15 July 2016

Consumer Protection Enforcement

The Productivity Commission has released its issues paper on Consumer Law Enforcement and Administration.

The paper [PDF] states
2 How is the multiple regulator model for the ACL working and how could it be improved? 
Reported progress 
There has been significant reform in relation to generic consumer protection law since the Commission’s previous review in 2008. 
As noted, in 2009 Australian governments under the banner of COAG agreed to adopt the Commission’s main recommendations for a new national consumer policy framework. This agreement was supported by a MoU among ACL regulators signed in 2010. The ACL itself took effect on 1 January 2011. 
Since the inception of the single law, multiple regulator arrangements, ACL regulators have developed a series of regulatory plans and strategies, and instituted measures to improve cross-agency coordination and consistency. Many of these have been documented in a series of annual progress reports on the implementation of the ACL (for example, CAANZ 2016b). The actions reported include:
• publishing the Compliance and Enforcement Guide to explain how ACL agencies have agreed to act together and individually to achieve compliance with the ACL 
• establishing the ‘Australian Consumer Law Intelligence Network Knowledge’ (ACLINK) system, and various working groups and committees, to share information, discuss enforcement priorities and coordinate dispute resolution and compliance activities 
• agreeing on a lead agency approach for compliance and enforcement action  
• developing websites, phone apps and other educational materials for use in all jurisdictions to assist consumers and business understand their rights and responsibilities under the ACL 
At face value, the reported developments suggest that the ACL regulators have gone some distance to adopt the various high level ‘good regulatory practices’ advocated in the 2008 report. They appear to have a broad array of enforcement tools, pursue risk-based enforcement approaches, and have in place mechanisms to communicate and coordinate with each other. 
On this latter point, according to the issues paper for the ACL review:
... the national consumer policy framework has facilitated regulator communication and cooperation between regulators in the areas of policy and research, education and information, and compliance and dispute resolution. These arrangements have given rise to an unprecedented level of coordination between consumer regulators, as highlighted in the annual ACL progress reports. (CAANZ 2016a, p. 5) 
However, there are issues around the availability of evidence to verify the success of the multiple regulator model in delivering consumer protection. In 2013, for example, a report argued that:
Assessing the effectiveness of Australia’s consumer protection regulators’ enforcement work is made problematic by the inconsistencies, lacuna and unhelpful approaches that riddle the reporting of enforcement work. (Renouf, Balgi and Consumer Action Law Centre 2013, p. 10) 
The Commission is seeking participants’ comments on the progress in implementing the ACL and the general success of the multiple regulator model. 
To what extent have issues noted in the Commission’s 2008 report — such as inconsistency, gaps and overlaps in enforcement and unclear delineation of responsibilities among regulators — been addressed by the current arrangements? 
To what extent have the ‘high level’ reforms documented in the implementation progress reports been reflected in improvements in ‘on the ground’ administration, compliance and enforcement of the ACL? 
What evidence or metrics are available that can be used to assess or substantiate these claims? What have been consumers’ and businesses’ experiences under the ACL regime? 
Does the multiple regulator model cause any confusion or other problems for consumers seeking redress or for business operations? How, in broad terms, could any such problems be addressed? What, if any, alternatives to the multiple regulator model should be considered? What benefits and costs would the alternatives have? 
Some particular concerns and challenges 
Any regulatory regime will always face some challenges, whether it be due to, for example, resourcing constraints for enforcement or the changing nature of the products or the marketplace the regime seeks to regulate. From its preliminary research and consultations on the ToR, the Commission is aware of a number of potential concerns or challenges around the administration and enforcement of the ACL. There are also some suggestions for improvement. (The following list is not intended to be exhaustive. The Commission will be seeking views and evidence from participants on these or other concerns or challenges for the enforcement and administration of the ACL.) 
Resourcing issues 
One matter raised by the ToR is the level of resources for enforcing the ACL. No regulatory regime is ever able to prevent all problems before they emerge or deal ‘perfectly’ with all problems once they do. However, there is the question of whether the  current levels of resources devoted to consumer protection are appropriate and commensurate to the risks being managed. 
Alongside this issue, the Commission understands that the level of resources available for enforcement of the ACL varies at the state and territory level (relative to, for example, their populations). In theory, this could lead to differences in the intensity of enforcement and, potentially, the level of consumer protection — or the availability of consumer redress — in different jurisdictions. (Evidence of different resourcing levels between jurisdictions leading to different consumer outcomes may be clearest in areas or incidents where the same adverse business act or strategy is exploited nationwide.) Alternatively, it may be that relatively under-resourced jurisdictions use different enforcement strategies or are able to refer some issues — particularly where they have a more ‘national’ character — to better resourced jurisdictions. 
Are the levels of resources for enforcing the ACL adequate? What are the effects of differences in resources available to state and territory ACL regulators? To what extent, if any, does the potential for the ACCC or ASIC to undertake enforcement actions affect the resources the states and territories devote to ACL enforcement? 
Enforcement tools and approaches 
One of the objectives of the consumer policy framework is to ‘promote proportionate, risk-based enforcement’. According to the CAANZ Review Issues Paper (p. 36), the ACL regulators achieve this partly through cooperation and targeting their enforcement activities at priority areas or areas where there is evidence of likelihood of consumer harm. 
Implementing proportionate, risk-based enforcement practices can be quite challenging in practice. Among other things, where information on consumer problems is limited or incomplete, it may be difficult to quantify risks with any great precision. To undertake proportionate, risk-based enforcement, regulators must also have appropriate tools and remedies. And, given their limited resources, regulators must make difficult choices at the margin between, for example, pursuing additional prosecutions rather than additional business and community education around consumer law matters. 
To what extent do the ACL regulators achieve proportionate, risk-based enforcement in practice? Are changes to the current approaches of the ACL regulators warranted, and is there any evidence to show that such changes would lead to improved outcomes for consumers overall? Are the enforcement tools and remedies available to regulators sufficient to address risks to consumers? 
Allocation of issues and responsibilities between regulators 
At the Commonwealth level, both the ACCC and ASIC have responsibilities for enforcing the ACL (although it is also possible to see ASIC as a ‘specialist’ regulator in the financial services field). A question for this study is whether communication and cooperation between ASIC and the other Commonwealth and state and territory ACL regulators, and the coordination of their enforcement activities, is operating effectively. There are also questions about how problems that emerge in particular jurisdictions, but have wider implications, are allocated between state, territory and national ACL regulators. 
What mechanisms are used to coordinate the regulation and enforcement of consumer financial products (or the financial aspects of consumer products) between ASIC and the other ACL regulators, and how effective are they? 
How adequate are current arrangements among ACL regulators (and specialist safety regulatory regimes) for identifying consumer concerns that are ‘extra-jurisdictional’ and for developing a consistent national regulator response? 
How might these arrangements be improved? Intelligence gathering and sharing 
Another set of issues relates to the sophistication with which data on breaches of the ACL (or on emerging consumer protection problems) are collected and analysed. 
Individual ACL regulators typically collect and analyse such data for their own jurisdiction, which can be valuable in focussing their regulatory effort on areas where the likelihood of consumer harm is greatest. Such databases can also assist in alerting consumers to likely problem areas (as does, for example, the NSW Fair Trading Complaints Register). The Commission’s 2008 report recommended that all consumer regulators should participate in a shared national database of serious complaints and cases. ACL regulators have some mechanisms in place to share information with their counterparts, such as ‘ACLINK’. However, the Australian National Audit Office has noted that it has some limitations (ANAO 2016, p. 28). 
Australia still does not have a national database — such as the Consumer Complaint Database in the United States, managed by the Consumer Financial Protection Bureau — that would more readily enable analysis of complete disaggregated complaints data for the purposes of identifying trends, patterns and issues of concern. 
What ongoing arrangements are there for ACL regulators and regulators of specialist safety regimes to share information on consumer protection problem areas on a national basis? Are such arrangements adequate, including for a future where markets are increasingly national in nature and new products and services are constantly entering those markets? 
If not, what arrangements might be cost-effective to institute that could provide such a national database? Are there approaches used by other countries that provide lessons for Australia on how it might improve the sharing of information among the different ACL regulators, or in other ways (for example, artificial intelligence or machine learning) identify emerging consumer harms or scams, or areas for priority enforcement? 
Other issues 
Some other issues that have been raised in the context of the parallel ACL review, that bear on the administration and enforcement of the ACL, include:
• differences in access to remedies for breaches of the ACL (for example, differences in application fees to access courts and tribunals and different penalties available in different states and territories) 
• the increase in online sales, and whether state- or territory-based ACL regulators are well placed to address concerns around imported products, particularly where there is no local distributor 
• whether ACL regulators are appropriately equipped to regulate business-to-business transactions, as they are now responsible for following recent amendments to the ACL that extended some of its protections to small business.
More broadly, the Commission is seeking participants comments and evidence on any other problematic aspects of the multiple regulator model for enforcing the ACL or how it is operating at present, the source of those problems, and suggestions on how the model or its operation could be improved. 
What problems are there with the administration and enforcement of the ACL under the multiple regulator model and how could it be improved? Where particular problems have arisen in the enforcement of the ACL, are these because of (a) weaknesses in the law (b) weaknesses in the way enforcement is undertaken (c) insufficient resources to enable sufficient enforcement action? 
3  Specialist safety regulatory regimes and their interface with the ACL 
As part of assessing how effectively the multiple regulator model is supporting a national consumer protection framework, the ToR require the Commission to also examine: the role of specialist safety regimes in protecting consumers; their interaction with the ACL; and the extent to which the responsibilities of the different specialist regime and ACL regulators are clearly delineated. 
The institutional ‘architecture’ for consumer safety regulation 
As noted earlier, the ACL has within it a national product safety and enforcement system (box 1). Under this system, Commonwealth, state and territory ACL regulators have responsibility for general consumer products. 
Governments have also established specialist safety regulatory regimes to deal with safety issues for specific types of complex products or where safety is paramount. Regulators of these specialist regimes typically have specific experience and expertise relevant to the subject matter of their regulatory framework (although, in some cases, the specialist regulatory function and the ACL function are housed in the same body). Examples of these specific areas and their regulators are contained in box 4. The ToR explicitly mention therapeutic goods, food safety, building and construction industry regulation, and electricity and natural gas regimes, as examples of specialist safety regimes the Commission should consider.
Box 4 Some specialist safety regimes and their regulators 
Specialist safety regimes and their regulators exist in the following areas: • Agriculture – Australian Pesticides & Veterinary Medicines Authority • Boats and marine safety – Australian Maritime Safety Authority • Building and building materials – for example, Consumer Affairs Victoria, NSW Fair Trading, Queensland Building and Construction Commission, SA Office of the Technical Regulator, Victorian Building Authority • Drugs and therapeutic goods – Therapeutic Goods Administration • Electrical appliances and goods – for example, Energy Safe Victoria, NT Worksafe, Dept. of Business, Queensland Electrical Safety Office • Food – Food Standards Australia and New Zealand, Prime Safe (Victoria), Therapeutic Goods Administration • Gas appliances – for example, Energy Safe Victoria, SA Office of the Technical Regulator, Queensland Department of Natural Resources and Mines, WA Department of Commerce (Energy Safety) • Motor vehicle and road traffic safety (Transport) – Department of Infrastructure, Transport, Regional Development and Local Government (Cth) • Veterinary products – Australian Pesticides & Veterinary Medicines Authority. Source: ACCC (2016). 
There is significant variation in the institutional architecture that applies across specialist safety regimes:
• some specialist regimes (for example, therapeutic goods and motor vehicle safety) operate under a single national law, but in others there are separate state- and territory- based laws or state/territory-based variations on the national law. 
• some specialist regimes (such as for therapeutic goods) have a single specialist national regulator responsible for enforcement, but for other specialist regimes each state or territory has responsibility for the administration and enforcement is that regime 
• in these latter cases, arrangements in states and territories vary. For example: – Victoria has established an independent regulator — Energy Safe Victoria — to deal with issues across electricity, gas, pipes and cabling, whereas most other jurisdictions have these responsibilities sitting within (or spread between) government departments – in Western Australia, NSW and the ACT, builder licensing, builder compliance and consumer protection sit within the one agency, whereas in Queensland builder licensing and compliance sit within the Building and Construction Commission and consumer protection sits within the Office of Fair Trading.
These variations may reflect the different nature of the products, services or activities being regulated and/or historical approaches to governance and institutional design, or different resource availability, in different jurisdictions. 
The Commission would welcome comprehensive information on the specialist consumer safety regulatory regimes that lie outside the ACL and the regulators responsible for administering those regimes in and across jurisdictions in Australia. What are the rationales for the delineation of enforcement responsibilities under the different regimes?  
Some potential problems and issues 
Whatever the reasons for these different institutional designs, the architecture of the specialist safety regulatory regimes and their interaction with the ACL raise several issues for the study, both in relation to the effectiveness of the ACL and of the specialist regimes themselves. Some changes in the market, including the growth in ‘bundled’ products, Internet sales and the increasingly national nature of markets, may also have ramifications for how consumer product safety is and should be regulated. (Again, the following set of issues is not intended to be exhaustive, and participants are invited to submit views and  evidence on these or other concerns or challenges in relation to the specialist regulatory regimes and their interaction with the ACL.) 
Complexities associated with multiple regulators 
The multiple regulator model for the ACL together with the myriad of specialist safety regimes and their regulators means that many consumer products are potentially subject to regulation by a number of regulators, and that any particular safety issue could also be addressed by more than one regulator. 
Products that are subject to specialist safety regulation, such as electrical products, have always been subject to general consumer protection regulation too. However, products are increasingly being sold with a bundle of features and related services that mean their supplier potentially needs to comply with multiple fields of regulation and multiple regulators. For example, a manufacturer or supplier of an Internet-enabled fridge sold on finance or with an energy plan might need to deal with the regulations of the Australian Communication and Media Authority, a specialist regulator, a state or territory ACL regulator and/or the ACCC and ASIC. 
Consumers will not always be familiar with which regulator is best placed to deal with their product safety concerns. In those cases, they may well first bring their concerns for a ‘specialist’ product to a Commonwealth, state or territory ACL regulator with responsibility for general consumer products. Alternatively, they may bring their concerns about a general product to a regulator of a specialist safety regime. 
There are a number of examples where there is scope for uncertainty around which regulator or regulators are responsible for a consumer safety issue. For example, the Australian Retailers Association submission to the CAANZ review noted:
Recent ‘hover board’ cases in the 2014 Christmas period exemplified the confusion and lack of consistency across States and Territories. ... for [ARA] retailers and for the ARA there was confusion on which jurisdiction was doing what and on what manufacturer or product type. (ARA 2016, p. 12)
Recent regulatory actions in relation to a brand of washing machines (box 5) also exemplify the complexities that can arise for consumers and industry around which regulator has primary responsibility for incidents of non-compliance, where both ACL and specialist safety regulation applies. 
Box 5 Product safety recall — specialist and ACL regulator involvement 
The case of Samsung washing machines is an example of an electrical safety issue involving specialist regulators raising broader issues about the interaction of safety recall remedies and consumer guarantees. NSW Fair Trading is leading a recall, in its capacity as the NSW electrical safety regulator, and working closely with the ACCC to address safety concerns associated with six models of Samsung top loader washing machines that were sold nationally between 2010 and 2013. The affected units have an internal fault where condensation can penetrate an electrical connector causing deterioration which may in turn cause a fire. Samsung continues to work with regulators on the recall and, in September 2015, issued a media statement clarifying that consumers are entitled to refunds or replacement for recalled washing machines, following reports that some consumers were only offered a repair. Regulators are advising consumers that where there is a major safety failure in breach of the consumer guarantee of acceptable quality, consumers have a choice of remedy, which is not overtaken by the electrical safety recall. Source: CAANZ (2016a). 
Examples such as these illustrate some of the challenges for regulators in ensuring that consumers, and indeed suppliers, sufficiently understand the delineation of responsibilities among ACL and other regulators, and that consumer problems are dealt with by the most appropriate regulator (or regulators). 
A threshold question is how significant or problematic are the challenges posed by product complexity and bundling for consumer safety regulation. 
What challenges do product complexity and bundling, and overlapping regulation, pose for ACL regulators, specialist safety regime regulators, businesses and consumers? What are some current examples of particular concern? How significant are these challenges? Does the availability of alternative avenues of regulating particular products assist ACL or specialist safety regulators in protecting consumers? 
To the extent that there are potentially significant problems, good communication between regulators would be one way to help ensure consumer protection does not ‘fall between the cracks’ or suffer from undue regulatory complexity or inefficient enforcement. This would require that regulators of specialist safety regimes and ACL regulators communicate with each other effectively about how responsibility should be allocated to deal with an unsafe product — either to ensure it is effectively dealt with where it is the responsibility of both regimes or to ensure that consumer concerns are referred to the whichever is the most appropriate ACL or specialist regulator of that product. It might also require cooperation in enforcement efforts, so that a ‘lead’ regulator, when meeting with a relevant supplier, would seek to ensure compliance with all relevant regulations, including those of other specialist safety regimes. 
This might be achieved through protocols for communication and cooperation (as between ACL regulators, for example). The Commission understands that officials in regulators of specialist safety regimes already communicate and cooperate with other specialist safety regulators or with ACL regulators (and vice versa) to some extent, albeit often informally. Since the inception of the ACL, the CAANZ implementation progress reports suggest that ACL regulators have put considerable effort into developing and formalising effective processes for communication and cooperation among themselves, and for the coordination of their regulatory efforts where needed. An issue is whether there is a need for similar, formal provisions between ACL regulators and regulators of specialist safety regimes. 
Another means of achieving the required communication and coordination may be through amalgamating ACL and some safety regime regulatory functions, and ‘internalising’ lines of communication and cooperation in this way. This model is evident in the organisation of, for example, the NSW Office of Fair Trading (which effectively embraces building, electricity and gas regulation responsibilities too). 
A more general issue is whether there is scope to improve enforcement of specialist safety regulation and/or general consumer protection regulation by altering any of the delineations of enforcement responsibilities, whether within or across regimes or jurisdictions. 
Are current protocols for communication, cooperation and coordination between regulators of specialist safety regimes and ACL regulators effective in dealing with consumer concerns where regulators in both regimes have responsibility for consumer protection? In particular: • Are those protocols effective in ensuring that consumer concerns about product safety received by one regulator are effectively directed to the most appropriate (ACL or specialist safety regime) regulator? • Are there examples of especially good or poor interaction between ACL and specialist regulators, and what lessons might these provide to improve interaction between ACL and specialist safety regime regulators? 
What changes to current arrangements are needed to achieve effective communication, cooperation and coordination of consumer protection regulation among regulators of ACL and specialist safety regulatory regimes? 
Can formal protocols for communication and cooperation provide effective channels or are broader organisational changes (such as co-location or amalgamation of regulatory functions) needed? 
Regulatory variations at the state and territory level 
In some specialist safety areas, variations in the laws between jurisdictions reduce the scope for consistent national responses by regulators of the ACL or specialist safety regimes — such as occurred with hoverboard electric self-balancing scooters (where some of the recharging units have caught fire). For example, different jurisdictions have different ‘minimum voltage thresholds’ in their electrical appliance safety laws. Thus, a solution in one state or territory (to a problem that may arise in all jurisdictions) may not be feasible under the electricity safety laws of other jurisdictions. 
This raises the question of whether there is or remains a valid rationale for variations in consumer product safety laws at the state and territory level, particularly given the increasingly national (and international) nature of markets. A number of specialist product safety areas operate under uniform national legislation, and the ACL itself is an example of the replacement of different state and territory laws with a nationally uniform law. In its 2008 Consumer Policy Framework report, the Commission recommended a review and reform program for industry-specific consumer regulation that would, among other things, identify areas where unnecessary divergences in requirements have significant costs and consider means of reducing these costs, including the case for transferring policy to the Australian Government. While the Commission understands that there have since been some attempts to achieve nationally uniform approaches in some remaining areas of state and territory difference, notably electrical safety, there is at present no agreement on the need for, and means of attaining, a nationally uniform approach in that area. 
What progress has been made in removing unnecessary and costly divergences in regulatory requirements between industry-specific state and territory consumer protection regimes since 2008? Where progress has been limited, why? Is there a case for pursuing a ‘one law’ model for areas of consumer product safety regulation, or other means of reducing the costs of variations, where there are currently state variations? If so, what areas should be priorities for review? 
Other market developments 
As noted above, the growth in product bundling and the increasingly national (and international) nature of markets pose some challenges for how consumer product safety is regulated generally. 
A further relevant development is the growth in direct (online) purchasing. Many specialist safety regimes have pre-market certification of products as a core element of their consumer protection role, but this is becoming harder to achieve where consumers or small suppliers acquire goods directly from abroad by purchasing over the Internet. In such cases, products can end up in consumers’ hands having bypassed the usual scrutiny by regulators of specialist safety regimes. Where products subsequently fall short of explicit or implied product safety or quality expectations, it is likely that consumer complaints would be directed to general ACL regulators. Either way, the lack of a domestic ‘supplier’ of the product may make it difficult for regulators to address. 
What are the ramifications of changes in products and nature of sales (including the move to online sales) for the enforcement of consumer product regulation? Are there other models that could provide lessons for the approach adopted in Australia?