Clifford Chance

The Australian government proposes to ban "unfair trading practices," targeting business conduct that distorts consumer decisions ('dark patterns') and specific practices like unfair subscriptions, drip pricing, dynamic pricing, and customer support barriers.

On 15 November 2024, the Australian Treasury released a supplementary consultation paper building on its August 2023 consultation regulation impact statement, 'Protecting Consumers from Unfair Trading Practices Consultation Regulation Impact Statement' (Consultation RIS).

This follows the Government's 15 October 2024 announcement of a review into artificial intelligence and the Australian Consumer Law (ACL), indicating its commitment to major reform.

The Consultation RIS sought evidence on the nature and extent of unfair trading practices and the extent of any consumer and small business harm arising from potential gaps in the ACL. These reforms resemble legislation in the UK and Europe designed to tackle "unfair" trading practices.

Treasury's research attributes these potential gaps to the increasing complexity of online marketplaces, global supply chains, evolving business models and increased market concentration in certain sectors, and identified the following conduct of particular concern:

• conduct that distorts, manipulates or undermines consumer choice, without necessarily being misleading or deceptive, such as practices that create an undue sense of urgency or scarcity (i.e. 'dark patterns');
• subscription-related practices, including practices which make it difficult for consumers to cancel a subscription;
• pricing-related practices, including drip pricing, dynamic pricing and hidden fees; and
• post-sale practices, including imposing unreasonable barriers to accessing customer support.

The Consultation RIS presented the following four policy options for consideration:

1. Status quo (no change).
2. Amend statutory unconscionable conduct.
3. Introduce a general prohibition on unfair trading practices.
4. Introduce a combination of general and specific prohibitions on unfair trading practices.

Submissions received by Treasury expressed varied views both on the existence, and extent, of gaps in the ACL. Certain stakeholders submitted that existing ACL protections and industry-specific regulations paired with reforms to Privacy Act would be sufficient to address perceived gaps.

Notwithstanding, option 4 garnered the highest level of stakeholder support. Its proponents submitted that this approach would:

• offer the most thorough regulation of unfair trading practices;
• ensure clear compliance obligations; and
• maintain sufficient flexibility to adapt to emerging commercial practices resulting from advancements in technology and evolving business models.

Accordingly, the supplementary paper seeks feedback in relation to the introduction of:

• a principles-based general prohibition designed to address unfair practices of the kind identified above, while being flexible enough to address new and emerging problematic conduct; and
• specific prohibitions that can effectively address particular unfair practices, as well as seeking information on the benefits to consumers and compliance costs for businesses associated with the proposed prohibitions.

General prohibition

The proposed general prohibition is geared towards conduct that unreasonably distorts or manipulates, or is likely to unreasonably distort or manipulate, the economic decision-making or behaviour of a consumer and causes, or is likely to cause, material detriment.

It is proposed that the general prohibition be accompanied by a non-exhaustive list of example conduct falling within scope of the prohibition, such as:

• the omission of material information;
• the provision of material information to a consumer in an unclear, unintelligible, ambiguous or untimely manner, including the provision of information in a manner that overwhelms, or is likely to overwhelm, a consumer;
• impeding the ability of a consumer to exercise their contractual or other legal rights; and
• use of design elements in online consumer interfaces that unduly pressure, obstruct or undermine a consumer in making an economic decision.

It is proposed that a staged approach be adopted for the introduction of a general prohibition, applying initially to business-to-consumer dealings.

Specific prohibition

The focus of the specific prohibitions is to address the balance of impugned conduct identified above (e.g. subscription-related practices et al).

Unlike the general prohibition, the consultation paper proposes that subscription-related form would apply to business-to-business transactions, as well as business-to-consumer.

Whether any of the remaining specific protections applying to business-to-consumer transactions would be available to protect small business in their dealings is proposed to be determined on a case-by-case basis.

Next steps

The Australian Treasury has indicated that once the consultation process has concluded, a decision regulation impact statement (Decision RIS) will be prepared, outlining the evidence gathered and the preferred policy approach.

The Decision RIS will be published by the Office of Impact Analysis on the Department of the Prime Minister and Cabinet website.

Moreover, in accordance with the Intergovernmental Agreement for the ACL, options to amend the ACL will be considered and agreed in consultation with States and Territories. Following this, the Government will consider what changes are required to financial services regulated by the Australian Securities and Investments Commission Act to ensure appropriate alignment across the ACL and financial services laws.

At the ASIC Forum on 15 November 2024, the ASIC Chair indicated that there was support for broadening of the consultation process to include financial services, with a "principles-based" approach favoured similar to the misleading or deceptive conduct provisions of the ACL.

Comments on the consultation are due by 13 December 2024.