Consumer protection takes the stage?

The Australian Consumer Law (ACL) aims to reduce the number of differing regulatory regimes governing consumer transactions in Australia, heighten protection for consumers and reduce uncertainty for consumers and business by (among other things):

• introducing a single national consumer law;

• incorporating and augmenting the consumer protection provisions in the Trade Practices Act (TPA); and

• introducing a national unfair contracts regime.

Consumers – is this the era of confusion?

The ACL applies principally to dealings with ‘consumers’.  A wide range of factors have been used in the ACL to determine whether the acquirer of goods and services is a ‘consumer’ and consequently it contains a confusing number of definitions of ‘consumer’.

Under section 2(3) of the ACL, a consumer contract is a contract for:

• the supply of goods or services; or

• a sale or grant of an interest in land,

 to an individual wholly or predominantly for personal, domestic or household use or consumption.

This definition differs significantly from that previously used in the Trade Practices Act because it applies to goods or services wholly or predominantly for personal, domestic or household use or consumption, rather than good or services ordinarily of a kind acquired for personal, domestic or household use or consumption.

Businesses must therefore consider every single transaction with a consumer and decide whether the goods and services being bought are wholly or predominantly for the consumer’s personal or business use.  In practice this means that businesses will either need to adopt the ‘consumer’ standard for all consumer transactions or have two different standard form contracts to offer consumer’s, depending upon whether they are purchasing the goods or services for personal or business use.

Under section 3 of the ACL another definition of ‘consumer’ applies to

• consumer guarantees;

• unlisted consumer agreements;

• lay-by sales agreements;

• the provision of itemised bills;

• the definition of continuing credit contracts; and

• linked credit contracts.

In these instances a person is a ‘consumer’ if and only if:

• the amount paid for the goods and services did not exceed $40,000; or

• the goods and services were of a kind ordinarily acquired for personal, domestic or household use or consumption; or

• the goods consisted of a car or trailer purchased principally for the transport of goods on public roads.

Further specific definitions of ‘consumer’ apply to ‘unfair contracts, product safety and unconscionable conduct where the section 3 definition of a consumer does not apply. 

The unfair contracts terms regime in section 23(3) of the ACL defines a ‘consumer contract’ as a contract for the supply of goods or services or the sale or grant of an interest in land to an individual wholly or predominantly for personal, domestic or household use or consumption¹.  Under section 2 of the ACL on product safety ‘consumer goods’ are defined as goods intended or of a kind likely, to be used for personal, domestic or household use or consumption.  Yet another definition of ‘consumer’ is introduced at section 22 which prohibits unconscionable conduct towards ‘business consumers’ excluding a listed public company and thereby introduces the notion of businesses as consumers.

Translating the characteristics of the goods and services in the various definitions of a ‘consumer’ can also be difficult.  In the case of Carpet Call Pty Ltd v Chan [1987] ATPR(Digest) 46-025 for example, the Court held that carpet was a commodity or good, ordinarily acquired for domestic consumption and does not lose that description by reason of a commercial rating or quality which makes it last longer than other carpet normally supplied for use in a domestic setting.  The Court concluded that the acquirer was a consumer despite the fact that the carpet in question was acquired for use in a night club to withstand heavy human traffic.  Interpreting the words ‘wholly or predominantly’ for personal, domestic or household use or consumption presents a difficult assessment of what degree of frequency is required for the terms ‘wholly or predominantly’ to apply.

Summary

Arguably the ACL by creating an array of definitions of  ‘consumer’ will confuse consumers about whether they are protected, confuse businesses about whether the ‘consumer’ standard applies to a particular transaction thereby inhibiting the efficient and open operation of businesses.

Should you have any questions about this update please do not hesitate to contact Mark MacLennan or Kerry Davis on: