Australian government moves to ban unfair trading practices
18 November 2024
What you need to know
- Following the Australian government's announcement that it intends to prohibit "unfair trading practices", Treasury has released a consultation paper on the design of the prohibitions.
- The consultation paper proposes both general and specific prohibitions be introduced. The proposed prohibitions are at varying stages of development.
- The general prohibition would cover a business's conduct where it unreasonably distorts or manipulates (or is likely to unreasonably distort or manipulate) the economic decision-making or behaviour of a consumer, and causes or is likely to cause detriment. This prohibition is intended to provide a "safety net" that can capture emerging and evolving practices, including "dark patterns".
- The specific prohibitions would cover subscription-related practices, drip pricing, dynamic pricing, online account requirements and barriers to accessing customer support.
- The current proposal is that the general prohibition would apply initially to business-to-consumer transactions, but may be extended to business-to-business transactions in the future. The consultation paper does not make clear when penalties would apply to the general prohibition (i.e. from the outset or after a two year transitional period).
- The consultation paper suggests that the specific prohibition on subscription traps would apply to business-to-business transactions (as well as business-to-consumer), from the outset, with penalties also to apply from the time the prohibition commences.
- The consultation paper requests feedback on whether the other specific protections should also apply in business-to-business dealings.
What you need to do
- Review the consultation paper and consider making a submission to Treasury by 13 December 2024.
- Consider whether your business engages in any of the types of conduct that could be classified as "unfair trading practices" and take proactive steps, where appropriate.
In October 2024, the Australian government announced that it intends to legislate to prohibit "unfair trading practices". "Unfair trading practices" is used to describe a variety of conduct that is capable of causing harm, but which may fall within grey areas or gaps in the Australian Consumer Law.
Examples of unfair trading practices cited by the government include conduct that distorts consumer choice, without necessarily being misleading or deceptive, such as practices that create an undue sense of urgency or scarcity; subscription related practices, including practices that make it difficult for consumers to cancel a subscription; pricing-related practices, including drip pricing, dynamic pricing and hidden fees; and certain post-sale practices, including imposing unreasonable barriers to accessing customer support.
Other jurisdictions such as the United Kingdom, the European Union and the United States have a general ban or prohibition on unfair trading practices and have introduced specific regulations targeting unfair commercial conduct.
On 15 November Treasury released a consultation paper on the design of the the unfair trading practices prohibition or prohibitions for Australia.
Previous consultation
This consultation builds on a previous one in 2023, which addressed the prior question of whether Australia "needed" a prohibition on unfair practices.
Current consultation
The consultation paper proposes that Australia would introduce both general and specific prohibitions on unfair trading practices. This approach attracted the most support from stakeholders who responded to the previous consultation.
General prohibition
The previous consultation identified concerns in relation to conduct known as "dark patterns". "Dark patterns" refer to a range of mostly design-related elements used in consumer interfaces (e.g. websites and apps) and choice architecture that distort, impair, subvert, or otherwise manipulate consumer decisions and actions, undermining consumer autonomy.
In order to address dark patterns and other harmful conduct not captured by the specific prohibitions outlined below, the consultation paper proposes to introduce a general prohibition on unfair trading practices. The general prohibition would have the flexibility to capture new practices as they emerge.
The general prohibition would capture a business's conduct where it:
- unreasonably distorts or manipulates, or is likely to unreasonably distort or manipulate, the economic decision-making or behaviour of a consumer, and
- causes, or is likely to cause, material detriment (financial or otherwise) to the consumer.
As an alternative to the requirement for "unreasonableness", the consultation paper raises the possibility of adding a further limb, which would examine the legitimate interest of the business. Specific language is not suggested for this alternative, but it may operate similarly to the current unfair contract terms provisions.
It is proposed that the ACL specify a non-exhaustive list of examples of conduct (a ‘grey list’) which may, depending on the circumstances, meet the above test. It is proposed the list include the following examples:
- the omission of material information;
- the provision of material information to a consumer in an unclear, unintelligible, ambiguous or untimely manner, including the provision of information in a manner that overwhelms, or is likely to overwhelm, a consumer;
- impeding the ability of a consumer to exercise their contractual or other legal rights (for example, requiring a consumer to provide irrelevant information to access a benefit they are entitled to or not providing a reasonably accessible contact point for customer service or complaints); or
- use of design elements in online consumer interfaces that unduly pressure, obstruct or undermine a consumer in making an economic decision (i.e. dark patterns).
The consultation paper invites stakeholders to consider whether any dark patterns of concern fall outside the scope of the proposed general prohibition.
Specific prohibitions
The consultation paper notes that the government is considering enacting specific prohibitions in addition to the general unfair trading practices prohibition. The paper considers five types of problematic conduct that could be addressed by the introduction of specific prohibitions, or in some cases, by reform to existing provisions of the ACL.
(1) Subscription-related practices
The previous consultation identified a number of subscription-related practices which can cause consumer harm. These included businesses not providing customers with the material information they need to make informed decisions about a subscription; practices that make it difficult for customers to cancel their subscription; and subscriptions that quietly renew or automatically rollover from a free trial or promotional period to a paid or full price subscription.
Of the various specific prohibitions contemplated in the paper, subscription-related practices is the most developed. The paper considers four options in relation to unfair subscription-related practices, several of which may be combined to form a multi-pronged specific prohibition. Unlike the general prohibition, the consultation paper proposes this prohibition would apply to business-to-business transactions, as well as business-to-consumer.
The detailed options proposed are:
(i) Pre-sale disclosure of material information: introduce a requirement that businesses clearly disclose to a customer certain material information about a subscription contract prior to signing up the customer to the subscription, including the length of the contract, how charging works and the total minimum cost.
(ii) Notification requirements: introduce a requirement that businesses notify customers before the end of any contract period if the contract will automatically renew; before the end of a free trial if it will convert to an ongoing subscription unless cancelled; and when issuing a receipt for each subscription payment, provide an option to cancel or modify that is as easy as signing up. Businesses could also be required to set out specific information in a notification, including e.g. how much the customer has spent on the subscription to date, the date and amount of the next payment, and instructions for how to cancel.
(iii) Opt-in requirement: introduce a requirement that businesses seek an active ‘opt in’ from a customer before the end of a free trial or introductory offer period, in order to sign up to an ongoing subscription.
(iv) Removing barriers to cancelling a subscription: introduce a requirement that businesses make the process for terminating a subscription as straightforward and easy as the process for subscribing to it.
(2) Drip pricing
Drip pricing is when a price is advertised at the beginning of an online purchase, but then extra fees and charges are gradually added during the purchasing process. This can result in consumers paying more than initially expected and can impair consumer comparisons between competing products. Specific concerns were raised in the previous consultation in relation to drip pricing practices in the context of accommodation bookings, airline and event ticketing. Drip pricing is also sometimes combined with pressure-based tactics such as countdown timers and warnings about lack of supply, in order to create a sense of urgency.
The paper seeks feedback on the adequacy of the existing prohibitions in the ACL (including misleading or deceptive conduct, false or misleading representations as to price and single figure pricing) in addressing drip pricing practices. The paper does not propose a specific formulation of a new prohibition on drip pricing.
(3) Dynamic pricing
"Dynamic pricing" refers to a practice where the price of a product or service that was presented upfront to the consumer increases during the purchasing process (for example, when in a queue to purchase concert tickets). Dynamic pricing practices are sometimes paired with other tactics that exert pressure on consumers, such as timeout counters and scarcity notifications.
The paper seeks feedback on whether this practice is adequately addressed by existing provisions of the ACL (including bait advertising, misleading and deceptive conduct or false or misleading representations as to price), or whether the use of dynamic pricing should be prohibited for example, by introducing a specific prohibition on businesses increasing the price of a product during the purchasing process.
(4) Online account requirements
Some online retailers may provide consumers with the option to make an online purchase as a ‘guest’, while others require a consumer to set up an account (with login) and providing personal information is a prerequisite for making a purchase. This can result in consumers being required to disclose more personal information than is reasonably necessary in order to purchase the product or service, and being signed up to receive marketing materials they do not want.
The paper seeks feedback on whether reform to the ACL is needed to address issues relating to mandatory account creation for online purchases. Options to address this practice could involve requiring retailers to provide a ‘guest’ check out option.
(5) Barriers to accessing customer support
Responses to the previous consultation raised concerns about post-sale practices employed by businesses which seek to impede consumer access to customer support when they have a problem with a good or service. The government is separately consulting on proposed penalties for businesses that fail to comply with consumer guarantee requirements, but there is no obligation on a business to provide a point of contact for general customer support.
The paper seeks feedback on whether a general prohibition on unfair trading practices would be sufficient to address consumer harm arising from this conduct and if not, how could a specific prohibition be designed.
Business to business dealings
In relation to the general prohibition on unfair trading practices, the consultation paper proposes that it be introduced in a staged approach. It would apply initially to business-to-consumer dealings, before potentially being extended to business-to-business dealings at a later date.
In contrast, as noted above, the prohibition on subscription-related practices is intended to apply to business-to-business transactions, as well as consumer-to-business transactions from its introduction. Whether any of the other specific protections would also apply in business-to-business dealings will be considered on a case-by-case basis and the paper requests feedback on this question.
Remedies for general and specific prohibitions
There is no specific proposal on remedies for contravention of the general prohibition. The paper seeks feedback on how penalties should apply to a breach of the general prohibition, the maximum penalties a court should be able to impose, and the most appropriate approach for implementing any penalty regime (i.e. whether penalties should apply immediately or only after a two year transition period).
Regarding the specific prohibition of unfair subscription-related practices, it is proposed that civil pecuniary penalties commence at the same time as the prohibition commences and that the full range of remedies under the ACL should be applicable to this prohibition. However, the paper seeks feedback on this point, and on the appropriate maximum civil penalty that a court should be able to impose for this conduct.
The consultation paper is more circumspect in relation to remedies that would apply to the other specific prohibitions, most likely as they are currently less developed than the proposal on subscription-practices.
ASIC Act
Once options to amend the ACL have been considered and agreed in consultation with States and Territories, the government will consider what changes are required to the ASIC Act to ensure appropriate alignment across the ACL and financial services laws.
Next steps
Consultation concludes on 13 December 2024.
