Protecting consumers from
unfair trading practices
Consultation Regulation Impact Statement
The Treasury
August 2023
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Contents | iii
Contents
Contents ............................................................................................................................................ iii
Abbreviations ...................................................................................................................................... 1
About this Consultation Regulation Impact Statement ......................................................................... 2
Consultation process ........................................................................................................................... 3
Making a submission to Treasury ............................................................................................................. 3
Contact information ............................................................................................................................ 3
Introduction ........................................................................................................................................ 4
Key focus questions............................................................................................................................. 6
Consultation objectives ....................................................................................................................... 7
The problem ....................................................................................................................................... 8
The emergence of unfair trading practices ............................................................................................... 8
Consumer and small business harms from unfair trading practices .................................................... 9
Experiences of consumers in the digital age ......................................................................................10
Limitations of existing protections in Australian law ..............................................................................11
Potential limitations of existing standards-based provisions .............................................................12
Unconscionable conduct ...................................................................................................................13
Unfair contract terms ........................................................................................................................17
Potential limitations of specific protections ...........................................................................................18
Key design considerations ......................................................................................................................19
Definition of unfair ............................................................................................................................19
Process to amend the Australian Consumer Law ..............................................................................20
Policy options .................................................................................................................................... 21
Option 1 – Status quo .............................................................................................................................21
Description ........................................................................................................................................21
Context ..............................................................................................................................................21
Option 1 – Preliminary Impact Analysis .............................................................................................22
Option 1 – Questions .........................................................................................................................22
Option 2 – Amend statutory unconscionable conduct ...........................................................................23
Description ........................................................................................................................................23
Context ..............................................................................................................................................23
Option 2 – Preliminary Impact Analysis .............................................................................................24
Option 2 – Questions .........................................................................................................................24
Option 3 – Introduce a general prohibition on unfair trading practices .................................................25
Description ........................................................................................................................................25
Context ..............................................................................................................................................25
Option 3 – Preliminary Impact Analysis .............................................................................................26
Option 3 – Questions .........................................................................................................................26
Contents | iv
Option 4 – Introduce a combination of general and specific prohibitions on unfair trading practices...27
Description ........................................................................................................................................27
What is a specific prohibition? ..........................................................................................................27
Combined approach ..........................................................................................................................28
Option 4 – Preliminary Impact Analysis .............................................................................................28
Option 4 – Questions .........................................................................................................................29
Next Steps......................................................................................................................................... 30
Appendix A – International responses to unfair trading practices ....................................................... 31
United States – General prohibition only................................................................................................31
United States – Enforcement actions under the FTC framework ......................................................32
European Union – Combined general and specific prohibition ..............................................................33
European Union – Flowchart of UCPD framework ............................................................................34
European Union – Enforcement actions under the UCPD framework ...............................................35
United Kingdom – Combined general and specific prohibition ..............................................................36
United Kingdom – Enforcement actions under the CPR framework..................................................37
Singapore – Combined general and specific prohibition ........................................................................38
Singapore – Enforcement actions under the CPFTA framework .......................................................39
Appendix B – Inquiries and reports on unfair trading practices ........................................................... 40
ACCC inquiries and reports .....................................................................................................................40
ACCC Digital Platforms Inquiry ................................................................................................................40
ACCC Digital Advertising Services Inquiry ...............................................................................................40
ACCC Digital Platform Services Inquiry ...................................................................................................41
ACCC Perishable Agricultural Goods Inquiry ...........................................................................................42
Appendix C – Defining dark patterns .................................................................................................. 43
Categories of dark patterns ....................................................................................................................43
Endnotes .......................................................................................................................................... 44
Abbreviations | 1
Abbreviations
ACCC
Australian Competition and Consumer Commission
ACL
Australian Consumer Law
AFCA
Australian Financial Complaints Authority
APY
Aṉangu Pitjantjatjara Yankunytjatjara
ASIC
Australian Securities and Investments Commission
ASIC Act
Australian Securities and Investments Commission Act 2001 (Cth)
ATO
Australian Taxation Office
CAANZ
Consumer Affairs Australia and New Zealand
CAF
Legislative and Governance Forum on Consumer Affairs
CASE
Consumers Association of Singapore
CCA
Competition and Consumer Act 2010 (Cth)
CCCS
Competition and Consumer Commission of Singapore
CEDA
Committee for Economic Development of Australia
CMA
UK Competition and Markets Authority
CPFTA
Consumer Protection (Fair Trading) Act 2003 (SG)
CPR
Consumer Protection from Unfair Trading Regulations 2008 (UK)
CPRC
Consumer Policy Research Centre
Consultation RIS
Consultation Regulation Impact Statement
Cth
Commonwealth of Australia
DAS
ACCC Digital Advertising Services Inquiry
Decision RIS
Decision Regulation Impact Statement
EU
European Union
FCA
UK Financial Conduct Authority
FTC
US Federal Trade Commission
FTC Act
Federal Trade Commission Act (US)
OECD
Organisation for Economic Co-operation and Development
RIS
Regulation Impact Statement
SG
Singapore
TPA
Trade Practices Act 1974 (Cth) (superseded by the ACL in Schedule 2 to the CCA)
UCPD
Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005
concerning unfair business-to-consumer commercial practices in the internal market
UK
United Kingdom
US
United States of America
About this Consultation Regulation Impact Statement | 2
About this Consultation Regulation Impact
Statement
On 9 September 2022, the Commonwealth, State and Territory consumer ministers agreed that the
Commonwealth would lead a public consultation on proposed reforms to address unfair trading
practices
1
in the Australian Consumer Law (ACL) on behalf of the states and territories.
This Consultation Regulation Impact Statement (Consultation RIS) seeks stakeholder feedback on the
policy options it canvasses, including their possible costs and benefits. This paper provides an overview
of how unfair trading practices are currently regulated, identifies issues for consumers and small
businesses posed by gaps in existing protections, and provides a preliminary impact analysis of the
policy options being considered.
Stakeholder feedback, including submissions, comments on regulatory impacts and cost estimates, will
be used to develop a Decision Regulation Impact Statement (Decision RIS). This will summarise and
assess the evidence gathered, and identify a preferred regulatory response. A timeframe for
publishing a Decision RIS has not yet been established but it is likely to occur during 2024.
1
South Australian Minister for Consumer Affairs, Andrea Michaels MP, ‘Cross border collaboration‘, (Press release,
21 September 2022). See also South Australian Attorney-General’s Department, ‘Consumer Affairs Ministers
meet in Adelaide‘ (Press release, 21 September 2022).
Consultation process | 3
Consultation process
Making a submission to Treasury
Interested parties are invited to comment on the options outlined in this paper. The consultation
process is open until 29 November 2023 with the objective of gathering additional evidence and data
on the extent of unfair trading practices and to seek views on the benefits and costs of the proposed
policy options. In addition, there are a number of targeted consultation questions to consider when
making a submission. There is no obligation to answer any or all of the consultation questions, and
there is no limit to the length of submissions.
While submissions may be lodged electronically or by post, electronic lodgement is preferred.
Treasury will also be hosting a number of consultation roundtables in the second half of 2023, with
details to be published on the Treasury’s consultation webpage in due course.
All information (including name and address details) contained in submissions will be made available
to the public on the Treasury website, unless you indicate that you would like all or part of your
submission to remain in confidence. Automatically generated confidentiality statements in emails do
not suffice for this purpose. Respondents who would like part of their submission to remain in
confidence should provide this information marked as such in a separate attachment.
Legal requirements, such as those imposed by the Freedom of Information Act 1982, may affect the
confidentiality of your submission.
View Treasury’s Submission Guidelines for further information.
Closing date for submissions: 29 November 2023
Contact information
Email (preferred) consumerlaw@treasury.gov.au
Mail Director
Consumer Policy and Product Safety Unit
Market Conduct and Digital Division
The Treasury
Langton Crescent
PARKES ACT 2600
Enquiries Director, Consumer Policy and Product Safety Unit by email
consumerlaw@treasury.gov.au
The policy options outlined in this paper have not received Australian Government approval and are
not yet law. As a result, this paper is merely a guide as to how the policy options might be
implemented to address the problem and improve consumer and small business protections against
unfair trading practices under the ACL. We look forward to your feedback.
Introduction | 4
Introduction
Unfair trading practices, also known as ‘unfair business practices’ or ‘unfair commercial practices’, are
particular types of commercial conduct which are not covered by existing provisions of Australia’s
consumer laws (such as misleading or deceptive or unconscionable conduct), but nevertheless can
result in significant consumer and small business harm.
Evidence suggests that a large and growing range of commercial practices and business models fall
into this category, including in the digital economy.
2
In 2017 Consumer Affairs Australia and New
Zealand (CAANZ) presented the Australian Consumer Law (ACL) Review Final Report to Consumer
Affairs Ministers, which identified significant stakeholder interest in introducing a general prohibition
against unfair trading practices. Federal and State and Territory consumer ministers agreed that the
issues identified by CAANZ warranted further exploration through a regulation impact assessment
process, including seeking further evidence on the nature of the problem and the extent of consumer
harm arising from potential gaps in the current law, and whether there is a need for government
intervention.
Reform which addresses unfair trading practices could address harmful commercial practices not
currently captured by existing protections in the ACL such as misleading and deceptive conduct and
unconscionable conduct provisions. Effective action against oppressive, exploitative or otherwise
unfair business behaviour could better protect consumers and small businesses, remove distortions to
competition (where firms engaging in unfair behaviours currently gain an advantage over their rivals)
and bring Australia into line with other Organisation for Economic Co-operation and Development
(OECD) countries. At the same time, taking policy action to deal with unfairness, which in many
respects is a subjective concept, poses a number of design and implementation challenges.
This paper confines its attention to a possible unfair trading prohibition under the ACL and does not
consider the extension of reform to Australian Securities and Investments Commission
(ASIC)-regulated financial services in the Australian Securities and Investments Commission Act 2001
(Cth) (ASIC Act). This will be considered through a separate regulation impact assessment process
which will be advanced in 2024.
2
Consumer Policy Research Centre, Submission to the ACCC on the Digital Platform Services Inquiry on updating
consumer law for digital platform services – Discussion paper, (Submission, 13 April 2022), p. 3; Australian
Competition and Consumer Commission, Digital platforms services inquiry – Interim report 6: Report on social
media services, (Report, March 2023).
Introduction | 5
The following policy options are presented for consideration:
• Option 1: Status quo (no change)
• Option 2: Amend statutory unconscionable conduct
• Option 3: Introduce a general prohibition on unfair trading practices
• Option 4: Introduce a combination of general and specific prohibitions on unfair trading practices.
This paper will broadly assess each proposed policy option from the perspective of:
In assessing the potential costs and benefits of each policy option, this paper includes indicative case
examples and anecdotes. This preliminary impact analysis is provided to inform the consultation
process and to help understand and assess the possible net benefit of each option. Additionally, this
paper refers to commentary, research, reports and inquiries conducted by government, private sector
and not-for-profit stakeholders on unfair trading practices and other related areas without expressing
support for, or preference of, any particular policy recommendation or conclusion.
For the purposes of this paper, unless otherwise specified, a ‘consumer’ means an individual person,
or small business which employs fewer than 100 persons or has a turnover for the last income year of
less than $10 million. Extending any potential unfair trading prohibitions to small businesses
recognises that small businesses can often face the same challenges as consumers when it comes to
experiences of unfair trading. This small business threshold is consistent with that in the Government’s
recent reforms to unfair contract terms legislation.
3
3
See Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth), Schedule 2 (Unfair contract
terms), effective 9 November 2023. See also Australian Small Business and Family Enterprise Ombudsman Act
2015 (Cth), s 5.
Productivity
and economic
impact
Fairness and
equity
Ease of
implementation
Regulatory and
administrative
burden
Stakeholder
support
Key focus questions | 6
Key focus questions
Below is a list of key focus questions to consider when reading the paper. A list of questions specific to
each policy option is included in the ‘Policy Options’ chapter.
You are encouraged but not required to respond to the key focus questions when lodging submissions,
and you may include other information you feel is relevant but does not relate to any of the questions
listed below. Where possible, Treasury encourages the provision of data and evidence to support your
views.
Key focus questions
Q1.
Q2.
Q3.
Q4.
Q5.
Q6.
Q7.
Q8.
Q9.
Consultation objectives | 7
Consultation objectives
Consistent with the announcement by the consumer affairs ministers in September 2022,
4
the
objective of this paper is to inform consideration of options for addressing unfair trading practices.
The overarching objectives for this paper are to:
• Identify the policy problem that warrants consideration of reform in this area;
• Explore policy options that address perceived harmful commercial practices not currently captured
by the ACL;
• Investigate policy options that could align Australia to other jurisdictions in this context; and
• Assess policy options that equip regulators with more tools to address unfair trading practices,
while ensuring firms are able to compete on their merits.
This paper seeks feedback on the regulatory, financial, business and community impacts of alternative
courses of action. Feedback received through public consultation will assist the Government to better
assess the costs and benefits of each option.
4
See South Australian Minister for Consumer Affairs, Andrea Michaels MP, ‘Cross border collaboration‘, (Press
release, 21 September 2022). See also South Australian Attorney-General’s Department, ‘Consumer Affairs
Ministers meet in Adelaide‘ (Press release, 21 September 2022).
The problem | 8
The problem
The emergence of unfair trading practices
Regulators, consumer groups, small business representatives and others have identified a range of
business practices – sometimes referred to as ‘unfair trading practices’ – that are causing significant
and growing consumer harm. Despite this, many of these practices are not currently prohibited by our
consumer and competition laws.
These practices are driven in part by the growing importance of digital platform services for small
businesses and consumers.
However, they are not confined to the digital economy.
The ACCC first recommended that the ACL be amended to include an unfair trading practices prohibition
in its 2019 Digital Platforms Inquiry final report
5
and has reaffirmed its support in subsequent inquiries,
including the Digital Platform Services Inquiry
6
, the Digital Advertising Services Inquiry
7
and the
Perishable Agricultural Goods Inquiry
8
(as outlined at Appendix B). Several consumer advocacy groups
including the Consumer Policy Research Centre
9
, the Australian Communications Action Network
10
and
Consumer Action Law Centre
11
have also advocated for an unfair trading prohibition.
The below list provides some examples, highlighted through multiple inquiries, of trading practices
which are potentially unfair.
5
Australian Competition and Consumer Commission, Digital Platforms Inquiry – Final Report, (Report, June 2019).
6
Australian Competition and Consumer Commission, Digital platforms services inquiry – Interim report 6: Report
on social media services, (Report, March 2023).
7
Australian Competition and Consumer Commission, Digital advertising services inquiry – final report, (Report,
August 2021).
8
Australian Competition and Consumer Commission, Perishable agricultural goods inquiry report, (Report,
November 2020).
9
Consumer Policy Research Centre, Unfair Trading Practices in Digital Markets: Evidence and Regulatory Gaps,
(March 2021).
10
Australian Communications Consumer Action Network, Discussion Paper for Interim Report No. 5: Updating
competition and consumer law for digital platform services (Submission, 1 April 2022), p. 8.
11
Consumer Action Law Centre, Submission to Australian Consumer Law Review – Issues Paper, (May 2016).
The problem | 9
Examples of potentially unfair trading practices:
• Inducing consumer consent or agreement to data collection through concealed data
practices;
• Exploiting bargaining power imbalances in supply chain arrangements, including by
unilaterally varying supply terms at short notice;
• Omitting or obfuscating material information which distorts consumers’ expectations or
understanding of the product or service being offered;
• Using opaque data-driven targeting or other interface design strategies to undermine
consumer autonomy;
• Exploiting or ignoring the behavioural vulnerabilities of consumers that are present in the
‘choice architecture’ of products or services (digital or otherwise);
• Adopting business practices or designing a product or service in a way that dissuades a
consumer from exercising their contractual or other legal rights;
• Non-disclosure of contract terms including financial obligations (at least until after the
contract is entered into);
• All or nothing ‘clickwrap’ consents that result in harmful and excessive tracking, collection and
use of data, and don’t provide consumers with meaningful control of the collection and use of
their data; and
• Providing ineffective and/or complex disclosures of key information when obtaining consent
or agreement to enter into contracts.
Consumer and small business harms from unfair trading practices
The business practices described above as currently falling outside the consumer protection law,
which may be described as ‘unfair’, impact individual consumers and small businesses in different
ways. Some of these business practices are illustrated in the infographic below. Immediate impacts of
this conduct may include consumers incurring financial losses or obtaining unsuitable goods or
services. Longer-term impacts could include consumers being reluctant to access or take advantage of
new technologies, innovations or business relationships. Further evidence is sought through this
consultation process on the extent of harms caused by unfair trading practices.
Targeting of vulnerable
people or groups
Predatory or aggressive
business conduct
Difficulty opting out or
cancelling goods or
services
Dark patterns and digital
engagement practices
Misleading omissions and
hidden information
Limited mechanisms for
redress
The problem | 10
In addition to causing direct harms to consumers, unfair trading practices can distort competition,
which relies on consumers being able to make free and informed choices about the products and
services that best suit their needs. Egregious business conduct that interferes with consumer choice,
such as that illustrated in the examples below, can result in consumers making decisions they would
not otherwise make, to their financial detriment. These practices can also limit the ability of
consumers to switch providers, harming competition.
Experiences of consumers in the digital age
The rise in e-commerce has brought significant benefits to consumers and small businesses, and many
markets, including traditional retail, travel, accommodation and financial services, have seen a growth
in competition as a result of it. Evolving market trends have also altered, and continue to alter, the
risks posed to consumers. Seemingly ‘free’ services or products might be provided to consumers in
exchange for consumer and business data that may be sold to third parties. Digital platforms collect
and use data and algorithms for multiple purposes, which may lead to personalising offers or pricing
for individual consumers without their knowledge or explicit consent.
12
This data also facilitates
targeted online advertising, which underpins many of the free services offered by digital platforms.
Research conducted by the Consumer Policy Research Centre (CPRC) found that less than 10 per cent
of consumers surveyed were comfortable with the current approach to targeted advertising with
tracking of online behaviour or personal characteristics without giving express permission.
13
In its 2019 Digital Platforms Inquiry, the ACCC observed that enhanced data collection and increased
sophistication in data analysis and consumer targeting creates the potential for significant consumer
harm.
14
Stakeholders have also raised concerns about consumer harm resulting from online designs known as
dark patterns,
15
which manipulate consumer choice and experience.
16
The CPRC found that 83 per cent
of respondents had experienced one or more negative consequences because of a website or app
12
Australian Competition and Consumer Commission, Digital Platforms Inquiry – Final Report, (Report, June 2019).
13
Consumer Policy Research Centre, Not a fair trade: Consumer views on how businesses use their data, (Report,
March 2023).
14
Australian Competition and Consumer Commission, Digital Platforms Inquiry – Final Report, (Report, June 2019),
p. 26.
15
The ACCC has cautioned that dark patterns present serious concerns for regulators where products are designed
in a way that are exploitative, deceptive, or undermine consumer autonomy by encouraging consumers to make
decisions that they would not normally make, often through an appeal to certain psychological or behavioural
biases. The ACCC defines ‘dark patterns’ as ‘[e]lements of user interfaces which have been designed to make it
difficult for users to express their actual preferences, or which nudge users to take certain action that may not be
in their best interests’. Similarly, the OECD defines dark patterns as ‘business practices employing elements of
digital choice architecture, in particular in online user interfaces, that subvert or impair consumer autonomy,
decision-making or choice… [that] often deceive, coerce or manipulate consumers and are likely to cause direct
or indirect consumer detriment in various ways’. The relevant definitions for these concepts have been provided
at Appendix C. The ACCC also notes that some ‘dark patterns’ conduct can occur offline as well, and
acknowledges that existing provisions in the ACL may cover some types of dark patterns. However, many dark
patterns would fall outside existing laws.
16
Consumer Policy Research Centre, Duped by Design – Manipulative online design: Dark patterns in Australia,
(Report, June 2022); CHOICE, Wait, what’s in my cart? The hidden cost of website ‘dark patterns’,
(19 August 2022); Australian Competition and Consumer Commission, Digital platform services inquiry Interim
report No. 3 – Search defaults and choice screens, (Report, September 2021).
The problem | 11
using design features aimed at influencing their behaviour.
17
In addition, the research showed dark
patterns led to one in four Australians sharing more personal information than they wanted to.
18
The provision of goods and services is becoming more complex and there is an increasing reliance on
intermediaries to facilitate online transactions for consumers. This can also lead to consumer
transactions that increasingly encompass complex side-contracts, licence agreements and multi-party
arrangements. It is important that reforms which seek to address unfair trading practices are able to
address the evolving nature of technology and e-commerce in the modern economy.
Limitations of existing protections in Australian law
The ACL currently contains 2 types of provisions to regulate business behaviour:
• Standards-based provisions, which establish principles that apply generally across circumstances
and industries; and
• Specific provisions, which establish clear offences for defined behaviours.
The standards-based provisions in the ACL include prohibitions against unconscionable conduct,
misleading or deceptive conduct and unfair contract terms, as outlined below. The prohibitions
generally apply to both business-to-consumer and business-to-business transactions. On the other
hand, specific provisions in the ACL prohibit discrete specific unfair trading practices such as pyramid
schemes and bait advertising.
Australia’s competition laws prohibit practices which lessen or undermine competition, including the
misuse of market power. Their objective is to ensure firms are able to compete on their merits by
prohibiting conduct which interferes with the competitive process. Industry codes provide rules or
minimum standards for businesses in specific sectors where bargaining power imbalances exist, some
of which include protections against practices which would be considered unfair.
As set out in the examples below, there may be conduct that causes significant consumer harm and:
• is not misleading or deceptive or likely to mislead or deceive, but which nevertheless distorts
consumer choice (for example, because businesses obscure or omit pertinent information)
• does not reach the threshold of unconscionable conduct
• may result in financial or other detriment but relates to:
– matters that do not form part of a standard form contract, or
– actions relating to entering into terms and conditions, rather than their content
• exists alongside a contractual relationship but is not referable to contractual rights and therefore
not captured by the unfair contract terms provisions, and/or
• is not a specific practice currently prohibited by the ACL.
17
Consumer Policy Research Centre, Duped by Design – Manipulative online design: Dark patterns in Australia,
(Report, June 2022).
18
Consumer Policy Research Centre, Duped by Design – Manipulative online design: Dark patterns in Australia,
(Report, June 2022).
The problem | 12
Potential limitations of existing standards-based provisions
Misleading or deceptive conduct
Section 18 of the ACL prohibits businesses from engaging in conduct which is misleading or deceptive
or is likely to mislead or deceive. The prohibition in its current form was first introduced in 1974 in the
Trade Practices Act 1974 (Cth). It applies even if the intention was not to mislead or deceive.
Misleading or deceptive conduct is assessed against whether an ‘ordinary’ or ‘reasonable’ member of
the relevant class of people to whom the conduct was directed are likely to be misled. A substantial
body of case law has developed since the introduction of the prohibition, and it is now generally well
understood by both consumers and business, and a well-accepted tenet of consumer laws in Australia.
Misleading omissions are not expressly covered by this provision although silence may be considered
misleading when there is a reasonable expectation that a fact, if it exists, will be disclosed.
19
The prohibition rarely imposes a positive duty on businesses to disclose information about their
practices, even where non-disclosure causes significant consumer detriment. Accordingly, the
prohibition will not always address practices that involve a business obscuring or omitting material
information or using data or negative choice architecture linked to a product or service which causes
consumers to make unintended or undesirable transactional decisions or hinders the exercise of their
consumer rights.
19
See ACCC v AGL South Australia [2014] FCA 1369.
The problem | 13
Misleading omissions: Disclosure of information to customers
ACCC v AGL South Australia
In Australian Competition and Consumer Commission v AGL South Australia Pty Ltd,
i
the ACCC
alleged AGL South Australia Pty Ltd (AGL SA) engaged in misleading or deceptive conduct and
made false or misleading statements concerning the level of discount residential consumers
would receive under AGL SA’s energy plans. The Federal Court agreed. AGL SA was subsequently
ordered to pay $700,000 in penalties and to offer refunds of approximately $780,000 to
23,000 customers for particular false or misleading discount representations, publish a corrective
notice in a newspaper, and pay $300,000 towards the ACCC’s costs.
ii
The Federal Court held that,
in 2012, AGL SA represented to residential consumers of electricity in South Australia, during
inbound telephone calls to AGL SA customer service representatives and subsequently in
welcome packs, that, if they entered into an energy plan, they would receive a specified discount
off the energy usage charges they would otherwise pay AGL SA. Although the customers initially
received this discount, in mid-2012 AGL SA increased the rates under its energy plans and sent a
letter to these customers advising them of the new rates and also stating they would continue to
receive their discount. However this was not the case because the rate rise meant they would no
longer receive the same level of discount.
iii
With respect to another rate increase in mid-2013 that was alleged to be misleading by the
ACCC, the Federal Court adopted a different view. The ACCC alleged that AGL SA engaged in
misleading or deceptive conduct by failing to provide certain information to these customers
relevant to the rate increase. The Court considered that the customers had no reasonable
expectation that such a disclosure should be made. Consequently, the Court ruled that AGL SA
had not engaged in misleading and deceptive conduct in this instance. This case illustrates the
legal limits to the existing prohibition on misleading and deceptive conduct.
Unconscionable conduct
The ACL contains 2 protections from unconscionable conduct:
• equitable unconscionable conduct, a concept from the courts of equity which prohibits conduct
where one party takes advantage of a special disadvantage of another;
20
and
• statutory unconscionable conduct, designed to address a broader range of conduct than equitable
unconscionable conduct.
21
Statutory unconscionable conduct under section 21 of the ACL is a general ban on conduct which is
particularly harsh or oppressive. To be considered unconscionable, the conduct must be against good
conscience as judged against the norms of society. There are several matters the court may consider
in determining whether conduct, or a system of conduct or pattern of behaviour, is unconscionable,
including:
• the use of undue influence, pressure or unfair tactics by the stronger party
20
See Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.
21
Competition and Consumer Act 2010 (Cth), Schedule 2 (Australian Consumer Law), s 21(4)(a).
The problem | 14
• the price or other terms on which the weaker party could have got the same or similar products or
services from another business
• whether the stronger party acted unreasonably in not informing the weaker party about key risks
that the stronger party should have known the weaker party was not aware of
• whether the parties acted in good faith.
22
Section 22 of the ACL contains a list of matters or factors that a court may have regard to when
determining whether conduct was unconscionable.
23
Generally, one factor is not itself sufficient to
meet the threshold.
Statutory unconscionable conduct is limited in its ability to address unfair practices because it is not
the same as unfair conduct and it requires a high threshold of misconduct to be met. As a result, there
are cases where courts have determined that conduct falls short of the high threshold, even though
that conduct would be considered by many as unfair and was likely to result in significant consumer
detriment.
Equitable unconscionable conduct has a narrower focus than statutory unconscionable conduct.
It prohibits a business from taking advantage of a consumer’s special disadvantage. A special
disadvantage may be age, sickness, illiteracy, lack of education, a language barrier, or some other
factor or combination of factors, which seriously affects a person’s ability to make a judgment as to
their own best interests.
The following examples illustrate the way courts have applied the statutory unconscionable conduct law.
22
Australian Competition and Consumer Commission, Unfair business practices, (n.d.).
23
Australian Consumer Law, s 22.
The problem | 15
Limitations of unconscionable conduct: Lack of transparency about changes
ACCC v Medibank
In June 2016, the ACCC instituted proceedings in the Federal Court against Medibank Private
Limited (Medibank) alleging it contravened the ACL by engaging in misleading conduct, making
false or misleading representations and engaging in unconscionable conduct.
iv
The ACCC alleged that Medibank:
v
• made representations that under the terms of its private health insurance policies, members
would not incur any out-of-pocket expenses for ‘in-hospital diagnostic services’ including
in-hospital pathology and radiology services;
vi
and
• had told its members and potential members that it would tell them in writing if it proposed
to make any ‘detrimental changes’ to the benefits it offered, and that it failed to provide such
notice when it no longer provided cover for out-of-pocket expenses in cases where diagnostic
service providers charged more than the schedule fee for their in-hospital diagnostic services.
The ACCC alleged that Medibank did not provide members with any advance notice of the
change in coverage for the out-of-pocket expenses, despite previously representing that it would
do so, while adopting a strategy of keeping communications about this change contained and
reactive. The ACCC alleged that the conduct was unconscionable because:
vii
• Medibank knowingly exploited what was alleged to be a lack of understanding by members of
private health insurance
• Medibank knew that its decision not to notify members would cause them harm
• not notifying members was unethical because it breached industry norms to provide
consumers with current information about their entitlement to benefits.
In August 2017, the Federal Court dismissed proceedings brought by the ACCC against Medibank,
where Justice O’Callaghan stated:
viii
Ultimately, that evidence, which I unhesitatingly accept, demonstrates that
the decision not to communicate with members (about which the applicant
complains) was a decision made in the context of the exercise by the relevant
committee of its business judgment. Some may agree with it, some may
disagree with it, but, in my view, there was nothing remotely
unconscionable about it.
In December 2018, the Full Federal Court dismissed an appeal by the ACCC with Justice Beach
stating:
ix
I accept that some members… may have been distressed by the unexpected
costs. Certainly, Medibank acted harshly. And I am also prepared to
conclude that it acted unfairly. But this is not enough to establish
statutory unconscionability.
The problem | 16
Limitations of unconscionable conduct: Consumer guarantees
ACCC v Mazda
In October 2019, the ACCC instituted proceedings in the Federal Court against Mazda Australia
Pty Ltd (Mazda) alleging the company had engaged in unconscionable conduct and made false or
misleading representations in its dealings with some consumers who bought new Mazda vehicles
between 2013 and 2017.
x
The ACCC alleged that these consumers began experiencing faults with their vehicles within a
year or two of purchase. The faults affected the ability of the consumers to use their vehicles,
and in some cases included the vehicles unexpectedly losing power and decelerating while they
were being driven. The vehicles were taken to Mazda dealers for repeated repairs, including
multiple engine replacements. One vehicle was off the road for 4 months within a 6 month
period. It was alleged that Mazda repeatedly refused to provide a refund or a replacement at no
cost to the consumers and pressured them to accept lesser offers which were made by Mazda
only after multiple failures of the vehicles and repeated attempted repairs. It was also alleged
that Mazda offered to refund only a portion of the car’s purchase price, or offered to provide a
replacement car if the consumer made a significant payment.
xi
In November 2021, the Federal Court found that while Mazda’s conduct could constitute
‘appalling customer service’
xii
and a ‘failure to comply with Mazda’s own procedures’,
xiii
Mazda’s
conduct was not unconscionable as its conduct was not ‘sufficiently divergent from the
community standards of acceptable business practices’.
xiv
In March 2023, the Full Federal Court dismissed the ACCC’s appeal against the Federal Court
judgment
xv
that Mazda did not engage in unconscionable conduct
xvi
and determined the alleged
conduct did not amount to unconscionable conduct because:
xvii
…the conduct of Mazda relied upon by the ACCC did not involve a sufficient
departure from the norms of acceptable commercial behaviour as to be
against conscience or to offend conscience for the reasons that we
explain below.
In reaching that conclusion, we have necessarily had to consider the conduct
of Mazda against the values that have been said to inform the standard of
conscience and matters that have been stated to be part of its essential
conception. In doing so, we recognise that this is not a search for easy
aphorisms or alternative formulations of the language of s 21 of the ACL
against which to judge the conduct of Mazda and perform the necessary
evaluative judgment.
The problem | 17
Limitations of unconscionable conduct: Targeting of people experiencing
situational vulnerability
Pitt v Commissioner for Consumer Affairs
The Commissioner for Consumer Affairs in South Australia brought proceedings against Mr Zane
Pitt, a real estate agent, alleging Mr Pitt had engaged in statutory unconscionable conduct
contrary to section 21 of the ACL. Mr Pitt undertook a business advertised as “We Buy Houses”
where he sought to buy properties from people who were struggling to sell by entering into an
option agreement to enable Mr Pitt to purchase the property at a fixed price sometime in the
future.
xviii
Mr Pitt entered into an Option Agreement with Mr Hartwig, a retired pensioner with limited
education and experience in commercial or property matters, to purchase his home at any time
over a 4-year period for $200,000.
xix
Mr Hartwig was in financial difficulty, having spent his
savings and exceeded his credit account limit, and was on a hardship program that permitted him
to pay his mortgage at a reduced rate.
xx
After the obtaining of a building report which identified defects in the property, Mr Hartwig
agreed with Mr Pitt to lower the purchase price to $175,000. Around this time, Mr Hartwig
informed Mr Pitt that he wanted to sell as soon as possible to use the proceeds to buy into a
retirement village.
xxi
Mr Pitt and Mr Hartwig executed a contract for the sale of the property for a sale price of
$175,000.
xxii
Mr Pitt and his daughter then executed a contract for the on-sale of the property
from Mr Pitt to Ms Pitt.
xxiii
Ms Pitt subsequently obtained approval to demolish the property and
construct 2 new dwellings, which were later sold for a total of $765,000.
xxiv
The South Australian Court of Appeal accepted that at the time of entry into the contract for sale,
there was a ‘marked disparity’ between Mr Hartwig and Mr Pitt in terms of their relevant
knowledge and experience; Mr Hartwig was ‘in a position of vulnerability and disadvantage’
where he had ‘limited options available to him’.
xxv
Nevertheless, the Court of Appeal overturned
the single Judge’s finding that Mr Hartwig was in a position of ‘special disadvantage’ as at the
entry into the Addendum Agreement, where his vulnerability or disadvantage was such as to
have seriously compromised or affected his ability to understand and safeguard his own
interests.
xxvi
The Court of Appeal held that it had not been established that Mr Pitt’s conduct was
so far outside societal norms of acceptable commercial behaviour as to warrant condemnation as
conduct that was offensive to conscience, and that he had not acted unconscionably.
xxvii
Unfair contract terms
This protection provides courts with the ability to declare contract terms in standard form consumer
and small business contracts unfair and impose significant penalties. In Part 23 of the ACL, a term of a
contract is unfair if it:
• causes a significant imbalance in the parties’ rights and obligations
• is not reasonably necessary to protect the legitimate interests of the supplier
• would cause significant financial or non-financial detriment to a party.
The problem | 18
These provisions consider the fairness of terms in standard form contracts. However, they do not
address unfair conduct that occurs prior to entering into contracts, or in the parties’ dealings while the
contract is in place, including when a business applies an otherwise fair contract term in an unfair
manner. As most of the unfair practices identified in this paper are about business conduct rather than
specific contract terms, the existing unfair contract term protection provisions are unlikely to address
such practices as they only apply in the context of standard form contracts.
Limitation of Unfair Contract Terms: Conduct beyond small business
contract terms
From a small business perspective, an unfair application or interpretation of an otherwise fair
contract term may result in unfair conduct. For example, a contract between a large and small
business may require the small business to indemnify the large business if losses result from
conduct or circumstances within the control of the small business. The large businesses insists
that certain conduct is ‘within the control’ of a small business, and therefore captured by the
term, even when the circumstances and conduct make that an unreasonable interpretation or
application of the contract. In these circumstances, the small business’s options are to acquiesce
to the larger business’s demands, commence costly legal proceedings or lose a key supplier
or acquirer.
Another example is that a contract between a large and small business may allow the large
business to unilaterally impose a price increase if the conduct is a ‘carry-through’ price increase
beyond the larger business’s control. The ACCC reports it has seen instances where the larger
business invokes this clause even when the larger business could have influenced or minimised
such costs and was therefore arguably not permitted to pass them on to the smaller business
under the relevant contract term.
Potential limitations of specific protections
Some specific trading practices are unlawful under the ACL. These protections target certain harmful
business practices that distort consumers’ economic behaviour through information asymmetries
(where one party has more or better information than the other) or through more overt practices
such as coercion or undue harassment.
Examples of existing ACL specific protections include false or misleading representations about, for
example, the price of goods, availability of repair facilities, or the existence of warranties. They also
include protections against bait advertising, accepting payment without intending to supply goods or
services, certain practices in the unsolicited supply of goods or services, participating in or persuading
someone to participate in a pyramid scheme, coercion, undue harassment or physical force in
connection with the supply or possible supply of goods or services, or the payment for them.
These provisions are narrowly drafted, and are not likely to capture new or emerging potentially unfair
conduct that stakeholders have identified.
The problem | 19
Key design considerations
Definition of unfair
Unfairness is an inherently subjective concept, thus highlighting the need for a calibrated policy
response. A reform which is poorly framed or ill-defined could create uncertainty, stifle innovation and
competition, and be difficult to enforce. On the other hand, an excessively narrow approach could be
ineffective, and might not capture the full range of unfair and harmful practices.
The ACL and consumer law from overseas jurisdictions provide some precedent and insight into the
potential definition of unfair in the Australian context. These precedents may provide a basis for
developing a definition of unfair under the options below. Stakeholder views are sought on what could
be an appropriate definition of unfair in the context of an Australian unfair trading practices
prohibition.
The unfair contract terms provisions under the ACL prohibit terms in consumer and small business
standard form contracts for consumers and small businesses which meet a high-level statutory test.
A possible unfair trading practices prohibition could draw on relevant parts of this test. For example,
a practice could be considered unfair if it:
• is not reasonably necessary to protect the legitimate interests of the party who would be
advantaged by the conduct; and
• would cause detriment (whether financial or otherwise) to a party if it were to continue.
Prohibitions in other OECD countries feature varying definitions of unfairness, as outlined at
Appendix A. These definitions could also be drawn upon to inform a definition of unfair in the
Australian context.
In the United States, the Federal Trade Commission Act (US) defines an act or practice as unfair when
it causes or is likely to cause substantial injury to consumers, cannot be reasonably avoided by
consumers, and is not outweighed by countervailing benefits to consumers or to competition.
In the European Union, the Unfair Commercial Practices Directive (UCPD) defines a commercial
practice as unfair if it is contrary to the requirements of professional diligence, and materially distorts
or is likely to materially distort the economic behaviour with regard to the product of the average
consumer whom it reaches or to whom it is addressed, or of the average member of the group when
a commercial practice is directed to a particular group of consumers.
In the United Kingdom, the Consumer Protection from Unfair Trading Regulations 2008 (UK) adopts a
definition of unfairness in line with the EU’s directive. A commercial practice is also taken to be unfair
if it is a ‘misleading action’, a ‘misleading omission’, or is ‘aggressive’.
In Singapore, the Consumer Protection (Fair Trading) Act 2013 (SG) considers an unfair practice to be
where a supplier in a consumer transaction: (1) deceives or misleads; (2) makes a false claim; (3) takes
advantage of a consumer if the supplier knows or ought reasonably to know the consumer is not in a
position to protect their own interests or reasonably able to understand the transaction or any related
matter; or (4) engages in certain specific practices, including taking advantage of a consumer by
including harsh, oppressive or excessively one-sided conditions so as to be unconscionable, or exerting
undue pressure/influence to enter the transaction.
These approaches vary widely in design, scope and potential effect. In the United States of America
(US), the reference to the likelihood of substantial injury to consumers contrasts with the EU’s focus
on distortion of behaviour. While the latter standard is far broader, it could also give rise to
uncertainty (over the demarcation between legitimate persuasion of customers and prohibited
The problem | 20
distortion of their behaviour) and be more difficult to establish (as it relies on a counterfactual).
Singapore’s approach invokes the idea of taking advantage of consumers, which has associations with
unconscionability in our and other countries’ laws. And only the US’s law acknowledges that
unfairness, in the way defined by it, may be outweighed by broader benefits to consumers and
competition.
Process to amend the Australian Consumer Law
The ACL is contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (CCA)
24
and aims
to protect Australian consumers and encourage fair trade and competition. The ACL is a national law
administered and enforced jointly by Commonwealth, state and territory consumer protection
agencies,
25
and the Australian Competition and Consumer Commission (ACCC).
As a law administered jointly by jurisdictions, certain processes must be followed to amend the ACL as
set out in the Intergovernmental Agreement.
26
The ACL can only be amended with the agreement of
the Commonwealth and 4 other states or territories (including at least 3 states) following a period of
formal consultation. If carried, a Bill to amend the ACL is prepared and publicly consulted on prior to
being introduced into the Commonwealth Parliament.
24
Competition and Consumer Act 2010 (Cth), Schedule 2 (Australian Consumer Law).
25
Access Canberra; New South Wales Fair Trading; Northern Territory Consumer Affairs; Office of Fair Trading
Queensland; South Australia Office of Consumer and Business Services; Tasmania Consumer, Building and
Occupational Services; Consumer Affairs Victoria; Western Australia Consumer Protection – Department of
Mines, Industry Regulation and Safety
26
Council of Australian Governments, ‘Intergovernmental Agreement for the ACL‘ (30 August 2019).
Policy options | 21
Policy options
Summary
To address the problem identified above, this paper discusses the following policy options:
Option 1
Status quo (no change)
Option 2
Amend statutory unconscionable conduct
Option 3
Introduce a general prohibition on unfair trading practices
Option 4
Introduce a combination of general and specific prohibitions on unfair trading practices
These policy options are expected to affect businesses (large and small), consumers and consumer law
regulators, together with Commonwealth, state and territory governments. This paper does not
present a preferred option, because further consultation and evidence on the likely impact of all
options is required to conduct an informed evaluation of each option. The policy options presented
may also be combined, depending on stakeholder feedback and the evidence gathered.
The paper evaluates the expected relative costs and benefits of the options, and how well each option
might address the policy problem set out earlier in the paper. Costs and benefits are assessed as
against the status quo. Noting the challenges of drawing comparisons between the different options,
the initial assessments outlined below are indicative only, and reflect the qualitative discussion of
options in this chapter. The views of stakeholders will inform a final Decision RIS.
Option 1 – Status quo
Description
This option proposes no change to the existing legislative framework. The ACL would continue to
protect consumers against misleading or deceptive conduct, unconscionable conduct, unfair contract
terms, and specific unfair trading practices that are prohibited by Part 3–1 of the ACL (for example,
pyramid selling, bait advertising).
Regulators would continue to monitor and enforce the existing consumer protection policy framework
and case law on the unconscionable conduct prohibition would continue to develop gradually.
However, regulators would be limited in their ability to respond to unfair trading practices, as
identified in the Problem chapter.
Context
Under this option, consumers and small businesses can:
• seek mediation and redress from Ombudsman services in certain sectors, such as energy and
water, telecommunications, financial services and small business
• ask businesses behaving poorly to change their conduct, or seek mediation or alternative dispute
resolution.
Small businesses can also access dispute resolution arrangements in industry sectors with voluntary
industry developed codes of conduct, or mandatory codes prescribed under legislation.
Policy options | 22
Regulatory agencies currently offer some recourse to consumers and small businesses regarding unfair
trading practices. The Australian Small Business and Family Enterprise Ombudsman helps small
businesses and family enterprises to resolve disputes involving other businesses or Commonwealth
Government agencies and avoid costly formal legal avenues.
27
Similarly, state-based consumer
regulators and small business commissions handle and provide support to individual complaints,
provide access to commercial mediation services and can make policy representations at higher levels
of government.
28
As the ACCC is not a complaint handling body, it rarely becomes involved in
individual consumer or small business disputes. Rather the ACCC uses individual reports, and other
sources of intelligence, to inform its compliance and enforcement work.
29
However, these courses of action would only be available if the alleged unfair practice is covered by
existing consumer laws.
Option 1 – Preliminary Impact Analysis
Option 1 would not have any regulatory impact as the current legal framework for dealing with
unlawful business conduct under the ACL would be maintained, as per the preliminary impact analysis
set out below.
Continuing benefits
Continuing costs
The status quo provides certainty for consumers and
businesses as existing protections under the ACL would be
maintained.
Unfair trading practices not covered by existing laws would
likely continue, with consumers and small businesses
bearing financial and non-financial costs as a result of these
practices, with no effective options for redress.
Option 1 – Questions
Option 1 – Status quo
1.1
Do you agree with the impact analysis of this option? Are there other issues that should be taken into account
when analysing the impact of this option?
1.2
If a trading practice is found to have caused consumer harm, do you think that the courts are able to determine
appropriate remedies in line with community expectations under the current legal framework? If not, why not?
1.3
Could a focus on stakeholder education help reduce the prevalence of unfair trading practices under existing
consumer protections?
27
Further information available at https://www.asbfeo.gov.au/about-us.
28
For example, refer to the statutory power of the NSW Small Business Commission, at
https://www.smallbusiness.nsw.gov.au/what-we-do/advocacy/our-legal-powers and the mediation services
offered at https://www.smallbusiness.nsw.gov.au/what-we-do/mediation.
29
Further information available at
https://www.accc.gov.au/about-us/accc-priorities/compliance-and-enforcement-policy-and-priorities.
Policy options | 23
Option 2 – Amend statutory unconscionable conduct
Description
This policy option would retain the core prohibition on unconscionable conduct contained in
section 21 of the ACL but would propose to extend the prohibition to capture unfair conduct within
subsection 21(3) or section 22 as a factor or element that must be assessed in determining whether
conduct is unconscionable in connection with the supply or acquisition of goods or services.
(Currently, the courts may consider the factors and elements listed in section 22.)
This policy option would seek to broaden the scope of sections 21 and 22 of the ACL to consider a
range of misleading, harsh, oppressive or predatory conduct depending on how unfair conduct is
defined. However, this policy option intends to maintain section 20 of the ACL that is confined within
the parameters of the unwritten law developed under equity.
The prohibition on unconscionable conduct could also be made prospective, so it applies to conduct
that is likely to be unconscionable. This would align with the misleading or deceptive conduct
protections in the ACL.
An alternative approach would be to add the concept of unfairness to the unconscionable conduct
provision itself (section 21 of the ACL). The rationale for this is that ‘unfair tactics’ are already referred
to in the list of factors courts should take into account in determining unconscionability, and that
elevating this to something courts must consider (as opposed to may consider) may not have a
material effect.
Context
In recent case law, judges applying the current prohibition have drawn a distinction between conduct
that is unconscionable and conduct that is unfair.
30
The intention of this option would be to clearly
signal to courts that unfair conduct that falls short of the threshold for unconscionability should also
be prohibited.
The first approach (which would not change section 21 of the ACL) would intend to retain the body of
case law that has developed based on the current statute, which may provide ongoing and useful
guidance to courts on the application of the provision and relevant factors. For example, the Full
Federal Court in ACCC v Quantum Housing Group Pty Ltd
31
found it is not necessary for a respondent
accused of unconscionable conduct to have taken advantage of or exploited some vulnerability,
disability or disadvantage of the person or persons to whom the conduct was directed in reference to
the section 21 prohibition.
32
However, amending section 21 of the ACL to create a deliberate and
explicit delineation from the unwritten meaning of unconscionability within equity law
33
may be
required to lower the threshold that can be applied as a departure from its traditional meaning and
interpretation.
30
See Australian Competition and Consumer Commission v Medibank Private Limited [2018] FCAFC 235; Australian
Competition and Consumer Commission v Mazda Australia Pty Ltd [2021] FCA 1493.
31
[2021] FCAFC 40.
32
[2021] FCAFC 40 [93] (Allsop CJ, Besanko and McKerracher JJ).
33
See Australian Consumer Law, s 20.
Policy options | 24
Option 2 – Preliminary Impact Analysis
This option is likely to have a medium regulatory impact compared to the other options proposed, as
outlined in the potential benefits and costs table below. This option would provide some benefits to
consumers and small businesses, and impose some compliance costs.
Potential benefits
Potential costs
Expanding the scope of statutory unconscionable conduct
to capture a broader range of ‘harmful conduct’ or ‘unfair
conduct’ would provide consumers and small business with
greater protection against unfair trading practices.
A new body of judicial precedent on amended statutory
unconscionable conduct would take time to develop and be
applied across Australia, leaving consumers and small
businesses exposed to unfair trading practices in the
interim.
Government and regulators would have more tools to
address harmful conduct not presently captured by the
existing unconscionable conduct laws.
Greater compliance and transition costs on businesses
beyond the status quo.
Including unfair conduct as a factor or element that must
be assessed in determining whether conduct is
unconscionable would provide a greater deterrence against
predatory, aggressive or misleading business conduct.
Government and regulators would incur greater costs for
implementation, oversight and enforcement of the
amended protection compared to the status quo.
It would build on existing case law and precedent, which
would provide useful guidance for the courts.
To the extent that reliance would continue to be placed on
the term unconscionable, it may be difficult to capture
manifestations of unfair behaviour.
Option 2 – Questions
Option 2 – Amend statutory unconscionable conduct
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
Policy options | 25
Option 3 – Introduce a general prohibition on unfair
trading practices
Description
This policy option would create a new general prohibition on unfair trading practices which would
apply to businesses across all sectors as a separate protection from the existing provisions of the ACL.
It would be a broad and flexible principles-based prohibition which would align it with the largely
principles-based nature of the ACL.
The US, the United Kingdom, the European Union and Singapore each have a general unfair trading
prohibition for business-to-consumer transactions, however the US also applies a general unfair
practices prohibition in the business-to-business context as well.
This paper does not propose a specific definition of unfair within this context. If this option were
progressed, any future definition would be determined through the policy development process,
drawing upon its use and application in international jurisdictions and the informed feedback of
stakeholders through this and future consultation processes. Importantly, the meaning of unfair would
require an appropriate and adaptable definition for a general prohibition against unfair trading
practices.
Recent reforms to the ACL introduced penalties for businesses that include unfair contract terms in
their standard form contracts with consumers and small businesses. Penalties will come into effect in
November 2023.
34
Any reform introducing a general prohibition on unfair trading practices could align
with the approach to unfair contract terms and include civil penalties for a breach.
Context
The ACCC’s 5th interim report of the Digital Platform Services Inquiry recommended an economy-wide
prohibition against unfair trading practices to address certain business practices not currently covered
by the ACL. The ACCC points out that while there are a range of unfair trading practices in relation to
digital platform services that currently fall outside of the ACL, unfair trading practices also occur across
the broader Australian economy. In a speech at the 2021 National Consumer Congress, former chair of
the ACCC, Rod Sims, stated:
35
While we [the ACCC] have had some success with the unconscionable conduct
provisions, the courts are showing us clearly the limitations of this provision, in part
due to how it is named… [s]uffice to say here that a principles-based prohibition
would allow the law to keep up with evolving unfair trading practices, particularly
as technology creates new opportunities for unfair conduct.
The intention of any proposal to introduce a general prohibition on unfair trading practices would be
to ensure it adapts to technological and commercial change. It could establish an explicit norm of
conduct about fair dealing and fair trading. Alternatively, it could have an explicit definition of what
constitutes an unfair practice.
34
Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth).
35
Australian Competition and Consumer Commission, Rod Sims, ‘2021 National Consumer Congress: Road to
recovery address‘ (Speech, 22 March 2021).
Policy options | 26
Option 3 – Preliminary Impact Analysis
Option 3 is likely to have a higher regulatory impact than option 2, as outlined in the potential benefits
and costs table below. A general prohibition on unfair trading practices would provide consumers and
small businesses with protection from a wide range of current and emerging unfair trading practices.
At the same time, if poorly framed it could create uncertainty for both business and consumers, and
even have an adverse effect on innovation, competition and efficiency. Businesses would also incur
compliance and training costs in order to ensure practices are not in contravention of the
principles-based prohibition.
Potential benefits
Potential costs
A general prohibition on unfair trading practices would
provide a greater deterrence against predatory, aggressive
or misleading business conduct. It would enable future and
evolving unfair trading practices to be captured.
Businesses would incur compliance and training costs to
ensure they are not engaging in unfair trading practices.
A general prohibition on unfair trading practices may better
meet community expectations for protecting consumers
and small businesses under the ACL.
Judicial precedent on a general prohibition may take time
to develop and be consistently applied. This could create
uncertainty for businesses which could have a chilling
effect on competition and innovation.
Government and regulators would have more tools to
more appropriately and efficiently respond to misconduct,
and therefore allow for less complex and less costly
regulatory intervention.
Government and regulators could incur greater costs
through increased enforcement and administration actions,
particularly as more conduct is captured.
A general prohibition on unfair trading practices would
bring Australia in line with other international jurisdictions
and prominent trading partners. (See Appendix A.)
Government and regulators would incur upfront costs in
developing guidance and education measures in order to
support business certainty.
A general prohibition on unfair trading may increase
consumer and small business confidence.
Depending on how it is framed, a general prohibition could
create uncertainty for businesses and consumers and be
difficult to enforce.
Option 3 – Questions
Option 3 – Introduce a general prohibition on unfair trading practices
3.1
Do you agree with the impact analysis of this option? Are there other benefits or costs that should be taken into
account when analysing the impact of this option?
3.2
Are there any consequences or risks that need to be considered when pursuing this policy option?
Please provide details.
3.3
Would this policy option potentially create uncertainty for business or limit competition and innovation? Would it
place any additional financial or administrative cost or burden on small businesses and/or consumers?
3.4
Do you consider a general prohibition on unfair trading practices would sufficiently deter businesses from
engaging in conduct that is considered unfair, harmful or detrimental to consumers?
3.5
Should a general prohibition on unfair trading practices define what is considered unfair? If so, what elements
should be incorporated? Should a definition of unfair be similar to the recent unfair contract terms amendment
under section 24 of the ACL?
3.6
Should civil penalties be attached to a general prohibition on unfair trading practices? Please provide reasons for
your response.
3.7
Are there any practices you think may be captured by a potential unfair trading prohibition, that you consider to
be part of legitimate commercial behaviour and should be excluded from an unfair trading prohibition?
Please provide examples.
Policy options | 27
Option 4 – Introduce a combination of general and specific
prohibitions on unfair trading practices
Description
The combination of a general principles-based prohibition against unfair trading practices (Option 3)
with the addition of a list of specific prohibited practices would be the most comprehensive and
targeted policy approach. These provisions would complement existing protections under the ACL,
such as the prohibitions against unconscionable conduct and misleading or deceptive conduct.
As discussed at Appendix A, this combined regulatory approach has been enforced in overseas
jurisdictions such as Singapore (since 2003), the European Union (since 2005), and the United
Kingdom (since 2008) for business-to-consumer transactions.
What is a specific prohibition?
As one part of this policy option, a specific prohibition on unfair trading practices would be a list of
specific instances of prohibited conduct that commonly result in consumer and/or small business harm.
This list could be updated over time as business models and strategies change. It would provide clarity
for both firms and their customers on what practices are not permitted, complementing any general
prohibition. The ACL already contains several specific prohibitions that, in overseas jurisdictions, are
included in their list of specific prohibitions against unfair practices. For example, in the European
Union, the UCPD provides a non-exhaustive list of 31 specific commercial practices which are deemed
in all circumstances to be unfair under 2 main categories of ‘misleading commercial practices’ and
‘aggressive commercial practices’. This list broadly covers bait advertising, phony ‘free’ offers,
manipulation of children, false claims about cures, hidden advertisements in media, pyramid schemes,
false offers of prizes and gifts, phony ‘special’ advantages, false use of limited offers, and persistent
unwanted offers. The UK has adopted the EU directive.
36
Under this option, further specific unfair practices would be inserted into the ACL alongside a general
prohibition on unfair practices. These prohibitions would be more specific, including clear and defined
instances of unfair practices that are not covered by any existing provisions of the ACL.
Option 4 is comparable to the approach taken to unfair trading in the EU, the UK and Singapore.
37
No international jurisdiction has introduced or enforced a stand-alone specific unfair practices
36
The UCPD was implemented into UK legislation through the Consumer Protection from Unfair Trading Regulations
2008. Since Brexit, the main change to the regulations is that trader liability for the misleading or aggressive
practices of importers of goods is now restricted to importers into the UK rather than importers into the European
Economic Area (EEA). Conway, Lorraine, ‘Brexit: UK consumer protection law‘, (May 2021, Briefing Paper 9126).
37
In Singapore, the Second Schedule of the Consumer Protection (Fair Trading) Act 2013 (SG) provides a list of
27 specific unfair practices that broadly covers specific misrepresentations about goods or services, false or
misleading representations, charging prices substantially higher than estimated, misrepresentations about rights,
remedies or obligations, misrepresentations about authority to negotiate final terms of agreement, undue
pressure, undue influence, representations about supply that cannot be supplied, free prizes, advertorials,
omitting or misleading material facts (including small print concealment), bait advertising, accepting payment
without intention to supply, asserting rights to payment for unsolicited supplies, refusing to supply copies of
agreement to consumers upon request, and harsh, oppressive or excessively one‑sided terms and conditions so
as to be unconscionable.
Policy options | 28
prohibition without also having a general unfair practices prohibition in place. More detailed
information about international responses to unfair trading practices is outlined at Appendix A.
Combined approach
This policy option gives a combined approach of the benefits of targeting specific practices, while also
retaining the benefits of a more general prohibition. Consumers and small businesses would be clearly
protected against the list of prohibited practices but would also have protection against unidentified
or emerging unfair trading practices from the broader principles-based prohibition. Breaches of a
combined general and specific prohibition would likely attract civil penalties.
The operation of this option could be similar to the structure of existing provisions in the ACL.
For example, the ACL provides a broad principles-based prohibition against misleading or deceptive
conduct, and it also contains a separate prohibition on making certain false or misleading
representations about goods or services.
Option 4 – Preliminary Impact Analysis
Option 4 is likely to have the highest regulatory impact of all the options presented, as outlined in the
potential benefits and costs table below. This option would provide the highest level of protection to
consumers and small businesses from unfair trading practices. As this option represents the most
significant legislative change compared to the status quo, it may present the largest transition cost to
businesses of all the options.
Potential benefits
Potential costs
Consumers and small business would be protected from
the widest range of both current and emerging unfair
trading practices. It would enable future and evolving
unfair trading practices to be captured.
Businesses would incur compliance and training costs to
ensure they are not engaging in unfair trading practices.
A combined prohibition on unfair trading practices may
better meet community expectations for protecting
consumers and small businesses under the ACL.
Businesses may be uncertain about what is unfair which
may create an overly cautious commercial environment
with potential impacts on business confidence and
innovation. The use of a specific list of practices, however,
could provide useful guidance to businesses and be easier
to enforce.
Government and regulators would have a comprehensive
range of tools to address harmful conduct not presently
captured by existing laws, including new and emerging
conduct.
Government and regulators could incur greater costs
through increased enforcement and administration actions.
A combined prohibition on unfair trading may increase
consumer and small business confidence.
Governments would incur upfront costs to developing
guidance and education measures in order to support
business certainty.
A combined approach would bring Australia in line with
other international jurisdictions and prominent trading
partners. (See Appendix A.)
Policy options | 29
Option 4 – Questions
Option 4 – Introduce a general and specific prohibition on unfair trading practices
4.1
Do you agree with the impact analysis of this option? Are there other benefits or costs that should be taken into
account when analysing the impact of this option?
4.2
Are there any consequences or risks that need to be considered when pursuing this policy option?
Please provide details.
4.3
Would this policy option place any additional financial or administrative cost or burden on small businesses and/or
consumers?
4.4
Do you consider a specific prohibition on unfair trading practices in the form of a list or schedule of unfair conduct
would be an adaptable policy option for technological change?
4.5
Do you consider a specific prohibition on unfair trading practices would sufficiently deter businesses from
engaging in conduct that is considered unfair, harmful or detrimental to consumers?
4.6
What types of unfair trading practices should be specifically prohibited? Should they be industry specific or
economy-wide?
4.7
Should civil penalties be attached to a combined prohibition on unfair trading practices?
Please provide reasons for your response.
Next Steps | 30
Next Steps
Treasury is undertaking a public consultation process in relation to the issues explored in this paper.
The objective of the consultation process is to build on previous stakeholder engagement, to gather
additional evidence and data on the extent of the problem and to seek views on the potential benefits
and costs of the proposed policy options.
The consultation process will consist of:
• a formal written submission process
• targeted meetings with key stakeholders and interested parties.
If you are interested in meeting with Treasury to discuss the paper or your submission, please contact:
Director
Consumer Policy and Product Safety Unit
Market Conduct and Digital Division
The Treasury
Email: consumerlaw@treasury.gov.au
Written submissions to this process may reference how previous consultation submissions address
particular questions posed in this paper.
Once this consultation process has concluded, a Decision RIS will be produced to discuss the results of
the consultation process, the evidence that has been gathered and the preferred policy option.
Specific questions are likely to arise from this Consultation RIS which may have not been considered at
the time of drafting. Treasury may undertake further targeted consultation with key stakeholders if
necessary. Please note that Treasury does not intend to reply to each submission.
Both this paper and the Decision RIS will be published on the Office of Impact Analysis website.
Appendix A – International responses to unfair trading practices | 31
Appendix A – International responses to unfair
trading practices
United States – General prohibition only
In the United States, section 5 of the Federal Trade Commission Act (FTC Act) contains a general
prohibition against ‘unfair or deceptive acts or practices in or affecting commerce’. The FTC Act
defines an act or practice to be unfair when it:
• causes or is likely to cause substantial injury to consumers
• cannot be reasonably avoided by consumers
• is not outweighed by countervailing benefits to consumers or to competition.
Uniquely, the FTC Act does not focus on definitions of the ‘average consumer’, the ‘vulnerable’
consumer, or establish specific examples or categories of conduct or acts that are prohibited.
• The FTC focuses largely on the concept of ‘substantial injury’ to the consumer which applies
to all persons engaged in commerce, including banks. In this context, ‘substantial injury’
usually involves monetary harm, but can also include, in certain circumstances, unquantifiable
or non-monetary harm.
• Substantial injury can occur where an act or practice causes a small amount of harm to a large
number of people, or if the injury raises a significant risk of concrete harm (not trivial or
merely speculative harm). Emotional impact and other more subjective types of harm will not
ordinarily make a practice unfair.
Public policy as established by statute, regulation, judicial decision or agency determination may
be considered with all other evidence in determining whether an act or practice is unfair, but not
as a primary consideration. Importantly, the FTC applies to transactions that may impact business
customers as well as individual customers.
Appendix A – International responses to unfair trading practices | 32
United States – Enforcement actions under the FTC framework
Epic Games
38
In March 2023, the US Federal Trade Commission (FTC) finalised an order requiring Epic Games,
creator of video game Fortnite, to pay a total of US$245 million to consumers to settle charges that
the company violated section 5 of the FTC Act due to the deployment of design tricks, known as dark
patterns, to induce millions of players into making unintentional purchases. The order also prohibits
Epic from charging consumers through the use of dark patterns or from otherwise charging consumers
without obtaining their affirmative consent. This was the FTC’s largest refund amount in a gaming
case, and its largest administrative order in history.
In a complaint announced in December 2022, the FTC alleged that Epic Games used dark patterns to
trick users into making purchases, charged account holders without authorisation and blocked access
to purchased content by locking the accounts the accounts of customers who disputed unauthorized
charges with their credit card companies. The FTC also alleged Epic Games ignored more than one
million user complaints and repeated employee concerns that many consumers were being wrongfully
charged.
Vonage
39
In November 2022, the FTC sought a court order to require internet phone service provider Vonage to
pay US$100 million in refunds to consumers. The FTC alleged that the company used dark patterns to
make it difficult for consumers to cancel and often continued to illegally charge them even after they
spoke to an agent directly and requested cancellation. According to the FTC’s complaint, Vonage billed
their customers for services on an automatic basis every month, either by charging a credit or debit
card or withdrawing money from a customer’s bank account directly. Consumer accounts ranged from
$5 to around $50 each month, while business accounts could cost up to thousands of dollars each
month. In many cases, the company signed customers up using ‘negative option’ plans that begin with
a free trial, but then required consumers to take action to avoid being charged. The FTC specifically
alleged that Vonage had engaged in the elimination of cancellation options, making the cancellation
process difficult, surprising customers with expensive junk fees when attempting to cancel, and
continuing to charge customers even after they had cancelled their service.
Google and iHeartMedia
40
In February 2023, the FTC finalised consent orders against Google and iHeartMedia settling allegations
that they produced and aired nearly 29,000 deceptive first-person endorsements by radio
personalities promoting the personalities’ use of and experience with Google’s Pixel 4 phone in 2019
and 2020. Separate state judgements also required them to pay a total of $9.4 million in penalties.
41
38
Federal Trade Commission, ‘FTC Finalizes Order Requiring Fortnite maker Epic Games to pay $245 Million for
Tricking Users into Making Unwanted Charges‘ (Press Release, 14 March 2023).
39
Federal Trade Commission, ‘FTC Action Against Vonage Results in $100 Million to Customers Trapped by Illegal
Dark Patterns and Junk Fees When Trying to Cancel Service‘ (Press Release, 3 November 2022).
40
Federal Trade Commission, ‘FTC, States Sue Google and iHeartMedia for Deceptive Ads Promoting the Pixel 4
Smartphone‘ (Press Release, 28 November 2022).
41
Federal Trade Commission, ‘FTC Approves Final Orders against Google and iHeartMedia for Deceptive On-Air
Endorsements for Google’s Pixel 4 Phone‘ (Press Release, 19 December 2022).
Appendix A – International responses to unfair trading practices | 33
European Union – Combined general and specific prohibition
In the European Union, Directive 2005/29/EC on unfair business-to-consumer commercial
practices in the internal market (UCPD) contains a general prohibition against ‘unfair commercial
practices’ if a commercial practice is:
• contrary to the requirements of professional diligence
• materially distorts or is likely to materially distort the economic behaviour of the average
consumer or the average member of a group it is directed towards.
The UCPD prohibits commercial practices under 4 main categories:
1. Misleading actions (Article 6) – where a commercial practice contains false information, is
untruthful or in any way deceives or is likely to deceive the average consumer.
2. Misleading omissions (Article 7) – where a commercial practice omits material information
that the average consumer needs to know in order take an informed transactional decision,
and that omission causes (or is likely to cause) them to undertake a transactional decision
they would not have taken otherwise.
3. Aggressive commercial practices (Article 8) – where a commercial practice impairs (or is likely
to impair) the average consumer’s freedom of choice or conduct due to harassment,
coercion, physical force, or undue influence, and causes the consumer to undertake a
transactional decision that they would not have taken otherwise.
4. Harassment, coercion and undue influence (Article 9) – where a commercial practice uses
harassment, coercion, including the use of physical force, or undue influence, which takes into
account factors such as timing, location, nature or persistance, threatening or abusive
language or behaviour, exploitation of specific misfortune or circumstance, any onerous or
disproportionate non-contractual barriers for exercising consumer rights, and any threat to
take any action that cannot legally be taken.
Annex 1 to the UCPD contains a specific prohibition approach which includes a non-exhaustive
list of 31 specific practices that broadly covers: bait advertising, phony ‘free’ offers, manipulation
of children, false claims about cures, hidden advertisements in media, pyramid schemes, false
offers of prizes and gifts, phony ‘special’ advantages, false use of limited offers, and persistent
unwanted offers.
The practice of listing specific conduct in an annexure or schedule is colloquially known as a
‘blacklist’ approach. The UCPD categorises this non-exhaustive list into 2 parts being ‘Misleading
commercial practices’ and ‘Aggressive commercial practices’.
In general, commercial practices which are likely to ‘materially distort the economic behaviour’
only of a clearly identifiable group of consumers who are particularly vulnerable (e.g., mental or
physical infirmity, age or credulity in a way which the trader could reasonably be expected to
foresee) would be assessed from the perspective of the average member of that group.
Exceptions apply to common and legitimate advertising practices, including the making of
exaggerated statements or statements which are not meant to be taken literally.
A recent Omnibus Directive has amended the UCPD to also impose a positive duty to provide
information in certain situations which include clearly disclosing any paid advertisement or
payment for online product searches and informing consumers if online prices are based on an
algorithm taking into account personal consumer behaviour.
Appendix A – International responses to unfair trading practices | 34
European Union – Flowchart of UCPD framework
This flowchart illustrates the relationship between the ‘blacklist’ of commercial practices in Annex I
and the general clauses of the UCPD, namely Articles 6 to 9 and Article 5 respectively. In order to be
considered unfair, and therefore prohibited under the UCPD, it is sufficient that a commercial practice
fulfils only one of these tests.
42
NO
YES
NO
NO
YES
YES
42 Official Journal of the European Union, ‘Commission Notice – Guidance on the interpretation and application of
Directive 2005/29/EC of the European Parliament and of the Council concerning unfair business-to-consumer
commercial practices in the internal market‘ (Regulatory guidance, 29 December 2021), C 526/26, p. 26.
Does the commercial practice fall under the blacklist of unfair commercial
practices (Annex I)?
Does the commercial practice constitute a misleading practice (Art 6 and 7)
or an aggressive practice (Art 8 and 9)… which is likely to distort the
transactional decision of the average consumer?
Practice is not prohibited
Does the commercial practice infringe professional diligence (Art 5(2)) and…
is likely to distort the transactional decision of the average consumer?
Practice is prohibited
Appendix A – International responses to unfair trading practices | 35
European Union – Enforcement actions under the UCPD framework
Samsung Electronics Italia
43
In January 2017, the Autorità Garante della Concorrenza e del Mercato, also known as the Italian
Competition Authority, imposed a total fine of €3.1 million against Samsung Electronics Italia for
promoting the sale of electronic products by promising prizes and bonuses to consumers in a manner
which constituted misleading and aggressive commercial practices. The prizes or bonuses promised to
consumers were only available if consumers registered with a website or had purchased through a
particular authorised retailer. These conditions were not specified in advertisements and could be
read only after registering on the website and having read the terms and conditions in full. If these
steps were completed, obtaining a prize was still very difficult as consumers were repeatedly
requested to provide documents. At the same time, after having bought the item linked to the
promotional offer, consumers were forced to register to the Samsung People online platform and
provide their personal data which were used by Samsung for marketing purposes. Additionally,
consumers could not get the promised prize or bonus without giving their consent to the commercial
use of their personal data which was used by Samsung for purposes not linked at all with the
promotional offer of the product itself.
Wind Tre & Vodafone Italia
44
In September 2018, the Italian Competition Authority imposed fines on 2 telecommunications
companies, Wind Tre and Vodafone Italia, for selling mobile phones with pre-installed SIM cards that
provided answering and internet services without informing consumers at the point of transaction.
The Court found that selling mobile phones with SIM cards that included pre-loaded and pre-activated
internet and voicemail services without first sufficiently informing consumers would be conduct falling
within the term ‘inertia selling’, thereby constituting a prohibited aggressive practice under point 29 of
Annex I.
45
Facebook
46
In November 2018, the Italian Competition Authority imposed a fine of €10 million on Facebook for
exerting undue influence on registered consumers through the transmission of their data from
Facebook to third-party websites and apps for commercial purposes without their express and prior
consent. The Italian Competition Authority alleged that undue influence had been caused by the
pre-selection of the broadest consent to data sharing, which was detrimental to consumers, who then
faced significant restrictions on the social network if they limited their data consent.
43
Autorità Garante della Concorrenza e del Mercato, ‘Italian Competition Authority fines Samsung 3.1 million euros
for misleading and aggressive commercial practices in promoting products‘ (Press Release, 25 January 2017)
(English translation); Eleftheria Papadimitriou, ‘Protection of Users’ in Ioannis Iglezakis, Legal Issues of Mobile
Apps: A Practical Guide (2020, Kluwer Law International).
44
Consiglio di Stato (Council of State, Italy), Autorità Garante della Concorrenza e del Mercato v Wind Tre SpA,
formerly Wind Telecomunicazioni SpA (C
‑
54/17) and Vodafone Italia SpA, formerly Vodafone Omnitel NV
(C
‑
55/17) (Court decision, 13 September 2019).
45
European Union, Commission Notice – Guidance on the interpretation and application of Directive 2005/29/EC of
the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the
internal market (29 December 2021), p. 127.
46
Autorità Garante della Concorrenza e del Mercato, ‘Facebook fined 10 million Euros by the ICA for
unfair commercial practices for using its subscribers’ data for commercial purposes‘ (Press Release,
7 December 2018) (English translation); ACCC, Digital Platforms Inquiry (Final Report, June 2019), p. 440.
Appendix A – International responses to unfair trading practices | 36
United Kingdom – Combined general and specific prohibition
Similar to the European Union’s UCPD, part 2 of the Consumer Protection from Unfair Trading
Regulations 2008 (CPR) contains a general prohibition against ‘unfair commercial practices’.
The Consumer Rights Act 2015 and the Enterprise Act 2002 also provide more specific protections
for unfair contract terms and notices.
The 3 main categories of unfair commercial practices under the CPRs are categorised similarly to
the UCPD but are defined differently:
• Misleading actions
• Misleading omissions
• Aggressive commercial practices
1. Misleading actions
• commercial practices that contain false information, are untruthful or in any way deceive or are
likely to deceive the average consumer
• commercial practices concerning any marketing of a product (including comparative advertising)
which creates confusion with any products, trademarks, trade names or other distinguishing
marks of a competitor
• commmercial practices concerning any failure by a trader to comply with a commitment
contained in a code of conduct which the trader has undertaken to comply with.
2. Misleading omissions
• commercial practices that omit material information
• commercial practices that hide material information
• commercial practices that provide unclear, unintelligible, ambiguous or untimely material
information
• commercial practices that fail to identify its commercial intent, unless this is already apparent
from the context, and as a result causes (or is likely to cause) the average consumer to
undertake a transaction decision they would not have taken otherwise.
3. Aggressive commercial practices
• commercial practices that impair, or are likely to impair, the average consumer’s freedom of
choice or conduct due to harassment, coercion, physical force or undue influence, and causes
the consumer to undertake a transactional decision that they would not have taken otherwise.
The CPR contains a specific prohibition approach which includes a schedule of 31 specific commercial
practices that are considered unfair commercial practices.
The schedule broadly covers code of conduct matters, displaying trust marks or quality marks
without authorisation, wrongfully claiming endorsement or authorisation by a public or private
body, bait advertising, ‘bait and switch’, limited offers, language barriers, selling illegal products,
‘advertorials’, false or inaccurate claims or impressions, pyramid schemes, medical cures, offering
fake prizes, and unsolicited selling.
Appendix A – International responses to unfair trading practices | 37
United Kingdom – Enforcement actions under the CPR framework
Hotel booking sites
47
In February 2019, booking sites such as Expedia, Booking.com, Agoda, Hotels.com, ebookers and
trivago were the subject of enforcement action by the UK Competition and Markets Authority (CMA)
due to serious concerns about pressure selling, misleading discount claims, and hidden charges.
The CMA took action because it was concerned that practices such as giving a false impression of a
room’s popularity or not displaying the full cost of a room upfront could mislead people, which could
limit consumer options and lead to potential breaches of consumer protection law. The booking sites
agreed to cooperate with the CMA and voluntarily agreed to the following:
• Search results – making it clearer how hotels are ranked after a customer has entered their search
requirements. For example, telling people when search results have been affected by the amount
of commission a hotel pays the site.
• Pressure selling – not giving a false impression of the availability or popularity of a hotel or rushing
customers into making a booking decision based on incomplete information. For example, when
highlighting that other customers are looking at the same hotel, making it clear they may be
searching for different dates. The CMA also saw examples of some sites strategically placing sold
out hotels within search results to put pressure on people to book more quickly. Sites have now
committed not to do this.
• Discount claims – being clearer about discounts and only promoting deals that are actually
available at that time. Examples of misleading discount claims may include comparisons with a
higher price that was not relevant to the customer’s search criteria. For example, some sites were
comparing a higher weekend room rate with a weekday rate or comparing the price of a luxury
suite with a standard room.
• Hidden charges – displaying all compulsory charges such as taxes, booking or resort fees in the
headline price. Sites can still break that price down, but the total amount the customer has to pay
should always be shown upfront.
Apple Inc
48
In 2018, the CMA raised consumer law concerns with Apple after finding people were not being
warned clearly that their phone’s performance could slow down following a 2017 software update
designed to manage demands on the battery. The CMA became concerned that people might have
tried to repair their phone or replace it because they were not aware the software update had caused
the handset to slow down. In addition, people were not able to easily find information about the
health of their phone’s battery, which can degrade over time.
In May 2019, the CMA secured an undertaking by Apple to make a formal commitment to always notify
consumers when issuing a planned software update if it is expected to materially change the impact of
performance management on their phones. This includes providing clear and comprehensible
information to consumers about lithium-ion batteries, unexpected shutdowns and performance
management of their devices. Apple webpages must now provide guidance to consumers on steps they
can take to maximise battery health and notify consumers in future iOS updates about material changes
and impacts on device batteries, such as its maximum capacity and peak performance capability.
47
Competition and Markets Authority, ‘Hotel booking sites to make major changes after CMA probe‘ (Press
Release, 6 February 2019).
48
Competition and Markets Authority, ‘Apple pledges clearer information on iPhone performance‘ (22 May 2019);
Competition and Markets Authority, ‘Apple iPhones: consumer protection case‘ (22 May 2019).
Appendix A – International responses to unfair trading practices | 38
Singapore – Combined general and specific prohibition
In Singapore, the Consumer Protection (Fair Trading) Act 2003 (CPFTA) contains a general
prohibition against ‘unfair practices’ if a supplier of goods or services has engaged in an act or
omission before, during or after a consumer transaction through the following broad categories
of conduct:
• Misleading or deceptive conduct
• False claims
• Taking advantage of consumers
1. Misleading actions
The CPFTA prohibits ‘unfair practices’ in consumer transactions if a supplier has done or said
anything, or omitted to do or say anything, resulting in a consumer being reasonably deceived or
misled.
2. False Claims
The CPFTA prohibits ‘unfair practices’ in consumer transactions if a supplier has made a false
claim. In some cases, this has been enforced in conjunction with the Singapore Code of
Advertising Practice to uphold the principle of ‘truthful presentation’ to ensure advertisements
do not mislead in any way by inaccuracy, ambiguity, exaggeration or omission.
3. Taking advantage of consumers
The CPFTA prohibits ‘unfair practices’ in consumer transactions if a supplier has taken advantage
of a consumer if the supplier knew (or ought to reasonably know) that the consumer was:
• not in a position to protect his or her own interests
• not reasonably able to understand the character, nature, language or effect of the transaction
or any matter related to the transaction
• anything specified in the Second Schedule.
The Second Schedule contains a specific prohibition approach which includes a non-exhaustive
list of 27 specific practices that broadly covers specific misrepresentations, false or misleading
representations, estimated prices, misrepresentations about rights, remedies or obligations,
misrepresentations about authority to negotiate final terms of agreement, undue pressure,
undue influence, and representations about supply that cannot be supplied.
Other specific practices also include free prizes, advertorials, omitting or misleading material
facts (including small print concealment), bait advertising, accepting payment without intention
to supply, unsolicited supplies, supplying copies of an agreement upon request, and harsh,
oppressive or excessively one-sided terms and conditions so as to be unconscionable.
Appendix A – International responses to unfair trading practices | 39
Singapore – Enforcement actions under the CPFTA framework
Lenovo Singapore & Want Join Information Technology
49
In April 2022, the Competition and Consumer Commission of Singapore (CCCS) announced an ongoing
investigation that revealed Lenovo Singapore and Want Join Information Technology had engaged in
unfair practices under the CPFTA by making false or misleading claims about the screen refresh rate of
certain models of the Lenovo Legion Y540 gaming laptop.
In the course of investigations, the CCCS ascertained that Lenovo Singapore had, between April 2019
and June 2020, stated on its website that the screen refresh rate of its Legion Laptops could achieve a
screen refresh rate of up to 144 Hz. However, in a model comparison table for the full range of models
of the Legion Laptop, only 2 specific models were stated to have a screen refresh rate of 60 Hz. In fact,
4 other models of the Legion Laptop could only achieve a screen refresh rate of up to 60 Hz. As a
result of the investigation, both companies provided the CCCS with an undertaking to cease the unfair
practices and not engage in any other unfair practices under the CPFTA.
Mobile Air
50
In November 2014, the Consumers Association of Singapore (CASE) sought an injunction against a
Mobile Air shop owner after they refused to sign a Voluntary Compliance Agreement to pledge to stop
their unfair practices. In November 2015, a district judge sentenced the shop owner to a 33-month jail
sentence and fined him S$2,000 for cheating 26 customers into paying S$16,599 for mobile devices
between January 2014 to October 2014.
It was alleged that the owner would sell low-priced mobile devices to attract customers, and after sales
deals were made, would alter the invoices to cheat victims into handing over more money. The district
judge also noted the elaborate nature of the scam, which involved the collection of payments in separate
tranches and the use of seemingly innocuous documents couched as warranty agreements and invoices.
Fashion Interactive
51
In January 2020, the CCCS obtained an order from the State Court to declare an e-commerce retailer
selling shoes, Fashion Interactive, had engaged in unfair trade practices under the CPFTA, and ordered
them to cease an unfair practice known as a subscription trap. In Singapore, a subscription trap is a
practice by suppliers to mislead consumers into signing up for a recurring subscription by giving
consumers the impression that they are only making a one-off purchase of goods or services.
Subsequently, if consumers do not cancel such subscriptions, typically within a grace period, they
would be liable for recurring charges.
CCCS’s investigations revealed that Fashion Interactive had not sufficiently disclosed key information to
consumers who were misled into purchasing a membership subscription with recurring monthly fees.
The use of subscription traps contravenes the CPFTA as an unfair trade practice because it omits to
provide a material fact to a consumer and uses small print to conceal a material fact from the consumer
or mislead a consumer as to a material fact, in connection with the supply of goods or services.
49
Competition and Consumer Commission Singapore, ‘Lenovo Singapore and Want Join Provide Undertakings to
CCCS in View of Past Unfair Practices Involving Screen Refresh Rate of Certain Models of Lenovo Legion Y540
Gaming Laptop‘ (Press Release, 14 April 2022).
50
Today Online, ‘Jover Chew gets jail, fine for ‘audacious’ cheating schemes‘ (Media article, 30 November 2015);
The Straits Times, ‘Case turns to court to bring Mobile Air to heel‘ (Media article, 13 November 2014).
51
Competition and Consumer Commission Singapore, ‘E-Commerce Retailer Fashion Interactive Ordered to Cease
Unfair Trade Practices and Stop Using “Subscription Traps”‘ (Press Release, 17 January 2020).
Appendix B – Inquiries and reports on unfair trading practices | 40
Appendix B – Inquiries and reports on unfair
trading practices
ACCC inquiries and reports
Speech by former chair of the ACCC, Rod Sims for the ACCC’s enforcement and compliance policy
update 2022–23 at the Committee for Economic Development of Australia (CEDA) on 3 March 2022:
‘The ACCC considers that introducing a prohibition on unfair practices, to apply
economy wide, is necessary to ensure that consumers are not harmed by such
practices, and well as to address other manipulative practices across the economy.’
Speech by former chair of the ACCC, Rod Sims at the 2021 National Consumer Congress on
22 March 2021:
‘While we have had some success with the unconscionable conduct provisions,
the courts are showing us clearly the limitations of this provision, in part due to
how it is named.
I will have more to say on this at our panel session at our next meeting. Suffice to
say here that a principles-based prohibition would allow the law to keep up with
evolving unfair trading practices, particularly as technology creates new
opportunities for unfair conduct.’
ACCC Digital Platforms Inquiry
ACCC Digital Platforms Inquiry – Final report, p. 26:
‘The ACCC has also observed a range of practices that are significantly detrimental
for consumers but which may not neatly fit under existing consumer laws. These
practices are driven in part by the significant increase in the amount of consumer
data now collected and the increased sophistication in data analysis and consumer
targeting, which also creates the potential for significant consumer harm...
Accordingly, the ACCC recommends that the Australian Consumer Law be amended
to include a prohibition on certain unfair trading practices, noting that such
prohibitions have been used to address similar practices overseas.’
ACCC Digital Advertising Services Inquiry
ACCC Digital advertising services (DAS) inquiry – Final Report, p. 41:
‘In the DPI Final Report we recommended that the Australian Consumer Law (ACL)
should be amended to introduce a prohibition on certain unfair trading practices.
We remain of the view that such a prohibition would enable the ACCC to undertake
strategic enforcement action to address the risk of ad tech providers, advertisers,
publishers, and digital platforms collecting or using data in ways that have the
potential to result in substantial consumer harm, but is conduct not captured by the
existing provisions of the ACL.’
Appendix B – Inquiries and reports on unfair trading practices | 41
ACCC Digital Platform Services Inquiry
ACCC Digital Platform Services Inquiry – First interim report (online private messaging services), p. 74:
‘Due to the impact of potentially unfair clauses in the terms and conditions of large
digital platforms on businesses, and particularly small businesses, the ACCC
reiterates the recommendations in the DPI Final Report that unfair contract terms
be prohibited (including penalties applying to their use) and there be a prohibition
on certain unfair trading practices (recommendations 20 and 21).’
ACCC Digital Platform Services Inquiry – Second interim report (app marketplaces), p. 11:
‘The ACCC remains concerned with the tracking of consumers through apps.
Many consumers express strong preferences for limitations on tracking, yet the
data practices of apps available on the App Store and Play Store often do not align
with those preferences …
The ACCC continues to support the DPI Final Report recommendations regarding
amending the Competition and Consumer Act 2010 to prohibit unfair contract
terms (recommendation 20) and certain unfair trading practices (recommendation
21) which will benefit the many consumers who use apps.’
ACCC Digital Platform Services Inquiry – Third interim report (search defaults and choice screens),
p. 67:
‘Some dark pattern conduct may be covered by existing prohibitions in the ACL,
including prohibitions on misleading or deceptive conduct, false or misleading
representations, unfair contract terms, and, in the case of extremely harmful or
manipulative dark pattern practices, unconscionable conduct. However, many dark
pattern and nudge practices, even those that cause considerable consumer harm,
would fall outside existing prohibitions...
For the reasons outlined above, the ACCC reiterates its support of a prohibition on
unfair trading practices. Such a prohibition would result in greater alignment
between relevant legislation in Australia and overseas.’
ACCC Digital Platform Services Inquiry – Fourth interim report (general online retail marketplaces),
p. 5:
‘The ACCC continues to support the introduction of a prohibition on certain unfair
trading practices to cover harmful conduct that is currently not captured by existing
provisions of the Australian Consumer Law. Such a prohibition may help address
issues raised in relation to data collection and use, as well as potential dark
patterns or nudges on online marketplaces (which may confuse users, make it
difficult for users to express their actual preferences, or manipulate users into
taking certain actions). The scope of such a prohibition should be carefully
developed such that it is sufficiently defined and targeted, with appropriate legal
safeguards and guidance.’
ACCC Digital Platform Services Inquiry – Fifth interim report (regulatory reform), p. 16:
‘Recommendation 1: Economy-wide consumer measures… The ACCC continues to
recommend the introduction of new and expanded economy-wide consumer
measures, including an economy-wide prohibition against unfair trading practices
and strengthening of the unfair contract terms laws.
Appendix B – Inquiries and reports on unfair trading practices | 42
These reforms, alongside targeted digital platform specific obligations, would assist
in addressing some of the consumer protection concerns identified for digital
platform services.’
ACCC Digital Platform Services Inquiry – Sixth interim report (social media services), p. 143:
‘The ACCC has concerns about unfair trading practices on social media platforms as
they often require users to agree to onerous contract terms in order to access their
services. This may leave consumers vulnerable to harms arising from extensive data
collection and dark patterns, discussed below.
We envisage any unfair trading practice prohibition would address
problematic conduct arising from power imbalances which is currently
unlikely to breach the ACL.’
ACCC Perishable Agricultural Goods Inquiry
ACCC Perishable Agricultural Goods Inquiry, p. xvii:
‘Recommendation 2: An economy-wide prohibition on unfair trading practices
should be introduced into the ACL… The findings of this report provide further
evidence that an economy-wide unfair trading practices provision is needed.
Introducing a prohibition on unfair trading practices to the ACL is necessary to
reduce the significant harms that are not currently captured by the provisions of
the ACL, and which will not be covered by the proposed reforms to unfair
contract terms laws.’
Appendix C – Defining dark patterns | 43
Appendix C – Defining dark patterns
Categories of dark patterns
The OECD lists the following practices as dark patterns:
52
• Forced action: forcing the consumer to do something in order to access a specific functionality.
For example, forcing consumers to provide more personal information than desired (email/ phone
number), requiring access to consumers’ contacts in order to use a service.
• Interface interference: privileging specific actions from the consumer favourable to the online
business through framing of information. For example, visually obscuring important information,
preselection of options by default, ambiguity or trick questions (double negatives), and
‘confirmshaming’ (manipulating consumers towards a particular option using emotive
language/framing).
• Nagging: repeated requests to consumers to do something thereby exploiting the consumers
willpower or time e.g. requests to turn on notifications, or location tracking.
• Obstruction: aim to make tasks or interactions more difficult than they need to be, exploiting
consumer inertia or willpower e.g. making it easy to sign up to a service, or opt in for privacy
intrusive settings, but hard to cancel the service or change privacy settings, or making it hard to
delete an account (termed immortal accounts).
• Sneaking: seek to hide or disguise the information relevant to the consumer’s decision such as
costs, and this may exploit sunk cost fallacy in consumers (i.e., the phenomenon whereby a person
chooses not to abandon a strategy or course of action because they have invested heavily in it,
even when changing the decision/action would clearly be more beneficial to them.
• Social proof: triggering a decision based on observations of other consumer’s behaviour. For
example, notifications about other consumers activities and testimonials about recent purchases.
• Urgency: real or fake temporal or qualitative limits on deals in order to pressure consumers to
make a purchase, for example, language such as ‘low stock’, ‘high demand’, or countdown timers.
52
See Organisation for Economic Co-operation and Development (OECD), ‘Dark commercial patterns – OECD Digital
Economy Papers – No. 336‘ (Report, October 2022), p. 8; See also Consumer Policy Research Centre, ‘How
Australia can stop unfair business practices – A comparative analysis of unfair trading laws in international
jurisdictions‘ (Report, September 2022).
Endnotes | 44
Endnotes
i
Australian Competition and Consumer Commission v AGL South Australia Pty Ltd [2014] FCA 1369.
ii
Australian Competition and Consumer Commission v AGL South Australia Pty Ltd [2015] FCA 399.
iii
Australian Competition and Consumer Commission v AGL South Australia Pty Ltd [2015] FCA 399, Annexure A.
iv
Australian Competition and Consumer Commission, ‘ACCC takes action against Medibank for alleged
misleading and unconscionable conduct‘ (Press release, 16 June 2016).
v
Australian Competition and Consumer Commission v Medibank Private Limited [2017] FCA 1006 [24]-[36]
(O’Callaghan J).
vi
Australian Competition and Consumer Commission, ‘ACCC takes action against Medibank for alleged
misleading and unconscionable conduct‘ (Press release, 16 June 2016).
vii
Australian Competition and Consumer Commission v Medibank Private Limited [2017] FCA 1006 [31]-[36]
(O’Callaghan J).
viii
Australian Competition and Consumer Commission v Medibank Private Limited [2017] FCA 1006 [302]
(O’Callaghan J).
ix
Australian Competition and Consumer Commission v Medibank Private Limited [2018] FCAFC 235 [353]
(Beach J); Australian Competition and Consumer Commission, ‘Full Federal Court dismisses ACCC appeal
against Medibank‘, (Press release, 20 December 2018).
x
Australian Competition and Consumer Commission, ‘Mazda in court for alleged unconscionable conduct and
false or misleading representations‘ (Press release, 31 October 2019).
xi
Australian Competition and Consumer Commission, ‘Mazda in court for alleged unconscionable conduct and
false or misleading representations‘ (Press release, 31 October 2019).
xii
Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2021] FCA 1493 [282], [400],
[510], [594], [774], [855], [956] (O’Callaghan J).
xiii
Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2021] FCA 1493 [855]
(O’Callaghan J).
xiv
Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2021] FCA 1493 [265]
(O’Callaghan J).
xv
Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2021] FCA 1493.
xvi
Australian Competition and Consumer Commission, ‘Court dismisses appeals against Mazda judgment‘
(Press release, 23 March 2023).
xvii
Australian Competition and Consumer Commission v Mazda Australia Pty Limited [2023] FCAFC 45
[547]-[548].
xviii
Pitt v Commissioner for Consumer Affairs [2021] SASC 24 [12]-[13].
xix
Pitt v Commissioner for Consumer Affairs [2021] SASC 24 [23]-[30].
xx
Pitt v Commissioner for Consumer Affairs [2021] SASC 24 [16].
xxi
Pitt v Commissioner for Consumer Affairs [2021] SASC 24 [44]-[47].
xxii
Pitt v Commissioner for Consumer Affairs [2021] SASC 24 [53].
xxiii
Pitt v Commissioner for Consumer Affairs [2021] SASC 24 [54].
xxiv
Pitt v Commissioner for Consumer Affairs [2021] SASC 24 [67]-[68].
xxv
Pitt v Commissioner for Consumer Affairs [2021] SASC 24 [202].
xxvi
Pitt v Commissioner for Consumer Affairs [2021] SASC 24 [212].
xxvii
Pitt v Commissioner for Consumer Affairs [2021] SASC 24 [255].