The Australian Government is undertaking a significant expansion of its consumer protection framework by proposing a general prohibition on unfair trading practices, extending these protections beyond consumers to include small businesses. This initiative aims to address a perceived "gap" in the existing Australian Consumer Law (ACL) and is a crucial development for all businesses operating in Australia.

Is there a need for change?

The proposed changes are being driven by concerns that the ACL does not presently offer adequate protections for a range of unfair trading practices that cause harm to consumers and small businesses. In particular, proponents argue that the current ACL, while providing general prohibitions against misleading or deceptive conduct, unfair contract terms, and unconscionable conduct, as well as specific prohibitions for certain practices, is seen as insufficient to address newer, emerging forms of misconduct. This is particularly true in the context of increasing complexity and sophistication of online marketplaces and associated technologies.

The ACCC has identified several unfair trading practices that cause, or are likely to cause, consumer harm - many of which it believes are not covered by current ACL protections. These include practices that: 

• Distort or manipulate consumer choice without necessarily being misleading or deceptive, such as those creating an undue sense of urgency or scarcity.
• Are subscription-related, making it difficult for consumers to cancel services or leading to automatic rollovers from free trials. In the 2023 Australian Consumer Survey, 25% of respondents reported difficulty cancelling subscriptions, and 23% were automatically subscribed to paid services after free trials.
• Involve pricing-related practices like drip pricing (where extra fees are added gradually online) and dynamic pricing (where prices increase during the purchasing process) and hidden fees.
• Involve post-sale practices that impose unreasonable barriers to accessing customer support.
• Utilise 'dark patterns' (deceptive design elements in user interfaces) that manipulate consumer decisions, often exploiting behavioural biases or information asymmetry. These can include complex menus, pre-selected checkboxes, and tactics that exert unreasonable pressure like countdown timers. 

Small businesses frequently experience similar challenges to consumers due to power imbalances when dealing with larger and more prominent businesses. Concerns reported to the Government by stakeholders, including the Australian Small Business and Family Enterprise Ombudsman, NSW Farmers, NSW Small Business Commissioner, and the Queensland Small Business Commissioner, include: 

• Bargaining power imbalances.
• Lack of resources and time to challenge larger businesses in court.
• Commercial tactics by large businesses that discourage small businesses from exercising legal rights.
• Retailers threatening to de-list suppliers who seek contractually entitled price increases.

The ACCC reports that unfair practices by large supermarkets have caused substantial harm to primary producers like dairy and chicken farmers. The NSW Small Business Commissioner has also received numerous reports from small businesses facing significant challenges in cancelling subscriptions or being adversely affected by automatic renewals, and encountering inadequate customer support from digital platforms, leading to potential revenue losses.

What changes are being considered?

The Government is proposing to amend the ACL by introducing both a general prohibition and specific prohibitions on unfair trading practices.

General Prohibition on Unfair Trading Practices:

The general prohibition will be a principles-based prohibition designed to be flexible enough to address current and emerging problematic conduct that falls into the gaps of the current ACL. It is proposed to capture conduct where a business unreasonably distorts or manipulates, or is likely to unreasonably distort or manipulate, the economic decision-making or behaviour of a consumer (and now a small business), and causes, or is likely to cause, material detriment (financial or otherwise) to them.

A "grey list" of non-exhaustive examples will accompany the general prohibition to provide guidance for businesses and regulators. These examples include: 

• The omission of material information.
• Providing material information in an unclear, unintelligible, ambiguous, or untimely manner, or in a way that overwhelms consumers.
• Impeding a consumer's ability to exercise their contractual or other legal rights.
• Using design elements in online consumer interfaces (dark patterns) that unduly pressure, obstruct, or undermine a consumer's economic decision.

Specific Prohibitions: 

The Government is also considering enacting specific prohibitions for identified problematic conduct:

• Options include requiring clear pre-sale disclosure of material information, mandating notifications before automatic renewals or after free trials, introducing an active 'opt-in' requirement for ongoing subscriptions, and critically, ensuring that the process for cancelling a subscription is as straightforward and easy as subscribing.
• Feedback is sought on whether existing ACL provisions are adequate, with consideration for requiring upfront disclosure of 'per transaction' fees.
• The Government is considering prohibiting practices where the price of a product or service increases during the purchasing process.
• Reform may involve requiring retailers to provide a 'guest' checkout option to prevent the unnecessary collection of personal information during online purchases.

Do the proposed changes go far enough or too far?