New laws would target 'dark patterns' and unfair practices 5 min read
On 15 November 2024, the Federal Government released a Consultation Paper that provided further information on the design of the long-awaited unfair trading practices prohibition. The Consultation Paper comes a month after the Prime Minister's office first announced it would legislate prohibitions around unfair trading practices, which we covered in our previous Insight.
In 2023, Treasury also released a Consultation Regulatory Impact Statement that had identified gaps in the Australian Consumer Law (ACL), which meant consumers and small businesses were inadequately protected against unfair conduct that did not strictly fall into the current prohibitions on unconscionable conduct, misleading and deceptive conduct, or false or misleading representations.
In this Insight, we delve into the Consultation Paper and examine what the changes could mean for businesses.
Key takeaways
- Treasury is seeking feedback on its proposed design of a new prohibition on unfair trading practices, a long-awaited change to the ACL. The deadline is Friday, 13 December 2024.
- The current proposal, outlined in a Consultation Paper, indicates that the Government will introduce both a general and specific prohibition(s) on unfair trading practices, with a focus on subscription practices, drip pricing, dynamic pricing, excessive requests for consumer data, and barriers to accessing customer support and consumer remedies after a purchase is made.
Addressing gaps in the current legislative framework
Treasury is concerned that, due to the increasing complexity of modern marketplaces and associated technologies deployed by businesses in consumer interactions (such as AI-enabled tools), new forms of potential misconduct are emerging that may distort or manipulate consumer choice (ie 'dark patterns'), or otherwise lead to consumer detriment.
Treasury is of a view that current prohibitions in the ACL may be inadequate to protect against these practices, as they may fall into a 'grey area' that:
- does not meet the threshold for misleading conduct under the ACL, particularly where a business has not made a positive representation, but has omitted information from a consumer in the course of a purchasing decision;
- does not meet the high threshold for unconscionable conduct under the ACL; and
- is not specifically prohibited by any other part of the ACL (eg the listed false misrepresentations in s29 of the ACL).
Treasury has identified a number of different categories of potentially unfair trading practices:
- conduct that distorts consumer choice without being misleading or deceptive, including practices that create a false sense of urgency
- subscription-related practices, including those that make it difficult for a consumer to cancel a subscription
- pricing-related practices, including drip pricing, dynamic pricing or hidden fees
- forcing consumers to unnecessarily create online accounts or otherwise provide personal information as a prerequisite for making a purchase
- post-sale practices, including imposing unreasonable barriers to customer support, or lack of access to remedies
- design-related elements used in consumer interfaces (eg websites and apps) and choice architecture that manipulate consumer decisions and undermine consumer autonomy.
Designing a general prohibition on unfair trading practices
Treasury plans to introduce a general prohibition on unfair trading practices, alongside specific prohibitions that target certain types of conduct. Similar models exist in United Kingdom, the European Union and the United States.
Following stakeholder feedback, Treasury intends that the general prohibition will capture a business' conduct where it:
- unreasonably distorts or manipulates, or is likely to unreasonably distort of manipulate, the economic decision-making or behaviour of a consumer (the 'conduct' element); and
- causes, or is likely to cause, material detriment (financial or otherwise) to the consumer (the 'detriment' element).
A non-exhaustive list of this type of conduct (ie a 'grey list') will likely be included in the ACL, including:
- 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
- use of design elements in online consumer interfaces that unduly pressures, obstructs or undermines a consumer when making an economic decision.
Proposed specific prohibitions on unfair trading practices
The Government is considering enacting specific prohibitions in addition to the general unfair trading practices prohibition.
Areas of focus for Treasury include:
- Subscription-related practices: Treasury is considering a number of options, including setting specific information requirements that businesses must present to consumers when offering subscription contracts, notification or opt-in requirements for automatic renewals or end of trial/introductory offer periods and removing barriers to cancelling subscriptions.
- Drip pricing: this occurs when a headline price is advertised, but the inclusion of fees increases as a consumer moves through a purchasing process. Treasury is seeking feedback on the adequacy of current protections under the ACL against drip pricing practices.
- Dynamic pricing: this occurs when the price of a product or service changes during the purchasing process (eg due to changes in supply and demand). Treasury is seeking feedback on the adequacy of the existing prohibitions in the ACL to address this issue, and whether dynamic pricing should be specifically prohibited under the ACL.
- Online account requirements: Treasury has concerns that businesses may request that consumers disclose information for everyday interactions (such as signing up to an online account) which are not reasonably necessary for the provision of a product or service to that consumer. Treasury recognises that there is a statutory framework outside of the ACL (such as the Privacy Act and the Spam Act) to protect consumer data, however, it is seeking views as to whether the ACL also needs to be changed to address these practices, such as requiring retailers to provide a 'guest' check out option.
- Barriers to accessing customer support: Treasury recognises that a general prohibition on unfair trading practices may be insufficient to ensure that consumers can adequately access customer support and services after a purchase, and it is seeking views as to whether a specific prohibition is required.
Other considerations
- Business-to-business dealings: the Consultation Paper requests feedback on whether the unfair trading practices prohibitions should also apply in business-to-business dealings, particularly in light of bargaining power imbalances and resource/time constraints that exist for small businesses. Treasury has considered stakeholder feedback that extending the prohibition to businesses would impact freedom of contract in commercial dealings and also carry uncertainty and risk, particularly where businesses operate within additional regulatory regimes such as industry codes. Treasury has proposed a two-staged approach that will apply to business-to-consumer dealings first before extending to business-to-business dealings.
- Financial services: Treasury is also seeking feedback on whether any unfair trading practices prohibition would also extend to financial services to ensure alignment between the ACL and financial services law proscribed under the ASIC Act.
Next Steps
Treasury will engage with stakeholders on the proposed design of the general and specific prohibitions and is seeking public feedback by Friday, 13 December 2024.