Who is a consumer? Changes coming in Australia from July 2021

The passing of the Treasury Laws Amendment (Acquisition as Consumer – Financial Thresholds) Regulations 2020 (Cth) (Regulations) on 9 July 2020 marked a significant change in Australia’s consumer protection regime. The Regulations broaden the application of the Australian Consumer Law (ACL), (Schedule 2 of the Competition and Consumer Act 2010 (Cth)), by expanding the definition of “consumer”.

What is the change for the purposes of the ACL?

The Regulations expand the definition of “consumer”. 

Currently, the ACL provides that a person is taken to have acquired particular goods as a consumer if:

• the amount paid or payable for the goods did not exceed $40,000, or if a greater amount is prescribed by regulation, that greater amount; or
• the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption; or
• the goods consisted of a vehicle or trailers acquired for use principally in the transport of goods on public roads. 

The ACL contains analogous prices payable for the purchase of services to be considered as acquired by a consumer.

The Regulations have the effect that from 1 July 2021, $100,000 will be the new price threshold, prescribing a “greater amount” than $40,000 for the purposes of paragraph 3(1)(a) of the ACL. This means that a person can purchase goods or services with a price of up to $100,000 and still fall within the definition of “consumer”. 

Although the Regulations do not expressly amend the definition of “consumer” for the purposes of paragraph 3(3)(a), which relates to the acquisition of services, this broader application is strongly implied. The new s 77A of the CCR is headed – “Prescribed amount – acquiring goods or services as a consumer”, and the new s 100 of the CCR states that the amendment applies both in relation to goods or services acquired on or after the commencement of the Regulations. 

It is important to note that a person could still fall under the definition of “consumer” despite exceeding the $100,000 threshold through satisfying other criteria in the ACL, e.g. in respect of a purchase of goods, the relevant goods could be of “a kind ordinarily acquired for personal, domestic or household use or consumption” or the relevant goods could consist of “a vehicle or trailer acquired for use principally in the transport of goods on public roads”.

When does the change come into effect?

The change will come into effect on 1 July 2021. This means that a person who acquires goods or services on or after 1 July 2021 for up to $100,000 will be a “consumer” for the purposes of the ACL.

What prompted the change?

This change follows the publication of the Australian Consumer Law Review: Clarification, simplification and modernisation of the consumer guarantee framework (Review) by Consumer Affairs Australia and New Zealand in 2018. 

The Review found that “the level of protection afforded to consumers has been eroded over time as the decline in the real value of the threshold means that certain purchases once covered under the ACL are no longer so covered”. Indeed, the Review noted that the current threshold of $40,000 was introduced in 1986, and the change to $100,000 is necessary to ensure that the definition of “consumer” remains in line with inflation and fit for purpose.

What is the effect of this change?

As the meaning of “consumer” is relevant to the operation of many important sections of the ACL, the effect of the Regulations is significant. Notably, the definition of “consumer” is relevant to the operation of consumer guarantees: ss 51-63 of the ACL. The ACL sets out rights which consumers have in relation to goods or services they acquire, and provides for circumstances in which suppliers and manufacturers are required to provide consumers with a remedy.   

Further, the definition of “consumer” is relevant to the operation of other provisions of the ACL, such as:

(a) Section 99B, which prohibits a person, in trade or commerce, from supplying a gift card to a consumer if the day that the gift card ceases to be redeemable is earlier than 3 years after the day of that supply.
(b) Section 100, which requires that a supplier must provide proof of transaction to a consumer.
(c) Section 102, which regulates the making of a warranty against defects to a consumer.

Ultimately, the change is crucial because the Regulations broaden the scope of the ACL provisions mentioned above, among others, enabling transactions of larger value than before to be captured under the regime.

Our recommendations

It is advisable for businesses to:

• Update all relevant contracts, warranty policies (both internal policies and those that are published), and terms and conditions, to ensure compliance with the amendment. 
• Provide consumer law compliance training for relevant staff, especially those dealing directly with customers, about the effect of this change on consumer guarantees and other provisions of the ACL. 
• Amend packaging and marketing materials to comply with the effect of this change on warranties against defects.