Firms granted delay to national consumer laws

Businesses in the retail and telecommunications sectors have been granted a 12-month transition period to adjust to the new Australian Consumer Law, which comes into effect on January 1, 2011.

The new law, which targets consumer protection, aims to cut red tape for businesses operating across state borders by replacing 20 existing state and territory laws with a single, national law.

It includes new rules on unfair contract terms, consumer rights when buying goods and services, product safety, door-to-door sales and other direct marketing.

David Bradbury, Parliamentary Secretary to the Treasurer, told The Australian Financial Review the transition period will give businesses time to adjust to the new rules.

“These transitional arrangements apply to some of the rules surrounding unsolicited selling, repair notices that suppliers must provide to consumers when they repair IT products or provide refurbished items, and warranties against defects,” Bradbury said.

In a submission to Treasury last month, retail giant Wesfarmers expressed its concern over the initial deadline, stating the regulations would leave its supplier base and manufacturers with insufficient time to amend warranty defect statements.

The government responded by delaying the commencement of the rules for warranties against defects until January 2012.

Similarly, regulations that give consumers a 10-day cooling off period to terminate a contract will take effect at the start of 2012, while national rules on repair notices and unsolicited selling will begin in July 2011.

Businesses will have to comply with existing state laws in the interim.

The Productivity Commission estimates this reform could provide benefits to the economy of between $1.5 billion and $4.5 billion a year.

The Australian Information Industry Association says the new law will impact on dealings between businesses and consumers, as well as affecting the day-to-day activities of many businesses.

The AIIA says businesses need to be aware of the following:

• There is an express guarantee that goods be of an “acceptable quality”. Consumers will only have the right to reject goods and receive a refund if defects are major, or if they are minor and are not remedied within a reasonable time.

Suppliers should therefore review their systems for dealing with consumer complaints, and processes to ensure timely defect rectification.

Arrangements with authorised repairers will have to be reviewed to ensure that they repair promptly.

• Manufacturers and suppliers who provide express warranties will need to include certain new provisions and all products released for distribution in Australia will be required to contain Australia-specific wording.

In some cases, this will require the warranty language to be rewritten, which could involve the reissue and revision of many commercial documents.

• The new product safety laws prohibit the supply of unsafe “product related services”. If services are not supplied in accordance with an applicable standard, they will be exposed to penalties.

Suppliers will need to understand the new laws or they will risk being subject to interim and permanent bans, and safety warning notices.

• Suppliers will be subject to a new mandatory reporting obligation. If a serious injury is associated with a supplier’s goods or services, they have a maximum of two days to lodge a report with the ACCC.

If a supplier fails in this obligation, they face conviction of a criminal offence. This new obligation will create significant compliance obligations for businesses, and manufacturers and suppliers will have to implement efficient systems to ensure that incidents are dealt with swiftly and a report prepared within the two-day deadline.

• Goods and services will be required to be supplied within a reasonable or agreed time. Suppliers will therefore have to be careful when specifying delivery dates.

Businesses who offer extended warranty schemes will have to review their terms and conditions to ensure they do not include false or misleading representations, and will have to ensure that employees who offer the extended warranties are adequately trained so as to avoid making false or misleading representations.

• Regulators will be given new enforcement powers to ensure compliance with the ACL. These powers include the issuing of substantiation notices, infringement notices and public warning notices, and the ability to seek penalties of up to $1.1 million for corporations and $220,000 for individuals who are in breach of the ACL.