
The Taskforce is to inquire and report into approaches to promoting and coordinating industry self-regulation, including the appropriate role of government and the development of industry codes as well as other approaches to self-regulation.
The key players in the promotion of industry self-regulation have always been industry, government and consumer advocates. The purpose of this chapter is to examine the respective roles of each group in the establishment of particular schemes.
The roles of industry, government and consumer groups are dynamic, adapting to the changing face of the Australian economy and, in particular, responding to competitive pressures, regulatory reform, new technologies and the increasing globalisation of consumer markets.
Industry has shown a growing enthusiasm for initiating self-regulation to engender consumer confidence in new products and new technologies. Government has increasingly promoted self-regulatory options as part of its broader commitment to regulatory reform. Consumer groups have embraced self-regulatory schemes to address consumer problems that cross jurisdictional boundaries. It is also worth noting the growth of third party certification schemes, particularly in the online environment, hinting at the commercial imperatives driving businesses to subscribe to some form of voluntary industry self-regulation to win consumer trust.
There is a variety of options for designing and promoting self-regulatory schemes and what works for one industry may not work for another. It follows that the `mix' of industry/government and consumer involvement that works well for one self-regulatory scheme may be inappropriate for another.
This chapter first examines the role that industry has played in promoting and coordinating self-regulatory schemes. This chapter then discusses the role of government as a stakeholder, developer, promoter, monitor and enforcer of schemes, as well as the crucial role that consumer groups have played and will continue to play in the development of industry self-regulation. Finally, the chapter analyses a number of options to better co-ordinate and promote self-regulation including discussion of whether a centralised government agency, an oversight committee, or model codes would be appropriate.
Conclusions
Industry approaches to promoting self-regulation
32. Experience has shown that industry will initiate a self-regulatory scheme in response to a clear commercial imperative to win consumer confidence and boost sales.
33. Industry may promote self-regulation as an alternative to government regulation where there is perceived to be a serious market failure or important social policy objective.
Role of government in promoting and coordinating self-regulation
34. Government involvement in self-regulation is justified when there is a public policy objective that would otherwise call for a regulatory response.
35. Government can assist in analysing systemic problems in an industry and in facilitating the design of a self-regulatory response to address those systemic problems.
36. Government can assist in integrating schemes into the regulatory framework.
37. Government is uniquely placed to promote international cooperation and harmonisation of self-regulatory initiatives.
38. The degree of government involvement will depend on the significance of the market failure or social policy objective being addressed and the consequences of self-regulation proving ineffective.
Role of consumer advocates in promoting self-regulation
39. Consumer input is important in the development and in maintaining the relevance of self-regulation. Consumer advocates can promote consumer confidence in self-regulatory schemes.
40. Consumer participation will be limited by human and financial resource constraints if there is no external financial assistance forthcoming.
Other conclusions
41. Code administration authorities established by industry should take responsibility for the monitoring and review of self-regulation, in consultation with government and consumer groups.
Industry has initiated a host of self-regulatory schemes for a variety of reasons.248 For commercial reasons, industry may develop a scheme to win consumer confidence and boost sales. Industry may also promote self-regulation as an alternative to government regulation.
The promotion of self-regulatory schemes is beneficial as a marketing tool to differentiate participants from competitors.
Industry self-regulation can also build consumer confidence when introducing new technology to the market. The Australian Code of Practice for Computerised Checkout Systems in Supermarkets was introduced to ease the transition away from individual item pricing to barcodes, including the provision of free items when the scanned price is higher than the shelf price.249
The Australian Chamber of Commerce and Industry commented that under self-regulation, industry (often through associations) can assume responsibility for concerns raised by the community and is able to interact directly with stakeholders to resolve the problem. It suggested that industry associations can play a key role in delivering a coordinated approach to issues thus ensuring national consistency.250
The Australian Supermarket Institute commented that the Code of Practice for the Fruit Juice Industry was developed by the Australian Citrus Industry Council to promote truth in labelling and fair trade of orange juice and other products. It has been designed to ensure that fruit juice is not adulterated and that the public is not otherwise misled about fruit juice products. The Australian Supermarket Institute commented that in taking this action itself, the fruit juice industry feels that it has enhanced both the image of the industry and the marketability of its fruit juice products.251
Similarly, the Australian Society of Certified Practising Accountants and the Institute of Chartered Accountants in Australia submitted that their commitment to self-regulation is vitally important when demonstrating to clients, the business community and governments the high degree of integrity and professionalism which members of the Accounting Bodies possess. To this end, the Accounting Bodies have sought to ensure that these groups can have confidence in the ethical standing and technical competence of our members and, in turn, in the quality of various accounting, auditing and other assurance and advisory services which the Bodies provide.252
This pattern is also evident internationally. Indeed, international experience teaches that the actions of one national industry association may act as a catalyst for similar industries in other countries to follow suit. For example, the Canadian Chemical Producers' Association introduced its Responsible Care initiative in 1985 and it has since become a global alliance with over 40 countries participating in the scheme. Each company which subscribes to the Responsible Care ethic is required to abide by six codes of practice which contain more than 150 requirements. Verification checks are undertaken every three years on each member-company of the CCPA to ensure the codes are being followed.253
Another example of a global voluntary self-regulation is the work conducted by the International Organisation for Standardisation (ISO). The ISO is a non-governmental, worldwide federation of national standards bodies from 130 countries that formulates and implements internationally agreed voluntary standards across a variety of g
oods and services.254
The Taskforce considers that industry will promote self-regulation when there are reasons to do so, such as to enhance consumer confidence to boost sales or `head off' government regulation.
Role of government
Industry self-regulation by its definition, is regulation by industry. However, government involvement in self-regulation can range from general policy guidance to more interventionist models. Government is in a position to identify particular problems or social policy objectives and can assist in designing a self-regulatory response to address them.
Throughout the inquiry process, the role of government in self-regulation has been a contentious issue. Hence, the Taskforce has focused on the role of government in this chapter.
Spectrum of government involvement
As with different types of self-regulation, not surprisingly there is a spectrum of government involvement ranging from little or no involvement to a more interventionist approach.
At one end of the spectrum, industry initiatives that improve the amount of information available to consumers to make informed choices might have little or no government involvement at all. For example, industry guidelines or customer service charters fall into this category.
Moving along the spectrum, standards developed by Standards Australia will often see government as a stakeholder providing comments.
`Light touch' approaches include the work of the Consumer Affairs Division in Treasury and the ACCC in advising schemes on voluntary codes. For example the ACCC has assisted industry with the Australian Code of Practice for Computerised Checkout Systems in Supermarkets.
Whereas, the government has incorporated codes into a regulatory framework in other cases. For example, over the last decade, the Commonwealth has established regulatory regimes for broadcasting and telecommunications that incorporate industry codes of conduct. Further, the Commonwealth is presently in the process of developing and implementing regulatory regimes in the financial services sector and privacy standards for personal information handling in the private sector. Both regimes allow for the development of industry codes and complaint handling schemes.255
Similarly, at the international level there is a range of government involvement in self-regulation. Self-regulatory policy has been promoted by the OECD as an alternative to formal regulation and is being embraced by member countries at different rates. Countries such as Australia and Canada are more actively embracing self-regulation, with each government researching and reviewing self-regulatory practice.0
The Taskforce notes that there is currently a range of government involvement in self-regulation depending on the industry and the particular scheme.
Public policy objectives of government
The degree of government involvement in self-regulation will depend on the public policy objective.1 Government involvement in self-regulation is justified when there is a public policy objective that would otherwise call for a regulatory response. This can include, for example, to encourage industry to develop codes that will assist in compliance with the law.
The Institution of Engineers Australia commented that self-regulation is appropriate as applied to the provision of some, but not all, engineering services. The Institution commented that those areas of engineering practice that represent a risk to public health and safety or where there is a significant asymmetry of knowledge between the professional engineer and the consumer require a co-regulatory approach that statutorily limits the provision of certain types of services to competent practitioners.2
On the other hand, the Australian Food and Grocery Council commented that the existence of market failure does not in itself justify government intervention as the market may correct itself over time. Government intervention may not be a remedy to the failure. It commented that a fundamental principle upon which government bases its regulatory and legislative policy is that the onus of proof in determining whether regulation will correct market failure is on the proponents of the regulation. It also argued that intervention must provide the highest net benefit to consumers as individuals, and the community as a whole.3
The Taskforce also recognises that government will be involved in aspects of particular industries. For example, the scope of service delivery in telecommunications, and the proposed privacy legislation that will impact across all industries.4
As a general principle, the Taskforce recognises that government has a role in self-regulation to ensure that self-regulation targets and achieves the relevant public policy objective.
Government involvement
As discussed elsewhere, the Taskforce considers that self-regulation is a three-way partnership between industry, consumers and government.
From an industry perspective, the Australian Pharmaceutical Manufacturers Association commented that an advantage of their current self-regulatory system is that it is an outward demonstration of successful partnership and trust between government and industry.5 Similarly, the Australian Supermarket Institute commented that the ACCC has been of great assistance in developing their Code's provisions and ensuring that they have remained relevant and effective.6
The Financial Industry Complaints Service commented that the whole of the self-regulatory process was satisfactory. Government was quite willing to allow industry to develop the schemes. The schemes that the Financial Industry Complaints Service has been involved with have approval from ASIC and consult with Treasury.7
Cable & Wireless Optus commented that the involvement of regulators as `observers' throughout the process of code and standard development has several benefits. First, it has enabled the industry to address regulator concerns at the outset rather than address issues at the end of the process. Secondly, it has resulted in regulators being fully aware of current industry discussions and hence familiar with the context for industry decisions.8
Cable & Wireless Optus surmised that in planning for self-regulatory schemes, it is considered beneficial for the roles and responsibilities of regulators to be clearly defined at the outset of the process and actively managed to encourage a cooperative approach.9
Participants at a Taskforce meeting held in Rockhampton agreed that government consultations are an important channel for communication between rural Australians and decision-makers. Participants commented that there is a general recognition that governments cannot solve all the problems facing regional Australia, however they considered that the rural community would appreciate receiving direct feedback from government representatives about their concerns.10
The Taskforce considers that government, among other roles, is a stakeholder in self-regulation and can offer assistance in the development and in maintaining the relevance of self-regulation.
Government can promote and assist in the development of self-regulation
The Government has had experience with many industries wishing to introduce self-regulation. It is therefore in a good position to advise and guide industry in different ways of approaching self
-regulation.
By publicising the benefits of self-regulation to consumers, the government may also be able to help create an incentive for industry to effectively self-regulate. Maintaining the higher standards required by a self-regulatory scheme may impose costs on businesses which will be reflected in the prices charged to consumers. If consumers are not well informed about the benefits of dealing with a member of the self-regulatory scheme, there will be little incentive for businesses to incur the extra costs required to establish or join the scheme, and those businesses that do so may be at a competitive disadvantage. Once the scheme wins acceptance within the market, there should be less need for the government to maintain its involvement.
The Insurance Council of Australia commented that it is important for government to be supportive of self-regulatory codes and schemes, and to promote and encourage consumer confidence in their use and effectiveness. The Council commented that government could assist industry in the development of self-regulation by promoting a more informed understanding of the role and scope of industry codes among consumer groups. It is particularly important to promote an understanding of the value of self-regulation when it provides a more effective alternative to legislation for both consumers and industry. The Council argued that having formally approved a code, by a sufficiently transparent process, government should become a supporter of its aims and objectives.11
The Australian Chamber of Commerce and Industry also urged government to address consumer scepticism of industry self-regulation through education and promotion of successful self-regulatory schemes.12
Further, the Australian Direct Marketing Association commented that consumer education should be pursued jointly with industry groups using the resources of government and industry.13
In other Taskforce discussions with stakeholders, it heard that the government can also help assist industries in adjusting to a self-regulatory scheme. In discussions with the Secretariat to the Queensland Red Tape Reduction Taskforce, it commented that in a recently deregulated environment, governments can assist industries by facilitating the development of a self-regulatory scheme.14
Similarly, participants at a Taskforce meeting held in Rockhampton commented that the government could assist industries more when self-regulatory schemes are being introduced.15
The Government has also promoted self-regulation through guidelines, directories and the Internet. For example, the Business Entry Point will contain a database of codes across Australia.16 Similarly, the Commonwealth's Directory of Consumer Dispute Resolution Schemes and Complaint Handling Organisations sets out consumer dispute resolution schemes, complaint handling organisations and other useful contacts such as fair-trading agencies.17
As discussed in chapter 6, the government has also released a publication titled Benchmarks for Industry-based Customer Dispute Resolution Schemes which is a guide to industry in designing and improving such schemes.18 The Benchmarks were developed to apply primarily to nationally based customer dispute schemes set up under the auspices of an industry. However, the underlying policy principles have also proven useful to smaller and non-industry schemes.
The Taskforce notes that the Minister for Financial Services and Regulation is committed to reviewing the Commonwealth's Benchmarks for Industry-based Customer Dispute Resolution Schemes this year.
The Australian Communications Authority has also produced its own guide, titled Developing telecommunications codes for registration, which addresses its approach to assessing codes for registration. The Authority commented that it has received positive feedback from ACIF and industry players about the clarity and comprehensiveness of the guide.19
Similarly, the Office of Small Business produced Resolving Small Business Disputes, which it commends as a resource for examining issues around self-regulatory approaches to dispute resolution.20
The ACCC has also produced guidelines to assist industry with compliance and the authorisation process.21 Similarly, ASIC commented that it has also engaged in a range of activities aimed at promoting alternative dispute resolution processes in the financial services industry. This includes chairing the Complaints Scheme Roundtable which provides a forum for the promotion and support of complaints schemes in the sector.22
The Taskforce considers that government can have a role to play in the development, and promotion, of self-regulation.
Government can assist in the analysis of systemic issues
Government can also play a role in the analysis of systemic issues. At the more interventionist end of the self-regulatory spectrum, some schemes may be handling complex and/or a large number of consumer complaints. Where appropriate, the government can assist in the analysis of systemic issues arising from these complaints. Government can also assist in facilitating the design of a self-regulatory response to address those systemic issues.
The Consumer Law Centre of Victoria, Consumer Credit Legal Service (Vic) and the Financial and Consumer Rights Council (Vic) commented that it is inherently difficult for industries to step back from their business to see systemic issues. They suggested that one of the primary strengths of a co-regulatory rather than self-regulatory approach is the ability to build in processes to identify systemic issues within an industry. Within co-regulatory models this presently best occurs through industry based external alternative dispute resolution schemes or direct regulatory oversight.23
The Taskforce recognises that, where appropriate, government can assist in the analysis of systemic issues.
Integration into the regulatory regime and international harmonisation
Government also has a role to assist in ensuring that self-regulation is integrated into the regulatory framework within and outside Australia. Government is in a good position to promote international cooperation and harmonisation of self-regulatory schemes.
For example, the Australian Communications Authority stated that government consultation protects against inconsistency with legislation. For example, the Telecommunications Act 1997, Trade Practices Act 1974, Privacy Act 1988, Disability Discrimination Act 1992 and State fair trading legislation may all have implications for codes, as may various instruments setting out provisions or standards that must be adhered to. The Authority argued that representation by government agencies ensures that legislative advice is available at the code development stage.24
ASIC also commented that government can assist in the process of developing schemes - this will include providing information and advice designed to ensure that the schemes are properly integrated into the regulatory framework. ASIC commented that it has extensive experience in dealing with a range of self-regulatory mechanisms that can be brought to bear during the consideration of any self-regulatory scheme.25
NRMA stated that an important role for government is to work with State Governments and industry to try to e
nsure that Federal and State based codes that apply to the same or similar products are as uniform as possible. This will reduce compliance costs, which is a particularly important issue as many companies start to market their products and services nationally. Consumers would also benefit through simpler and more standardised guidelines and codes.26
The Association of Superannuation Funds of Australia Limited commented that ad hoc or differing codes and standards or poorly designed regulations or laws can significantly increase the overheads to industry (and to final consumers). It commented that increased overheads can be the outcome where state laws apply.27
The Taskforce also recognises that Australia is part of a bigger game, and self-regulatory schemes should be aware of overseas standards. For example, Standards Australia commented that consideration of regulation versus self-regulation must be written within a framework of encouraging and facilitating global trade.28
Similarly, the Australian Toy Association commented that any imposts or obligations on companies under any self-regulatory arrangement should not disadvantage Australian companies vis--vis international competition.29
NRMA also stated that with the increasingly globalised nature of many markets and the growth of e-commerce, the government also has an important role to play in working to achieve international harmonisation. Consumers would then receive the same level of protection in each market. Conversely, it will help to prevent Australian businesses from losing customers to overseas countries that may offer cheaper products but provide less consumer protection through industry self-regulation.30
The Taskforce considers that government can assist industry in developing and maintaining the relevance of self-regulatory schemes by raising awareness of the regulatory framework operating within and outside Australia.
Is government just cost-shifting?
Some organisations have argued that government is simply shifting the cost of regulating onto industry. For example, the Australian Food and Grocery Council commented that it does not support self-regulatory measures that are simply seeking to shift the regulatory resource costs forcing industry to accept the contingent liability of developing and maintaining a regulatory measure.31
The Taskforce considers that self-regulatory schemes should be developed and assessed using the fundamental principles flagged in this report, in other words identification of the specific problem and objective, consultation, assessment of the benefits and costs and the application of the effective minimum solution to the specific problem.
Regulatory creep
During the consultations, some organisations raised the issue of regulatory creep. That is, where self-regulation develops into more quasi-regulation or co-regulation.
This issue was also flagged in the Grey-letter Law report, which stated that `those consulted raised concerns that sometimes what starts out as self-regulation can become widely accepted practice, gain an imprimatur from a government agency, and then become embodied in a quasi-regulatory arrangement, and may become black letter law'.32
Similarly, the Australian Chamber of Commerce and Industry commented that it is concerned about the potential for self-regulatory schemes to become quasi-regulation. Often if a scheme appears to be working well, there has been a tendency for governments to want to formalise it thereby changing the nature of the self-regulatory industry approach. Many incidents occur and are managed under self-regulatory schemes without the need to involve the regulator. The Australian Chamber of Commerce and Industry commented that this is a difficult issue to address especially when there is a prevalent view among sections of the community that only regulation is a sufficient safeguard.33
ASIC noted that perceptions of regulatory creep may simply reflect a move towards a more coherent and less ad hoc relationship between government and the scheme, rather than representing the growth of an `overly formalised' approach.34
As a general principle, the Taskforce considers that government should be involved in schemes when there is a public policy objective to do so. If self-regulation is working well, then there is no need for any, or more, government involvement. As noted above, government can assist in promoting the benefits of self-regulatory schemes to consumers.
Degree of government involvement in monitoring self-regulation
There is a range of options to monitor self-regulation, including some form of government involvement. To a large extent, the degree of government involvement in monitoring will depend on the industry concerned, the nature of the industry specific problem and the importance of self-regulation meeting its aims.
There are various models for government supporting and enforcing self-regulation. For example, government can underpin schemes in legislation to improve their effectiveness.35
As a broad principle, the Investment and Financial Services Association supported the view expressed in the Grey-letter Law report (1997, p. 81) that `Government should not, however, be directly involved in the monitoring and review of schemes which are self-regulatory. Otherwise, the essential character of self-regulation may be lost. Government involvement may change the character of the self-regulatory scheme to one of quasi-regulation.'36
Similarly, the Australian Chamber of Commerce and Industry noted that many incidents occur and are managed under self-regulatory schemes without the need to involve the regulator.37
However, ASIC commented that there is a role for government, in some cases, to monitor compliance with the code, and assist in the process of reviewing the operation of self-regulatory schemes, which may lead to alterations to the scheme or to other regulatory responses (e.g. regulator-issued standards to law reform recommendations).38
ASIC argued that the capacity for timely regulator intervention is especially important in the case of financial services because the industry is heavily dependent on consumer confidence. If the regulator does not possess the power to intervene in a timely fashion in the case of market failure, consumer confidence in the integrity of the Australian financial markets may be compromised.39
Similarly, PowerTel commented that any effective self-regulatory regime needs to recognise that `blackspots' will emerge and government regulators must be empowered to take remedial action quickly.40
The Royal Aeronautical Society also argued that self-regulation must always be accompanied by a rigorous system of dialogue with, and policing by, the government agency responsible for the safety of the public.41
The Australian Direct Marketing Association commented that there is a role for government to channel complaints to appropriate industry bodies and monitor the effectiveness of industry-based complaints handling. This will encourage a continuous dialogue between government and the private sector in the interest of consumer satisfaction.42
During its regional consultations, the Taskforce heard that rural primary industries like to have some level of government involvement as a safety net. I
n particular, concern was expressed over rogue traders being able to keep operating under a self-regulatory scheme and potentially undermine it. Some participants suggested that this problem needed to be addressed by government to ensure the safety of consumers and so reputable businesses were not at a competitive disadvantage.43
The Taskforce emphasises that rogue players will not necessarily disappear with more formal government regulation. There can be no guarantee that rogue traders will comply with the law.
As a general principle, the Taskforce considers that the degree of monitoring by government will depend on the degree of market failure and the consequences of self-regulation failing to achieve its objectives. The Taskforce recognises that government has an interest in the review of schemes, and can `step up' if self-regulation is failing and can help assess whether self-regulation is the most appropriate mechanism.
Authorisation process
Industry should be aware of the authorisation process.44 As noted by the Australian Food and Grocery Council, government also has a role in ensuring that markets are sufficiently competitive and that firms do not enter into arrangements that lessen the degree of competition.45
The Department of Industry Science and Resources commented that self-regulatory initiatives attempt to create an informal set of industry standards of behaviour. In most circumstances this has a positive outcome, reducing circumstances of undesirable conduct and providing a better interface between an industry and its market. There is a risk, however, that self-regulatory initiatives can give rise to anti-competitive behaviour, by either suppressing competition between firms, broad agreements on prices or by forming defacto industry cartels which consolidate market power. The Department commented that during the drafting of the Oilcode, for example, considerable efforts had to be expended to avoid the code entering the area of price setting or market structure, both areas where potentially anti-competitive conduct could arise.46
Similarly, the Department of Industry Science and Resources argued that self-regulatory initiatives in the form of design standards can be used to establish effective barriers to entry in a marketplace, entrenching the position of existing market participants against the interests of new market entrants. Initiatives on product quality can, while couched in the interests of consumers, contribute to the establishment of a protected market which may not be in consumers' ultimate interest.47
The Department of Industry, Science and Resources submitted that, while the ACCC monitors anti-competitive arrangements, and acts where it can be shown that such arrangements are not in the public interest, consideration needs to be taken in the preparation of self-regulatory initiatives to minimise anti-competitive effects.48
During the course of the inquiry, some industry associations raised some concerns over the authorisation process. One industry association commented that authorisation fees are potentially a deterrent for smaller associations.49 At present, there is no discretion under the Trade Practices Act 1974 for the ACCC to waive fees. However, the Taskforce notes that under the national competition policy review process, the government is committed to reviewing fees (including the authorisation fee) charged under the Trade Practices Act 1974 this year.
Another association that has been through the authorisation process, the Australian Direct Marketing Association, commented that the process needs to be more clearly defined. The association submitted that time limits should be placed on public consultation, that it was not the role of the process to redesign or redraft industry documents, and that the applicant should be consulted on the content and context of any public announcement regarding the application.50
The Taskforce has made the ACCC aware of these concerns.
However, overall, organisations consulted found the authorisation process useful and a necessary process for protecting competition. Indeed, the Consumer Law Centre of Victoria submitted that it was a legitimate part of the ACCC's statutory role to assist in the redesign of self-regulatory schemes to ensure that such schemes met the `public benefit' test in the Trade Practices Act.51
The Taskforce considers that the authorisation process is essential in providing a public benefit justification process. However, the Taskforce considers that industry should manage the risk of having to seek authorisation in the first place.
Centralising government responsibility
During the course of consultations, a number of organisations raised the issue of centralising responsibility for self-regulation into one government agency. Some organisations considered that it was confusing and bureaucratic for industry to know which regulator(s) to deal with. For example, the Service Providers Industry Association (SPAN) commented that regulatory oversight of information industries is fragmented across many agencies and organisations. It submitted that industry-specific regulation applicable to telecommunications service providers involves:
- The Department of Communications, Information Technology and the Arts;
- The Australian Broadcasting Authority;
- The Australian Communications Authority;
- The ACCC;
- The Attorney-General's Department (privacy, interception etc.);
- The Australian Communications Industry Forum (the principal self-regulatory resource for the industry);
- The Telecommunications Industry Ombudsman; and
- The Australian Communications Access Forum.52
SPAN commented that coupled with a variety of other agencies that administer generic industry and consumer codes and legislation, as well as industry association codes of conduct, the totality represents a complex web of requirements to be understood and followed by industry participants.53
SPAN argued for clear allocation of areas of responsibility to lead agencies, expressed in simple terms that are widely understood and respected by government, industry and consumer interests. Those lead agencies should set the basic regulatory principles that guide regulatory and self-regulatory activities (an example is the establishment of Privacy Principles by the Attorney-General and Privacy Commissioner, consumer protection would be presumably handled by the Treasury).54
Similarly, NRMA commented that another action by government that could help to promote more effective self-regulation would be to establish a specialised Unit within a department such as Treasury to deal with self-regulatory issues. This would help to ensure a consistent approach to self-regulation by government as well as streamline the administrative process for business and consumers.55
However, government agencies argued that each agency has its own specialised area and to try to centralise this expertise would be futile.56 For example, as noted above, ASIC has responsibility for the financial sector whereas the Department of Health and Aged Care oversees the health industry. The agencies argued that a centralised agency dealing with self-regulation would lead to one big, bureaucratic organisation which would be detrimental to industry.
ASIC submitted that centralising responsibility into one agency to cover self-regulatory arrangements across all industries would
not be successful. It argued that it is more appropriate for government agencies and regulators with responsibilities for particular industry sectors to deal with self-regulation in that sector. ASIC considered that departmental and agency roles should be made clear and noted that the Consumer Affairs Division of Treasury provides general advice on self-regulatory issues.57
To some extent, the Consumer Affairs Division in Treasury does offer industry advice on developing codes of practice in the first instance. This advice revolves around the Codes Kit containing previously mentioned publications such as the Codes of Conduct Policy Framework and Benchmarks for Industry-based Customer Dispute Resolution Schemes.58 In addition, the ACCC also assists self-regulatory schemes, particularly with compliance and enforcement.
The Taskforce considers that centralising government responsibility for self-regulation would result in a loss of expertise. However, the Taskforce considers that government needs to ensure Departmental and agency roles in self-regulation are clear.
Role of consumers
The Taskforce recognises that consumer groups play an important role in developing and maintaining the relevance of self-regulation. A number of organisations (including industry, consumer groups and government agencies) have expressed the importance of consumer participation in adding credibility to self-regulatory schemes.
Consumer input
The Australian Communications Authority commented that consultation with consumer groups and the public is one of the most important requirements of developing a telecommunications code for registration. Consultation with these groups is assured by Part 6 of the Telecommunications Act 1992 which requires the Australian Communications Industry Forum (ACIF) to consult with at least one consumer representative organisation, and obliges ACIF to also provide a minimum 30 day consultation period for comments from the public. In practice, ACIF usually provides a 45 day consultation on consumer codes.59
The Australian Communications Authority suggested that consumer organisations in particular have made a very significant contribution to the development of ACIF codes. Consumer representatives participate on all six Consumer Codes Reference Panel Working Committees and advise on all consumer issues which arise in code development.60
It also commented that consumer groups and representatives have been instrumental in determining the priorities and work programme of the ACIF Consumer Codes Reference Panel. The Authority commented that they have made significant research and policy contributions to the work of the Reference Panel, both in terms of sharing results of research undertaken under the auspices of other organisations and institutions, and in undertaking contracted research and policy work on ACIF's behalf. During the public comment phase consumer representatives provide advice on targeting interested groups and utilising networks to distribute information about the draft code.61
Similarly, the Department of Health and Aged Care commented that consumers are becoming sceptical when they perceive self-regulation imposed as a cheap option, and for the benefit of business. The Department argued that, overall, if self-regulation is to work effectively, there needs to be consideration of how to encourage strong community involvement to ensure it remains open to rigorous, public scrutiny. In this context it is worth noting the level of public debate involving the passage of sensitive primary legislation through Parliament. Overall, there is a need for a clearer picture, or at least guidelines, on the role of self-regulation in supporting genuine tripartite solutions. If such developments do not occur, we risk seeing declining consumer faith in self-regulation, and other useful alternative forms of regulation (such as public health promotional activities).62
Similarly, industry bodies have acknowledged the importance of consumer input. For example, the Insurance Council of Australia recognised the necessary role to be played by consumer groups in the development and maintenance of effective industry self-regulation.63 Likewise, the Financial Industry Complaints Service commented that consumer groups have been part of the working party for the development of their scheme. It suggested that it is important that the general public has confidence in the schemes and consumer groups assist in providing this.64
Insurance Enquiries & Complaints Limited also commented that both industries and consumer groups can learn and benefit from each other as schemes can improve the level of information on problems that consumers are facing.65
One observer, from the Safe Food Consumers (& Growers) Association, stressed that there is a strong need for consumer input. He submitted that underpinning industry self-regulation there must be an independent body responsive to the rights of consumers to regulate for safety, quality and fair pricing of all products and services.66
The Consumer Law Centre of Victoria, Consumer Credit Legal Service (Vic) and the Financial and Consumer Rights Council (Vic) commented that in order to deliver outcomes which serve the interests of consumers as well as industry it is necessary to include expert consumer advocacy and participation in the development and oversight of co-regulatory schemes or models.67
The Consumer Law Centre of Victoria, Consumer Credit Legal Service (Vic) and the Financial and Consumer Rights Council (Vic) endorse consumer participation in the following processes:
- Government and regulatory consultative processes;
- public hearing and enquiries;
- the development, amendment and review of industry standards and conditions of service and supply;
- the development of consumer friendly products and services;
- the development of codes, charters and dispute resolution mechanisms; and
- the oversight and management of external dispute resolution schemes.68
At the international level, other countries such as the United Kingdom and Canada also acknowledge the valuable contribution that consumers can make to successful self-regulatory schemes. Canada has focussed on consumer contribution to policy development particularly in the area of voluntary codes, in conjunction with non-governmental organisations and the private sector, to ensure consumer protection.69
Human and financial resource constraints
The Taskforce also recognises that consumer participation is constrained by limited resources. For example, the Consumer Law Centre of Victoria, Consumer Credit Legal Service (Vic) and the Financial and Consumer Rights Council (Vic) commented that consumer groups and consumers generally are largely under-resourced in terms of time and funding, both of which are necessary to meaningfully participate. This is particularly the case when compared to the resources generally available to industry participants. The Consumer Law Centre of Victoria, Consumer Credit Legal Service (Vic) and the Financial and Consumer Rights Council (Vic) argued that as part of the examination of specific industries proposing to move to a less prescriptive regulatory model, industries should be required to propose models for the inclusion of consumer representatives. That representation should be proportional with industry participation.70
Similarly, the Consumers' Telecommunications Network commented that there are resource implications in meeting the demand for consumer input arising from many different sources. Organisations such as themselves which rely substantially on volunteer contributions find it increasingly difficult to attract and retain sufficient consumer representatives to meet the needs of the various regulatory and self-regulatory bodies.71
Further, NSW Legal Aid argued that, as noted in the Grey-letter Law report, there needs to be effective resourcing provided to consumer groups to participate in the drafting and subsequent reviews of codes, and in the bodies responsible for overseeing the code.72
NSW Legal Aid commented that if self-regulatory or co-regulatory schemes are to work properly and deliver the benefits envisaged, then there needs to be effective participation of consumer representatives and, therefore, a commitment by government to properly resourcing those representatives.73
The Australian Consumers' Association recommended that a levy be imposed on the supply side of the market of other industries to ensure appropriate demand side input.74
The Small Enterprise Telecommunications Centre Limited (SETEL) noted that government grant funding has enabled consumer groups to adopt a broader focus on telecommunications issues and to participate in self-regulatory forums.75
SETEL commented that the `voice' of consumers has been strengthened through this process and the involvement in the self-regulatory process has enabled the presentation of the various consumer perspectives to a wider audience in the telecommunications industry. The major discrepancy existing today is the imbalance of input into the self-regulatory process caused by restrictions in funding of consumer representation so as to be able to `compete' with the input (and influence) of the industry representatives.76
SETEL also contended that the self-regulatory model used in the telecommunications industry in particular, pits some of Australia's most powerful corporations against consumer representatives in a frequently unequal battle. It believed that the funding of consumer representation in any self-regulating industry should be commensurate with the size and resources of the industry and the extent to which consumer representation is required in self-regulatory forums.77
In other words, SETEL argued that `David must at least have a sling and a stone when going in to battle with Goliath'.78
ASIC also argued that consumer organisations would require access to sufficient resources if they were to contribute effectively to the process of developing self-regulatory schemes.79
The Taskforce recognises that consumer groups, and consumer participation more generally, assume an important role in the development and in maintaining the relevance of self-regulation. The Taskforce also recognises that consumer participation will be limited by human and financial resource constraints if there is no external assistance forthcoming.
Oversight committee
During the course of consultations, the Taskforce has heard a number of organisations advocating for an oversight committee for self-regulation. For example, the Commonwealth Consumer Affairs Advisory Council commented that in a maintenance and monitoring role, the government could create a small `Code' authority independently reporting annually on the performance of endorsed codes (award schemes etc), innovations and shortcomings. It would also be responsible for endorsement and public education. The Advisory Council discussed that this may be able to be achieved at effectively no cost by redirecting existing ASIC and/or ACCC funds being applied to self-regulation issues.80
Similarly, the Australian Consumers' Association cited that while a lot of effort goes into the formation of self-regulatory standards, this diligence is rarely followed through in practice. For example, it submitted that a series of recommendations from a review have not been implemented. The Association would support the recommendation to create a tri-partisan (government, consumers and industry) oversight committee that would seek to ensure self-regulation is not only implemented but also maintained.81
Further, Clayton Utz commented that a body could be responsible for administering the codes and liaising with industry bodies to ensure that the various codes are reviewed and amended where appropriate at regular intervals. This body could also be responsible for maintaining a code register website and interacting with bodies that are proposed to perform similar functions under legislation such as the Privacy Commissioner. It commented that to ensure the regulatory burden imposed by such administration is not too heavy on code subscribers it is recommended that such an administrator's role be `light handed' and facilitative rather than compelling.82
Similarly, one participant in the Brisbane consultations with a background in regulatory policy, Mr Euan Morton, commented that there is scope for a private organisation or government body to compare and rate various codes to improve the level of information on them. He acknowledged that an oversight body would add an extra layer of bureaucracy, but he considered that the benefits in assisting consumers would outweigh the costs.83
However, the Taskforce recognises from an industry perspective, some form of oversight committee would add an extra level of bureaucracy that industry has to deal with. Hence, industries may shy away from developing self-regulatory schemes or not commit as many resources than it would have otherwise. Further, to a large extent, the government already plays a role in monitoring self-regulation and ensuring that it is still relevant.
ASIC commented that while there is a need for effective ongoing monitoring of self-regulatory schemes, it does not believe that an oversight committee is the best way to deal with issues and would unnecessarily add to existing agency structures.84
Developing a model code of practice
As discussed elsewhere, there is no single industry model of self-regulation. However, there are elements of good practice in self-regulation that are generally consistent across schemes.85 Some organisations have argued that a model code could be developed along these elements of good practice.
Clayton Utz commented that there should be uniform requirements for codes. It discussed the establishment of a register for codes of conduct, where a quality assessment procedure could be implemented to ensure that a particular code was appropriate for inclusion in the register. To this end, a set of core requirements should be developed and finalised as being necessarily evident in each code appearing in the register as well as ensuring a degree of uniformity between different codes.86
Clayton Utz suggested that such core requirements should include:
- complaint handling and dispute resolution procedures which comply with AS4269 (the Australian Standard on complaints handling);
- sanctions and penalties appropriate to the industry for deliberate and continuous breaches of the code;
- the information privacy principles (where appropriate);
- provisions dealing with transactions conducted via electronic
commerce (where applicable); and - procedures for the regular review and amendment of the code.
Clayton Utz argued that by making code provisions more uniform, industry participants which are regulated by multiple codes of conduct can achieve compliance more effectively without needing to develop multiple code compliance systems.87
Similarly, the Australian Direct Marketing Association commented that the role of government in respect of codes should be to both promote national consistency by developing model codes under the auspices of (for example) the Ministerial Council on Consumer Affairs, where appropriate, and to encourage self-regulatory industry bodies to develop codes based on the model.88
Further, the Commonwealth Consumer Affairs Advisory Council suggested that there is a role for government in establishing a government endorsed `Code' framework (developed through Australian Standards). It argued that only participants in codes who meet the requirements can advertise that fact, and participants in codes must advertise that their code does not meet the requirements. Participants in an industry with a complying code who do not subscribe should advertise the fact. The Advisory Council suggested that part of the endorsement process would involve the examination of competition issues, for example cartels of big players constructing codes which may have the effect of forcing out smaller players.89
As discussed throughout the report, the Taskforce considers there is no single industry model for self-regulation or codes. However, there are some general principles of good practice as discussed in chapter 6.90
248 Chapter 3 outlines reasons for self-regulation and the types of schemes adopted. The consultant's report, Tasman Asia Pacific 2000, Analysis of market circumstances where industry self-regulation is likely to be most and least effective, also discusses particular industry's initiating schemes.
249 Submission number 11, p. 2.
250 Submission number 27, p. 5.
251 Submission number 11, p. 4.
252 Submission number 33, p. 1.
253 For more information on the CCPA and Responsible Care program please see http://www.ccpa.ca/.
254 For more information please see www.iso.ch.
255 During the closing stages of the Taskforce inquiry, the Australian Broadcasting Authority released its final report on the Commercial Radio Inquiry. The Taskforce notes that the report highlights the importance of raising awareness of schemes.
0 For further information on self-regulatory policy in Canada and the UK see Office of Consumer Affairs, 1998, Voluntary Codes: A Guide for their Development and Use, Industry Canada.
1 As discussed in chapter 5, self-regulation is more appropriate where there is no strong public interest concern. Examples of public policy objectives are health and safety issues.
2 Submission number 26, p. 23.
4 Privacy Amendment (Private Sector) Bill 2000.
10 Taskforce consultation in Rockhampton, 27 June 2000.
11 Submission number 18, pp. 7-8.
12 Submission number 27, p. 12.
13 Submission number 36, p. 8.
14 Taskforce consultation in Brisbane, 26 June 2000. Established by the Queensland Government, the Queensland Red Tape Reduction Taskforce provides advice to the Deputy Premier on how to reduce the burden of regulation on Queensland business. It recently prepared Guidelines on Alternatives to Prescriptive Regulation which are available from the Queensland Department of State Development.
15 Taskforce consultation in Rockhampton, 27 June 2000.
16 The Business Entry Point site can be accessed via http://www.business.gov.au. The Business Entry Point provides businesses with access to resources from approximately 50 Commonwealth Government agencies, 100 State and Territory agencies and 125 industry associations.
17 Consumer Affairs Division, Commonwealth Department of Treasury 2000, Directory of Consumer Dispute Resolution Schemes and Complaint Handling Organisations, 4th edition, released by the Minister for Financial Services & Regulation, the Hon Joe Hockey MP. This document is available on the Internet at http://www.treasury.gov.au/publications/pubs.asp.
18 Benchmarks for Industry-based Customer Dispute Resolution Schemes 1997, released by the then Minister for Customs and Consumer Affairs, Senator the Hon Chris Ellison. This publication can be accessed through the Treasury web-site: http://www.treasury.gov.au/publications.
19 This guide is available from the Australian Communications Authority or through the Internet at: http://www.aca.gov.au/codes/.
20 Available from the Office of Small Business or http://www.dewrsb.gov.au/group_osb/smallbus/resolvedisp/index.htm.
21 For more information visit the ACCC website at: http://www.accc.gov.au.
22 Submission number 37, p. 5.
23 Submission number 29, p. 13.
24 Submission number 17, p. 5.
25 Submission number 37, p. 32.
27 Submission number 22, p. 4.
28 Submission number 13, p. 1.
29 Submission number 23, p. 3.
31 Submission number 30, p. 6.
32 Grey-letter Law: Report of the Commonwealth Interdepartmental Committee on Quasi-regulation, 1997, p. XIV. The report is available at: http://www.pc.gov.au/orr/.
33 Submission number 27, p. 6.
35 For more information about underpinning codes in legislation at the Commonwealth level see Department of the Treasury 1999, Prescribed codes of conduct - policy guidelines on making industry codes of conduct enforceable under the Trade Practices Act 1974. See also Appendix C of the Taskforce's draft report for further discussion about various models of government enforcement of self-regulation.
36 Submission number 41, p. 3.
37 Submission number 27, p. 6.
38 Submission number 37, pp. 32-33.
41 Submission number 40, p. 4.
42 Submission number 36, p. 8.
43 Taskforce consultation in Tamworth, 28 June 2000 and Bunbury, 20 July 2000.
44 Chapter 6 discusses the authorisation process.
45 Submission number 30, p. 2.
46 Submission number 31, pp. 19-20.
49 Taskforce consultation with the Internet Industry Association, Canberra, 6 March 2000.
50 Submission number 36, p. 9.
51 Submission of 24 July 2000.
52 Submission number 25, pp. 2-3.
56 Taskforce consultation with Government agencies held in Canberra, 6 December 1999.
58 Codes of Conduct Policy Framework released by the then Minister for Customs and Consumer Affairs in March 1998; this document is available on the Internet at http://www.treasury.gov.au (choose Consumer Affairs/Publications/Industry Self-Regulation Publications).
59 Submission number 17, p. 7.
62 Submission number 44, p. 13.
63 Submission number 18, p. 7.
64 Submission number 15, p. 4.
65 Insurance Enquiries & Complaints Limited, Melbourne, 20 June 2000.
66 Mr Frank Ash, Safe Food Consumers (& Growers) Association, 12 July 2000.
67 Submission number 29, p. 14.
69 For further information please see Office of Consumer Affairs, Industry Canada Fall 1999 - Winter 2000, Consumer Quarterly, Volume 5, Number 1.
71 Submission number 32, p. 2.
72 Submission number 24, p. 6.
73 Submission number 24, p. 6.
74 Submission number 16, p. 2.
75 Submission number 20, pp. 2-4.
79 Submission number 37, p. 13.
80 Submission number 14, p. 6.
81 Submission number 16, p. 2.
82 Submission number 43, p. 3.
83 Taskforce consultation in Brisbane, 26 June 2000.
86 Submission number 43, p. 2.
88 Submission number 36, p. 8.
89 Submission number 14, p. 6.
90 The Taskforce also recognises that the Ministerial Council of Consumer Affairs guideline 1996, Fair Trading Codes of Conduct, Why have them, how to prepare them is a useful reference tool for industry developing codes.
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Next: Chapter 8: Options that facilitate the improvement and harmonisation of dispute resolution schemes