Antipodean alignment: impact of the proposed Australian Consumer Law.

• Author: Morrison, Andrew

WITH a population of some 21 million people, Australia is a small nation by global standards. However, by relative measures, the Australian economy is well developed and resilient. Out of sight perhaps, but not out of mind. Australia is a member of the G-20 (Group of Twenty Finance Ministers and Central Bank Governors). It houses four of the nine remaining AAA rated banks in the world. In fact, as the world economy sees glimmers of light after the global financial crisis, it seems that Australia has weathered that storm better than many. Amongst various indicia, increased consumer demand for products in Australia is expected to translate into increased opportunities for inbound international business.

Australia also has a highly developed federal legal system and, in common with our North American allies, a strong social appetite for consumer litigation, including class actions. As governments here change their political stripes, so too have the prospects of regulatory reform shifted gears. Consumer protection is now high on the governmental agenda, and the legislative wheels are in motion.

This article introduces the proposed Australian Consumer Law ("ACL") to an international defense orientated audience. Australia's federal consumer watchdog, the Australian Competition and Consumer Commission ("ACCC"), has described the ACL as the biggest upheaval of Australia's consumer policy framework in more than 30 years. The changes which are contemplated will impact consumer and consumer orientated business transactions throughout the nation. They will also have implications for international ventures conducting business in Australia. In short, every foreign corporation that supplies, or intends to supply, consumer products and services to or within Australia ought to be aware of the widespread changes that the ACL appears set to deliver.

A specific focus is the product safety provisions of the ACL. The current Commonwealth product safety provisions have not been updated comprehensively since they were introduced in 1986. Much has been made of the objective of harmonizing legislation across various Australian jurisdictions to reflect "best practices" in existing domestic legislation. However, the marketplace is global and a key concern is whether we will, in fact, also take the opportunity to harmonize Australian product safety law with international best practice. As matters stand, it appears likely that Australia will take a conceptually similar but substantively different approach, with some material consequences.

1. The Australian Legal System

   Australia shares common (law) antecedents with many former British colonies. However distance and cultural difference have shaped our law. It is useful initially to briefly outline Australia's legal system.

   Australia is a federation comprising six states and two self-governing territories. The Australian Constitution specifies a range of matters that are the responsibility of the Federal Government. The balance of legal matters remains the responsibility of State and Territory Governments.

   Australia's laws and legal system have their foundation in the common law of England, and its practices and procedures broadly reflect those of the Anglo-American common law world. While judgments of the House of Lords and the English Court of Appeal are persuasive authority, they are not binding on Australian courts. More recently, in developing Australia's laws, our courts have looked to the jurisprudence of other countries, particularly the superior courts of the United States and Canada, for guidance.

   Australia has both a federal court system and a hierarchy of courts in each of the States and Territories. In all cases, the ultimate appellate court is the High Court of Australia ("HCA"). Decisions of the HCA are binding on all other Australian courts. The HCA is also responsible for the determination of constitutional disputes, in the same way as the United States Supreme Court.

   As in the multi-jurisdictional federation of the United States, the Australian legal system is necessarily complex. The division of law-making powers between the Federal Government and the States/Territories has major implications for the adoption of nationally consistent laws.

   Consumer law provides a key illustration of the tension that exists in this arena: section 51(xx) of the Australian Constitution grants power for the Federal Government to make laws with respect to corporations, (1) but it is up to the States and Territories to provide legislation to protect consumers against the acts of individuals and organizations who do not formally incorporate. Creating a single, harmonious consumer protection system requires the political will of all the States and Territories to co-operate with the Federal Government. While such co-operation and collaboration has happened in Australia in its history, (2) it is not a common occurrence. This is discussed in more detail below.

2. The Current State of Play

   1. Trade Practices Act/Fair Trading Acts

      For nearly four decades Australia's consumer protection and product safety laws have been housed within the federal Trade Practices Act, 1974 (Cth) ("TPA"), as well as through Fair Trading Acts in each State and Territory)

      The key provisions in the TPA in relation to product safety and marketing (not including product recalls and safety actions) are:

      (a) [section] 52: prohibiting misleading and deceptive conduct in trade or commerce;

      (b) [section] 53: prohibiting misrepresentations made in trade or commerce;

      (c) Part V, Division 2: implying terms into consumer transactions as to merchantable quality and fitness for purpose;

      (d) Part V, Division 2A: imposing strict liability on manufacturers and importers, such that goods must be of merchantable quality and fit for purpose; and

      (e) Part VA: imposing strict liability on manufacturers and importers in respect of "defective goods"--identical to those imposed under the European Product Safety Directive.

      Given constitutional limitations, the TPA only applies to corporations acting in trade or commerce. The Fair Trading Acts contain similar provisions, but with a broader application to individuals and unincorporated groups.

   2. Australia: Sun Burnt Country and a Litigious Environment

      As a tourist destination, Australia has a number of internationally recognizable landmarks. We also possess a strong legal environment which actively encourages litigation and consumer product claims. For the purpose of this paper, there are three legal features which bear comment:

      1. Litigious Culture:

         A part of the United States legal landscape that is closely reflected in Australia is the tendency to litigate--sometimes described as a culture of "blame and claim". Today, and for the better part of the last decade, Australia is the nation outside North America where a corporation is most likely to find itself defending a consumer based class action.

         There has been a significant incidence of "copy cat" litigation--where proceedings are commenced in the United States, identical or at least remarkably similar actions are subsequently commenced in Australia. The Association of Trial Lawyers of America (now the American Association for Justice ("AAJ")) assisted Australian plaintiffs' lawyers in establishing a sister organization in Australia, while Australian trial lawyers participate in a range of AAJ activities. This culture, and a willingness to sue for damages in tort and under the consumer protection provisions of the TPA, pose major risk considerations for Australian businesses and for manufacturers and suppliers wherever located.

      2. Litigation Funders:

         Once struck down as trafficking in litigation, litigation funding arrangements no longer fall prey to laws against champerty and maintenance. To the contrary, Australian governments and courts alike have embraced litigation funding as one means of...