CCA-ACL Compliance: Do This Soon
It’s been several months since the Competition and Consumer Act (CCA) and Australian Consumer Law (ACL) took effect, replacing the Trade Practices Act. You followed our “do now” advice and now you’re ready for the next step.
In this post we look at three major changes introduced by the ACL that require virtually every business to introduce new or amended procedures.
Priority 1: Product Safety
Rapid disclosure is now a legal obligation.
Australia’s well-established system of mandatory and voluntary recalls, banning orders and mandatory standards is now complemented by a notification requirement in the legislation. This means that a supplier must notify “the Commonwealth minister” within 48 hours of becoming aware that a person suffered serious injury, illness or death associated with a consumer good or product-related service they supplied.
In effect, this means you notify the ACCC using an online form. But the critical issue for you, the Compliance Officer, is the process that leads to that notification.
Note that the obligation to report applies to all participants in the supply chain including retailers, installers, repairers, importers and/or exporters. Also note that the reporting “triggers” are very simple, ie:
- The goods in question are consumer goods;
- The supplier becomes aware that a person has suffered death or serious injury or illness that may have been caused by the use or foreseeable misuse of the goods
So if your business is in any way connected to consumer goods and their safety, you need to ensure that any report of death, serious injury or illness linked to those goods is properly identified and fast-tracked to a person with authority to initiate the notification. This sounds simple, but you can expect resistance along the following lines:
- It’s the importer’s problem, not ours
- It’s only the consumer’s opinion, nothing’s been proved
- It’s the user’s fault that this happened
- We can’t afford the reputational damage this will cause
Your long-term goal is to overcome that resistance, but it’s going to take time. You will find the case study materials the ACCC has provided in its Guideline useful as you work towards this change of culture. But for now, stick to the practicalities in the diagram below so you at least have a workable (and defensible) process.
The first stream of activity is a broad risk assessment, charting which ’consumer goods’ and/or services linked to those goods your business deals with in the course of its activities. The second is a review of your information channels: in essence, if there was a problem how would we be told about it? Would we recognise the issue as potentially requiring notification? If not, what do we need to change?
The last stream concerns the processes that follow the recognition of a potentially notifiable matter. Who in the organisation should have the authority to notify the Minister? Who else should be notified? [For example, a retailer who learns of an injury event would need to notify its supplier as well as the Minister.] Should our business assume the role of an agent in this process? [For example, a wholesaler might act as the notifying agent for all the retailers it had supplied, thereby relieving them of any subsequent notification responsibility.]
Once all these tasks are completed, one final step remains: setting up a testing process to ensure the procedures work. This would logically be integrated with your existing processes to test complaint referral and product recall systems. If you don’t have such processes, the ACL has given you a timely reminder of the need to develop and implement some. Do it fast.
Priority 2: Substantiation
Readiness means resilience.
If your business makes a representation promoting its goods or services the ACCC now has the power to serve a notice requiring you to supply information or documents capable of substantiating or supporting the claim. ASIC has an identical power in relation to financial services. In either case you have to comply with the notice within 21 days or face a penalty.
While there is an option to apply for an extension of time, the better course is to be prepared to meet the tight deadline that these notices impose. After all, if you are prepared to make a claim you should be prepared to prove it to your customers. So it shouldn’t take long to assemble the evidence you need to satisfy the regulators.
- If your business is retail and you make Was/Is price discount claims, you’ll need evidence in each case that the product had been offered for sale at the ‘Was’ price for an appropriate period. Do you maintain central control over pricing? If so, you will probably have evidence readily to hand; if not, you may need to establish store-based price tracking systems.
- If you supply goods and make claims about their performance you might need independent test evidence of that performance. This is especially important where there is a Standard involved (mandatory or not) and you claim to adhere to it.
Whatever the nature of your promotional claims you would be well advised to test your ability to respond to a substantiation notice with appropriate speed. A mock notice is one way to test this – you can conduct the exercise in-house or use an external provider, but the essential element is that it be taken seriously.
So in example 1, if your store network has some pricing autonomy your mock notice would be aimed at selected stores. In example 2, the focus would be on your product people (buyers or manufacturers) and the test evidence they can provide. Provided the relevant people believe that the exercise is serious and react accordingly you are well on your way to becoming responsive, ready and resilient.
Priority 3: Warranties
Prepare NOW for 2012.
- 1 mistake now, at least 3 next year
As a responsible CCA/ACL Compliance Officer you would have observed the transformation of the old statutory warranty system into a comprehensive Consumer Guarantee regime – the official ‘business guide’ is here. What you may have missed is Regulation 90; and the reason you might have missed it is that its operation has been suspended until 1 January 2012.
This Regulation sets down rules for businesses that supply warranties against defects when they supply consumer goods. From the operative date, those warranties must:
- Explain the procedures for making a claim
- Explain how to recover costs incurred in making the claim
- Include a prescribed form of words
It f0llows that an immediate compliance priority for any business that supplies consumer goods is to ensure these requirements are met by its suppliers (or in-house production facilities) NOW so that all of its inventory is compliant on 1 January 2012.
While your warranties may already meet the first and second conditions above – although a quick product survey suggests that is unlikely – they are most unlikely to meet the third, which requires the inclusion of the following statement with no variations: Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other reasonably foreseeable loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure.
While a product itself may be perfectly compliant, if a defect warranty is part of its packaging or the warranty is inside a sealed package, the process of meeting these requirements will be diificult and time-consuming. The better course would be to minimise the quantity of non-compliant goods held at year’s end, and the way to do that is to act now.
CCA-ACL Compliance: Do This Now
You are responsible for compliance in your business. It’s now two months since the Competition and Consumer Act (CCA) and Australian Consumer Law (ACL) took effect. You’ve done nothing, and you have a queasy feeling in the pit of your stomach.
Just settle down. The regulators know they can’t expect too much to happen in January, and of course you’d need to spend February coming up with a plan. But now’s the time to start executing and this is your to-do list.
The Mission
Prepare for a critical review of your compliance program.
You want to reach the point where an Australian Competition and Consumer Commission (ACCC) investigator would usually be convinced of your company’s commitment to compliance. We say ‘usually’ because even investigators have their grumpy moments.
The good news is that within a few working days you can do what simply has to be done. In this series we look at various aspects of your Marketing Compliance Program and tell you what must be done now, what should be done in the near future, and what could be done with this amazing opportunity. And there are your first two tasks:
- Recognise the opportunity
- Stop calling it a Trade Practices Compliance Program – those days are over
The Reason
A Ministerial Council on Consumer Affairs reform.
On 1 January 2011 the CCA replaced the former Trade Practices Act. It includes the ACL as a Schedule and provides for its application as State, Territory and Commonwealth legislation. The intent is to give consumers consistent rights and protections all over Australia, to simplify the law and to create a national enforcement regime.
This is the culmination of a series of reforms that have given the ACCC a wider range of powers and will, if successful, deliver better integration of State and Commonwealth enforcement efforts. But the behaviours required of business under the new laws are largely the same – in other words there are only a few substantive changes.
Your company’s compliance program is designed primarily to prevent non-compliant behaviour by your people. A secondary purpose is to prove your good intentions in the event that a breach does occur. It won’t do that if it is demonstrably obsolete: this would reflect an unsound culture with an absence of “awareness and sensitivity to the need to consider regulatory obligations as a routine incident of corporate decision-making”, to borrow the words of Justice French.
So let’s get to work. In this article we’ll focus on policies and resources. Next week’s instalment will look at critical procedures and your training/development tasks.
Your Policies and Resources
Must Do Now
This part is simple – change any reference to “Trade Practices” in your enterprise’s policy statements and in resources such as manuals. Where these exist in digital form to be accessed online, the task is easy. If you have distributed physical resources such as wallcharts, laminated DO/DON’T cards and the like you’ll need a plan – but all you have to do right now is create the plan.
The bigger issue for now is what should you change it to? The straightforward answer is ACL – but if the resource/policy in question concerns anti-competitive conduct, this would be incorrect. How about CCA? That might be OK, but does this mean you have a separate policy/resource for compliance with the SPAM Act and State/Territory trade promotions rules?
We advocate the term Marketing Compliance as a handle for all these disparate rule systems. What we advocate may not be suitable for every enterprise, and ultimately this is a matter for whoever leads the business and is accountable for compliance. But think of it this way: if you’d adopted a name like this before these reforms you wouldn’t have so much stuff to replace now.
Should Do Soon
You need to follow through on the resource replacement plan discussed above. While that’s going on you should also review the potential impact of the new rules on how you do business, and whether resources need to be created or updated to respond to the changed environment.
The key substantive changes introduced by the ACL are:
- a national law prohibiting unfair contract terms
- new consumer guarantee provisions (replacing the former statutory warranties)
- a new national regime for unsolicited consumer agreements (replacing laws on door-to-door sales and other direct marketing)
So if, for example, your business uses standard form contracts in its customer dealings you should arrange for the terms of those contracts to be reviewed and where necessary changed. The review doesn’t have to be completed tomorrow; but in the meantime you should treat any complaints about your contract terms as priority issues. The same applies to the policies and resources applicable to your direct selling practices and/or refund policies where these are part of your business activities.
Could Do – Your Opportunity to Improve
The update and review activities outlined above can be dealt with as a matter of routine. But since they involve potential changes to critical policies and key business processes, they can be seized as an opportunity to renew and refresh the engagement of the Board and senior management in the compliance program. It may be some time since marketing compliance issues have been on the Board’s agenda; here is the perfect occasion to address that.
On a more direct and practical front, there are numerous opportunities for demonstrable improvement in the areas of process-procedure and training-development. The next article in this series will talk about these, and say more about what to do right now.
To Be Continued
News news is privacy news
News Ltd’s phone hacking problems refuse to go away, with British celebrities now queuing up to find out whether their privacy rights were infringed, and demanding compensation. These high-profile cases illustrate the role private enforcement plays in the UK privacy regime, and raise again the question of whether this option should be available in Australia.
Steve Coogan picture courtesy 'The First Post' www.thefirstpost.co.uk
Quick Recap
In 2005 Buckingham Palace became concerned about journalists gaining access to voicemails belonging to Prince William, Prince Harry and others. Their concerns were well-founded and the royal reporter for Rupert Murdoch’s News of the World was jailed along with a private investigator. The newspaper’s editor, Andy Coulson, resigned while denying any knowledge or involvement. That was expected to be the end of the affair.
Over the next few years a number of celebrities – notably Sienna Miller, Jude Law and Steve Coogan – formed the view that their voicemails had also been hacked. They launched proceedings against News of the World and obtained access to materials seized in the original investigation. Publicity for these cases coincided with Mr Coulson’s reappearance in public life in the role of media adviser to the new British Prime Minister, David Cameron; he has since stepped down from that role.
It is hardly surprising that these cases have received colourful coverage in the non-News Ltd media, and given Mr Coulson’s connection to the issue it is not only the Murdoch companies that would prefer the matter to go away. A wide-ranging and very expensive settlement of the scandal has been predicted by experts including BBC business editor Robert Peston.
Australian Perspective
The ‘celebrity litigation’ aspect of this story could not have taken place in Australia because there is no individual right of privacy upon which to base an action. The Australian Law Reform Commission proposed the introduction of a statutory tort of privacy infringement in its 2008 report For Your Information – Australian Privacy Law and Practice. The government indicated that it would “consider these [second stage] recommendations once the first stage’s reforms have been progressed“.
Given that the first stage, scheduled for 2010, remains in a Senate Committee (at last report) one would not expect to see this reform implemented any time soon. But the point of this article is not to discuss changing government priorities. I want to pose a question: is this form of privatised law enforcement appropriate from a public good perspective?
To state the obvious: if the tort was in place it is unlikely that a suburban family would invoke it in response to, for example, the circulation of unflattering photos taken by a supermarket surveillance camera. The likes of Nicole Kidman or Russell Crowe would be far more likely to pursue such a remedy against an annoying paparazzo. And if successful they – like Sienna and Jude in the UK – would benefit financially from compensation and/or damages, and in more general ways from other orders that the Court might grant.
Reforms on the way
Do the sensitivities of these talented folk warrant protection, and is society generally likely to benefit from such measures? On one analysis, yes; and there is a case for implementing this reform in advance of the first stage reforms to which the government is already committed.
The first stage includes such measures as mandatory reporting of privacy breaches and the empowerment of the Privacy Commissioner to impose large monetary penalties for breaches of what will be called Uniform Privacy Principles. All worthy objectives, it’s true, but essentially symbolic unless substantial resources are committed to enforcement. A government committed to returning to surplus and facing significant expenditures arising from recent natural disasters is unlikely to supply those resources.
But an offended, cashed-up celebrity has no such constraints, and does not require the support of a conservative public prosecutor to take action. If there is a need for better privacy protection, why not create this new right of action immediately and let the market shape its initial development?
Privatising reform
It’s much the same approach as was taken to the creation of new consumer rights back in the 1970s, and yes it has its limitations – the subsequent appearance of publicly-funded consumer watchdogs demonstrates that. But it is a start, has minimal impact on the public purse, and allows a new jurisprudence to develop at the expense of offenders and/or well-resourced complainants.
Apart from anything else, it would be amusing to listen to the media proprietors squeal the very moment such a proposal was aired.
Nick Riewoldt’s compliance paradox
Rapid response is desirable, but effective response is essential.
The St Kilda Football Club Captain’s response to the recent posting of his nude image on Facebook is a classic example of an individual and his employer responding to the wrong risk. The impact of this error on his own reputation, and that of his club, is potentially catastrophic.
Story Recap
A teenage girl became known to the media and St Kilda when she complained that a player had made her pregnant. Nothing concrete came of this, but a year later the same girl – who by now had lost the baby, or babies – posted explicit photographs of Riewoldt and two teammates on her Facebook page. She claimed to have taken them herself at a Melbourne hotel and they went viral very quickly.
The club responded by obtaining an injunction – the legal basis for which seems a little dubious, but we’ll get to that another day – to prevent such publication. But the horse had bolted the stable and most folk with an interest in AFL football were aware of the story, many having seen the pictures.
Riewoldt then fronted the media to give his side of the story. The essence of it was that the teenager had not taken the photos, but that they were instead taken by a teammate, Sam Gilbert, who was one of the players involved in the girl’s original allegations. The club and Riewoldt claim that the girl stole the photos from Gilbert’s laptop during a subsequent encounter.
Reputation Damage
Leaving aside the pesky business of truth, consider the relativities: compare the reputational damage arising from each version of the story. The girl’s position is that she has been intimately involved with numerous footballers over the past year or so, and that in the course of those dealings she obtained certain photographs. After being poorly treated by the club and certain individuals she elected to release the images into the public domain for the purpose of revenge. Nasty.
The club/Riewoldt version is that within the context of a “footy trip” it is the regular practice of its key personnel, all male, to photograph one another naked and in various stages of arousal. These images are then preserved for the later enjoyment of the photographer. The teenage complainant trespassed against the photographer, Gilbert, and made off with his property, which she later sought to exploit for financial gain. Sordid and homoerotically charged.
Like most prominent footballers, Riewoldt has regularly been informed that he is a role model and part of his financial compensation arises from this status. Both he and the club, not to mention the AFL, would therefore have recognised this set of events as a crisis demanding an appropriate response. But did they respond to the right threat?
Exposed Issues
The problematic theme of the girl’s story may be placed under the general heading of “consorting with schoolgirls”. But there is nothing criminal about it because it appears that the girl was at all times over the age of consent, and the only issue that might arise would be in the event of a serious imbalance of power or abuse of trust. The girl does not seem to lack confidence, and there would seem to be more abuse involved in St Kilda’s heavy-handed reaction than the original alleged event.
The AFL in fact facilitates the regular engagement of footballers and teenage fans of both sexes at footy clinics, all of which contributes to AFL ticket sales and club branding. While parents might well be concerned about the potential sexual engagement of young players with young female fans, the girl’s tale fits within a familiar frame of reference. The club and Riewoldt would be tarnished, but a suitable penance could no doubt be designed and a recovery of reputation predicted.
And at no time has the club denied that Sam Gilbert continued to consort with the girl after the earlier pregnancy allegations – how else could she have stolen from his laptop? Let’s not forget that there would be at least some St Kilda fans who read this as a positive story for Riewoldt, in much the same way as Kevin Rudd’s strip club visit humanised him to many voters.
The club’s version has naked footballers regularly prancing about in each others’ hotel rooms, with a camera readily to hand to record the fun. Riewoldt took a view that others may share, that the photographer has a moral obligation to erase images upon the subject’s request. He claims to have made that request, and it was Gilbert’s failure to do so that warranted Riewoldt’s visible fury at the press conference. There would, however, be no lasting harm – according to Riewoldt and the club – because both footballers were and are “professional”.
Which particular version of ‘professional conduct’ involves the capture, storage and later perusal of pornographic images of one’s colleagues? Unclear, and it doesn’t matter. There are two graver concerns: the first is, unfortunately, that those colleagues are of the same gender. The truth is that a significant number of football fans are unreconstructed homophobes who will find the images challenging and the story disturbing; the damage will not be confined to St Kilda, because there is evidence of this type of behaviour in many clubs. The genie is out of the bottle now.
The second grave concern is the linkage of this set of events to the rugby-league-group-sex-scandal theme that brought down Matthew Johns and others. There was a homoerotic component to that saga too: “it’s more fun to do it with your mates”.
What does this have to do with corporate compliance? Put simply, the AFL/St Kilda behavioural template involves a “commitment to an appropriate culture”; above all, that culture must include respect for vulnerable people, including young women. When responding to the scandals that inevitably beset young folk with hormonal challenges, the league, the club and its players know they must act firmly and fast to ensure the respect message is reinforced.
Compliance Program
It’s not just possible but probable that in this case they have reacted to the wrong challenge and caused irreversible harm to player, club and code. That’s what happens when your compliance program is one-dimensional and formulaic. Individuals are not empowered to analyse and respond to complex situations; instead they are given a one-size-fits-all playbook and told to respond in an instant. Rapid response is desirable, but effective response is essential.
Compliance Cultures
Antitrust and Corruption laws – compliance and enforcement
Culture and Antitrust Legislation
The concept of agreement, central to antitrust jurisprudence, is itself a cultural artifact. The propensity of market participants to arrive at an understanding varies according to the nature of the market and the region/nation in which it is situated. Corporate compliance programs that aim to prevent anti-competitive understandings and/or agreements must recognise and respect the different social implications of these terms for specific business units.
Misuse of Power/Position
What constitutes power or its abuse in a given market is not always an economic question. The mere threat of entry to a regional Australian market has been regarded as a misuse of power, regardless of the potential entrant having no presence in that market whatsoever: ACCC v Rural Press Ltd [2001] FCA 1065. European regulators and courts have displayed an attitude to the exploitation of a market position that would not be universally held (see Microsoft proceedings in the European Court of First Instance, Case T-201/04, 17 September 2007). Corporate policymakers and advisers need to appreciate a wide range of ‘power perceptions’ in the formulation of global strategies and the implementation of global compliance programs.
Culture and Corruption Legislation
Corruption legislation concerns itself (broadly) with the flow of benefits from entities in the private sector to entities in the public sector. It is stating the obvious to assert that attitudes to this can vary within a country, let alone across international borders. This is to some extent reflected by the corruption statutes themselves, which are not always restricted to the private/public interface, and may or may not provide exceptions or exemptions that recognise local gift-giving cultures.
Local Perspectives
It would be a mistake to generalise about attitudes to gift-giving even on a regional basis. Australian State governments have regulations that differ from each other’s, and from the Commonwealth. In Qatar, it is a breach of civil service regulations for officials to receive gifts of any kind regardless of “corrupt intent”; but the Bahrain Penal Code (Decree Law No 15/1976) only prohibits the acceptance of a gift by a civil servant or officer if it is an inducement to confer favourable treatment, and gifts of modest value are customary and acceptable. Thus a broad prohibition of gift-giving, intended to ensure compliance with the Foreign Corrupt Practices Act (“FCPA”), may hamper business activities and even give the appearance of cultural imperialism. Such policies need to be thought through at the local implementation level; if not, the most likely outcome is “lip-service” compliance.
