Australian Regulatory Compliance Review

Australian Consumer Law stage 2

The Ministerial Council on Consumer Affairs (MCCA) has agreed to the final form of the Australian Consumer Law which will take full effect on 1 January 2011. It will introduce a single, national law for fair trading and consumer protection, which applies equally in all Australian jurisdictions, to all sectors of the economy and to all Australian consumers and businesses. The Commonwealth Government intends to introduce a Bill in early 2010.

The Australian Consumer Law will be based on the existing consumer provisions of the Trade Practices Act 1974, but will include:

• a new national unfair contract terms law, which is currently being considered by the Australian Parliament;
• a new national product safety legislative and regulatory framework;
• a new national consumer guarantees law, which will replace the provisions in 15 existing national, state and territory laws about implied warranties and conditions in consumer contracts for goods and services; and
• reforms drawing on best practice in state and territory laws.

Product Safety

MCCA agreed that the new national product safety law will:

• include a reporting requirement for suppliers to notify the appropriate product safety regulator when it becomes aware of consumer goods it has supplied that have been associated with a serious injury or death;
• apply the national product safety requirements to services related to the supply, installation or maintenance of consumer products;
• apply a threshold for product bans and product recalls to include goods which, through reasonably foreseeable use, will or may cause injury to any person; and
• allow product safety regulators to undertake a product recall where no supplier can be found to conduct the recall.

Consumer rights

There will be a single national law guaranteeing consumer rights in relation to their acquisition of goods and services. They will be based on existing implied conditions and warranties, which will be simplified and streamlined.

Other changes include:

• a single national law covering unsolicited sales practices, including door-to-door selling, telephone sales (to the extent not already covered by the Do Not Call Register Act 2006) and other forms of direct selling which do not take place in a retail context.
• fundamental rules for lay-by sales transactions.
• when a business promises to give a consumer a gift or a prize, they should be supplied to the consumer as described and within a reasonable time of the promise being made.
• goods with multiple prices displayed should be sold at the lowest displayed price unless the seller chooses to withdraw them from sale.
• false or misleading testimonials about goods and services are specifically prohibited.
• demanding payment for unsolicited advertisements is prohibited and, in this regard, any document seeking payment for unsolicited goods, services, advertisements or directory entries shall include a statement that it is not a bill payable by the consumer. The Australian Consumer Law will also clarify that a consumer is not liable for unsolicited services.
• Under the Australian Consumer Law, there will be a single national power for the making of information standards about goods or services.
• The Australian Consumer Law will entitle consumers to receive a receipt for goods or services supplied above a certain value where businesses are not already required to give a tax invoice to a consumer under the GST law. The requirements will be consistent with those already in place in the GST law.
• The Australian Consumer Law will also entitle consumers to request an itemised bill for services.

Citigroup responds to ASIC consumer credit insurance concerns

Citigroup Pty Ltd (‘Citigroup’) has responded to ASIC concerns that some telephone sales of consumer credit insurance products between August 2008 and January 2009 may have been misleading, or likely to mislead consumers.

Citigroup received complaints from customers about the sale and promotion of its consumer credit insurance products known as ‘CreditShield’ and ‘CreditShield Plus’ (together known as ‘Creditshield’). Citigroup was selling Creditshield during calls placed by cardholders to activate new or replacement credit cards (‘activation calls’).

Of the total complaints Citigroup received, 174 cardholders complained about selling practices. In addition, a large number of cardholders cancelled their Creditshield policies during this period.

ASIC reviewed randomly selected recordings of direct marketing calls selected from Citigroup’s complaints register.

ASIC’s review of the activation calls revealed the following issues:

• The sale of Creditshield to cardholders who had not agreed to purchase it
• The use of potentially misleading or ambiguous phrases by Citigroup during the activation calls
• Telephone operators persisting with selling Creditshield to callers, despite the cardholder saying ‘No’ more than once – on some occasions in calls reviewed by ASIC, the cardholder said ‘No’ on three or more occasions.
• The practice of telephone operators to keep cardholders ‘captive’ on the telephone call by waiting to tell cardholders that their credit cards had been activated only after Creditshield sales (or attempted sales) had been completed.

Prior to ASIC raising its concerns with Citigroup, Citigroup had already acted to terminate some telephone sales agents.

In order to address ASIC’s concerns and resolve the issues identified, Citigroup has implemented a number of changes to the calling script for its telephone operators.

Some of the changes include the following:

• The initial purpose of the call (the card activation) is concluded before cardholders are asked if they wish to hear about another product (such as Creditshield);
• Words such as ‘enrol’ and ‘activate’ have been replaced by ‘purchase’ when operators are referring to Creditshield;
• The provision of a general advice warning at the commencement of the call;
• The removal of representations regarding Creditshield being ‘free if you have paid your bills’; and
• The introduction of a clear approach to handling customer objections during Creditshield telephone sales.

Citigroup is also now in the process of writing to all customers (other than those that have already made a claim on their policies) who purchased Creditshield while activating their card between August 2008 and January 2009 to ensure that they are aware that they purchased Creditshield, and that they are aware of Creditshield’s terms and conditions.

Customers who believe they were not made aware of their purchase of Creditshield or its terms and conditions are being asked to contact Citigroup in order for Citigroup to promptly address and resolve customers’ concerns including potentially refunding affected customers in the appropriate circumstances.

Do Not Call Register Legislation Amendment Bill introduced

The Do Not Call Register Legislation Amendment Bill 2009 has been introduced into Parliament.

If the Bill is passed, the Do Not Call Register will be expanded to enable all Australian telephone and fax numbers to be registered by all persons, including individuals, businesses, government and organisations.

The main elements contained in the Bill are:

• a provision that makes all Australian telephone and fax numbers eligible to register on the Do Not Call Register;
• a prohibition on sending unsolicited marketing faxes to an Australian number which is registered on the Do Not Call Register, subject to certain exemptions;
• a requirement that agreements for the sending of unsolicited marketing faxes must require compliance with the Act. This requirement is aimed at organisations which may contract with another party to provide fax marketing services on their behalf;
• civil penalty provisions for breaches of the new provisions;
• the introduction of ‘registered consent’ which will give all new registrants the option of consenting to receive telemarketing calls or marketing faxes relating to particular industry classifications at the time of listing their number on the Register. The default position will continue to be that registrants are opting out of all telemarketing calls and marketing faxes, unless they take positive action to opt-in to receive certain types of telemarketing calls and marketing faxes. Registrants will be able to change their options at any time if they later choose to opt-out of these calls/faxes;
• conferring powers on the Australian Communications and Media Authority (ACMA) to make a determination setting out the industry classifications for the purposes of enabling registrants to choose the telemarketing calls and marketing faxes they wish to receive (if any);
• conferring powers on the ACMA to make a determination or determinations about the circumstances in which consent will be inferred for unsolicited telemarketing calls and marketing faxes to business numbers. This is a reserve power and there will be no change to the existing inferred consent provisions under the Act; and
• consequential amendment to Part 6 of the Telecommunications Act 1997, to allow the fax marketing industry to make industry codes, and the ACMA to make industry standards for the ‘fax marketing industry’, consistent with the existing arrangements which allow codes and standards to be made for the telemarketing industry. The ACMA will have the power to make an industry standard relating to the fax marketing industry.

It is anticipated that these arrangements will be in operation during the second half of 2010.

Spam Act action by ACMA: Vodafone and 3 others

The Australian Communications and Media Authority (ACMA) has accepted enforceable undertakings and payments from three companies—Vodafone Hutchison Australia Pty Limited (VHA), New Dialogue Pty Ltd (New Dialogue), Big Mobile Pty Ltd (Big Mobile)—and issued a formal warning to Coca-Cola South Pacific Pty Ltd (CCSP) arising from alleged breaches of the Spam Act 2003 in a marketing campaign that promoted certain Coca-Cola products through SMS.

VHA's enforceable undertaking included a financial component of $110,000. The undertaking was offered by VHA in response to three ACMA investigations into alleged breaches of the Spam Act (including the Coca-Cola marketing campaign). VHA has undertaken to appoint an independent auditor to monitor Spam Act compliance and to make recommendations to improve Spam Act compliance, to be implemented by VHA. VHA has also undertaken to provide Spam Act training for all employees.

The ACMA has also accepted enforceable undertakings from media agency New Dialogue and content aggregator Big Mobile in relation to the Coca-Cola marketing campaign. In accordance with its enforceable undertaking, New Dialogue has paid an amount of $22,000. Big Mobile has undertaken to pay compensation to each recipient of any SMS message that breaches the Spam Act during the term of the enforceable undertaking (12 months).

ACMA has also a formal warning to CCSP for causing commercial electronic messages to be sent without an unsubscribe facility and not providing contact information, as required under the Spam Act.

Do Not Call Register review discussion paper

The Government has released a Discussion Paper reviewing the Do Not Call Register Act which allows Australians to opt out of receiving unsolicited commercial marketing (telemarketing) calls by listing their fixed line and mobile telephone numbers used primarily for private or domestic purposes.

The Discussion Paper does not deal with the Government's announced intention to expand the Register to include business numbers.

It invites comments on the operation of the Register and key elements of the legislation and discussion of options including :

• the opt-out mechanism
• the definition of consent
• the length of the registration period
• exemptions
• research calls

The closing date for submissions is 4 November 2009.

ACMA v Mobilegate SMS spam penalty

The Federal Court has handed down its penalty in ACMA v Mobilegate (previously discussed here)

According to ACMA the Federal Court has awarded penalties totalling $15.75M against the following defendants:

• Mobilegate Ltd: $5 million
• Winning Bid Pty Ltd: $3.5 million
• Mr Simon Anthony Owen: $3 million
• Mr Tarek Andreas Salcedo: $3 million
• Mr Glenn Christopher Maughan: $1.25 million

A penalty hearing against 3 other defendants will take place on 30 November.

ACMA instituted proceedings against eight respondents in the Federal Court in December 2008, alleging contraventions of both the Spam Act and the Trade Practices Act in relation to premium SMS chat services. ACMA alleged that the respondents were engaged in a complicated scheme to obtain mobile phone numbers from members of dating websites, using fake member profiles, in order to send commercial electronic messages by SMS.

ACMA alleged that:

• after the numbers were obtained, unsolicited messages were sent to the mobile phone numbers offering the opportunity to chat via SMS using services described as the ‘Safe Divert’ or ‘Maybemeet’ services;
• the chat was not offered by genuine members of dating websites but employees of Mobilegate and Winning Bid;
• consumers were charged up to five dollars per message; and
• when users questioned whether the messages were from a real person, they were told that it was a real person who was using the “Safe Divert” service to keep their mobile phone number private.

ASIC's approach to insurance telephone marketing

ASIC has published details of the resolution of its concerns with AEGON Direct Marketing Services Australia Pty Ltd (ADMS) that some telephone sales of life risk insurance products may have been misleading, or likely to mislead consumers.

ASIC was concerned that the direct marketing calls may have created the impression that customers were not being asked to make a decision to purchase the insurance product immediately over the phone and in certain circumstances, customers were told that they would be sent policy documents so that they could review and make a decision whether to purchase during the cooling-off period.

ASIC also had concerns with telephone sales representatives using the words ‘enrol’, ‘activate’, ‘start’, or ‘issue’ when referring to purchase of an insurance product which may not have made it sufficiently clear to consumers that they were purchasing insurance products.

In response, ADMS has implemented, or is in the process of implementing, a number of changes to its calling script. Some of the changes include the following:

• The word ‘enrol’ has been replaced by ‘purchase’.
• The removal of the phrase, ‘you don't have to make a decision today’.
• The customer is asked to confirm their understanding that they are ‘purchasing’ an insurance product.
• The provision of an expanded general advice warning towards the start of the direct marketing call.
• Overall, more wording has been made mandatory for telephone sales representatives to follow.

To supplement the latest script change, it intends to circulate a written reminder to telephone sales representatives every three months, highlighting the importance of observing the script during each call, and is designing an ongoing training plan for its Quality Assurance and Sales Verification teams.

It is also taking steps to ensure that all customers receive a second billing reminder letter before the end of the cooling-off period.

First SMS Spam Act case

In Australian Communications and Media Authority v Mobilegate Ltd A Company Incorporated in Hong Kong (No2) [2009] FCA 887, the Australian Communications and Media Authority (ACMA) succeeded in obtaining injunctions and declarations against a number of parties involved in the ACMA’s first SMS spam case before the Federal Court. The matter relates to the sending of unsolicited commercial SMS messages.

Justice Logan gave default judgment on 14 August, against five respondents, Mobilegate Ltd, Winning Bid Pty Ltd, Mr Simon Anthony Owen, Mr Tarek Andreas Salcedo and Mr Glenn Christopher Maughan, concerning breaches of the Spam Act 2003.

The action was in relation to premium SMS chat services. The ACMA alleged that the respondents were engaged in a complicated scheme to obtain mobile phone numbers from members of dating websites, using fake member profiles, in order to send commercial electronic messages by SMS.

Unsolicited messages were then sent to the mobile phone numbers offering the opportunity to chat via SMS using services described as the ‘Safe Divert’ or ‘Maybemeet’ services. The chat was not offered by genuine members of dating websites but employees of Mobilegate Ltd and Winning Bid Pty Ltd. Consumers were charged up to five dollars per message.

A hearing as to penalty is pending .

ACMA registers Mobile Premium Services Code

ACMA has registered the industry-developed Mobile Premium Services Code, which will be legally binding from 1 July 2009. The code sets out detailed rules covering a range of important matters including procedures to be followed for subscribing to premium SMS services; the banning of advertisements targeted at children under 15; strict rules about how advertisements (and charges) are displayed; and improved complaints handling obligations of companies supplying premium SMS services.

There will be a ‘double opt-in’ requirement meaning that a prospective customer will need to give two independent confirmations of a request before they can subscribe to an ongoing premium SMS service.

The code, will be reviewed in 12 months.

ACMA fines Optus for spam text messages

The Australian Communications and Media Authority (ACMA) has issued two infringement notices to the value of $110,000 to Optus Networks Pty Ltd for allegedly sending electronic messages without accurate sender identification, in contravention of the Spam Act 2003.

The infringement notices were in relation to 20,000 commercial electronic messages sent by Optus that ACMA alleges failed to provide clear and accurate sender identification. The messages promoted the OptusZoo entertainment service to Optus customer mobile phones with the sender identification ‘966’.

Although Optus argued that "966" was the numeric equivalent of Zoo, this was not considered sufficient identification, as "966" could be used to represent any number of permutations on a telephone keypad.

When ACMA and Optus could not agree on an enforceable undertaking, ACMA issued the infringement notices.

Optus has paid the amounts specified in the infringement notices and has advised that new compliance measures have been implemented that will ensure accurate sender identification is included in all commercial electronic messages.