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Focus: Standards, bans and notices

26 August 2010

In brief: The product safety provisions of the new Australian Consumer Law create a national regulatory framework to be administered jointly by the Australian Competition & Consumer Commission and by state and territory regulators. Partner Annette Hughes , Senior Associate Ric Morgan and Lawyer Stuti Sethi outline the new regime for safety standards and permanent bans, which involves a transfer of power to the Commonwealth and allows safety standards, bans and warning notices to be imposed on product-related services, as well as consumer goods.

This is the third in a series of Focus articles examining in further detail the new Australian Consumer Law and its effect on product liability in Australia. The last two articles will address consumer guarantees and the new compulsory reporting requirements for product risks and their interaction with similar overseas systems.

How does it affect you?

  • The new regime has a broader application than the existing product safety regime under the Trade Practices Act 1974 (Cth) (the TPA). In particular:
  • safety standards can apply to 'product related services' such as installation, maintenance and delivery;
  • the use or misuse of consumer goods or services needs to be considered in evaluating the application of, and compliance with, safety standards and safety warning notices where the use or misuse is reasonably foreseeable; and
  • it will be an offence to manufacture, possess or control consumer goods that do not comply with safety standards and interim or permanent bans.

Background

This article is part of a series addressing the changes to the product safety and liability regime under the Trade Practices Amendment (Australian Consumer Law) Act No. 2 2010 (Cth) (the ACL2) and addresses:

  • safety standards;
  • bans on consumer goods and product-related services;
  • safety warning notices; and
  • information standards.

These changes are part of a move to centralise the administration and operation of product safety regulation, with a national framework to be administered jointly by the Australian Competition & Consumer Commission (the ACCC) and by state and territory regulators.

Importantly, while the new regime is similar to the current TPA requirements, it now applies to 'product related services'. While this specifically includes services such as installation, maintenance, repair, cleaning, assembly and delivery of consumer goods, it can include 'any other services related to the supply of consumer goods'.

As part of the new centralised approach, standards, bans and notices made by the Commonwealth take precedence over any similar notices at a state or territory level. All notices will be published on the Internet rather than in the Gazette by the Minister. This appears to be aimed at making such notices more publicly visible. It also seems likely that notices related to product safety will be posted on the Product Safety Australia website as well.

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Safety standards

While new safety standards are similar to the existing TPA requirements, the following changes should be noted:

  • safety standards will only be made by the Commonwealth Minister and can be made whenever reasonably necessary to prevent or reduce risk of injury to any person; and
  • safety standards can made in relation to 'product related services' regulating how services provided with consumer goods must be provided.

The new regime continues the prohibition on supply and offering to supply goods that do not comply with relevant safety standards and makes it an offence to manufacture, possess or have control of such goods (for the purpose of supplying the goods in Australia). This imposes an obligation on everyone in the supply chain.

Similarly, the new regime makes it an offence to supply or offer to supply product-related services that do not comply with safety standards.

While these offences are strict liability offences, subject to a maximum penalty of $1.1 million for bodies corporate and $220,000 for others, the ACCC may seek other remedies, such as injunctions, damages, compensatory orders, pecuniary penalties, non-punitive orders and adverse publicity orders, disqualification orders, redress for non-parties and public warning notices.

Where a safety standard specifies more than one method of compliance, or where more than one standard could apply and the requirements are contradictory, suppliers can be required to nominate the standard or compliance method that applies to their product.

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Bans on consumer goods and product-related services

Bans can be imposed on consumer goods and product-related services by state and territory Ministers in their respective jurisdictions and by the Commonwealth Minister in all states and territories.

As with safety standards, it is an offence to supply or offer to supply, export, manufacture, possess or control goods or services that are subject to interim or permanent bans, with the penalties and alternative remedies available to the ACCC remaining the same.

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Interim bans

While interim bans have been part of product safety regulation for some time, the circumstances in which such bans can be imposed have been expanded. Under the new regime, an interim ban can be imposed not only where it appears that the good or service may or will cause injury to any person but where a 'reasonably foreseeable use (including a misuse)' of consumer goods may or will cause injury to any person.

The term 'reasonably foreseeable use' is not defined in the legislation; however, the explanatory materials suggest that the pre-existing use in some states and territories and the use of 'reasonable foreseeability' in negligence cases should guide the interpretation.

Interim bans can be imposed for a period of 60 days by the relevant state or territory Minister, and can be extended for a further 30 days. The Commonwealth Minister can further extend an interim ban for 30 days.

Unless the Commonwealth Minister forms the view that consumer goods or product-related services create an imminent risk of death, serious illness or serious injury, there is a compulsory conference procedure before a ban can be imposed. Even where there is such a risk, a conference must be held, but is required after the ban has been issued. We note that these consultations are conducted in public and may result in damage to the reputation of a product, brand or company even if they result in no ban or the removal of an interim ban. The requirements for conferences mirror the current provisions but notices of such conferences will now be published on the Internet, increasing the risk of reputational damages.

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Permanent bans

Permanent bans on consumer goods and product-related services can be imposed only by the Commonwealth Minister, where:

  • an interim ban is already in force; or
  • it appears to the Minister that the consumer good, or a reasonably foreseeable use (including a misuse) of the consumer good, will or may cause injury; or
  • the result of supplying a product-related service, or a reasonably foreseeable use (including a misuse) of consumer goods to which such services relate, may or will cause injury.

As with interim bans, a conference procedure must be followed before a permanent ban is imposed.

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Safety warning notices

Any state, territory or Commonwealth Minister can publish written safety warning notices that state that goods or services are under investigation to determine whether:

  • the goods, or a reasonably foreseeable use (including misuse) of the consumer goods, will or may cause injury to any person; or
  • the service, or a reasonably foreseeable use (including a misuse) of the goods to which such services relate, may or will cause injury.

The notice can include warnings of possible risks involved in the use of the goods or services. Such notices will be published on the Internet and it is possible that corporations will suffer reputational damage before the investigation is concluded. Corporations must be diligent in managing communications regarding their products to manage the risk of this damage.

As soon as practicable following the investigation, the investigating Minister must either issue a ban, require a recall or announce the results of the investigation.

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Information standards

The Commonwealth Minister can make standards that require the provision of certain information about goods and services such as the expiry date and content information for goods and services that are intended to be used in Australia.

The failure to comply with the relevant information standards is a strict liability offence with a maximum penalty of $1.1 million for bodies corporate and $220,000 for others who are not bodies corporate. Again the ACCC can seek other remedies, such as injunctions, damages, compensatory orders, pecuniary penalties, non-punitive orders, adverse publicity orders, disqualification orders, redress for non-parties or issue public warning notices.

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Conclusion and recommendations

While the ACL2 introduces a new regime for product safety standards, bans, information standards and safety warnings, these largely reflect the existing arrangements under the TPA. However the new regime has a broader application than the existing one. In particular:

  • safety standards can apply to 'product-related services' such as installation, maintenance and delivery;
  • the use or misuse of consumer goods or services needs to be considered in evaluating the application of, and compliance with, safety standards and safety warning notices where the use or misuse is reasonably foreseeable; and
  • it will be an offence to manufacture, possess or control consumer goods that do not comply with safety standards and interim or permanent bans.

In addition, the way in which product safety concerns can be addressed by the relevant regulators is likely to result in a broader dissemination of information about safety concerns. It is also possible for this to occur prior to any consultation with the manufacturer or distributor. This is likely to increase the risk of reputational damage.

This means that suppliers need to manage communications about product safety issues proactively and act early to address product safety issues or risk losing control of the message.

For further information, please contact:

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