On 31 August 2023, Treasury released its Consultation Regulation Impact Statement on proposed reforms to regulate unfair trading practices in Australia (Consultation). Unfair trading practices (also commonly referred to as unfair business practices or unfair commercial practices) are types of commercial conduct that are not prohibited by existing provisions of the Australian Consumer Law (ACL) but which can nevertheless distort competition and result in significant harm to consumers and small businesses.
Currently, only certain types of conduct are prohibited under the ACL, such as misleading or deceptive conduct, unconscionable conduct, bait advertising, referral selling and pyramid schemes (among others). The outcome of the consultation may be new reforms that seek to cover a broader range of conduct that currently does not reach the legal thresholds of the existing prohibitions.
Treasury has provided four policy options for consideration, which would apply economy-wide, and is seeking submissions and responses from interested stakeholders by 29 November 2023.
Examples of potentially unfair trading practices
Treasury provides a range of examples of conduct that may be considered to be potentially unfair trading practices, but which it considers are not currently prohibited and could be the subject of proposed reforms. These include:
inducing consumer consent or agreement to data collection through concealed data practices;
exploiting bargaining power imbalances in supply chain arrangements, including by unilaterally varying supply terms at short notice;
omitting or obfuscating material information which distorts consumers’ expectations or understanding of the product or service being offered;
using opaque data-driven targeting or other interface design strategies to undermine consumer autonomy;
exploiting or ignoring the behavioural vulnerabilities of consumers that are present in the ‘choice architecture’ of products or services (digital or otherwise);
adopting business practices or designing a product or service in a way that dissuades a consumer from exercising their contractual or other legal rights;
non-disclosure of contract terms including financial obligations (at least until after the contract is entered into);
all or nothing ‘clickwrap’ consents that result in harmful and excessive tracking, collection and use of data, and don’t provide consumers with meaningful control of the collection and use of their data; and
providing ineffective and/or complex disclosures of key information when obtaining consent or agreement to enter into contracts.
Treasury’s proposed policy options to address unfair trading practices
Treasury proposes four distinct policy options to address unfair trading practices in Australia:
Status quo (no change): There would be no law reform and the current legislative framework is maintained, with the ACCC continuing to monitor and enforce the ACL.
Amend statutory unconscionable conduct: The core prohibition on unconscionable conduct would be expanded so that unfair conduct must (rather than may) be considered in determining whether conduct is unconscionable or alternatively, the concept of unfairness could be added to the unconscionable conduct provision itself. This would be through amending section 21(3) and/or section 22 of the ACL. Treasury states that the intention of this option would be to clearly signal to the courts that unfair conduct that falls short of the threshold for unconscionability should also be prohibited.
General prohibition: A general prohibition on unfair trading practices would be applied across all business sectors, separate from the current prohibitions under the ACL. The intention of any proposal to introduce a general prohibition on unfair trading practices would be to ensure it adapts to technological and commercial change. It could establish an explicit norm of conduct about fair dealing and fair trading. Alternatively, it could have an explicit definition of what constitutes an unfair practice. Treasury states that any reform introducing a general prohibition on unfair trading practices could align with the new approach to unfair contract terms and include civil penalties for a contravention.
A combination of general and specific prohibitions: This option is most like the unfair trading approach taken in the EU, UK and Singapore, and would introduce a comprehensive and targeted policy approach, complementing existing prohibitions under the ACL. Under this option, further specific unfair practices would be inserted into the ACL alongside a general prohibition on unfair practices. These prohibitions would be more specific, including clear and defined instances of unfair practices that are not covered by any existing prohibitions of the ACL.
ACCC support for unfair trading practices reform
The ACCC has been advocating for a prohibition on unfair trading practices under the ACL since its 2019 Digital Platforms Inquiry Report , and released a statement on 1 September 2023 supporting Treasury’s Consultation.
Earlier this year, Gilbert + Tobin hosted a panel discussion with ACCC Chair Gina Cass-Gottlieb, who provided insight into the unfairness debate in Australia and the ACCC’s perspective on unfair trading practices. We expect that Policy Option 4 described above, being a combination of general and specific prohibitions, is likely the option preferred by Treasury and the ACCC.
Next steps for the consultation process
Treasury is seeking submissions and responses to their consultation paper by 29 November 2023.
If you would like further information on the consultation, or assistance in drafting a submission, please contact one of our experts.
Other important dates
The new unfair contract terms regime will apply from 10 November 2023, and the ACCC is seeking feedback on its draft greenwashing guidance for businesses until 15 September 2023. Please reach out to one of our experts if you would like more information or to request assistance.