Review of the Australian Consumer Product Safety System Discussion Paper

Chapter 1 - Features of a Consumer Product Safety System

In order to minimise the physical and financial cost to the community of unsafe products, Australia’s consumer product safety system must be able to ensure that:

• the goods and services available for purchase by consumers are safe for their intended uses and consumers have adequate information about the safety characteristics of products;

• any unsafe products that do reach the market are readily detected and reported;

• such products can be removed from the market in an effective and timely manner; and

• consumers are able to obtain redress and compensation for any loss they suffer as a result of unsafe products.

A product safety system that delivers these outcomes is essential for reducing, to an acceptable level, the risks faced by Australians when purchasing and using consumer products.

These outcomes can be achieved in a variety of ways by those involved in the product safety system, namely consumers, businesses and governments. The mix of solutions employed will affect the fortunes of individual businesses and consumers and the welfare of the Australian community as a whole.

Product safety and the welfare of Australians

The broader impact of the consumer product safety system on the welfare of Australians depends on a number of factors, in addition to how effectively it protects consumers from the risk of unsafe products. These other factors relate to the efficient operation of markets in consumer products and the efficiency with which government resources are used. They include:

• whether the rules which businesses must follow under the system are straightforward, not overly costly to comply with, and open to review;

• whether the system interferes with the way businesses located in one part of Australia, or overseas, sell their products to consumers throughout Australia;

• whether the system allows businesses to take advantage of technology to produce new and innovative products;

• whether the system allows businesses and consumers to take advantage of the increasingly global nature of the consumer product market; and

• whether the system makes the best use of the resources that the community is able to devote to government regulation of consumer product safety.

How the product safety system operates has an important impact on community welfare

The first four of these factors relate to the impact which the product safety system has on the ability of businesses to deliver to consumers the goods and services that meet their needs and which provide them with the broadest possible range of product choices at the most competitive prices. The final factor reflects the fact that consumers also fund the involvement of governments in the consumer product safety system through taxation, and would wish these resources to be applied effectively.

While government regulation is usually the most visible and easily identifiable part of a product safety system, the actions of consumers and businesses are often highly effective in minimising the harm caused by unsafe products. Importantly, they do so in a way that poses the least obstacles to business activity and to the ability of consumers to choose the goods and services that they prefer.

Role of consumers

Consumers generally expect that if products are allowed to be sold in the market, they are safe when used for their intended purpose. They further protect themselves from harm by researching the safety characteristics of products that they intend to purchase, by following instructions on how to use a product appropriately, and by monitoring its continuing safety. If a problem arises with a product, consumers will often report this to the supplier or manufacturer, or to a government consumer protection agency. Ultimately consumers have the right to seek redress and compensation for the harm caused by unsafe products.

Role of businesses

Industry has the responsibility to provide safe products and address issues of safety as they arise. These issues relate not only to the physical characteristics of a product but also to an understanding of the likely manner in which it will be used and other factors which may impinge on its safe use.

It is important that industry has a manufacturing or supply philosophy that sees safety considerations as an integral part of its operations.

Responsible businesses play an essential role in protecting consumers from unsafe products. Many go to considerable lengths to ensure that the products they market are safe and are used in a safe way by their customers. They achieve this through: incorporating safety considerations in product design; ensuring that consumers are provided with sufficient information about the product and how to use it; and implementing quality assurance programmes that involve receiving consumer feedback and complaints. Many businesses respond promptly to safety problems concerning their products and, where necessary, act to recall products from the market, notify consumers of any problems, and provide redress to consumers who have suffered loss.

Businesses, acting collectively through industry associations and standards-writing bodies, often impose product safety obligations on themselves. This can occur through industry codes that require many of the practices described above. It can also involve contributing to detailed standards for specific products or processes, such as the widely recognised Australian Standards.

The case for government involvement

Unfortunately, it is not always possible to rely on the good practices of businesses or the efforts of consumers to protect themselves against harm caused by unsafe products. In making decisions about the production and sale of goods and services, businesses may not take full account of the harm caused to consumers by unsafe products. Consumers may also not possess all the information they need about the safety of products. This can occur because consumers decide that the information is too difficult or expensive to obtain, because businesses do not have enough incentive to collect and supply it, or because unscrupulous businesses deliberately withhold important information from consumers. Consumers may also make assumptions about the safe use of a product which are not warranted.

Governments can assist and provide incentives to consumers and businesses

In these cases, governments have an important role to play. Governments have a wide range of tools available to assist in protecting consumers from unsafe products. These include measures to educate consumers and businesses about their responsibilities and to provide consumers with information about the safety of particular products or require businesses to deliver such information themselves. Governments can also give businesses greater incentive to ensure the safety of products placed on the market, such as by giving consumers the right to seek compensation from businesses whose products cause harm. These approaches essentially attempt to strengthen the involvement of businesses and consumers in the product safety system, instead of requiring the government to make detailed decisions about the nature of the goods and services that consumers can purchase.

In some cases, these measures prove insufficient, and governments are required to directly intervene in the market to protect consumers. Such intervention can take the form of bans on the sale of particular products, orders requiring their recall, or safety and information standards which must be met before they can be marketed. Governments also have an important role in collecting information about product safety problems and using this information to inform their decision-making as well as that of businesses and consumers.

Government decisions should consider the impact on community welfare

When choosing the best approach to solving a particular product safety problem, governments seek to protect consumers while also considering the impact that any government action will have on the overall welfare of the community. To this end, governments should strive to avoid imposing complicated rules on businesses which are costly to comply with, which make it difficult for some businesses to compete in providing goods and services to consumers, or which make it difficult for businesses to introduce new and innovative products for which consumer demand exists. Any rules that are introduced should be administered in the most efficient and effective manner possible. Government actions that fail to meet these criteria have the potential to harm consumers through increased prices, fewer choices, and a higher burden of taxation.

Governments should also ensure that measures have a global outlook and reflect undertakings made to the wider international community.

Chapter 2 of this paper discusses how Australia’s consumer product safety system operates in practice and identifies areas in which it could be strengthened so as to better promote the welfare of the Australian community.

Next: Chapter 2 - Australia's Consumer Product Safety System

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