Comparing Product Safety Re-Regulation in Australia: The Never-Ending Story

Product Safety is one major theme for the 4th Consumer Law Roundtable, hosted this year at Sydney Law School on 4 December 2009. Others include unfair contract terms and consumer credit, and this Roundtable will have an Asia-Pacific focus. Professor Michelle Tan will join us again from Japan, and keynote speakers are Professor Tsuneo Matsumoto (chair of Japan’s new Consumer Commission, which he outlines here) and VUW’s Kate Tokeley (considering unfair contract terms from a New Zealand perspective). A major role of the new Consumer Affairs Agency – supervised by Commission – is to collect and analyse consumer product-related accident data, which Japanese suppliers need to disclose since amendments in 2006.
Meanwhile, on 16 November the Australian Treasury initiated yet another public Consultation: “Regulatory Impact Statement – Australian Consumer Law – Best Practice Proposals and Product Safety Regime”. Before being considered for a Bill, a cost-benefit analysis (RIS) has been required for these proposals, based on consumer law reform recommendations from the Productivity Commission in 2008 other than those (especially unfair contract terms regulations) which were introduced as a separate Bill in July – without the extra hurdle of such a RIS analysis. Unfortunately, the Treasury did not publicise well this latest Consultation (eg not via their portal) and required Submissions by 30 November. They wanted to report to the Ministerial Council of Consumer Affairs (MCCA), also scheduled for 4 December – alongside, incidentally, PM Rudd’s major conference on the Asia Pacific Community concept (see my revised blog on that here).
Despite this very tight deadline, I provided the following Submission in response to Part II (pp 82-98) of this consultation, regarding Product Safety (PS) re-regulation. I elaborated mainly on a few key points developed in my Submission to the first consultation on the Australian Consumer Law reform announced in February 2009. Hopefully Australia will finally join Japan and many other Asia-Pacific countries (China, Canada and the US) in adopting the new global standards for PS.

PC Report’s Recommendation 9.3: reporting requirement for products associated with serious injury
1. The PC’s report in 2008 appears to offer an alternative requirement of only requiring reporting if there had been a successful PL claim or out-of-court settlements. But that aimed to reiterate the PC’s recommendations from its report of 2006 specifically on PS, and the latter report in fact preferred the stronger option of disclosure for any products associated with serious injury. This should be the minimum new standard for the PC’s reasons which you summarise at the bottom of page 92 of your Paper.
2. Since 2006 all Australia’s major trading partners (including China since 2007) have at least this disclosure requirement, extending to their importers as well as manufacturers. But they go further to require notification of certain risks associated with consumer goods, not just actual injury or death as proposed for Australia. The US has had this requirement from the 70s, with further provisions added in 1990 (situations creating “an unreasonable risk of serious injury or death”). The revised European Directive of 2001 also requires disclosure of serious risks. Japan’s amendments in 2006 require disclosure of risks specified in regulations – currently situations involving (officially notified) fires, even if no injury results. Legislation introduced in Canada this year covers “an occurrence in Canada or elsewhere that resulted or may reasonably have been expected to result in an individual’s death or in serious adverse effects on their health, including a serious injury”. In light of these developments world-wide, MCCA should revisit the PC’s recommendation and take it a step forward. Its arguments for a disclosure obligation effectively apply also to the new global standard that extends disclosure to at least some serious risks, not just actual injuries that may have been fortuitously avoided in a particular case.
3. In assessing costs versus benefits in imposing such disclosure obligations, three major points can be added to your Paper:
a. All these countries have gone through similar assessments (Canada’s RIS system is closest to Australia’s), and have very similar consumption-based economies (except perhaps for China).
b. Explicitly (as in the Canadian provisions just quoted) or implicitly, importers in those countries have to monitor and disclose problems that arise with the goods they trade in even if those arise abroad. This means that prudent importers from our major trading partners will increasingly impose contractual obligations on their Australian exporters to disclose product-related problems that arise in Australia (and indeed third countries). This will make industry compliance costs for Australian exporters increasingly minimal, especially the more reputable ones dealing with reputable importers abroad. If compliance costs do rise for less reputable exporters, they seem particularly justified because those exporters threaten Australia’s reputation by risking injury to consumers abroad, and they may well also sell the same goods to Australian consumers. And an unfair situation is created if instead suppliers to our domestic market are not held to the same safety standards as those who export abroad.
c. Regarding instead the costs to the Australian government (p93 of your Paper), these can be minimized by integrating our new system particularly with the European one. Its RAPEX database of notifications is already already linked with other countries (through MoUs with China, the US, and possibly soon Japan). Maximising those efficiencies is another reason to extend Australia’s disclosure requirement to that in the 27 EU member states, namely serious risks as well as actual injuries. Inter-governmental information sharing obligations would also be a straightforward valuable addition to Australia’s burgeoning FTAs.
Other PC Report Recommendations: cover goods-related services and reasonably foreseeable misuse of goods, government recall of “orphan goods”
4. The EU and most of our other major trading partners already provide for these protections as well.
5. The “reasonable foreseeable misuse” clarification was agreed in the PC’s final report in 2006 after extensive consultation and criticism of an alternative formulation in its draft report of 2005. As your Paper reiterates (p 90), this is also consistent with PL requirements under TPA Part VA, so extra compliance costs for (law-abiding) businesses should be minimal.
6. Similarly, all services should be provided safely under the TPA Part V Div 2 when there is a contractual relationship. This still adopts a negligence test, but there is a growing trend in our Asia-Pacific region to extend strict liability to suppliers of unsafe services anyway. The main advantage of clearly extending PS obligations to goods-related services, under TPA Part V Div 1A, is to reduce costs and delays for regulators faced with arguments from businesses asserting that the problem is associated only with the service and not the goods.
7. At pp 88 and 91 it is stated that the “do nothing” alternative would be “cost neutral for the government”. This neglects the significant costs to the government, but also taxpayers who subsidise litigation services, involved where businesses contest distinctions such as whether the problem arose from the “service” or “goods” themselves. The federal Attorney General has strongly criticised today’s dispute resolution system and various procedural and institutional reforms have been now been proposed. But prevention is usually better than cure.
8. At pp 81 and 91, there are omissions regarding a benefit involved in the government instead undertaking reform: “meeting reasonable consumer expectations about the role of the state in product safety”. This benefit is mentioned at p 94 regarding the disclosure requirement, and p 96 regarding recalls of orphan goods.

Author: Luke Nottage

Prof Luke Nottage (BCA, LLB, PhD VUW, LLM LLD Kyoto) is founding co-director of the Australian Network for Japanese Law (ANJeL), Associate Director (Japan) of the Centre for Asian and Pacific Law at the University of Sydney (CAPLUS), and Professor of Comparative and Transnational Business Law at Sydney Law School. He specialises in international dispute resolution, foreign investment law, contract and consumer (product safety) law.