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

Terms of Reference 4

Measures to improve the Model Code and ensure it remains relevant

Options for the Model Code

Section 6 of the review discussion paper set out a list of possible options for the Model Code. These included:

Option 1 No Code;

Option 2 Retain Model Code with amendments;

Option 3 Sectoral sub-codes;

Option 4 Mandatory code; and

Option 5 Status quo.

The Working Party determined that proceeding with Option 2 (retaining the Model Code with amendments) was desirable. An analysis of each of the above options is included in Appendix A. The Working Party subsequently focussed on what improvements needed to be made to the Model Code itself and what other recommendations should be made to facilitate better arrangements for the Model Code.

Recommended changes in relation to the Model Code

The following outlines the Working Group’s proposed changes and recommendations in relation to the Model Code based on its analysis and consultation undertaken throughout the Review of the Direct Marketing Model Code of Practice. Most of the recommendations below involve updating the Model Code for other regulatory changes that have occurred since the introduction of the Model Code.

1. Inclusion of the NPPs in the Model Code

Since the Model Code was introduced, the Privacy Act has established a new privacy regime for collecting and handling personal information. The NPPs contained within the Act provide a set of general, base line information handling standards for the private sector.

Including a reference to the NPPs in the Model Code would be desirable, as it would:

• highlight the importance of respecting consumers’ privacy to direct marketers;
• make the Model Code current and consistent with the Government’s privacy regime;
• assist in improving the neutrality of the Model Code (as the NPPs themselves are not technologically specific); and
• represent best practice in code development (a code should contain all relevant regulatory and self-regulatory requirements of relevance to the industry).

The adoption of the NPPs in the Model Code is unlikely to be controversial, with this approach well supported by submissions to the review with no dissenting views. Additionally, the ADMA Code already includes the NPPs.

Small businesses that are not a health service, trade in personal information or provide services under an Australian Government contract are exempt from complying with the NPPs and the broader privacy regime. However, the inclusion of the NPPs in the Model Code will mean that all direct marketers that chose to adopt the Model Code’s provisions will be required to comply with the NPPs.

2. Inclusion of the NPP guidelines in the Model Code

While a number of submissions called for the Model Code to address specific privacy issues, including the sending of direct marketing material with non-direct marketing material, the use of public records and cookies, the Working Party considered that these issues were best handled by the OFPC in the context of the NPP Guidelines. While the Working Party acknowledged the Model Code is not the vehicle to extend or interpret privacy guidance it nevertheless recognised the value of flagging the NPP guidelines in the Model Code.

For example, the Guidelines provided for NPP 1.3 (a)(b) suggest that 'if an organisation collects personal information using a cookie, web bug or other means, it could give the NPP 1.3 information in a statement clearly available on the website; for example, it could be linked directly from the homepage and other pages that make use of the devices'.

Including the guidelines in the Model Code would offer direct marketers further guidance as to their requirements under the current privacy regime.

3. Consent to send commercial e-mail messages

The Model Code does not currently offer direct marketers specific guidance on the issue of obtaining a consumer’s consent when engaging in direct marketing. There was a strong call in submissions for consideration of this issue in the Model Code, particularly in relation to the sending of commercial e-mail messages.

Submissions indicated the prevalence of ‘spam’ in Australia and difficulties faced by consumers in preventing it. In response to this, the majority of submissions called for a consent-based approach to unsolicited commercial e-mail. A consent-based approach is used in the BPM. Clause 23.1 of the BPM outlines that no marketer, including mailing-list operators, may send direct marketing to recipients who:

• they do not have a prior relationship with, or
• have not explicitly requested the material.

This provision has become known as the qualified opt-in approach to commercial e-mail.

While the ADMA Code currently reflects most of the provisions of the BPM it does not include a reference that resembles the qualified opt-in position expressed in clause 23.1.

Addressing the issue of unsolicited commercial e-mail by providing a qualified opt-in approach in the Model Code can be justified for the following reasons:

• the BPM is Australian Government policy and was released following extensive consultation with other levels of Government, consumer and industry groups;
• the approach is consistent with the existing Privacy regime²⁰;

it would be sensible for the Model Code to be consistent with the relevant provisions of the BPM; and

• attributes of e-mail commerce have the capacity to cause greater levels of consumer detriment in comparison to conventional forms of direct marketing and these potential costs to consumers make it important to take action to combat such costs. That is:
  • the costs are disproportionate vis-a-vis other forms of direct marketing; for example, the costs are borne by the marketer via traditional marketing methods (for example, postage) while the marketer faces negligible costs when using e-mail;
  • unsolicited e-mail can affect the bandwidth of online networks, imposing transmission and storage costs on Internet Service Providers that are then borne by the consumer; yet the sender is unlikely to face similar costs as e-mail is a cheap quick form of interacting with consumers;
  • the speed at which marketing material can be disseminated via e-mail allows scams and misleading information to be circulated quickly to a large audience of consumers — this increases the potential for systemic and widespread consumer detriment; and
  • e-mail can also be used to transmit computer viruses. This threat is not associated with more conventional forms of direct marketing.

Recommendation 3 The Working Party recommends a qualified (existing commercial relationship) opt-in approach to unsolicited commercial e-mail be included in the Model Code.

4. Information to be supplied to consumers

Part 3 of the Model Code currently covers provisions relating to Telemarketing. As defined by the Model Code, telemarketing encompasses all activities that relate directly or indirectly to direct marketing and which involve the use of a telephone, facsimile machine, or other customer equipment connected to a telecommunications network to contact a consumer.

Part 3, provisions 51-55(b) of the Model Code refers to the information direct marketers must provide to consumers when engaging in telemarketing. Broadly these require the telemarketer to:

• identify themselves and the direct marketer they represent;
• state the purpose of the call, and if calling from outside Australia, identify the country;
• not state that they are undertaking market research when their purpose is a commercial one; and
• provide details of the source from which the consumer’s personal information was obtained if a consumer requests this.

The Working Party took the view that these provisions should apply to all forms of direct marketing. This change would assist in creating a more neutral Model Code.

Applying the above provisions to all forms of direct marketing is consistent with the NPPs, as Principle 1: Collection outlines, amongst other things, the responsibility of businesses to identify themselves when collecting personal information.

It is also consistent with the requirements specified in the BPM and ADMA’s ‘Fair Conduct Relevant to E-commerce’ section of its Code of Practice. The BPM sets out the following:

• Section 27 states that businesses should provide consumers with accurate and easily accessible information that allows identification; and
• Section 28 articulates the types of information that should be provided to consumers.

The exception to this recommendation is Provision 52²¹ of the Model Code as it relates specifically to a telemarketer blocking the transmission of the calling line, which is not applicable to other forms of direct marketing.

5. Telemarketing hours

The Model Code currently establishes that telemarketers are prohibited from calling or using Automatic Calling Equipment (without a consumer’s consent) before 8.00 am and after 9.00 pm (local time at the consumer’s location). Additionally, the restriction applies all day on Christmas Day, Good Friday and Easter Sunday.

Recently the Corporations Regulations 2001 were amended to include Sundays and all national public holidays as excluded hours for the hawking of certain financial products. It is the Working Party’s view that it is not appropriate for telemarketing hours to be inconsistent across a range of goods and services and accordingly the Working Party recommends a consistent approach to telemarketing hours be adopted in the Model Code.

6. Third party marketers

Third party marketers are individuals or businesses that are hired by direct marketers to carry out part of the direct marketing process for them. Examples of third party marketers include those engaged in a letterbox drop or a list operator hired to handle the dispatch of e-mail. A third party is deemed to include agent, contractor, sub-contractor, consultant or supplier. However, third party marketers would not include persons required to support corporate or internal functions of the direct marketing business (for example, accountants, tax advisers, plant or equipment providers).

The Model Code does not currently make specific mention of the use of a third party by a direct marketer, and arguably may fail to cover the conduct of certain parties involved in the direct marketing process. However, the definition of direct marketer includes ‘any individual or organisation who engages in direct marketing’. In order to ensure the conduct of third parties are covered by the Model Code, the Working Party suggests a provision be introduced in the Marketing claims section which would place an onus on direct marketers to inform any third parties (that are hired to carry out part or all of a direct marketing process) of the provisions of the Model Code.

7. Deletions from marketing lists

The NPPs currently require businesses to give consumers the opportunity to opt-out of receiving direct marketing material. In response to this requirement, ADMA has made it compulsory for its members to keep a Do Not Mail/Do Not Call service register to record consumers who have chosen to opt-out.

The Working Party recommends that the Model Code include a provision that requires direct marketers to purge from their marketing lists the names of consumers who have chosen to opt-out from receiving direct marketing material.

In order to foster best practice in this area, the Model Code should require direct marketers to purge a consumer’s details from their lists within 30 days of being asked to do so by the consumer. This section would also include a provision that stipulates direct marketers are also required to remove deceased persons from their lists within 30 days of being asked to do so.

8. Unconscionable Conduct

Section 51AB of the Trade Practices Act 1974 (the TPA) states that ‘a corporation shall not, in trade or commerce, in connection with the supply or possible supply of goods or services to a person, engage in conduct that is, in all circumstances, unconscionable.’

Although this is a relevant piece of legislation that direct marketers are required to conform with there is not currently a provision in the Model Code that refers to Unconscionable Conduct. This is, notwithstanding that other TPA provisions are included in the Model Code.

It is the Working Party’s view that a reference to unconscionable conduct be included in the Model Code. The provision to be included would set out direct marketers’ obligations under the TPA, as is the case with other provisions in the Model Code.

9. Complaint handling procedures

Provisions 59²² and 60²³ of the Model Code, which relate to internal complaint handling procedures, outline the requirements of direct marketers dealing with consumer complaints. Provision 60 requires direct marketers to comply with Australian Standard on Complaints Handling (AS 4269).

As mentioned previously, a direct marketer is defined as 'any individual or organisation that engages in direct marketing, and includes telemarketing'. This definition appears to exclude direct marketing industry associations.

The Working Party therefore recommends Provision 59 be extended to include industry associations to ensure that these bodies, as well as direct marketers, are complying with AS 4269 when dealing with consumer complaints.

10. Code awareness issues

The Working Party considers that a high level of business and consumer awareness of the provisions of a code of practice is essential to make such a code effective. Information supplied to the review indicates that, at a consumer level (at least), such awareness may not currently exist. For example, complaints to the ADMA Code authority were at a level of less than four a month during 2000-2001.

Provision 63 of the Model Code states that a code administration body should arrange publicity for the code and make provisions for employee awareness of the code. The Working Party wishes to strengthen this by requiring Code administration bodies to develop strategies to ensure the active promotion of their Codes.

11. MCCA to actively promote the Model Code

The review identified the need for Government jurisdictions at all levels to do more to publicise the Model Code. One avenue could be for MCCA to actively undertake a publicity campaign once the revised Model Code is released. As such, the Working Party recommends MCCA actively promote the Model Code through various channels once it is publicly released, including through State and Territory Fair Trading Offices, inclusion on relevant Government websites and industry mail-outs.

12. Inclusion of parts of the BPM in the Model Code

As suggested in recommendation three, the BPM is current Australian Government policy and as such, it is sensible that the Model Code reflects any relevant provisions of the BPM that impact on the direct marketing industry.

The Working Party recommends that relevant parts of the BPM²⁴ (the inclusion of Clause 23.1 is recommended separately in recommendation 3) be included in the Model Code. These sections of the BPM identified by the Working Party describe best practice in providing information to consumers prior to the formation of a contract.

13. A general foreword be added to the Model Code

The Working Party recommends a ‘Foreword’ be added to the Model Code (see Appendix B). The Forward would briefly discuss MCCA’s objectives for the Model Code and how the Model Code is consistent with jurisdictions’ commitment to self-regulation of the direct marketing industry.

14. Administration of the Model Code

The Model Code is currently subject to review every three years. This updating mechanism has resulted in the Model Code becoming outdated in the current environment, as it has been unable to reflect changes in the regulatory and technological environments on a timely basis.

In order to increase the flexibility of the Model Code, it is recommended that a permanent Direct Marketing Working Group be established to monitor the Model Code and developments within the direct marketing industry in the time between review periods. The Working Group, made up of interested SCOCA jurisdictions, would meet via teleconference when required to discuss industry changes and any other issues relating to the Model Code. The Working Party also recommends that the Model Code be reviewed after two years instead of the current three, in an effort to update the Model Code in a more timely fashion.

It should also be noted that this group would not form an official SCOCA Advisory body and any SCOCA member, regardless of whether they are represented on the Working Group, would be able to suggest possible issues to be discussed by the Working Group. The Australian Government is willing to chair this permanent Working Group.

As discussed in the review paper, the Working Party had difficulty measuring the extent to which the Model Code has achieved its objectives. As such it is recommended that the permanent Working Group should look to develop benchmarks²⁵ that can be used in the future to better measure the extent to which the Model Code is achieving its objectives and enable timely amendments to the Model Code when necessary.

These benchmarks should be clear and measurable and include:

• monitoring complaints;
• industry coverage;
• consumer awareness;
• trader awareness; and
• dispute resolution.

The Working Party also recommends that a number of other issues be explored further by the permanent working group. These include:

• the current exemption of automated commercial premises
• privacy issues (including the use of publicly available information for direct marketing purposes and the sending of direct marketing material with non-direct marketing material).
• emerging technologies for example, SMS.

²⁰ The NPP guidelines outline circumstances in which it may be impracticable to seek the individual’s consent. In relation to spam, the guidelines state that ‘...as the cost of e-mailing is negligible, ordinarily it will not be ‘impracticable’ to seek consent where an organisation chooses on-line methods of contact or communication.’

²¹ Provision 52 states 'When making an outbound telemarketing call, a telemarketer shall not block the transmission of the calling line identity to the receiving service'.

²² Provision 59 states 'Each direct marketer adopting this code shall have in place procedures for dealing with complaints from consumers'.

²³ Provision 60 states 'The procedures required under clause 59 shall be available to all consumers who have been contacted by direct marketing and shall comply with the Australian Standard on Complaints Handling (AS 4269)'.

²⁴ Specifically sections 28.4, 28.5, 32, 34, 35.10, 35.11, 35.12, and 35.13. These are set out in Appendix C.

²⁵ Benchmarking is this context, would be an activity that looks to define best practice and then measure the performance of the direct marketing industry against such best practice objectives.

Next: Appendix A: Possible options for the Model Code
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