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

4 Regulatory framework

While the Model Code operates as a self-regulatory system, it sits within a legislative framework. As a self-regulatory system, the Model Code is not intended to replace this legislative framework.

4.1 Trade Practices Act

The Trade Practices Act is the primary legislation regulating consumer protection throughout Australia at the national level.

Part V of the Trade Practices Act contains the consumer protection provisions. In relation to direct marketing, the most important provisions relate to:

• misleading or deceptive conduct;

• false representations about goods or services as to their quality, value, price, availability of facilities for repair, place of origin, warranties, etc;

• offering gifts, prizes or other free items with the intention of not providing them;

• harassment and coercion; and

• asserting a right to payment for unsolicited goods or services, unless the supplier has reasonable cause to believe that there is a right to payment.

The Act also implies non-excludable conditions and warranties into consumer contracts. The implied warranties and conditions include:

• a condition that goods supplied by sample or description will comply with that sample or description;

• warranty that services will be supplied with due care and skill;

• warranty that any goods supplied with services will be fit for the purpose; and

• warranty that, where the purpose is made known, goods or services supplied will be fit for that purpose.

It should be noted that the TPA provides that the ACCC has the power to exempt from legal action certain anti-competitive conduct that may otherwise contravene the Act. This power extends to authorising industry standards which may have an anti-competitive effect, but which are offset by accompanying public benefit.

4.2 State and Territory legislation

All States and Territories have fair trading legislation that substantially mirrors the consumer protection provisions of the Trade Practices Act.

In Victoria, as well as general consumer protection provisions mentioned above, the Fair Trading Act contains specific provisions relating to direct marketing (referred to as `non-contact sales' in the Act). These provisions impose certain requirements on the seller as to the provision of information to the buyer, for example, the full terms of the agreement, the total consideration to be paid and the name and address of the seller.

It should be noted that Victoria and Queensland are currently in the process of reviewing their Fair Trading Acts. Interested parties may wish to provide input to those processes, as well as this review of the Model Code.

The States and Territories also have other legislation which, while not necessarily applicable to direct marketing, may be relevant guidance in ensuring that a consistent regulatory approach is taken. This is particularly important where a company engages in, for example, door to door selling as well as direct marketing.

All States and Territories have door to door selling legislation. For present purposes, the most significant part of the door to door selling legislation is the cooling off period that applies to purchases. Depending on the particular state or territory, the cooling off period is between 5 and 10 days.

Sale of goods legislation may also be relevant to direct marketing, particularly in relation to implied warranties. For example, goods sold by sample or description must correspond to that sample or description.

4.3 Privacy legislation

As of 21 December 2001, the Privacy Act applies to personal information collected and handled by many private sector organisations in Australia. The legislation establishes a co-regulatory scheme. It sets out a legislative framework for collecting and handling personal information and also contains provision for organisations or industry sectors to develop privacy codes that can operate in place of the legislative framework and be tailored to their own industry needs.

The Privacy Act establishes the National Privacy Principles (set out in Schedule 3 to the Privacy Act) as the minimum privacy standards for the Private Sector. The National Privacy Principles (NPP) regulate the collection, use and disclosure and transfer overseas of personal information. They require organisations to ensure that personal information they hold is accurate up to date and complete, and secure. Organisations are also required to be open about how they manage personal information, provide access and correction rights to individuals, and allow people to deal with them anonymously if that is lawful. The National Privacy Principles also regulate the adoption use and disclosure of Commonwealth Government identifiers.

Of particular interest is NPP 2.1(c), which allows organisations to use non-sensitive personal information for direct marketing where. Among other things, it is impracticable to seek the individual's consent and where the individual is told that they can opt out of receiving any more marketing from the organisation. The Privacy Commissioner has published guidelines which outline circumstances in which it may be impracticable to seek the individual's consent.

The Privacy Act does not apply to a small business operator. A small business is a business with an annual turnover of $3 million or less. However, the small business exemption does not apply to a small business that is a health service; that trades in personal information; or that provides services under a Commonwealth contract. Small business operators that are not covered by the legislation can choose to opt in if they so wish.

Further information regarding the Privacy Act and the National Privacy Principles can be obtained from the Office of the Federal Privacy Commissioner's website at www.privacy.gov.au, or the Attorney-General's Department's website at www.ag.gov.au/ privacy.

4.4 Self-regulation

The Taskforce on Industry Self-Regulation noted that where self-regulation operates within the context of general law, such as the Trade Practices Act and the Fair Trading Acts, then it can add detail and industry specific guidance to help market participants comply with the law and achieve competitive conduct.

4.5 Building Consumer Sovereignty in Electronic Commerce: A Best Practice Model for Business

The Best Practice Model is Australia's implementation of the OECD Guidelines on Consumer Protection in the Context of Electronic Commerce.

The Best Practice Model provides voluntary guidance to industry and consumers on the elements of an effective self-regulatory framework in electronic commerce. Adoption of the Best Practice Model will help to ensure that consumers are adequately protected and have confidence in making online transactions.

The Best Practice Model deals with several areas of particular concern to consumers, business and government that need to be addressed in order to build a world class consumer protection environment. These key issues include information, payment, redress, jurisdiction and privacy. Given the substantial degree of overlap between direct marketing and electronic commerce, these key issues may also need to be addressed in this review of the Direct Marketing Model Code.

The Best Practice Model is available at http://www.ecommerce.treasury.gov.au/
publications/BuildingConsumerSovereigntyInElectronicCommerce-ABestPracticeModelForBusiness/index.htm

4.6 Benchmarks for Industry-based Customer Dispute Resolution Schemes

The Benchmarks provide a set of principles which should form the basis of any effective dispute resolution scheme. The Benchmarks do not have the force of law³ and are intended to be voluntary guidelines, however adherence to them will be a clear demonstration of a commitment to good practice.

The Benchmarks are:

• accessibility;

• independence;

• fairness;

• accountability;

• efficiency; and

• effectiveness.

Since a self-regulatory scheme such as the Direct Marketing Model Code should include provision for resolving disputes between businesses and consumers, it is important that the review of the Model Code take into account the Benchmarks.

The Benchmarks are available at http://www.selfregulation.gov.au/publications/ BenchmarksFor Industry-BasedCustomerDisputeResolutionSchemes/index.asp

4.7 International experience

Other jurisdictions have also addressed the issues raised by direct marketing. Appendix A of this paper outlines the approaches taken by the OECD, the United States and the United Kingdom.

Discussion Points 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 may influence the Model Code? Is the Model Code consistent with existing self-regulatory regimes?

Footnote:
3 However, the Benchmarks have been incorporated into Australian Securities and Investment Commission Policy Statement 139, which is used for interpreting the Financial Services Reform Act. The Benchmarks have also been incorporated into prescribed standards for the approval of complaint handling procedures under a privacy code by the Privacy Commissioner.

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