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AustraliaCompliance with the Trade Practices Act 1974

Australian Law Reform Commission 1994

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About this Review

The government referred the issue of compliance with the TPA to the ALRC in 1992 to report by no later than 30 June 1994.

 

Review recommendations

Chapter 2 - National framework

1. The Ministerial Council on Consumer Affairs should commence development of a national scheme of consumer protection laws (para 2.17).

2. In developing a national scheme of consumer protection laws, the Ministerial Council on Consumer Affairs should consider the issues of language and structure of legislation (para 2.18).

Chapter 3 - Encouraging compliance

3. Section 28 of the TPA should be amended to state that the role of the TPC is to promote a competitive and fair market environment in Australia and to include a non-exhaustive list of the functions of the TPC. That list should include

  • enforcement of the TPA
  • encouragement and development of corporate compliance programs
  • development of codes of conduct (para 3.4).

4. Section 28 of the TPA should be amended to make it clear that the TPC may exercise the functions listed in that section in respect of all provisions of the TPA (para 3.18).

Chapter 4 - Responding to contraventions

5. The TPA should be amended to include a preamble or other provision stating: The objective of this Act is to promote a competitive and fair market environment in Australia (para 4.2).

6. Section 7 of the TPA should be amended to provide that knowledge of, or experience in, consumer protection and fair trading may qualify a person for appointment as a member of the TPC (para 4.3).

7. The TPA should be amended to make it clear that where the court has found a contravention of the Act it may make orders for one or more of the following purposes:

  • to compensate a person who has suffered loss or damage as a result of the contravention
  • to undo the effects of the contravention
  • to prevent a future contravention of the Act, both immediately and in the longer term, and to promote and encourage community-wide compliance with the TPA
  • to provide deterrence and, as a secondary or incidental outcome, retribution (para 4.8).

8. The TPC should expand its education and information role by preparing and making publicly available a document describing various orders that could be sought in different specified and illustrated situations (para 4.17).

9. The TPA should be amended to provide that, where the TPC considers it appropriate to do so, the TPC may, with the leave of the court and subject to any conditions imposed by the court, intervene in proceedings brought under the TPA (para 4.21).

10. The TPA should be amended to require the TPC, when commencing proceedings relating to a contravention of the TPA, to consider all orders that would be necessary to serve the purposes that are relevant in the circumstances (para 4.22).

11. The TPA should be amended to make it clear that administrative action undertaken by the TPC should be taken to achieve one or more of the following purposes:

  • to compensate those who have suffered loss or damage as a result of the contravention
  • to undo the effects of the contravention, both immediately and in the longer term, and to promote and encourage community-wide compliance with the TPA
  • to prevent future contravention of the Act (para 4.23).

Chapter 5 - Access and cost issues

12. Section 87(1B) of the TPA should be amended to

  • remove the restriction that a representative action may only be brought where the TPC has brought a prosecution under s 79 or proceedings for an injunction under s 80
  • allow a representative action to be brought for a contravention of any provision of the TPA in relation to which the TPC has an enforcement role (para 5.18).

13. The TPA should be amended to give the TPC standing to bring representative proceedings under Pt IVA of the Federal Court Act on behalf of persons who suffer loss or damage from a contravention of the TPA regardless of whether the TPC has a claim in its own right (para 5.21).

Chapter 6 - Post sale consumer protection

14. Section 75A of the TPA should be amended to include a right to a replacement (para 6.9).

Chapter 7 - Compensating persons who suffer loss or damage

15. The TPA should be amended to provide:

  • where a court considers it appropriate to make an order for compensation and to impose a fine or make any other order for the payment of a pecuniary sum and it appears to the court that the defendant has insufficient means to pay both, notwithstanding anything in s16A of the Crimes Act 1914 (Cth) the court must give preference to compensation
  • before imposing a fine or making any other order for the payment of a pecuniary sum, the court may adjourn consideration of the matter to enable enquiries to be made to ascertain the identity of any victim of the contravention and the extent of the victim's loss or damage
  • the court may give directions as to the manner in which, and by whom, the enquiries should be made (para 7.4).

16. Section82(2) of the TPA should be amended to allow the court to extend the period in which a claim for damages can be commenced if the court considers it appropriate to do so (para 7.13).

17. Section87(1CA) of the TPA should be amended to provide that the time limit for any application under s87(1A) is three years and that the court has a discretion to extend that time if the court considers it appropriate to do so (para7.16).

18. The TPA should be amended to provide that in assessing damages under s82 a court shall do what is reasonable and appropriate in the circumstances and not be constrained by the common law principles of the law of contracts and torts (para 7.21).

19. The TPA should be amended to provide expressly that courts may make orders for contribution and indemnity and that contribution and indemnity may be claimed in the proceedings in which the plaintiff claims damages from the respondent (para 7.23).

20. Section 82 of the TPA should be amended to allow recovery of damages under that section for a contravention of a provision of Pt IVA (para 7.28).

Chapter 8 - Undoing the effects of, and preventing further, contraventions

21. The TPA should be amended to require the court to take into consideration the estimated profits of a contravention when imposing a penalty, civil or criminal (para 8.4).

22. Section 80A of the TPA should be amended to make corrective advertising orders available for contraventions of Pt IV and IVA, as well as for Pt V (para 8.7).

23. Section 80 of the TPA should be amended to make it clear that reassessment or revision of a corporation's internal compliance controls may be required as a term of injunctive relief (para 8.11).

24. Section 230 of the Corporations Law should be amended to enable the Federal Court, on application by the TPC, to prohibit a person who has been found, in a prosecution or a civil penalty proceeding, to have contravened the TPA from managing a corporation for such period as is specified in the order (para 8.14).

Chapter 9 - Penalty regime for Pt V

25. Criminal penalties should be retained in PtV, for both individuals and corporations but criminal liability should depend on proof of a particular advertent mental state (para 9.10).

26. Civil penalties should be made available in Divisions 1 and 1A of Pt V, in addition to the regime of criminal penalties (para 9.11).

27. If each element of prohibited conduct is present, the contravener should be liable to a civil penalty, subject to the operation of statutory defences. If each substantive element is engaged in knowingly, intentionally or recklessly, the conduct should constitute an offence (para 9.12).

28. If civil penalties are introduced to Pt V as recommended by the Commission, the TPA should provide that

(i) if civil penalty proceedings in respect of particular conduct have been completed, no criminal proceedings may be commenced in respect of that conduct.

(ii) if criminal proceedings in respect of particular conduct have been completed, no civil penalty proceedings may be commenced in respect of that conduct (see, however, (vi)).

(iii) if civil penalty proceedings have been commenced but not completed, criminal proceedings may be commenced. The civil penalty proceedings shall be permanently stayed unless the criminal proceedings are withdrawn before completion.

(iv) if a prosecution has been commenced in respect of particular conduct civil penalty proceedings may not be commenced.

(v) if in criminal proceedings the Court is not satisfied beyond reasonable doubt that an offence has been committed but it is satisfied on the balance of probabilities that a person has contravened a civil penalty provision, the Court may make a declaration to that effect.

(vi) if the Court makes a declaration that a provision of Pt V has been contravened, an application for imposition of a civil penalty may be made to the Court on the basis of that declaration (para 9.18).

29. The TPA should provide that the TPC may initiate civil penalty proceedings against an accessory, even if the corporation is prosecuted in respect of the same conduct, and that an accessory may be prosecuted even if civil penalty proceedings are taken against the corporation (para 9.20).

30. Section 84 should, in so far as it attributes criminal liability to a corporation, be amended to reflect the CLOC principles (para 9.35).

31. Section84(3) of the TPA should be amended to reflect the general principle that criminal responsibility requires intention or advertence (para 9.37).

32. The time limit for bringing proceedings under Pt IV for the imposition of a civil penalty should remain six years (para 9.41).

33. If civil penalties are introduced into Pt V, the time within which civil penalty proceedings under PtV must be commenced should be three years (para 9.41).

34. Section77 should be amended so that it provides for the imposition of a penalty (para 9.43). Chapter 10 - Penalties for contravening the TPA

35. The TPA should be amended to provide expressly for corporate probation and probationary conditions of the following types:

  • the corporation is to develop and submit to the court a program to prevent and detect contraventions of the TPA, including a schedule for implementation
  • upon approval by the court of a program to prevent and detect contraventions of the TPA, the corporation is to notify its employees and shareholders that it has contravened the TPA and advise them of the steps it has taken to avoid repetition
  • the corporation is to make periodic reports to the court or the independent representative appointed by the court regarding the corporation's progress in implementing the compliance program
  • the corporation is to submit to a reasonable number of regular and unannounced examinations of its books and records at appropriate business premises by the independent representative and to inquiries made of knowledgeable individuals within the corporation (para 10.9).

36. The TPA should be amended to provide expressly for corporate community service orders (para 10.17).

37. Section 80A should be amended to provide that an adverse publicity order may be imposed where a corporation is found to have contravened the Act and the court wishes to impose a penalty (para 10.21).

38. Whatever range of penalties is available against a corporation convicted of an offence against Pt V of the TPA should be available as civil penalties under PtV of the TPA (para 10.28).

39. Section 80A of the TPA should be amended to provide that adverse publicity orders may be made against individuals who have contravened Pt V of the TPA (para 10.32).

40. The range of civil penalties available against individuals who have contravened Pt V should include probation, community service orders and adverse publicity orders (para 10.33).

41. Section241 of the Corporations Law should be amended to prohibit corporations from indemnifying their officers, employees or agents or any other person implicated in a contravention against criminal or civil penalties imposed upon the officers, employees or agents or other person (para10.34).

42. The same range of sanctions that is available against a corporation or individual convicted of an offence against the TPA should be available as civil penalties for contraventions of Pt IV of the TPA (para 10.35).

43. The TPA should be amended to delete from s 76 the reference to relevant factors to be considered by the court. A new provision should be created to require the court, when determining a sentence or a civil penalty, to have regard to the relevant factors currently listed in s76 and the following additional factors:

  • (if the contravener is a corporation) whether a revision of the contravener's compliance controls is necessary and the extent to which defective internal controls have been revised in light of the lessons learned from the circumstances in which the contravention occurred
  • how much, if any, profit was made as a result of the contravention
  • whether the contravener continued the relevant conduct notwithstanding a written request from the TPC to discontinue it (para 10.38).

44. The TPA should be amended to provide that the court may require a corporation that has contravened the Act to provide to the court, prior to the court assessing the need for or the amount or nature of a penalty, a report detailing what steps have been taken by the corporation since the contravention to improve the corporation's internal controls and to discipline the persons implicated in the contravention (para 10.40).

45. The maximum civil penalty in PtV should be $200000 for a body corporate and $40000 for a person other than a body corporate and the maximum fine in PtV should be $1m for a body corporate and $200000 for a person other than a body corporate (para 10.43).

46. Monetary penalties provided for in the TPA, both civil and criminal, should be prescribed in terms of penalty units (para 10.46).

Chapter 11 - Administrative powers

47. The TPA should be amended to

  • require the TPC to establish and maintain a register open to all members of the public
  • require that all undertakings entered into under s 87B be lodged on the public register within 28 days of being settled
  • allow terms of an undertaking that are confidential to be withheld from registration provided the register notes that a term has been withheld and the grounds on which it is confidential
  • provide that a term may be confidential if it contains information that is commercial-in-confidence or consists of personal details of an individual not involved in the contravention of the TPA or if disclosure of the information would be against the public interest or harm national security (para 11.6).

48. The TPA should be amended to provide that

  • a court may require a person who has been brought before the court for breaching a s87B undertaking to lodge a security bond and
  • if that person is brought before the court for a subsequent breach of the undertaking, the court may order the forfeiture of all or part of the security bond (para 11.9).

49. Section 87B of the TPA should be amended to provide that, in deciding whether to accept an undertaking, the TPC must consider what steps the person offering the undertaking has taken to ensure that a relevant contravention will not occur again (para 11.10).

50. Section87B of the TPA should be amended to provide that, when deciding whether to accept an undertaking, the TPC should be required to consider, where relevant, what steps have been taken to ensure that the issue of compensation is dealt with (para 11.11).

51. The TPA should be amended to require the TPC to include in its annual report information on the use of its formal administrative powers and a general summary of the types of complaints it receives and how it deals with them (para11.16).

52. The TPA should be amended to give the TPC power to give to a private litigant information the TPC has obtained from an investigation involving its powers under s 155 if it is satisfied that the person is carrying on, or contemplating in good faith, a proceeding in respect of a contravention of the TPA to which the information is relevant (para 11.23).

53. The TPA should be amended to provide that the court may order a person who is found to have contravened the TPA to pay the reasonable investigation costs of the TPC, as determined by the court (para 11.24).

54. The TPA should be amended to provide that the TPC is able to seek a declaration from the Federal Court under s 163A (para 11.27).

55. The TPA should be amended to

  • enable the TPC to require a person who makes a statement promoting, or apparently intending to promote, the supply of goods or services to provide the TPC, within the period specified in the notice, with proof of any claim or representation made in the statement
  • provide that it is an offence if the person served with the notice fails to respond to the notice within the specified time
  • enable the TPC, if it considers that the evidence provided by the person served with the notice is insufficient to support the claim or representation, to issue a notice under s 155(1) to that person or to authorise entry of that person's premises under s 155(2), notwithstanding that the TPC may not have a reasonable belief that the claim or representation is false or misleading
  • provide that a person may not refuse to answer a 'substantiation' notice on the ground that the information provided may incriminate him or her
  • provide that the use of the information obtained by the TPC as a result of issuing a notice is subject to limitations the same as those imposed by s155(7) (para 11.31).

Chapter 12 - Issues related to court procedures

56. Section 83 of the TPA should be amended to allow a finding of fact by a court or tribunal in any proceedings against a person under the TPA to be used as evidence of that fact in subsequent proceedings against the same person under the TPA, except where the subsequent proceedings are for the imposition of a penalty (para 12.23).

57. The TPA should be amended to enable the TPC to seek discovery, inspection and interrogatories in proceedings seeking the imposition of a civil penalty against a corporation (para 12.28).

 

Terms of Reference

1. I, Michael Duffy, Attorney-General of Australia, having regard to:

  • the need to ensure effective compliance with the Trade Practices Act 1974 (the Act) and
  • difficulties that have been experienced in securing compliance with, and in enforcing, the consumer protection provisions of the Act; and
  • the need for quick, cost effective and fair remedies to be available for contravention of the Act;

refer to the Law Reform Commission, for inquiry and report under the Law Reform Commission Act 1973 section 6, the following matters:

  • whether there are ways of ensuring compliance with the consumer protection provisions of the Act by appropriate orders, in particular, by orders that a person cease and desist action that is or may be in contravention of those provisions;
  • whether the law adequately provides for redress for those who suffer loss or damage because of contraventions of those provisions or of orders of that kind;
  • what kinds of sanctions and penalties should be available in respect of such contraventions including:
    • what penalty options other than fines and pecuniary penalties are appropriate; and
    • what levels of penalties are appropriate to reflect the community's disapproval of actions that constitute such contraventions;
  • what provision ought to be made to ensure that those whose interests are or may be, whether directly or indirectly, prejudiced by such contraventions can have access to quick, cost effective and fair remedies, including what courts and tribunals should have jurisdiction in relation to such matters;
  • any related matter.

2. The Commission is also to report whether any of the recommendations it makes in relation to contraventions of the consumer protection provisions of the Act ought to be applied in relation to contraventions of Part IV or IVA of the Act.

3. The Commission is to consult the Trade Practices Commission, the Federal Bureau of Consumer Affairs, the Attorney-General's Department, the National Competition Policy Review, the National Consumer Affairs Advisory Council, the Law Council of Australia, national organisations representing manufacturers and producers, retailers and consumers, State and Territory consumer affairs agencies and any other person it thinks fit, having special regard to the Commonwealth's Access and Equity policy.

4. The Commission is to report as soon as possible, but no later than 30 June 1994.

Attorney-General December 1992