Economy

Consumer law red tape cuts could save billions

SmartCompany /

Harmonising state and federal consumer laws could ease the red-tape burden on small business and benefit the economy by up to $4.5 billion each year, according to a new draft report by the Productivity Commission.

The biggest change advocated by the sweeping report is to roll the state fair trading acts and product safety laws into a single national consumer protection law and moving responsibility for enforcement to the Australian Competition and Consumer Commission, a change the Productivity Commission says would result in significant cost savings.

The report also says significant productivity dividends could be achieved by moving to standardise occupational qualification licensing regimes, introducing a national licensing regime for finance brokers – a move long advocated by industry groups such as the Finance Brokers Association of Australia – and rationalising consumer protection and pricing regimes in the telecommunications and energy sectors.

The ability of consumers – including small business owners – to make claims for larger amounts in informal small claims tribunals and more powerful enforcement options to prevent unscrupulous behaviour in the building industry are also recommended.

Although the current mix of state and federal consumer protection laws have performed reasonably well, according to the report, they have resulted in some glaring examples of excessive red tape, such as:

  • Telecommunication customer contracts are subject to at least six pieces of regulation.
  • According to the Victorian Government, changes agreed between states to the Uniform Consumer Credit Code typically take between three and five years to implement.
  • Contracts subject to mandatory disclosure requirements are often very long and complex. Mobile telephone contracts of 500 pages are an extreme example.
  • There are a plethora of complaints bodies, including over 100 government regulators and more than 20 consumer ombudsman’s offices.

The Productivity Commission says small businesses will benefit from more nationally consistent laws and improved consumer protection enforcement, but argues there is no need to implement dedicated small business consumer protection laws.

“The need to protect small businesses as consumers is likely to vary across sectors. As such, and given the costs of changing legislation, the desirability of extending the coverage of particular industry-specific consumer regulation to these businesses would be best determined on a case-by-case basis,” the report says.

A big winner if the report’s proposals are implemented will be the ACCC, which would take on new powers to regulate consumer protection laws at a state level.

ACCC chairman Graeme Samuel says implementation of the report’s recommendations would probably see the ACCC shifting from its current national focus to encompass more localised consumer enforcement.

“The division of responsibilities at the moment tends towards the ACCC dealing with national matters and the states operating at a local level because of the structures the parliaments have put in place, but clearly if they change that structure our focus would change with it,” Samuel says.

The report also presents a challenge to the new Federal Government, which during the election campaign promised to use the opportunity of “wall to wall” Labor governments to introduce a new era of co-operative federalism.

New South Wales Business Chamber spokesman Paul Ritchie says the Federal Government’s preparedness to act quickly on the Productivity Commission’s final recommendations will be an early test of Labor’s commitment.

“There is a unique aligning of the planets with wall to wall Labor governments, and the absence of elections in 2008,” Ritchie says. “We believe there is a greater place for national standards as distinct from what we see at the state level, and this is a great opportunity for action in that direction.

Chris Bowen, the new Minister for Competition Policy and Consumer Affairs, says acting on the final report – due later this year – will be a priority. “We seek to establish a responsive and robust consumer environment, to the benefit of all Australian consumers,” Bowen says.

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