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Recommendation issued to: Australian Competition and Consumer Commission

Recommendation details
Output No: R20010018
Date issued: 30 March 2001
Safety action status:
Background:

See report 'Systemic Investigation into Fuel Contamination'.

Output text

The Australian Transport Safety Bureau recommends that the Australian Competition and Consumer Commission review its relationship with other regulatory bodies to clarify the limits of their respective regulatory powers and responsibilities with respect to aviation fuels, to ensure that aviation safety issues are effectively regulated.

Initial response
Date issued: 30 September 2002
Response from: Australian Competition and Consumer Commission
Action status: Open
Response text:

The Commission has an active interest in issues of fuel adulteration generally. This has been the case, in relation to diesel, the use of toluene and ethanol as petrol additives, as well as the contamination of aviation fuel.

The contamination of aviation fuel is a particularly important issue, because in addition to the damage, detriment and misrepresentations there are also serious safety implications.

I would like to take this opportunity to provide you with an outline of the following issues in the attachment:

* The consumer protection and fair trading roles and functions of the Commission;
* The Commission's enforcement priorities and objectives;
* An outline of the relevant fair trading provisions of the Trade Practices Act 1974; and
* The Commission's role in relation to your recommendations.

Should you have any questions regarding the attachment, or if you would like to further discuss the issues raised, please contact either [name provided] on [telephone number provided], or [name provided] on [telephone number provided].

THE CONSUMER PROTECTION AND FAIR TRADING ROLES AND FUNCTIONS OF THE COMMISSION

The objectives of the Commission and the Trade Practices Act 1974 ('Act') that it administers, are to prevent anti-competitive conduct, thereby encouraging competition and efficiency in business, resulting in a greater choice for consumers (and business when they are purchaser) in price, quality and service. The legislation also safeguards the position of consumers in their dealings with producers and sellers, and business in its dealings with other business.

The Commission is a national statutory authority responsible for ensuring compliance with the Trade Practices Act, State and Territory application legislation and for administering the Prices Surveillance Act 1983. The Commission also has additional responsibilities under other legislation.

Essentially the Act is divided into two major parts:
* Part IV which deals with anti-competitive practices; and
* Part V which deals with unfair trading practices - consumer protection

The Commission's role under Australian competition policy is expected to continue to be both challenging and exciting. Effective competition is the key to efficiency and productivity in business. It is the factor that encourages innovation, cost and production efficiency and enhanced consumer satisfaction by businesses striving to keep ahead of their competitors. However, stiff competition also creates incentives for unethical traders to 'cut corners' to beat their rivals, and this is where the Commission must step in.

Recent trends have shown that a culture of healthy and legal competition between businesses has developed in Australia since the introduction of the Trade Practices Act. However, the incentives to cheat will always be too much for some businesses to resist, and hence there will always is a need for Commission type enforcement.

However, in addition to its enforcement role, the Commission views itself playing an important part in developing and maintaining industry compliance and awareness of the Trade Practices Act.

THE COMMISSION'S ENFORCEMENT PRIORITIES AND OBJECTIVES

In enforcing the Trade Practices Act the Commission initially asks is the breach the subject matter of the complaint provable.

If the answer to this threshold question is yes, does the alleged breach fit within the Commission's priorities for action.

The Commission is always keen to ensure that it chooses the right enforcement tool to achieve its goals and objectives. In making this decision, the Commission will take into account a series of factors, including the following:

* Does the conduct involve blatant disregard of the law;
* Does it involve significant public detriment;
* What will be the educative or deterrent effect of any action;
* Are there new market issues; and
* Is there a need to test the reach of the Act.

In choosing the appropriate method for enforcing a particular section of the Act, the Commission will also take into account the aims of any enforcement action. The types of aims that the Commission would normally be concerned with include:

* Stop the unlawful conduct;
* Obtain compensation/restitution for the victim;
* Undo the effects of the contravention;
* Deterring/preventing unlawful conduct occurring/being repeated in future; and
* Punishing the wrongdoer.

AN OUTLINE OF THE RELEVANT FAIR TRADING PROVISIONS OF THE TRADE PRACTICES ACT 1974

Parts of the Trade Practices Act and mirror provisions in State and Territory Fair Trading Acts which might apply to the contamination of aviation fuel include:

1. The product liability provisions;
2. The implied warranty provisions; and
3. The misleading and deceptive conduct or misleading representations provisions.

1. PRODUCT LIABILITY PROVISIONS

Part VA of the Act, (Liability of Manufacturers and Importers for Defective Goods) provides a right of private action to secure compensation for loss if it can be shown that on the balance of probabilities, the goods did not meet the standard of safety which persons generally are entitled to expect and as a result caused injury or harm to property.

The Commission can take representative action for breach of Part VA, on behalf of persons affected.

The Commission holds a unique position in bringing legal proceedings under the Act as its presence in them is as a result of being an accountable public authority fulfilling a role defined by parliament. This stands in contrast to private litigants who are seeking personal compensation in the action and do not have a wider community interest.

The Commission's ability to bring representative actions for defective goods under Part VA is, however, limited by the legislation.

Section 75AQ of the Act provides that:

1) The Commission may, by application, commence a liability action on behalf of one or more persons identified in the application who has suffered the loss for whose amount the action is commenced.


2) The Commission may only make an application under this section if it has obtained the written consent of the person, or each of the persons, on whose behalf the application is being made.

The impact of section 75AQ is to preclude the Commission from bringing an action under Part VA even if it were to raise serious public concerns or a case which could provide valuable precedent for the future in these cases where the injured parties do not wish the Commission to be a party to the proceedings.

It should, however, be noted that in the recent spate of cases which have raised product liability concerns on a large scale there has been no shortage of private law firms eager to run the cases. This is not necessarily a bad outcome as the interests of consumers are being looked after and the Commission is able to utilise its resources in other areas.

The Commission's role is to stand in the footsteps of those injured and others can do that also (Refer: Dowsett J's comments in McDonalds [1999]).
There are no State or Territory Fair Trading Acts which mirror Part VA of the Act.

2. IMPLIED CONDITIONS IN CONSUMER TRANSACTIONS

The Act implies the following conditions into contracts.
* The goods must be of merchantable quality. This means that they must meet a basic level of quality and performance that would be reasonable to expect of the particular goods, having regard to their price and the manner in which they are described. (Sections 71(1), 66(2)).
* The goods must be fit for their purpose. This means they must be suitable for any particular purpose the consumer made known to the supplier when negotiating or arranging to purchase the goods, or a purpose which is obvious from the circumstances in which the sale took place. (Section 71(2)).
The Commission cannot bring an action for breach of any of the statutory conditions.
However, a consumer may bring a private action for damages in any court or tribunal of competent jurisdiction against a supplier who supplies goods that are not of merchantable quality or are not fit for their purpose.

3. MISLEADING OR DECEPTIVE CONDUCT / FALSE AND MISLEADING REPRESENTATIONS

Misleading or deceptive conduct

Section 52 of the Act prohibits conduct by business which is misleading or deceptive, or which is likely to mislead or deceive. Whether or not conduct is held to be misleading or deceptive will depend on the particular circumstances of each case.
Generally, sellers are required to tell the truth or refrain from giving an untruthful impression. Failure to disclose material information may in some circumstances be a breach of the Act.

False or misleading representations

Section 53(a) specifically prohibits false claims about the standard, quality, value, grade,
composition, style, model or history of goods.

Enforcement issues

In these instances, an enforcement agency will need to show either explicit or implicit representations.
It may be possible to show misleading conduct if there is admissible evidence that:

1. in each case the performance characteristics of the contaminated
aviation fuel differs significantly from the performance characteristics of "normal" aviation fuel; and
2. the damage to aircraft engines and/or safety issues caused by the contaminated fuel differs from "normal" levels.

The difficulty here is that there is no Mandatory Standard for "normal" aviation fuel.

STATE AND TERRITORY FAIR TRADING ACT PROVISIONS

Section 52 of the Act (misleading or deceptive conduct), is mirrored by the following State and Territory Fair Trading Act provisions:

* NSW s 42 Fair Trading Act (NSW)
* VIC s 9 Fair Trading Act (Vic) 1999
* SA s 56 Fair Trading Act (SA)
* TAS s 14 Fair Trading Act (Tas)
* QLD s 38 Fair Trading Act (Qld)
* WA s 10 Fair Trading Act (WA)
* ACT s 12 Fair Trading Act (Act)
* NT s 42 Consumer Affairs and Fair Trading Act (NT)

Section 53 of the Act (false or misleading representations), is mirrored by the following State and Territory Fair Trading Act provisions:

* NSW s 44 Fair Trading Act (NSW)
* VIC s 12 Fair Trading Act (Vic) 1999
* SA s 58 Fair Trading Act (SA)
* TAS s 16 Fair Trading Act (Tas)
* QLD s 40 Fair Trading Act (Qld)
* WA s 12 Fair Trading Act (WA)
* Act s 14 Fair Trading Act (Act)
* NT s 44 Consumer Affairs and Fair Trading Act (NT)

The State and Territory Fair Trading Acts do not contain provisions that mirror the product liability or implied condition provisions of the Trade Practices Act.

THE COMMISSION'S ROLE IN RELATION TO YOUR RECOMMENDATIONS

In the current context of the aviation fuel contamination inquiry it is the Commission's role in relation to your recommendations to essentially provide an educative function.

The comments above regarding the application of the Act to this issue are aimed at providing a basic outline of how the Act is likely to apply to fuel contamination issues.

Commission staff are available to discuss and provide guidance to industry as well as other government departments on the application of the provisions of the Trade Practices Act to their specific field of interest. We are therefore, available to further discuss the issues raised above.

As previously mentioned, any enforcement action the Commission takes on fuel contamination or adulteration issues will be assessed on the facts of each case and pursued in accordance with the Commission's enforcement priorities and actions. The Commission will of course, always assess any such complaints received, or referred from other agencies within this framework.

Mandatory Standards for Motor Vehicle Fuel

In the context of monitoring and compliance with fuel standards, I would note that Environment Australia is currently preparing Mandatory Standards for the content of motor vehicle fuel in Australia.

It is my understanding that this Standard is being developed pursuant to the Fuel Quality Standards Act 2000 which came into effect on 1 January 2002.

While these particular Standards are being primarily introduced for environmental policy reasons, the Standard will be supported by a rigorous monitoring and compliance regime. This testing will ensure motor vehicle fuel meets the content requirements of the Standards, and thus minimise the opportunity for consumers to be mislead as to the content of such fuel, its quality and fitness for purpose.

It may well be worth the Australian Transport Safety Bureau contacting Environment Australia directly to discuss the Standard and its implementation and compliance processes. This information may provide a useful basis should ATSB pursue such an avenue for avoiding aviation fuel contamination.

I am able to provide the contact details of the Environment Australia staff responsible for managing this issue.

 
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Last update 01 April 2011