Business given more time to prepare for new consumer laws, but direct selling sector says laws could destroy members

The Australian Government has unveiled new regulations around the second tranche of its new consumer law regime that will give companies up to 12 months to prepare for changes to warranty, repair and unsolicited selling rules that officially come in on January 1, 2011.

But the Direct Selling Association of Australia remains furious at the introduction of new regulations around direct selling that prevent companies involved in so-called unsolicited sales from accepting payment or supplying goods before the end of a cooling-off period that lasts for 10 business days.

While the new transitional arrangements announced late last week will give the direct selling industry until the start of 2012 to prepare for these restrictions on payment and supply, the executive director of the Direct Selling Association of Australia, John Holloway, says his organisation will use the transition period to push for the laws to be changed.

“We see those provisions in particular as really just show stoppers for the direct selling industry,” Holloway told SmartCompany.

“We’ve got 12 months to get this changed or our businesses will either by seriously impaired or gone. “

While the centrepiece of the Government’s first tranche of the consumer laws was a ban on unfair contracts terms, particularly in so-called standard contracts, the second tranche starting on July 1 focuses squarely on consumer protection issues, such as consumer guarantees, warranties and false and misleading conduct.

But a key area of focus is direct selling, with the major change being a prohibition on supplying goods or accepting payment within a cooling-off period of 10 clear business days where a sale is considered to be unsolicited.

This was designed to crack down on high-pressure selling in areas such as door-to-door sales, telephone sales and party-plan sales, but Holloway says the laws have gone too far and will restrict the direct selling sector from competing with traditional retail sector.

He gives the example of a company which sells its products in retail stores, on the internet and via direct selling mechanisms. In the retail environment, a transaction is completed immediately, while in the eCommerce space there might be just a day or so gap between when an order is taken and the goods delivered.

But with the direct sale, there will be at least a 10-day gap between the sale of goods and the seller being able to deliver and accept payment.

Breaches of the new laws carry penalties of up to $10,000 for individuals and up to $50,000 for corporations.

“At a time when you are seeing so much of an increase in concentration in the Australian retail market, it beggars belief that you would be denying consumers access to another retail channel and it beggars belief you would be denying suppliers and manufacturers access to another retail channel,” Holloway says.

“This prohibition on supply and payment will inevitably hurt this alternate retail model. They just really haven’t thought this through.”

The sector’s protests have resulted in some concessions from the Government. The industry will have six months to get its point-of-sale documentation in order and will have 12 months to transition to the new 10-day cooling off period rules.

In addition, party plan sales made at an actual party will be exempted from the cooling-off period rules, although sales made after a party will not.

But Holloway says direct selling businesses will not be able to “transition” over the next 12 months to rules that limit their ability to actually transact with customers, and says his organisation will lobby for further changes to the law over the next 12 months.

“We just simply can’t survive with those conditions.”

Other key traditional arrangements announced cover repair work done by the IT sector and the provision of warranties for defects.

However, consumer law expert Murray Deakin, a partner at law firm Middletons, says businesses should be reviewing their trading terms and warranty information now to ensure that it complies with the new consumer laws.

“Trading terms and warranty cards are key,” Deakin says.

“And to the extent a business has got content on a website or is planning advertising in the New Year, they should be reviewing that to ensure they are compliant.”

He also says businesses should ensure that customer-facing staff understand consumer rights under the new regime and can respond to complaints and problems accordingly.

“There are some new rights under these laws that I don’t think a lot of businesses are across yet and they need to ensure staff that are customer facing are alive to these new rights and respond appropriately.”

“There is not a lot of time between now and January 1 to get those things sorted.”

Deakin says businesses can also expect the ACCC to take a very firm approach towards enforcement of the new laws.

“It’s a whole new ball game. I certainly expect the ACCC to be far more active towards corporate Australia in relation to consumer protection.”