Review of the MCCA Direct Marketing Model Code of Practice - Report

Environmental changes since 1997

There have been a number of changes in the regulatory and technological environments that have impacted on the direct marketing industry since the Model Code was released in 1997. The following section outlines these changes.

Legislative changes

The Privacy Act

The Privacy Amendment (Private Sector) Act 2000 (Privacy Act) provides a nationally consistent regulatory framework for privacy. 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 National Privacy Principles (NPPs) (set out in Schedule 3 of the Privacy Act) set the minimum privacy standards for the private sector. The NPPs regulate the collection, use, disclosure and transfer overseas of personal information. They require organisations to ensure that personal information they hold is accurate, up to date, 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 act anonymously where such action is lawful.

The Privacy Commissioner has produced guidelines for the NPPs that provide helpful information about the Principles. This guidance is advisory only, and not legally binding.

The Privacy Act and the NPPs do not apply to small business operators, which are defined as those with an annual turnover of $3 million or less⁶. However, this exemption does not apply to a small business that is a health service, that trades in personal information, or that provides services under an Australian Government contract⁷.

Of specific relevance to direct marketers is NPP 2.1(c), which allows organisations to use non-sensitive personal information for direct marketing where, amongst 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.

Telemarketing hours

Provision 56 of the Model Code states that without a consumer’s consent, a telemarketer shall not make an outbound telephone or Automatic Telephone Equipment call to contact a consumer before 8 am or after 9 pm (local time at the consumer’s location) or on the public holidays of Christmas Day, Good Friday and Easter Sunday. The current telemarketing hours included in the Model Code mirrored those originally prescribed in Regulation 7.8.22 of the Corporations Regulations 2001 for the hawking of certain financial products.

This regulation was recently amended. The effect has been that since 6 November 2002 the hawking of certain financial products by telemarketers is no longer permitted on a Sunday and since 11 March 2003, no longer permitted on a national public holiday. These public holidays are:

• New Year’s Day;
• Australia Day;
• Good Friday;
• Easter Monday;
• Anzac Day;
• Christmas Day; and
• 26 December (Boxing Day).

Self-regulatory changes

The Australian E-Commerce Best Practice Model (the BPM) released in May 2000, represents Australia’s implementation of the OECD Guidelines on Consumer Protection in the Context of E-commerce (OECD Guidelines). The BPM provides voluntary guidance to industry and consumers on the elements of an effective self-regulatory framework in e-commerce.

The BPM addresses several areas that relate to direct marketers. These issues include information, payment, redress, jurisdiction, advertising and privacy.

The BPM advocates a ‘qualified’ opt-in approach to commercial e-mail in Clause 23.1⁸. The effect of the clause is that businesses should not send commercial e-mail except where they have an existing relationship with the person or where the person has indicated that they wish to receive commercial e-mail.

This approach to commercial e-mail was decided upon following extensive consultation with consumer and industry groups.

Non-legislative changes

Technological developments

Since the release of the Model Code in 1997, there has been an expansion in the types of direct marketing methods employed by organisations. For example, e-mail and the Internet have become popular instruments among marketers. This improved interconnectivity has meant that direct marketing has become faster and cheaper, and organisations using advanced technology now have the ability to process larger amounts of personal data.

The ease and prevalence of commercial e-mail in Australia has prompted the NOIE to conduct a review into unsolicited commercial email (spam) known as The Spam Problem and How it Can be Countered. An interim report was released in August 2002, which included a number of draft recommendations proposing a strategy to reduce spam that finds the right balance of regulatory, self-regulatory, technical and consumer awareness approaches. The findings of the review were announced on 16 April 2003.

International developments

Since the formation of the Model Code there have also been a number of international developments, key of which are outlined below.

Organisation for Economic Co-operation and Development (OECD) developments

The OECD Guidelines⁹, set out the core characteristics for effective consumer protection for online business-to-consumer (B2C) transactions. As indicated above, Australia has adapted the OECD Guidelines in consultation with industry and consumer bodies to develop the BPM.

The OECD Guidelines include the following statements:

• Advertising and marketing should identify the business on whose behalf the marketing or advertising is being conducted, where failure to do so would be deceptive.
• Businesses should develop and implement effective and easy-to-use procedures that allow consumers to choose whether or not they wish to receive unsolicited commercial e-mail messages.
• Where consumers have indicated that they do not want to receive unsolicited commercial e-mail messages, such choice should be respected.

European Union (EU) developments

The EU-Privacy Directive, formally titled Directive 2002/58/EC Concerning the Processing of Personal Data and the Protection of Privacy in the Electronic Communications Sector, 2002, addresses issues of consent, identity of sender and the option to have further communication cease with respect to electronic messaging for direct marketing.

Article 13 in the E-Privacy Directive makes it clear that ‘opt-in’ consent is required for the sending of all unsolicited commercial e-messages in all forms of communication (including faxes). The Directive is intended to be mirrored in the national laws of the countries within the European Commission (EC).

United Kingdom (UK) developments

The Consumer Protection (Distance Selling) Regulations (the ‘Regulations’) came into force on 31 October 2000 and were introduced in order to implement the EC Distance Selling Directive of 1997. The Regulations protect consumers involved in distance selling contracts. They apply to any supplier (whether or not UK based) that sells goods or services to consumers in the UK, and is intended to be broad enough to cover the range of mediums including the Internet, mobile phones, catalogues, direct mail or digital television sales.

Key elements of the provisions are that sellers must provide certain information to consumers prior to the contract, either in writing or through another ‘durable medium’. There is a 30-day performance period (unless stated otherwise) and failure to comply with this will entitle the consumer to a refund of any money paid in advance. The consumer is not required to deliver the goods back to the supplier if he/she cancels the contract (the onus is on the supplier to make arrangements to collect them). If the main contract is cancelled, any related credit agreement is also automatically cancelled.

⁶ Small businesses subject to the Privacy Act from 21 December 2002 include those small businesses related to a larger business (a related body corporate) as well as small businesses that trade in personal information or are Australian Government contract service providers.

⁷ All health service providers regardless of their size have been subject to the Privacy Act since 21 December 2001.

⁸ 23.1 Businesses should not send commercial e-mail except:

23.1.1 to people with whom they have an existing relationship; or

23.1.2 to people who have already said they want to receive commercial e-mail.

⁹ These Guidelines can be obtained at http://www1.oecd.org/publications/e-book/9300023E.PDF.

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