Review of the MCCA Direct Marketing Model Code of Practice Discussion Paper

1 Introduction

Direct marketing has the potential to benefit both consumers and suppliers through increasing choice in shopping behaviour. However, a prerequisite to obtaining these benefits is consumer confidence.

In November 1997, Direct Marketing: A Model Code of Practice (the `Model Code') was released by the Ministerial Council on Consumer Affairs to deal with some of the problems that had been identified in relation to direct marketing.

Adopting the provisions of the Model Code is voluntary for organisations engaged in direct marketing. The Model Code is intended to form a basis for development of specific codes of practice. While the Model Code is not itself enforceable, it fits within a consumer protection safety net comprised of the Trade Practices Act and the various State and Territory Fair Trading Acts.

Following the release of the Model Code, the peak industry body, the Australian Direct Marketing Association (ADMA) agreed to substantially adopt the provisions of the Model Code. ADMA applied for and received Australian Competition and Consumer Commission (ACCC) conditional authorisation for its Direct Marketing Code of Practice (the `ADMA Code').

The Model Code provides that it is to be reviewed three years after release and at periodic intervals thereafter. The Ministerial Council on Consumer Affairs at its meeting on the 21 July 2000, agreed to commence the review of the Model Code in 2001. At its meeting on the 2 August 2002, the Ministerial Council agreed to commence public consultation on the review.

The objective of this review is to determine the effectiveness of the Direct Marketing Model Code in protecting consumers and ensure its requirements satisfy fair trading and consumer protection needs in a changing regulatory and market environment and to ensure its provisions continue to be relevant.

This paper is designed to provide a policy context and general guidance for interested parties wishing to contribute to the review of the Model Code. The paper poses a number of questions on which comments are sought. However, comments do not have to be limited to those that appear in this paper.

1.1 Structure of discussion paper

This paper has been structured broadly in line with the Council of Australian Governments Principles and Guidelines for National Standard Setting and Regulatory Action (the `COAG Guidelines').¹

The COAG Guidelines state that potential regulators should identify whether there is a need for action and quantify the potential benefits and costs of that action. The identified costs and benefits can then be analysed and a conclusion drawn on whether action is necessary and what is the most efficient approach.

While this paper is intended merely to raise issues for discussion and is not, in itself, a proposal for regulatory action, its structure has been adopted so that information can be gathered from stakeholders in a format consistent with the COAG Guidelines.

The first part of this paper provides some background to the development of the Model Code, followed by a discussion generally of the direct marketing industry. The paper then places direct marketing and the Model Code within the current regulatory framework, including both legislation and other self-regulatory initiatives.

The paper then raises some discussion points that may be useful in analysing the potential costs and benefits of various options relevant to this review of the Model Code. Interested parties are not limited to these discussion points only. Comment is sought from interested parties generally on direct marketing and any insights that can be provided will be of great value to this process.

1.2 Terms of Reference

To review the effectiveness of the Direct Marketing Model Code of Practice and report to the Ministerial Council on Consumer Affairs on the following matters:

• The extent to which the Model Code has achieved its objectives of enhancing the potential for consumers to benefit from distance selling and improving the market for reputable businesses;

• Whether the Model Code's objectives remain current and valid in view of changes in the regulatory and technological environment, and the extent to which the Model Code has achieved its objectives;

• What measures could improve the Model Code and ensure it remains relevant.

• The extent to which the Model Code has been adopted by industry.

1.3 Consultation

This review is being conducted by a Working Party comprised of Commonwealth, State and Territory fair trading agencies.

Public consultation on the review of the Model Code will occur by written submissions, targeted focus groups and individual and public meetings (if necessary).

Formal submissions can be lodged electronically (preferred) or in hard copy to the address below.

Postal Address: Review of Direct Marketing Model Code
Consumer Policy Framework Unit
Competition and Consumer Policy Division
Department of the Treasury
Langton Crescent
Canberra ACT 2600

E-mail: directmarketing@treasury.gov.au

Facsimile: 02 6263 3964

Telephone: 02 6263 2028

All submissions will be published on www.consumer.gov.au (subject to claims for confidentiality).

The closing date for submissions is 11 October 2002.

1.4 Discussion Points

Development of the Model Code 1. What has been the impact of the Model Code on direct marketing practices? 2. To what extent have the objectives of the Model Code been achieved? 3. To what extent have industry associations adopted the provisions of the Model Code, and what proportion of direct marketers in the relevant industry sectors do they represent? 4. What approaches have industry associations taken to implement the provisions of the Model Code? 5. To what extent has the adoption of the various provisions of the Model Code impacted on the practices and competitive advantage of ADMA members?

Background 6. Is the definition of direct marketing in the Model Code appropriate? 7. Do you have any information as to the size of the direct marketing industry? 8. What are your experiences with complaints in relation to direct marketing? Do particular types of activity raise more complaints than others? Does direct marketing cause particular problems for certain groups in the community (for example, older consumers, disabled people)?

Regulatory Framework 9. How well do you think the Model Code fits within the current regulatory framework? 10. Is the Model Code effective in supplementing existing law? 11. Should the Model Code play a greater role in clarifying and improving compliance with existing law? 12. Has the Model Code operated flexibly in the changing regulatory and technological environment? 13. What self-regulatory initiatives might influence the Model Code? Is the Model Code consistent with existing self-regulatory regimes?

How the direct marketing industry operates 14. What consumer issues in relation to direct marketing have arisen since the development of the Model Code? 15. Does the Model Code effectively deal with practices that are now emerging, or could emerge, in direct marketing? 16. What effect has the internet had on direct marketing and how does this affect the Model Code? 17. What effect has improved global communication and logistics had on direct marketing and how has this affected the Model Code? 18. Does the Model Code adequately address market failures?

Issues for discussion Submissions are invited on any issue in relation to the review of the Model Code. Sample issues that may be appropriate for consideration include, but are not limited to: 19. What areas of the Model Code are, or are likely to be, of most benefit to you? What areas of the Model Code are, or are likely to be, of least benefit to you? 20. What areas of the Model Code are, or are likely to be, of most cost to you? What areas of the Model Code are, or are likely to be, of least cost to you? 21. Should any requirements in the Model Code be mandatory? If so, which ones? 22. Is the Model Code consistent with the National Privacy Principles? Are any amendments to the Model Code required to ensure that private information of individuals is protected in line with the National Privacy Principles? 23. Is the Model Code consistent with the E-commerce Best Practice Model? Are any amendments to the Model Code required to deal with the particular characteristics of electronic commerce? 24. How does a code which does not provide complete coverage of the direct marketing industry affect the position for consumers? 25. Should the Model Code address the issue of collection and use of information from publicly available sources, for example, electoral rolls and municipal building approval records? 26. Should the Model Code cover direct marketing material circulated with non-direct marketing material (for example, enclosing advertising with the electricity bill)? 27. Should the current limits on the hours during which direct marketers are permitted to contact consumers remain in the Model Code? If so, should those hours be altered? 28. Should the Model Code require that direct marketers be required to obtain a consumer's consent before sending direct marketing material to that consumer? If so, should consent be express, or should constructive consent be permitted? Should direct marketers be required to update their do-not-call and do-not-mail lists within a specified time limit after receiving a request from a consumer?

Footnote:
1 The COAG Guidelines are available at http://www.dpmc.gov.au/pdfs/coagpg.pdf.

Return to: Direct Marketing Model Code - Contents