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2002
THE PARLIAMENT OF THE COMMONWEALTH
OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TRADES
PRACTICES AMENDMENT (SMALL BUSINESS PROTECTION) BILL
2002
EXPLANATORY MEMORANDUM
(Circulated by
authority of the Minister for Small Business and Tourism,
the Honourable Joe
Hockey, MP)
TRADES PRACTICES AMENDMENT (SMALL
BUSINESS PROTECTION) BILL 2002
The Bill proposes amendments to Section 87 of the Trades Practices Act
1974 (TPA) to enable the Australian Competition and Consumer Commission
(ACCC) to bring representative actions in respect of contraventions of Sections
45D and 45E of the TPA.
The Bill has no financial impact on the Commonwealth
Budget.
REGULATION IMPACT STATEMENT
Problem:
The problems addressed by this Bill are
deficiencies in the Trade Practices Act 1974 (the TPA) compliance and
redress mechanisms and barriers to the institution of proceedings under the
TPA.
Current Situation:
At present, section 87 of the TPA
allows the Australian Consumer and Competition Commission (ACCC) to bring
representative actions in respect of contraventions of all of Part IV of the
TPA, except for sections 45D and 45E.
Objective:
The
objective of the proposed amendments is to improve the enforcement aspects of
the regulatory regime contained within the TPA and address the shortcomings in
present legal remedies to encourage compliance with the obligations under the
TPA.
Options:
Option 1 – No
Action
This option would involve a series of legislative amendments to be made
to the TPA to address the identified problems.
Impact analysis (costs
and benefits) of each of the options:
Option
1 – No action
The Australian Law Reform Commission (ALRC) in Australian Law
Reform Commission Report No 68: Compliance with the Trade Practices Act
1974 (1994), documented that business (particularly small business) and
consumers are unable to access appropriate legal remedies under the TPA. The
ALRC noted that the cost of bringing proceedings was a substantial impediment to
bringing an action.
If no action is taken, the difficulties associated
with accessing legal remedies under the TPA will remain. Where the TPA has been
contravened and private individuals are unable to commence their own legal
proceedings (and thereby punish contravening parties for their misconduct), the
ACCC will be required to carry a greater share of the enforcement burden and
associated costs. Maintenance of the status quo will mean that businesses
(particularly small business) and consumers will continue to be denied the
protection purported to be offered by the TPA and hence will bear the costs of
the loss or damage produced by the unlawful conduct. This may be particularly
costly for small businesses wishing to compete with businesses that successfully
gain market share through unlawful conduct. The flow-on from this is the
creation of inefficient and uncompetitive markets, which will produce a negative
result for the community generally.
Amendments would be made to section 87 of the TPA to allow the ACCC to
bring actions for compensation or a representative action in respect of
contraventions of sections 45D and 45E of the TPA.
The general problem
of access to legal remedies under the TPA would be addressed by ensuring that
the ACCC has clear powers to enable it to bring representative proceedings on
behalf of businesses and consumers.
Consumers and businesses that are
presently unable to recover compensation for their loss would benefit from
improved access to legal remedies. This correction of market processes will
produce a more competitive environment for business and hence enhance the
welfare of the community.
Consultation:
The proposed
measures have been subject to broad consultation. The amendments were
originally contained within the Australian Law Reform Commission Discussion
Paper 56: Compliance with the Trade Practices Act 1974. The submissions to
this Paper were considered and a position developed and documented in the
Australian Law Reform Commission Report No 68: Compliance with the Trade
Practices Act 1974.
The ALRC consulted with peak business
organisations, consumer groups, the judiciary, government departments,
enforcement agencies and academia.
The former Minister for Customs and
Consumer Affairs, the Hon Chris Ellison MP released the Legislative Outline:
Amendments to the Trade Practices Act 1974: A Better Deal for Consumers and
Small Business in September 1997. This discussion paper drew on the
recommendations for reform made by the ALRC. The public submissions expressed
general support for the legislative amendments proposed under Option
2.
The proposed measures were also considered by the Joint Select
Committee on the Retailing Sector, in its August 1999 report, Fair Market or
Market Failure? The Committee consulted with peak business organisations,
enforcement agencies and government departments.
Treasury, the
Attorney-General's Department, the Department of Prime Minister and Cabinet, the
then Department of Industry, Science and Resources, the Department of Transport
and Regional Services, the Department of Finance and Administration and the
Australian Competition and Consumer Commission were consulted when the proposed
amendments were brought forward as part of the Workplace Relations and Other
Legislation Amendment (Small Business and Other Measures) Bill
2001.
Treasury, the Department of Prime Minister and Cabinet and the
Department of Employment and Workplace Relations have been
consulted.
Conclusion and recommended option:
The preferred
option is to amend the TPA to allow the ACCC to bring representative actions in
respect of contraventions of sections 45D and 45E of the TPA.
If there is
no action, then the current problems of business (particularly small business)
and consumers being unable to access appropriate legal remedies under the TPA
will continue.
Implementation and review:
Implementation of
the preferred option will occur through this Bill. The Government has informed
the public of the intention to amend the TPA in the media.
As the TPA has
fundamental effects on the business environment and establishes the parameters
within which Australian business operates, it is subject to continuing
evaluation and assessment by the Treasury to ensure its continued
effectiveness.
This is a formal provision specifying the short title of the Act.
Clause 2 specifies that Act is to commence on the day on which it
receives Royal Assent.
Clause 3 specifies that the Trade Practices Act 1974 is amended as
set out in the Schedule.
Item 1 – Paragraph 87(1A)(b)
This item would remove the words “(other than section 45D or 45E)” from Paragraph 87(1A)(b) of the Trade Practices Act 1974 (TPA). The effect of this change would be to enable the Australian Consumer and Competition Commission (ACCC) to seek orders from the Federal Court on behalf of one or more persons who have suffered, or are likely to suffer, loss or damage by conduct of another person where the conduct engaged in is in contravention of sections 45D or 45E.
This change would remove the current limitation, where the ACCC is able to seek such orders for all of Part IV of the TPA other than sections 45D or 45E.
Item 2 – Paragraph 87(1B)(a)
This item would remove the words “(other than section 45D or 45E)” from Paragraph 87(1B)(a) of the Act, which prescribes the conditions the ACCC must satisfy before they may commence a representative action on behalf of a person or persons who have suffered loss or damage, or likely to suffer loss or damage, as a result of conduct in contravention of the TPA.
This change would allow the ACCC to initiate representative actions in respect of breaches of sections 45D and 45E. The ACCC may currently initiate such representative actions for all of Part IV of the TPA, other than sections 45D and 45E.
Item 3 – Application
Item 3 makes it clear that the ACCC may only bring actions for compensation or representative actions for contraventions of Sections 45D and 45E in relation to conduct that occurred on or after the commencement of the amendment.