exercises its powersand functions accordingly.

ACL regulators have put in place

systems to create a nationalapproach to compliance andenforcement. They agree to:

> have regard to this complianceand enforcement document

> regularly consult and communicateabout priorities, markets,compliance and enforcement

> general principles for handlingand managing complaints andmarket intelligence under the ACL

> general principles for compliance

and enforcement action to bringabout trader compliance forserious breaches of the ACL.

The following principles apply tocompliance and enforcement action:

> it is the obligation of all tradersto comply with the ACL

> there are private rights ofaction for traders andconsumers under the ACL

> the ACCC and ASIC have nationalresponsibilities and can act in allstate and territories

> each state and territory regulatorcan act in its own jurisdiction, asdefined by its own legislation

> circumstances will vary between jurisdictions and ACL regulatorswill have varying priorities relevantto their jurisdiction.

This means ACL regulators may takedifferent compliance and enforcementactions from time to time. This mayreflect co-ordination between regulatorsto take action in a particular jurisdiction,or reflect a particular priority in aspecific jurisdiction, rather thaninconsistent application of the law.

All ACL regulators participate in SCOCA,which has established arrangements

to enhance consistency, co-ordinationand co-operation amongst the ACLregulators. It has agreed to producean annual report on compliance andenforcement of the ACL.

04 Impact on traders andconsumers


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The ACL regulator:

> cannot force a business orconsumer to settle the dispute

> can investigate a business when alaw may have been broken, even ifthe complaint was resolved.

In some cases, ACL regulators

will conduct a number of inquiriesbefore contacting the business inorder to gather sufficient factsabout the matter and to protectthe integrity of the investigation.

Where to get moreinformation

Visit consumerlaw.gov.au or contactthe relevant ACL regulator (details, page14). Guides to other aspects of the ACLare also available (see list on page 5).

Common questions

Why might an ACL regulatorinvestigate a business?

A business may be investigated by anACL regulator as a result of:

> a complaint from a consumer,

competitor or other regulator> market intelligence

> information from whistleblowersor other informers

> a targeted compliance activitydesigned to identify and reducenon-compliant behaviour bybusinesses in a particularindustry or area.

What happens if a consumercomplains about a business?

In many cases, the relevant ACLregulator will first encourage theconsumer and business to resolveor settle the dispute informally.

An ACL regulator can investigatea business when a law mayhave been broken, even if the

complaint was resolved.


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Contacts

Australian Competition andConsumer CommissionGPO Box 3131Canberra ACT 2601T. 1300 302 502accc.gov.au

Australian Capital Territory

Office of Regulatory ServicesGPO Box 158Canberra ACT 2601T. (02) 6207 0400ors.act.gov.au

New South Wales

NSW Fair TradingPO Box 972Parramatta NSW 2124T. 13 32 20fairtrading.nsw.gov.au

Northern Territory

Office of Consumer AffairsGPO Box 1722Darwin NT 0801T. 1800 019 319consumeraffairs.nt.gov.au

Queensland

Office of Fair TradingGPO Box 3111Brisbane QLD 4001T. 13 QGOV (13 74 68)

fairtrading.qld.gov.au


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C A V 2 1 5 7_

V e t r o

D e s i g n

South Australia

Office of Consumer& Business AffairsGPO Box 1719Adelaide SA 5001T. (08) 8204 9777ocba.sa.gov.au

TasmaniaOffice of Consumer

Affairs & Fair TradingGPO Box 1244Hobart TAS 7001T. 1300 654 499consumer.tas.gov.au

Victoria

Consumer Affairs VictoriaGPO Box 123Melbourne 3001T. 1300 55 81 81

consumer.vic.gov.au

Western Australia

Department of CommerceLocked Bag 14Cloisters Square WA 6850T. 1300 30 40 54commerce.wa.gov.au

Australian Securities andInvestments CommissionPO Box 9827(in your capital city)T. 1300 300 630asic.gov.au


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Documents

Compliance Enforcement Guide