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Should Australia Introduce a Prohibition on Unfair Trading? Responding to Exploitative Business Systems in Person and Online

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Abstract

Australian consumer protection law contains broad and flexible prohibitions on misleading and unconscionable conduct in trade or commerce. Yet concerns have been raised that these prohibitions are unsuitable for responding to predatory business systems. These are businesses that, by design or operation, target consumers experiencing vulnerability to offer costly products ill-suited to their needs. This concern has arisen in response to prominent instances of products of dubious efficacy offered to marginalized communities. It has also arisen from concerns over the increasing potential for data-driven digital marketing to manipulate consumer choice by targeting with fine-grained accuracy consumer vulnerabilities. In response to these concerns, it has been suggested that the Australian Consumer Law should be reformed, by introducing a prohibition on “unfair trading” inspired by the general prohibitions on such conduct in the EU and USA. This paper explores the key considerations relevant in assessing the merits of this proposed statutory “transplant.” Ultimately, the paper is supportive of the proposed reform, while also recognizing its limits.

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Notes

  1. Until 2018, the protection in Section 21 did not apply a listed public company, and hence, Section 20 was applicable in this context. This restriction on the scope of Section 21 was removed by the Treasury Laws Amendment (Australian Consumer Law Review) Act 2018.

  2. An equivalent prohibition applying to financial services exists in the Australian Securities and Investment Commission Act 2009 (Cth) Section 12CB.

  3. Both of these principles had also been recognized in earlier decisions of the courts (Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) (National Exchange), p. 140 [30]).

  4. See also on this approach: Director of Consumer Affairs Victoria v Scully (2013), p. 183 [48]; Perpetual Trustee Company Ltd v Khoshaba 2006; Tonto Home Loans Australia Pty Ltd v Tavares 2011.

  5. Mr. Kobelt was successfully prosecuted for breaches of Section 29(1) of the National Consumer Credit Protection Act 2009 (Cth), which prohibits a person from engaging in a “credit activity” if they do not have a licence authorizing them to engage in that activity.

  6. Receipts from Mr. Kobelt’s withdrawals would be stored in plastic bags until full, usually discarded after two to three months. Mr. Kobelt kept a diary in relation to book-up transactions, but its entries were difficult even for the Court’s forensic accountant to understand: Kobelt (2019), at [31]).

  7. Besanko and Gilmour JJ and Wigney J.

  8. Kiefel CJ and Bell J; Gageler J and Keane J agreeing; Nettle and Gordon JJ dissenting; Edelman J dissenting.

  9. In addition, the majority considered that Mr. Kobelt’s book-up system provided a response to the problems of “humbugging” and “demand sharing,” in indigenous communities (Kobelt (2019), [69]). See further Yates and Sharman (2019).

  10. See above n 4.

  11. See also Australian Competition and Consumer Commission v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Limited) [2015] FCA 368 (unconscionable system of conduct in addressing erectile dysfunction).

  12. Compare the similar description in Paciocco (2015) at 274 [296], discussed above.

  13. Notably, in the EU, the view has been expressed that some solely automated targeted advertising may be prohibited under article 22 of the General Data Protection Regulation: see Data Protection Working Party, Guidelines on Automated Individual Decision-Making and Profiling for the Purposes of Regualtion 2016/679, 17/En. Wp251rev.01 (Feb. 6, 2018).

  14. This power has been used in response to harmful privacy practices, see Jessica Rich (Director, Bureau of Consumer Protection FTC), “Built to last: Section 5 and the changing marketplace,” speech delivered at Section 5 Symposium Washington, D.C., February 26, 2015 discussing Craig Brittain, File No. 132-3120 (F.T.C. January 29, 2015) (proposed consent), available at http://www.ftc.gov/enforcement/cases-proceedings/132-3120/craig-brittain-matter and FTC v. Sitesearch Corp. d/b/a LeapLab (D. Az. filed Dec. 23, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/142-3192/sitesearch-corporation-doing-business-leaplab.

  15. It should be noted that the application of this regime to data collection notices is not straightforward in Australia as some such provisions may not be “contracts” to which the regime can apply (see Clifford and Paterson 2020). A reform to extend the regime of unfair terms to notices as has occurred in the United Kingdom may also be warranted in Australia: see Consumer Rights Act 2015 (c 15) (UK) Section 61(4).

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    Authors and Affiliations

    1. Melbourne Law School, The University of Melbourne, Melbourne, Australia

      J. M. Paterson

    2. Law School, University of Western Australia, Perth, Australia

      E. Bant

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    Correspondence to J. M. Paterson.

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    This article is part of an Australian Research Council funded project DP180100932 on coherence in the general prohibition on misleading conduct in the Australian Consumer Law. Research assistance provided by Yi Tung and Calvin Collins, JD Candidates, Melbourne Law School. Errors are our own.

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    Paterson, J., Bant, E. Should Australia Introduce a Prohibition on Unfair Trading? Responding to Exploitative Business Systems in Person and Online. J Consum Policy 44, 1–19 (2021). https://doi.org/10.1007/s10603-020-09467-9

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