Product Safety Reform and the ACL Review – Blog Post

The following is a blog post by Luke Nottage and Catherine Niven. The original post can be accessed here

In 2008, as consumer confidence in Australia took a big hit from the Global Financial Crisis, the Productivity Commission published a report advising the federal Treasurer to lead a belated “re-harmonisation” of consumer protection law. The State and Territory governments agreed to enact substantive provisions mirroring those legislated by the federal Government, thus creating a uniform “Australian Consumer Law” (ACL) in force nation-wide from 2011.

This reform project was mainly “sold” as saving transaction costs for businesses domestically, but also in their dealings with overseas markets that have also been “trading up” to higher standards of consumer protection law (including now ASEAN). As such, for example, all Australian jurisdictions introduced general provisions voiding unfair contract terms along the model adopted by the European Union (EU) in 1993, following the lead of Victoria in 2003. More directly impacting on consumer product safety, the ACL added a novel reporting requirement that suppliers notify the Australian Competition and Consumer Commission (ACCC) about serious product-related accidents, introduced already in 2001 by the EU – albeit in more expansive form.

In addition, the Australian governments also agreed to review the operation of the ACL after five years. In March 2017, with little fanfare, officials in “Consumer Affairs Australia and New Zealand” (CAANZ) released a Final Report including recommendations for ACL reform. They include mixed blessings for enhancing consumer safety law.

The good news is that CAANZ first acknowledges that Australia’s current regime focuses too much on post-market controls (pp35-6). Regulators’ powers are generally triggered only after serious accidents or risks arise, through safety warning notices, bans, compulsory recalls, or by receiving notifications of voluntary recalls and the new mandatory accident reports. Consumers also have private rights to claim against direct sellers as well as manufacturers for product safety defects, but only if they can prove harm has been caused, which CAANZ concedes is difficult anyway given persistent problems of access to justice. There are also enforcement challenges created by the “trend towards direct sourcing of less expensive products from overseas by retailers of ‘fast-moving consumer goods’” (p37).

In terms of pre-market controls, the ACL allows regulators to set mandatory safety standards for certain high-risk products, but these take time and resources to develop and update. CAANZ therefore recommends following several overseas jurisdictions that add a “general safety provision” (GSP), putting the onus on traders to supply only safe products – with regulators being able to penalise non-compliance.

CAANZ refers to the GSP introduced in Canada’s Consumer Product Safety Act and another detailed in the General Product Safety Regulations 2005 in the United Kingdom. Yet the UK concept there dates back to 1987 legislation and spread throughout the EU via a 1992 Directive. It is unfortunate that CAANZ did not urge adoption of the well-established EU regime’s core features, but instead sets out “a range of design issues for further consultations”, including “the scope of the [future GSP] provision, the incentives and consequences, how risks should be allocated within the supply chain, and how the provision could meet its objectives while minimising costs for traders” (p39).

CAANZ also moots the possibility of a “safe harbour” defence to GSP violations, suggesting that if no specific mandatory standard has been enacted, “traders could choose to rely on a voluntary standard or another comparable means of compliance” (p40). This is perceived as “consistent with some overseas models like those in Malaysia and Singapore” (p41).

In fact, the GSP in section 21 of Malaysia’ Consumer Protection Act 1999 does not expressly contain such a safe harbour. Although otherwise stated in the form of the EU Directive, it does not provide for the Directive’s Article 3 presumption (not even: guarantee) of conformity available in specified circumstances. As for Singapore, its Consumer Protection (Consumer Goods Safety Requirements) Regulations 2011 adopt a unique hybrid approach, which also does not allow suppliers to choose any old voluntary or comparable standard, although it has its own questionable features. Instead, suppliers must only deal in consumer goods that comply with standards from the ISO, EU, ITO or US-based ASTM. Hopefully, the forthcoming consultation into the details of a new GSP for Australia will involve more accurate consideration of the format and operation of such provisions in our major trading partners.

The worst news from the Final Report is that CAANZ declined stakeholder calls to loosen the strict confidentiality obligations imposed on the ACCC, under ACL section 132A, when it receives mandatory accident reports. The ACCC can only share such reports with State and Territory regulators – not even sector-specific safety regulators (without consent from suppliers or the federal Minister determining that disclosure is in the public interest). Such confidentiality obligations also impede Australian regulators sharing accident report details with counterparts in other countries. Many of those (eg Japan) make mandatory reports publically available, and indeed extend their scope to serious safety risks (rather than only actual injuries and rapid-onset illnesses triggering treatment by doctors or nurses), which would have been another valuable ACL enhancement.

CAANZ instead will “continue to look for opportunities to improve information for consumers about safety risks” (p46), noting a hybrid solution in the US. There, a longstanding scheme for mandatory reports by suppliers involves confidentiality obligations for regulators. However, since 2008 after extensive toy safety failures, the US government also provides the public-access saferproducts.govwebsite, allowing product safety reports from medical practitioners, consumers and others.

Relaxed confidentiality provisions, or at least the US hybrid scheme, should be introduced promptly in Australia. Good information flows about safety risks are essential not only to the “regulatory enforcement pyramid”, but also the ACL’s private redress mechanisms that indirectly may encourage suppliers to deal in safe products. CAANZ elsewhere recognises this problem by recommending legislative clarification about what constitutes a notifiable “voluntary recall” (p42), and extra powers to force non-suppliers to disclose relevant safety information (such as a third-party product certification body: p43).
Another reason for more extensive ACL reforms concerning consumer product safety is that Australia’s hospital injury reporting schemes are inadequate, and seemingly not well integrated into ACL regulatory decision-making. CAANZ did recognise that the development of a national database of injury incidents would offer greater opportunities for regulatory decision-making, but also highlighted challenges with developing, running and funding of such a database (p95).

In fact, our collaborative academic study has commenced to demonstrate the value of using injury data recorded by health authorities to inform product safety policy and decision-making. It is the first study of its kind to compare consumer product safety regulatory data with child injury incident data to evaluate the appropriateness of government responses based on injury risks. The project will also compare the congruence of regulatory and child injury incident data in Australia with the USA to generate new knowledge about regulatory responses and product safety risks, identifying the strengths and weaknesses of the current system to focus improvements to future health and safety policy.

The investigatory team includes researchers from the Queensland University of Technology, University of Sydney, University of NSW, Flinders University and the Mater Medical Research Institute. Funding for this Discovery Project is provided by the Australian Research Council for 2017-9.