The debate over unfair trading practices rolls on: where specifically is it headed?

The debate over whether a general prohibition against unfair trading practices should be added to the Australian Consumer Law (ACL) is nothing new and has been front of mind amongst consumer law policymakers since at least September 2022 when Commonwealth, State and Territory Consumer Ministers agreed that the Commonwealth would lead a public consultation on options to address unfair trading practices on behalf of all jurisdictions. This resulted in the release of the Protecting Consumers from Unfair Trading Practices Consultation Regulation Impact Statement (Consultation RIS) on 31 August 2023, which proposed four potential options for reform on which stakeholders were asked to comment.

Fast forward 12 months since the close of the consultation period on the Consultation RIS and Treasury has now released a supplementary consultation paper which focuses on the fourth of the reform options initially proposed in the Consultation RIS: a proposal which departs from what many had expected to be a preference for a general prohibition by proposing the introduction of a combination of general and specific prohibitions on unfair trading.

Of particular note are the specific unfair practices which the supplementary consultation paper identifies, including subscription traps, drip pricing, dynamic pricing, and excessive data requests.

While not specifically targeted at online businesses, the consultation paper suggests that online practices are the focus of the proposed “specific prohibition” changes.

While the conduct that falls within the proposed specific unfair practices may be relatively identifiable, there are challenges in developing a general prohibition that provides sufficient certainty and does not overlap with existing ACL prohibitions.

There is still time for interested stakeholders to make submissions to Treasury in response to the supplementary consultation paper (with submissions due by Friday, 13 December 2024).  It will otherwise be over to the Government to prepare a Decision Regulation Impact Statement outlining the evidence gathered and the preferred policy approach moving forward.

Why have reforms been proposed?

The consultation paper states that the proposed frameworks have been designed to address developing business practices, generally seen online, that may undermine consumer choice and autonomy that do not fall within current regulation. For example, practices that:

• do not meet the threshold for misleading conduct under the ACL, especially in cases where a business has not made a direct misrepresentation but has failed to disclose important information during the purchasing process.
• do not satisfy the high standard for unconscionable conduct under the ACL; and
• are not specifically prohibited by any other provisions of the ACL (e.g., the false misrepresentations listed in section 29 of the ACL).

General prohibition: a safety net for emerging practices

The proposed general prohibition against unfair trading practices would be principles-based, targeting practices that harm consumers but may not be covered by the current provisions of the ACL.

The proposed general prohibition would capture business conduct where it:

• unreasonably distorts or manipulates, or is likely to unreasonably distort or manipulate, consumer decision-making or behaviour;
• causes, or is likely to cause, material detriment (financial or otherwise) to the consumer.

Treasury believes that a general prohibition would offer flexibility to adapt to new emerging practices.

However, as the consultation paper recognises, there is a risk that conduct that falls within the prohibition will be difficult to identify with precision and may result in regulatory overreach or unintended consequences, including increased compliance costs.

This challenge is apposite when the types of conduct identified in the consultation paper are considered.

The consultation paper describes business practices such as “the design of user interfaces that manipulate consumers into taking action”, “manipulative and exploitative design practices”, “provision of unnecessary information by consumers” and “dark patterns” (said to be a range of mostly design-related elements used in consumer facing interfaces and choice architecture,  sometimes referred to as ‘tricks’ used to get consumers to do things that they would not otherwise do) may fall within the prohibition.

The ACCC submitted that the inclusion of a “grey list” of conduct that may fall within the general prohibition would assist in providing greater clarity and guidance to businesses and consumers. The proposed grey list includes the following conduct:

• the omission of material information
• the provision of material information to a consumer in an unclear, unintelligible, ambiguous or untimely manner, including the provision of information in a manner that overwhelms, or is likely to overwhelm, a consumer
• impeding the ability of a consumer to exercise their contractual or other legal rights
• use of design elements in online consumer interfaces that unduly pressure, obstruct or undermine a consumer in making an economic decision

Previous submissions have suggested that the introduction of a general unfair practices prohibition is unnecessary and that the conduct by businesses that sought to be addressed fall within the current prohibitions under the ACL.

Additionally, the introduction of a general unfair practices prohibition may be seen as lowering the threshold for regulatory intervention in circumstances where poor business practices should result in consumers switching to competing suppliers.

Specific prohibitions: targeted areas of concern

The Government is considering introducing specific prohibitions in addition to the general prohibition on unfair trading practices. Treasury is focusing on the following areas:

1. Subscription-related Practices: Proposals to make it easier for consumers to cancel subscriptions and ensure clear notifications for auto-renewals and trial offers.
2. Drip Pricing: Addressing practices where additional fees are added during the purchasing process. Feedback is sought on whether current protections are adequate.
3. Dynamic Pricing: Consideration of whether current rules sufficiently address price changes during purchasing due to supply and demand fluctuations.
4. Online Account Requirements: Scrutiny of businesses requiring online account creation and exploring whether guest checkout options should be mandated.
5. Barriers to Accessing Customer Support: Exploring the need for a specific prohibition to ensure consumers have access to customer support post-purchase.