Australian Regulatory Compliance Review

Product development, misleading advertising and regulatory compliance

Why is it so hard for some businesses to accurately advertise their products? Are they too complex or is the advertising not checked?

Last week the ACCC issued proceedings for misleading advertising against Crazy John's (in respect of mobile phones) and Saab Australia (in respect of green claims on their cars). How could such claims be prevented?

The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court against Mobileworld Operating Pty Ltd (trading as Crazy John's) for alleged contraventions of sections 52 and 53 of the Trade Practices Act 1974 in relation to the promotion of certain of its mobile phone plans.

The ACCC alleges that Crazy John's has engaged in misleading or deceptive conduct by representing that handsets on its Crazy Phone Plans are available 'FREE' or for '$0', when in fact consumers are required to pay for the handsets through higher call rates than those available on comparable plans which do not include a handset.

The ACCC has also instituted legal proceedings against GM Holden Ltd, which supplies and markets Saab motor vehicles in Australia and trades as Saab Australia, alleging misleading and deceptive conduct and false representations concerning 'green' claims made in the advertising of Saab vehicles.

In 2004 I posted this article (pdf) on the need to consider end compliance issues (such as product standards and misleading advertising) when developing new products or modifying existing products (regardless whether it is a car, a mobile phone plan or a financial product). I recently updated the article to take into account the decisions in ACCC v Audi and ACCC v Telstra. As the issues covered are still relevant I am publishing the full amended version below.

CONTINUOUS COMPLIANCE AND PRODUCT DEVELOPMENT
Even in organisations that have well designed compliance systems,  compliance must be put into the daily practice of the business.

New product development and changes to existing products involve compliance risks. This can occur because of the way in which decisions are made and the way such projects are implemented.

Poor product knowledge combined with lack of understanding of regulatory requirements can lead to a breach.

Even small changes have risks.

In Australian Competition and Consumer Commission V Wizard Mortgage Corporation Limited [2002] FCA 1317 considered an existing advertisement for a loan product which had been legally cleared but had been changed by the marketing head by adding in an interest rate (there was no rate before). However the product was not available at that rate. The Federal Court agreed with the ACCC that the ad was misleading and deceptive.

In BMW Australia Limited v Australian Competition & Consumer Commission [2003] FCA 727 the Federal Court of Australia found that BMW’s 2002 318i model had breached the Trade Practices Act (TPA) by using safety warnings on the jacks which did not comply with the Australian Safety Standards. In dispute was the importance of 5 words which had been omitted.

In Australian Competition and Consumer Commission v Audi Australia Pty Ltd [2007] FCA 1990, the Federal Court made orders against Audi relating to its misleading advertising that the Audi Q7 3.6 SE motor vehicle had 7 seats as a standard feature at the standard price when in fact the standard seating for the Audi Q7 3.6 SE was 5 seats.

In Australian Competition and Consumer Commission v Telstra Corporation Limited  [2004] FCA 987 the Federal Court decided that Telstra's $0 mobile phone advertising was misleading and deceptive after analyding Telstra's mobile phone plans.

The decision making process
Decisions on new products and changes to existing products may be made for different reasons:
• Defensive: follow the leader
• Product innovation
• Market research
• Compliance input

How is the decision made? Is there a team that investigates the options and puts together a business case before a decision is made or does the CEO or the board make the decision and then ask one or more people to investigate it?

You need to do your homework to show that careful business judgment was exercised.

Do you have all the regulatory licences and approvals?
Have you satisfied all regulatory conditions?
Does your pricing model take into account different scenarios?
Have you considered tax issues?
Have you done full "specifications" of the product?
What are the product terms and conditions?
Have pros and cons been weighed?
What are the most important objectives?
Can compromises be made?
Is the change worth making?
What are the different options?
Are there ethical or governance issues?
Is there any ambiguity?
Is it fully documented?
Have you done a cost/benefit analysis?

Implementing decisions
Once the decision is made, who has control?
Is there an external Project Manager?
Is there an implementation team? If so, is every relevant person on it?

An implementation committee should represent the following interests:
• Legal (for issues such as name of product, intellectual property, trade practices, advertising clearance, documentation and specific product regulation)
• Commercial
• Prudential/risk profile
• Accounting/actuarial
• Software (new, modifications)
• Marketing
• HR/training

Will you seek input from your front line staff, key suppliers, customers or regulators?
The committee needs to give clearance at both draft AND final stages.

Product documentation
The process should result in documentation that identifies the background of the product, specifications and operational risks. This will ensure that whoever markets the product has a proper understanding of the product and does not inadvertently mislead consumers. And when the marketing material is produced, a person must have responsibility for checking its accuracy and compliance.

Conclusion
There needs to be a method for ensuring that a new product or a change to an  existing product has been considered from all angles (marketing, IT, compliance, HR, finance etc) before a decision is made to proceed with it.

At the least, failure to do your basic homework can jeopardize your marketing campaign. If timing is critical, the success of the product can be affected.

Australian domain name disputes update

Australian cricket captain Ricky Ponting has lodged an application (set for hearing in the Federal Court on 8 February 2008) claiming misleading and deceptive conduct against the operator of a website which described itself as "the official Ricky Ponting site": Ricky Thomas Ponting v Kevin Leonard Consulting Pty Limited (ACN 087 382 858) & Anor (also see Computerworld story)

It is not clear why Ricky Ponting has chosen litigation rather than the domain name disputes resolution procedure administered by .auDA. [UPDATE 17 January: David Starkoff comments]

UPDATE 13 February 2008: Ricky Ponting discontinued his action on 8 February.

According to this data from the World Intellectual Property Organization 2007 was a record year for domain name disputes. Disputes are dealt with under ICANN's Uniform Domain Name Dispute Resolution Policy (“UDRP”)

The auDRP is an adaptation of the Uniform Dispute Resolution Policy (UDRP) administered by ICANN with respect to the generic top level domains such as .com.

auDA can compel dispute resolution where:

(i) a domain name is identical or confusingly similar to a name, trademark or service mark in which the complainant has rights; and
(ii) the domain name owner has no rights or legitimate interests in respect of the domain name; and
(iii) the domain name has been registered or subsequently used in bad faith.

The complainant has the burden of proof.

The Australian 2007 decisions made by WIPO include decisions to transfer the domain name to the complainant as well as cancellation of the name.

The WIPO Domain Name Dispute Resolution Service has resources and past decisions.

In the UK recently Maestro (a subsidiary of Mastercard) failed in its attempt to stop another organisation using maestro.co.uk.

The appeal panel ruled that it did not prove the case that the registration was abusive, and that because maestro is a normal word with a dictionary definition it could not monopolise its use in domain names just because it also happened to be one of its brands.

auDA's policy states that it accepts that a complainant has rights in the complainant's personal name.

Productivity Commission draft report: Review of Australia's Consumer Policy Framework

The Productivity Commission has released its Draft Report of the  Review of Australia's Consumer Policy Framework.

A key point of the draft report is the need for national consumer regulation with a sole national regulator (possibly the ACCC).

The first step in creating a nationally coherent consumer policy framework should be the introduction of a single generic consumer law applying across Australia. This should be based primarily on the consumer provisions in the Trade Practices Act.

• The ACCC should be solely responsible for enforcing the product safety provisions nationally.
• The case for making it the sole national regulator for all of the new generic law should be actively explored.
• In the meantime, individual States and Territories should be given the option of referring their enforcement powers for all of the new law to the ACCC.

There should also be a CoAG oversighted review and reform program (akin to the National Competition Policy legislation review process) to:

• identify and repeal unnecessary industry-specific consumer regulation, with a particular focus on removing regulations that apply in only one or two jurisdictions;
• dentify other areas of specific consumer regulation applying in most or all jurisdictions where divergent requirements and/or lack of policy responsiveness are particularly costly; and
• determine how these costs should be reduced, with explicit consideration of the case for transferring policy responsibility to the national level.

However, in two areas of current State and Territory responsibility - consumer credit provision (including finance broking), and the consumer protection aspects of energy services - the case for a national approach is well established. Hence, the transfer of responsibility to the national level should occur without further review.

To complement this broad reform program for specific consumer regulation, improvements should be made to some of the particular regulatory requirements applying to consumer credit, utility services and home building.

The Commission is seeking comment from interested parties on its draft report through written submissions and/or attendance at public hearings to be held early in 2008. The closing date for written submissions is Wednesday 6 February 2008.

Released with the draft report is a consultancy report, Comparison of Generic Consumer Protection Legislation, by Professor Stephen Corones and Professor Sharon Christensen, Faculty of Law, Queensland University of Technology.

Unsolicited commercial faxes

The Department of Communications, Information Technology and the Arts, is consulting industry, small businesses and individuals in relation to unsolicited commercial faxes, particularly on options that could assist fax users to reduce the volume of unsolicited material received.

The Department has prepared a short discussion paper (pdf) and questions for comment as part of the consultation process.

The closing date for comments and submissions to the Department is 17 September 2007.

ACMA penalises "missed call" marketing

The Australian Communications and Media Authority (ACMA) has issued DC Marketing Europe Limited with an Infringement Notice, carrying a penalty of $149,600, for extensive breaches of the Spam Act 2003.

ACMA penalised DC Marketing for 102 contraventions relating to missed call marketing activities in July and August 2006.

Missed call marketing involves the sending of short duration calls to mobile phones, thereby leaving a ‘missed call’ message on the phone.

Under this practice, when the mobile phone owner returned the missed call, they received marketing information from DC Marketing. Consumers had no way of knowing who the missed call was from before calling DC Marketing and so effectively paid to receive DC Marketing’s marketing messages. The missed call marketing messages sent out by DC Marketing were unsolicited, did not identify the sender and did not contain an unsubscribe facility, each of which is a breach of the Spam Act.

ACMA fines 2 companies for Spam Act breaches

In 2 separate cases, the Australian Communications and Media Authority has fined the Pitch Entertainment Group (Pitch) $11,000 and International Machinery Parts Pty Ltd (IMP Mobile) $4,400 respectively for breaches of the Spam Act.

Pitch and its directors have also entered into an enforceable undertaking that requires future compliance with the Spam Act and contains stringent compliance reporting and staff education obligations.

ACMA found that the Pitch Entertainment Group, which trades as Splash Mobile in Australia, sent over one million commercial electronic messages to mobile phones without a functional unsubscribe facility.

IMP Mobile also failed to provide a functional unsubscribe facility when sending messages to mobile phones.

Telemarketing Standards varied

On 29 May 2007, ACMA varied the Telecommunications (Do Not Call Register) (Telemarketing and Research Calls) Industry Standard 2007 effective from 31 May 2007 to allow research calls to be made on Sundays between 9.00 am and 5.00 pm.

Telemarketing calls are still prohibited on Sundays under the standard.

More

Do Not Call Register opens for consumer registration

In anticipation of a 31 May 2007 start date, the Do Not Call Register has started accepting consumer registrations.

Individuals will be able to register their numbers either online at https://www.donotcall.gov.au/or by post. Telephone registrations will be available soon.

Only the relevant account holder for the telephone number being listed, or someone nominated by the account holder can register the number.

Only Australian telephone numbers used primarily for private and domestic purposes can be listed on the Do Not Call Register. These include fixed (or landline) numbers, mobile phone numbers and voice over internet protocol (VoIP) numbers.

Businesses will not be able to register their numbers. Fax numbers will also not be accepted.

Individuals will not have to pay to register their telephone numbers.

Registration will only last for three years. You will need to contact the Do Not Call Register to re-register if you wish to continue your listing after this time. You can remove your registration at any time.

The legislation applies irrespective of where the call originates. Telemarketers operating outside Australia will face the same penalties as telemarketers operating within the country, if they call a number on Australia’s Do Not Call Register.

You can learn more about the register under frequently asked questions.

UPDATE 21 May: telephone registrations open

Do Not Call Register Index

Collaborative compliance wiki

We are all looking for ways to store and find that document or piece of information we're going to need in the future.

And just as importantly we are looking to find ways to share that information with others.

In my quest for a solution, I have set up a wiki to help share tools and information to manage compliance. The goal is to create a "how to" resource as much as a "what to do" resource collectively with like-minded persons and to co-operatively improve our compliance resources.

Unlike Wikipedia which is an encyclopaedic open wiki, this wiki will be limited to compliance and can't be changed unless you register.

Communities of practice have become a cornerstone of the knowledge strategy of leading organizations.

If you're interested in risk management and compliance I invite you to join.

Go to www.complianceonline.com.au and have a look.

The site is designed to be co-operative: by registering (there is no fee) you can suggest topics, create new pages or add to or comment on existing topics. You can contribute by identifying problems you are trying to solve, outcomes you are trying to achieve, lessons learned or solutions you've already devised.

Or you may wish to focus on one issue rather than the variety I have started on.

Let me know what things are important to your business or the things that interest, challenge, excite or intrigue you. If we have common interests  I will try to provide the resources on the wiki.

You can just read collaborative compliance wiki if you want to but if you want to participate you will need to register.

April podcast

My second podcast is now available!

You can now listen to me while you eat your lunch (just turn up your speakers) or download it to your mp3 player and listen while you commute or go for a walk. Let me know what you think!

This month I discuss my collaborative compliance wiki, marketing, web 2.0 and communities of practice and what all that has to do with law, compliance and improving your business.

The podcast goes for 10 mins 35 seconds and is 9.69mb.

Listen now

Do Not Call Register: telemarketing standards explained for businesses

The Do Not Call Register is expected to be operational by 31 May 2007.

For a business, the core obligation is not to make an unsolicited telemarketing call to a number on the Register and ensure that any agreements you make to outsource telemarketing comply with the Act (Sections 11 and 12).

If a number is not on the Register, a business may call it provided the business (or its provider) complies with the telemarketing standards.

What's a telemarketing call?

A telemarketing call is a voice call to a telephone number, where, having regard to:

(a) the content of the call; and
(b) the presentational aspects of the call; and
(c) the content that can be obtained using the telephone numbers, URLs or contact information (if any) mentioned in the call; and
(d) if the telephone number from which the call is made is disclosed to the recipient (whether by calling line identification or otherwise)—the content (if any) that can be obtained by calling that telephone number;
it would be concluded that the purpose, or one of the purposes, of the call is:
(e) to offer to supply goods or services; or
(f) to advertise or promote goods or services; or
(g) to advertise or promote a supplier, or prospective supplier, of goods or services; or
(h) to offer to supply land or an interest in land; or
(i) to advertise or promote land or an interest in land; or
(j) to advertise or promote a supplier, or prospective supplier, of land or an interest in land; or
(k) to offer to provide a business opportunity or investment opportunity; or
(l) to advertise or promote a business opportunity or investment opportunity; or
(m) to advertise or promote a provider, or prospective provider, of a business opportunity or investment opportunity; or
(n) to solicit donations; or
(o) a purpose specified in the regulations.

The Regulations exclude the following from the definition of a telemarketing call:

• product recall calls;  
• fault rectification calls;  
• appointment rescheduling calls;  
• appointment reminder calls;  
• calls relating to payments;  
• solicited calls (eg returning a call for information); and  
• calls not answered by the person to whom the call is made.

Schedule 1 of the Act defines designated telemarketing calls which are also exempt from the prohibition in section 11 (but not the telemarketing standards). These are calls made by Government bodies, religious organisations and charities, political parties, independent members of parliament, candidates and educational institutions.

Even if a telephone number is not registered on the Do Not Call Register, telemarketers will have to comply with the new Telemarketing Standard.

The standard applies to:

• all telemarketing calls made to an Australian number to offer, advertise or promote goods, services, interests in land, business opportunities or investments, or to solicit donations
• all research calls to conduct opinion polling and to carry out standard questionnaire-based research, and        
• calls made for the above purposes by public interest entities (such as charities, registered political parties, and religious organisations) who are exempt from the general prohibition on calling numbers listed on the Do Not Call Register when making specific types of telemarketing calls.

The standard establishes minimum standards in four main areas:

        1. The standard provides clear and enforceable rules including restrictions on hours of calling. A caller must not make or attempt to make:

• a telemarketing call on a weekday before 9 am or after 8 pm        
• a research call on a weekday before 9 am or after 8.30 pm        
• a telemarketing or research call on a Saturday before 9 am or after 5 pm        
• a telemarketing or research call on Sunday or a nationally recognised public holiday.        

        2. Under the standard, contact information and the purpose of the call must be provided by the person making a telemarketing call as well as revealing, on request, the source from which the caller obtained the telephone number.

        3. The standard requires the caller to terminate the call where the call recipient asks for the call to be terminated or otherwise indicates that he or she does not want the call to continue.       

4. The caller is also required to ensure that calling line identification is enabled at the time that the caller makes or attempts to make a call

Resources

False or misleading loan calculator

The difficulty with any automated calculator for a consumer is understanding the assumptions on which it is based. If the calculator relates to financial services it could be in breach of the ASIC Act if it is misleading.

ASIC has announced it has obtained orders in the Supreme Court of Queensland against Gold Coast company, Etracka Pty Ltd (Etracka), following concerns over a loan calculator licensed to mortgage brokers throughout Australia.

These orders follow allegations by ASIC that the information provided by the company’s Express Simulator calculator was false, misleading or deceptive or likely to mislead or deceive.
 
The Court ordered that Etracka add a warning to Steps 1 and 4 of the Express Simulator, and to the Simulation Express Report which is subsequently emailed to the user of the calculator. This warning will now advise users that if they have not elected to make an additional monthly repayment into the Non-transactional Loan (which is as high as reasonably possible having regard to the user’s financial circumstances and the terms and conditions of their loan), the calculator will not provide a reliable comparison between a Non-transactional Loan and a Transactional Loan used in accordance with the eTracka Strategy.

The Court also ordered that Etracka send corrective notices to its members, clients, and licensees and users of the Express Simulator calculator within seven days.

ASIC and general insurance

In a recent speech to the Insurance Council of Australia, ASIC Chair Jeffrey Lucy observed that:

• One of ASIC's continuing areas of focus is the quality and reliability of product disclosure, including advertising. Some PDS's are not adequately updated with information about some of the significant benefits, characteristics or features of the product when products are enhanced with new features, and do not meet the disclosure requirements in the Corporations Act.
• ASIC had concerns about insurers advertising that they had the ‘cheapest’ or ‘lowest’ price in these cases when the comparisons were based on different assumptions to those made by competitors.
• ASIC also had issues regarding advertising ‘maximum no claim discounts’ or ‘rating 1 for life’, which represented that an actual accident would not affect the premium when in fact it may.
• new product disclosure requirements for general insurance products will commence on 21 June 2007.
• ASIC recently extended its transitional relief for issuers of general insurance products from the dollar disclosure requirements in PDSs from 1 April 2007 to 30 June 2008.

Do Not Call Register update

ACMA has been engaged in consultation on steps necessary for the Do Not Call Register to be fully operational by 31 May 2007.

The latest discussion paper relates to the cost of access to the Register by telemarketers.

It will generally be unlawful to make telemarketing calls to numbers placed on the Register.  However, the Act allows persons (such as telemarketers) to submit their contact lists to the Register Operator for checking against the Register.  Upon submission of the list and payment of the appropriate fee (if any), the Register Operator must inform the access seeker which of the numbers in their list (if any) are, or are not, on the Register. This process of ‘washing’ contact lists will assist telemarketers to comply with the Act when it commences.

Do Not Call Register Act

The Do Not Call Register is still being set up. (Here's the Do Not Call Register Act 2006).

ACMA's Home Page and the  Privacy Commissioner's Do Not Call Register page give useful updates.

Website compliance, pricing errors and ecommerce update

I have previously commented on how companies such as Dell and Bramleys have responded to website pricing errors.

If you have a business website, doing business on-line requires compliance with e-business rules as well as the standard laws, even if you think your site is just a "brochure" or information site.

To assist you, I have modified my report on financial services websites to cover business-to-consumer (B2C) websites generally and am pleased to make it available to readers at no charge. Download the Business website compliance report (pdf). I would appreciate any comments.

Other links:

Website legal compliance
Online contracts (pdf)

Telephone numbers to be protected

The Telecommunications Amendment (Integrated Public Number Database) Bill 2006 will amend the Telecommunications Act 1997 (Telecommunications Act) to provide additional safeguards to ensure that integrated public number database (IPND) information is only disclosed and used for the purposes specified in Part 13 of the Telecommunications Act.

The IPND is an industry-wide database of all residential and business phone numbers (both listed and unlisted) and associated customer information, including name and address information. The IPND was established and is maintained by Telstra as a condition of its carrier licence.

The insertion of a definition of public number directory into the Telecommunications Act is intended to prevent IPND information being used directly to produce records or databases which are used for such purposes as marketing, data cleansing and appending, debt collection, identity verification and credit checking and to limit the extent to which records which are public number directories (within the meaning of the definition in the Bill) are readily able to be used for such purposes.

Comment: The Australian

ACMA issues first communications industry report

The ACMA Communications Report 2005–2006 assesses industry performance across the communications, internet and broadcasting sectors.

The report is structured into four parts, covering:

• an overview of the communications operating environment in 2005–06,
• a snapshot of key participants in the communications environment,
• analysis of the benefits that accrue to consumers from access communications services; and
• an assessment of some of the challenges posed by the emerging communications environment.

Restoring your reputation after a compliance breach: Choicepoint

Earlier this year Choicepoint a major US data broker agreed to pay US$15 million to settle charges it did not properly protect consumers' personal financial information.

For Choicepoint it was a public relations disaster.

ChoicePoint faced its critics with the attitude: "We want to make our privacy practices exemplary."

According to Keeping Your Enemies Close (NY Times) Choicepoint started its makeover with the following:

• it offered possible victims of identity theft membership of a credit monitoring service at no charge for one year, and provided them with free reports from the big three credit bureaus.
• To actual victims of identity theft, it offered its expertise to help correct the problem.
• The company also gave a $1 million, four-year grant to the Identity Theft Resource Center, a nonprofit group in San Diego.
• ChoicePoint then overhauled its security measures, a move that began with the filling of the new position of chief privacy officer.
• it stopped dealing with private investigators
• it set up a centralized credentialing department (separate from sales)
• It also performs random audits of its customers, to ensure that they are conducting searches appropriate for their type of business, and it uses its computer systems to monitor accounts for suspicious activity.
• ChoicePoint has endured roughly 100 outside audits, most of them conducted by long-term corporate customers
• ChoicePoint also set up a Web site for consumers who, at no cost, want to check and challenge possible inaccuracies in their dossiers

via beSpacific

Spam Act penalty for Clarity1

ACMA has welcomed the imposition of $5.5 million fine on Clarity1 and its director for sending spam emails.

Earlier this year, the Federal Court found Clarity1 had contravened the Spam Act in sending at least 231 million commercial emails in twelve months after the Spam Act 2003 commenced in April 2004, with most of these messages unsolicited and in breach of the Act. The Federal Court fined Clarity1 $4.5 million and Director Wayne Robert Mansfield $1 million.

It is the first time an Australian company has been fined under the Act for sending spam. The company also has been banned from sending any unsolicited emails.

GE Money refunds card establishment fee

GE Money will refund a $25 establishment fee paid by approximately 2,500 MasterCard customers following discussions with the Australian Securities and Investments Commission (ASIC).

GE’s announcement follows concerns raised by ASIC regarding the following statement on its website: ‘There is no annual fee for your GO MasterCard. That means it costs you nothing to have it - pay nothing and make it your card of choice year after year.’

An investigation by ASIC found that while existing customers did not incur charges, new customers were charged a $25 establishment fee.

 GE will refund the establishment fee to all consumers who applied for the MasterCard online. It has also removed the statement from the GO MasterCard website.

 The GO MasterCard was widely advertised through other means. The statement considered by ASIC to be misleading did not appear as part of the broader advertising campaign, which included television and radio advertising, brochures, and in-store materials.

National telemarketing standards

The Australian Communications and Media Authority has commenced the development of a national standard for the telemarketing industry with the release of a discussion paper.

The standard will form an important part of the Do Not Call Register Scheme which will regulate unsolicited telemarketing calls.

This standard is intended to establish minimum standards for all telemarketers, such as the hours in the day when telemarketers are allowed to make calls, as well as the kind of information they are obliged to divulge about themselves and the organisation they represent.

ACMA is inviting comments from consumers and industry about the development of the industry standard by close of business, Friday 8 September 2006.

ASIC issues enhanced fee disclosure guide

ASIC has issued an updated guide for product issuers to help them comply with the Corporations Amendment Regulations 2005 (No. 1) (the enhanced fee disclosure regulations).

The enhanced fee disclosure regulations introduced requirements for disclosure of fees and charges in Product Disclosure Statements (PDSs) and periodic statements for most superannuation and managed investment products. The guide for product issuers answers some common questions about the enhanced fee disclosure regulations.

 The regulations require PDSs for certain investment–linked financial products to include:

• a standardised fee template (with accompanying explanation);
• an example of annual fees and costs for a balanced or similar fund; and
• a boxed consumer advisory warning.

The regulations applied to PDSs for superannuation products from 1 July 2005 and other financial products, including managed investment products, from 1 July 2006.

The regulations also mandate certain transactional disclosures in periodic statements of product issuers of superannuation products (from 1 July 2006) and of managed investment products (from 1 July 2007).

Not stating conditions can be misleading: Westpac reviews product advertising

Westpac Banking Corporation (Westpac) has agreed to review advertising for the Westpac One savings account after ASIC was concerned that the advertisements were misleading, or likely to mislead.

ASIC was concerned that the Westpac One savings account was advertised with a 5.8 per cent interest rate ‘on everyday savings’. However, consumers have to satisfy a number of conditions to get this interest rate, which makes it potentially unsuitable as an everyday savings account.

The advertised rate only applies if, during the month, the consumer makes no withdrawals and makes at least one deposit, otherwise the interest rate is reduced to zero for that month. The savings account is also only available as part of a package of Westpac banking products.
 
In response to ASIC’s concerns, Westpac agreed to cease its existing advertising campaign.

ASIC’s Deputy Executive Director, Consumer Protection, Ms Delia Rickard confirmed ASIC’s previously stated view that, when a headline claim is subject to exclusions or qualifications, those qualifications must be contained within the headline claim itself or be very clearly or prominently noted.  

ACCC authorises direct marketing code

The ACCC has announced that it has authorised the latest version of the Australian Direct Marketing Association (ADMA) Code of Practice.

The Code contains standards of marketing by ADMA members in respect of telemarketing, ecommerce and privacy. It also establishes an independent complaints body.to hear consumer complaints about members.

Review of Franchising Code of Conduct

The Minister for Small Business and Tourism has announced that the Australian Government will review the disclosures section of the Franchising Code of Conduct.

The disclosures section includes information requirements that franchisors must disclose to prospective franchisees, before deciding to purchase a franchise. The review will consider all available evidence and make any necessary recommendations to improve the Code.

The mandatory Franchising Code of Conduct was introduced in 1998 to improve fair trading in the franchising sector. The Code is supported by the Office of the Mediation Adviser to ensure speedy resolution of disputes.

Submissions should be made by August 15 and can be sent to Review of Franchising Code, c/o Office of Small Business, GPO Box 9839 CANBERRA ACT 2601.

Spam Act review

The Minister for Communications, Information Technology and the Arts, Senator Helen Coonan, has tabled in Parliament a report on the review of the Spam Act 2003.

The review found that the Australian Communications and Media Authority (ACMA) has undertaken effective and appropriate enforcement of the Spam Act.

Key findings include:

• the percentage of worldwide spam originating from Australia has decreased since the enactment of the Spam Act;
• The Spam Act has been actively enforced by ACMA and the first prosecution under the legislation was successfully undertaken in the Federal Court in April 2006 (against Clarity1). In addition, ACMA has issued 10 formal warnings and thirteen fines and infringement notices of more than $20, 000 to businesses for email and SMS marketing in contravention of the Spam Act. ACMA has required more than 600 businesses to make changes to their email and SMS marketing practices to comply with the Act;
• Despite Australia’s activity against spam, it remains a problem. It is estimated that between 60 per cent and 80 per cent of worldwide email traffic is spam, and spam sent through other media, such as SMS, is on the rise.
• The majority of spam received in Australia is of overseas origin, and it has become apparent that spam has become increasingly malicious—either attempting financial fraud, or carrying viruses, trojans or other code to compromise computer security.
• The review found that the current coverage of the Spam Act, as it applies to commercial messages, is appropriate. There is no need to extend the prohibition to capture all unsolicited messaging.
• The Government will consult on extending regulation to faxes.

ALSO SEE: Internet Industry Spam Code of Practice

ACMA setting up Do Not Call Register

The Australian Communications and Media Authority (ACMA) has announced it is setting up a Do Not Call Register to protect individuals from unsolicited telemarketing phone calls. The Register will allow people to opt out of receiving such calls. There will be no cost for submitting a telephone number to the Register.

The Register is expected to be up and running in 2007. ACMA is currently drafting an implementation plan for its introduction.

ACMA is also setting minimum national contact standards to regulate telemarketing calls. These standards will cover permitted calling hours, minimum information requirements and termination of calls.

The standards will apply to all telemarketers, including organisations that are exempted from the Do Not Call Register arrangements.

Do Not Call Register Bills passed by Senate

The Do Not Call Register Bills have been passed by the Senate.

The Bills are now waiting Assent. The are not expected to commence until early 2007.

National telemarketing standards and the Do Not Call Register explained

The Do Not Call Register (Consequential Amendments) Bill 2006 accompanies the Do Not Call Register Bill 2006. It will provide for the Australian Communications and Media Authority (ACMA) to make national standards which will regulate aspects of the making of telemarketing calls.

Currently, telemarketers operate under a number of different rules established by industry bodies on a voluntary basis, State and Territory laws, as well as some Commonwealth legislation. A national legislative framework for telemarketing would provide a single regulatory framework for the telemarketing industry and to consumers. The national standards would apply to all telemarketers, including those organisations which are exempt from the prohibition on making unsolicited telemarketing calls. The standards are expected to be in force from early 2007.

The Do Not Call Register

The Do Not Call Register Bill provides for the establishment of a Do Not Call Register. The Register would be kept by ACMA or outsourced to a third party who would operate the Register on behalf of the ACMA. It provides a system whereby individuals can register their home and mobile numbers on the Register.

A telephone number is eligible to be entered on the Do Not Call  Register if:
(a) it is an Australian number; and
(b) it is used or maintained exclusively or primarily for private or  domestic purposes; and
(c) it is not used or maintained exclusively for transmitting  and/or receiving faxes.

Registration of a telephone number on the Do Not Call  Register remains in force for 3 years at a time.

Telemarketers who wish to make telemarketing calls will in effect be required to check their calling lists against the numbers registered on the Do Not Call Register to ensure that they do not contact numbers of individuals who have opted out of receiving telemarketing calls.

Complaints relating to the Do Not Call Register and breaches of the Bill can be made to the ACMA. ACMA will have the power to take out injunctions or seek civil penalties against offenders.

What is a telemarketing call?
Telemarketing calls are voice calls made with the purpose to offer, supply, provide, advertise or promote goods or services for land or an interest in land; or a business opportunity or investment opportunity; or to solicit donations. Telemarketing calls include messages for which the commercial/marketing element may be a secondary purpose, not necessarily the primary purpose of the call, such as calls which may be primarily designed to gauge customer satisfaction, but have a secondary purpose of soliciting sales.

The key principle is that unsolicited telemarketing calls must not be made to a number registered on the Do Not Call Register without consent. However "designated marketing calls" will be permitted.

What is consent?
Consent means:
(a) express consent; or
(b) consent that can reasonably be inferred from:
(i) the conduct; and
(ii) the business and other relationships;
of the individual or organisation concerned.

How long does consent last for? If:
(a) express consent is given; and
(b) the consent is not expressed to be for a specified period or for an indefinite period;
the consent is taken to have been withdrawn at the end of the period of 3 months beginning on the day on which the consent was  given.

Consent may not be inferred from the publication of a telephone number.

What is "a designated telemarketing call "?
A designated telemarketing call is exempt from the restrictions. Calls by a government body, a religious organisation, a charity or charitable institution, Political parties, independent members of parliament, candidates and educational institutions may be exempt in certain circumstances.

More background