Consumers

Question 1

Button Batteries (legal)

Answer 1

• Product safety regulations under Schedule 2 of the Australian Competition and Consumer (ACC) Act 2010 (Cth) are only effective when they are fit for purpose whilst ensuring products are safe, instilling consumer trust.
• A key issue surrounding product certification is that the Voluntary Code of Conduct (sec.120-201 ACC act) allows businesses to self-regulate their safety standards, leading to increased accessibility to products lacking mandatory safety standards, highlighting the need for reform as consumers value that there is more than minimal compliance with product safety standards.
• Button Batteries indeed are fit for purpose, however their prevalence in items accessible to children, such as birthday cards and toys, deems them unsafe.
  2021 Australian Story, “Sisters in Arms” : Awareness was raised through the media by focusing on two mothers which shared stories of the death of their children after swallowing button batteries in 2013 and 2015.
• Despite the mothers’ attempt to raise awareness and subsequent coronial inquest in 2015 which made 13 recommendations such as “button battery manufacturers make safer button batteries” (recommendation 1), “manufacturers place adequate warnings on their packaging” (recommendation 2), and that the “ACCC rapidly develop regulation for the federal government’s consideration” (recommendation 3), there was a lack of subsequent legal responsiveness.

Question 2

Button Batteries (non-legal)

Answer 2

• It was not until CHOICE (NGO), an agency of reform, raised awareness about product safety by conducting a ‘Button Battery Safety Test,’ which found 10 out of 17 household products unsafe.
• Their 2020 petition for mandatory button battery safety standards, following the death of another child, led to the implementation of new Safety and Information Standards in June 2022. Regulated by the ACCC under Subsection 104 Schedule 2, these standards require mandatory testing of button battery products for compliance and mandate clear warnings to inform consumers.
• The effectiveness of the new reforms that the battery “must not release during reasonably foreseeable use or misuse and the compartments holding the batteries must be safe from children” was demonstrated by the May 2024 recall of MCoBeauty “Lip Lights Shine Gloss” for lacking required warnings, and the 2023 fine of $155,660 imposed on Tesla for similar safety breaches.
• While these actions show the legislation’s impact in holding companies accountable, they also highlight concerns about the adequacy of penalties and ongoing production of dangerous batteries. Thus, the 2022 reforms to Safety and Information Standards under the ACL, though resource-intensive and delayed, have proven somewhat effective in improving product certification and addressing the concerns raised by the ‘Sisters in Arms’.

Question 3

Royal Commission

Answer 3

• In a modern economy, credit, regulated under the National Credit Code 2009 and overseen by the ASIC Act 2001 (Cth), is a pertinent issue with 63% of Australians holding a credit card (Jacaranda Finance 2024).
• Due to this many consumers live well beyond their means, with $41.64 Billion dollars in credit card debt within Australia alone (Finder Data 2024), individuals are often placed in a state of vulnerability, highlighted in the 2022 CHOICE article, “It’s not uncommon for us to see victim survivors of family violence and economic abuse present each week with buy now, pay later debts and issues”.
• In accordance with Chapter 3 of the National Consumer Credit Protection Act (2009), anyone holding a credit licence must comply with responsible lending, which has been a development of the law in response to the Banking Royal Commission in 2017.
• Despite the regulations placed on the provision of credit, the supervision of the financial industry was seen as too relaxed and therefore the Royal Commission sought to ameliorate misconduct in the banking, superannuation and financial services industry. Focussing on the big 4 banks, (CBA, NAB, Westpac, ANZ) and targeting specific instances where the finance industry was not operating in the best interests of consumers, there were 76 subsequent recommendations in 2019 with 27 implemented (ABC News, 2024).

Question 4

Stubbings

Answer 4

• The Banking Royal Commission was seen as highly effective in the high court case of Stubbings v Jams 2 Pty Ltd (2022), which under Chapter 3 of ASIC lending laws, banks did not lend to Stubbings as he was unfit to enter a contract.
• Notwithstanding, the court subsequently recognised the unconscionable conduct of A J Lawyers who did. This case highlighted that Stubbings was clearly unfit to enter into an asset based loan,with low literacy level and no source of income, and the lender engaging in predatory lending and exploitative practice, which regulatory guide 209 of responsible lending conduct under the National Credit Code clearly condemns.
• Therefore, as Stubbings was at an evident disadvantage, the High Court precedent ruling in favour of Stubbings clearly met society’s values to protect the vulnerable when he was able to subsequently seek redress in this manner.
• Of significance was the High Court’s consideration of whether certificates of independent legal and financial advice obtained from the debtors justified the lenders refraining from further inquiry as to the debtors’ personal and financial situation. The High Court found they did not.

Question 5

BNPL

Answer 5

• BNPL is clearly an ongoing credit issue with 73% of individuals seeking financial legal services were in relation to not being able to pay off BNPL debt (Guardian, 2023).
• These schemes are characteristic of the loopholes in the definition of Credit in the National Credit Code; “NCC does not apply to low-cost, short-term credit (under 62 days in duration)” (ASIC, 2024).
• In Commissioner Hayne’s recommendations he specified to “leave the National Credit Code alone”, and thus an expansion of responsible lending laws to BNPL schemes were not factored in recommendations of the Royal Commission.
• This left a clear gap in the National Credit Code with 2 in 5 Australians using a BNPL scheme (Finder Data, 2024), there is an evident need for consumers to be protected.
• The benefit to the consumer is that they get the product immediately, and if they make the repayments on time, pay little to no interest and credit checks are usually not needed for small purchases, being “foolproof if used responsibly” (A Current Affair, 2024).
• In response to the emerging issues of BNPL, in February 2019, the Senate Standing Committee on Economics released its report “Credit and financial services targeted at Australians at risk of financial hardship” which included findings and recommendations into the BNPL industry, such as the development of an industry code of conduct (recommendation 10).
• These proposed law reforms were well responded to by non-legal agencies of reform, “BNPL is credit and should be regulated like other credit products,” (a combined release from Financial Rights Legal Centre, Financial Counselling Australia, Consumer Action Law Centre and CHOICE).
• Yet despite these propositions being over 5 years ago, there has been no implementation into statute law.
• Non-legal agency of reform has been actively lobbying, the Financial Legal Rights Centre, for a response from governments in order for BNPL to be recognised as a form of credit. In their News.Com.Au interview “Credit Card Crisis Caused by Cost of Living”, they expressed, “BNPL schemes are very dangerous for the vulnerable” and the “Highly addictive nature means consumers become accustomed to making large expenses they do not have the capacity to pay off and end in large amounts of debt… The only credit that is beneficial for the economy is credit that can get paid back” (News.Com.Au, 2024).
• Since 2021 however, payday lenders have been subject to some regulation under Design and Distribution Obligations under the Corporations Act 2001 (Cth) by virtue of the broader credit definition under the Australian Securities and Investments Commission Act 2001 (Cth), giving ASIC greater powers to intervene where unscrupulous behaviour may be occurring when it comes to contracts.
• Treasury Law Amendment Bill 2024 (18 months and still not passed)
  Extends the scope of the National Credit Code (2009) by further expanding the definition of a credit contract → BNPL would be included

Question 6

Greenwashing

Answer 6

• Credit providers can be seen to take advantage of consumers through the advent of marketing innovations as well as unconscionable conduct, highlighting the imperative role the law plays in regulating credit.
• Marketing is a process by which a business creates a ‘consumer interest’ in its products.
• Over time the marketing process has become increasingly sophisticated with the advent of ecommerce.
• Therefore, recent innovations surrounding “Greenwashing” in global-marketing technologies are of particular interest to lawmakers.
• With the onset of globalisation, marketing innovations have posed a significant risk to consumers due to the tension between consumer protection and the demand for profits.
• The issues surrounding this can be seen by “Greenwashing”, a form of advertising and marketing that involves deceptively presenting products as enivronmentally sustainable.
• By misleading investors and consumers that are genuinely seeking environmentally friendly companies or products, the process of greenwashing directly overrides the objectives of consumer law; to protect the welfare of consumers while supporting an effective marketplace.
• In the 2024 Consumer Policy Research Centre report on, “The Consumer Experience on Green Claims in Australia” they found:
• Only 33% of “Green” products had evidence to support their claim
• 47% of Australians choose green claims purposefully when purchasing a product
• • Under section 18 of the Australian Competition and Consumer Act (2010) Cth, consumers are entitled to rely on any environmental claims. In the precedent Greenwashing outcome, ASIC v Vanguard (2024), greenwashing was seen as a mechanism by which credit providers deceived investors.
• On the 28th of March 2024, Justice O’Bryan found that Vanguard had contravened the ASIC Act numerous times including Section 12 and 27, as well as Section 18 of the ACL, when it made false and misleading representation about the ESC exclusionary screens that were applied to the Vanguard Ethically Copnscious Global Aggregate Bond Index Fund (worth $1 billion).
• Admitting to engaging in conduct that was liable to mislead the public, this case highlighted the issues surrounding deceptive marketing and how distinct legal responses are imperative.
• In the legal recognition of greenwashing, the effectiveness can be seen in the case of ACCC v Clorox (FCA) in April 2024. ACCC instituted proceedings against the manufacturer of “GLAD” branded kitchen and garbage bags for allegedly making false or miseleading representations that 50% of kitchen and garbage bags were partly made of recycled “ocean plastic”. This directly breached section 18, 29, and 33 of the ACL.

Question 7

Phishing

Answer 7

• In 2022, investment scams accounted fo the highest losses at $1.5 billion, followed by remote access scams ($229 million) and payment redirection scams ($224 million)
• AFCA continues to see a significant volume of complaints involving scams
• ABC News April 2024, “Five Australians among 37 arrested over global phishing scam following international investigation”
  Police said the scam involved 100,000 individuals from across the globe who used the platform ‘LabHost’ to trick individuals into providing their personal information, such as online banking logins, credit card details and passwords
• Among the victims 94,000 were Australian
• Police arrested a man from Melbourne and a man from Adelaide, who were both LabHost users, and charged them with cybercrime offences
• The AFP alleges LabHost was impersonating more than 170 fraudulent websites such as “reputable banks, government entities, and other major organisations to trick victims into believing they were legitimate websites”
• In 2023, ScamWatch received over 108,000 reports relating to phishing to the tune of $26 million
• “In addition to financial losses, victims of phishing are subejct to ongoing security risks and criminal offending, including identity takeovers, extortion and blackmail
  Persecuted for drug crimes rather than phishing - discretion -
• ABC News 2022, “Zhneya Tsventneko handed eight-year jail term in US for multi-milion dollar text message scam”
• Extradited to the US in early 2022 oover a phishing scam
• US mobile phone consumers suffered unauthorised charges on their bills
• According to the US Department of Justice, from 2012 to 2013, Tsetvenko and his co-conspirators defrauded hundreds of thousands of mobile phone consumers in the US by placing unauthorised charges on their mobile phone bills
  Must forfeit $15 million and spend 98 months in prison

Question 8

Deepfake

Answer 8

• With the development of AI-based tools that can create images and videos at scale, a new phenomenon has emerged: deepfakes, images or recordings that have convincingly altered and manipulated to misrepresent someone as doing or saying something that was not actually said or done
• Not only has this technology created confusion, skepticism, and the spread of misinformation, deepfakes also pose a threat to privacy and security. - With the ability to convincingly impersonate, cybercriminals can orchestrate phishing scams or identify theft operations with alarming precision
• While deepfakes have enabled creative possibility (especially in marketing and entertainment), they can misused for harmful purposes, such as fraud, defamation and false advertising
• Brands and marketers have begun harnessing deepfake technology to enhance their campaigns
• Currently in Australia, formal regulation expressly targeting deepfakes does not exist
• “How AI is taking beauty standards back to the future”, Australian Story, ABC 2024
• Generative AI is creating all sorts of disruptions → not a direct copy, therefore not clear who owns the original data or whether the new images infringe copyright → blurs grounds for creating efficacy in complaints
• Change.Org petition (non-legal)
• Calling for mandatory AI warning label → can not trust social media companies to regulate
  Tension between the demand for products and ethical concners
• Unethical to create demand over something that does not exist
• Morals and ethics → does not meet society’s needs when AI is enhancing the objectification of women in the way they mislead consumers about the reality of models
• No means of redress
• Limitation of the ACL provision is that they only apply to conduct in “trade or commerce” - only effective in protecting consumers where deepfake was created in trade/commerce.
• The ACL would not deal with arguably more damaging cases of deepfakes, such as revenge porns, fake news, or rumours outside of the realm of trade/commerce
• The protection under the ACL may also be limited in circumstances where a bad actor independently creates a deepfake to pass off a replica product or service (to exploit and identity, brand, or business).
• In such instances, even if the deepfake advertisement was made in trade or commerce, the identity of the bad actor is not necessarily known to the consumer, which could post difficulties for enforcement by suppliers. Nor is the actual supplier responsible for deepfake advertisement that it did not create and publish. This leaves limited to no remedies for the consumer to the extent they have been misled by the deepfake advertisement.
• June 2024 - the Criminal Code Amendment (Deepfake Sexual Material) Bill 2024 will impose serious criminal penalties to those who share sexually explicit material without consent. This includes material that is digitally created using artificial intelligence or other technology → the only protection is for the VICTIM not the offender
• Copyright laws can protect to an extent but needs to prove SIMILARITY not dissimilarity