"Unfair trading practices” and “dark patterns” on the Government’s agenda

The Australian Government has said it in principle supports the introduction of an economy-wide prohibition on “unfair trading practices”. The change seeks to address “the evolving nature of technology and e-commerce in the modern economy”.

Our key takeaways are:

• Australian Government consulting: The Government has completed its consultation process to assess potential regulatory options, so developments in this area are forthcoming.
• The influence of international approaches: We suspect existing regulatory approaches to “unfair trading practices” in international jurisdictions will influence Australian lawmakers. The European Union (EU)’s “Unfair Commercial Practices Directive”, in particular, may serve as a guide for an Australian framework.
• The potential form of a new consumer law prohibition: the Government is considering:
• a general prohibition on “unfair trading practices”;
• a general prohibition of that kind, together with a “black list” of specified conduct; or
• retaining the current prohibition on unconscionable conduct (in s 21 of the Australian Consumer Law) but extending it to capture “unfair conduct” as a factor which must be assessed in determining whether conduct is unconscionable.

The legislative target of these proposals is conduct that may not fall within existing prohibitions on misleading and deceptive conduct or unconscionable conduct under the Australian Consumer Law, including so-called “dark patterns”, perceived consumer “lock-in” mechanisms, and conduct inappropriately impacting consumers’ transaction decisions.

• Further scrutiny of commercial practices: This reform would be consistent with the ACCC’s continued focus on consumer protection in the digital economy, the rising tide of tech regulation in Australia and other legislative change, such as the changes to the “unfair contract terms” regime. In sum, businesses are facing increased and complex compliance risks, particularly where new prohibitions are generally expressed. 
• ASIC-regulated financial services will be considered in 2024: the Government has said that introducing an “unfair trading practices” prohibition to ASIC-regulated financial services will be considered separately in 2024.

Drawing on international models?

As to a new general prohibition on unfair trading practices in Australia, it may be modelled on provisions operating in international jurisdictions.^[1] One example is the EU’s unfair commercial practices directive (UCPD). The UCPD has also been replicated (with some amendments) in the United Kingdom’s Consumer Protection from Unfair Trading Regulations 2008 (UK) (CPR).^[2]

The Australian Government has said that a general prohibition in Australia must be designed to ensure it can adapt to commercial and technological change.^[3] The UCPD is one such approach: it seeks to deploy a general (but complex) standard which could respond to evolving commercial practice. In this respect, the UCPD prohibits “unfair commercial practices” and provides that a commercial practice is “unfair” if the practice is:

• contrary to “requirements of professional diligence”, which includes considerations of “honest market practice” and/or “the general principle of good faith”; and
• “likely to materially distort” the average consumer’s “economic behaviour” in relation to the relevant product. This includes “appreciably” impairing “the consumer's ability to make an informed decision” such that the consumer took a decision that the consumer would not have made otherwise.

A ‘blacklist’ of unfair trading practices?

A second regulatory option under consideration is the introduction of a “blacklist” – that is, a list of identified prohibited unfair practices which would aim to complement a general principles-based prohibition on unfair trade practices. The Government’s consultation paper notes that a general prohibition, introduced alongside such a “blacklist”, would be the “most comprehensive and targeted policy approach”.^[4]

A general prohibition, coupled with a list of identified practices, would follow a legislative structure which has parallels that can be found in the existing “unfair contract terms” regime in the Australian Consumer Law – the “unfair contract terms” regime contains a general prohibition on “unfair contract terms” together with a list of “examples” of the kinds of contract terms that may be unfair.^[5]   

A two-pronged structure can also be found in regulatory frameworks adopted by the EU and UK. By way of example, the UCPD provides that “unfair commercial practices shall be prohibited” and sets out a definition of “unfair”. In addition, the UPCD provides a “list of those commercial practices which shall in all circumstances be regarded as unfair”, and which operates alongside the broader prohibition.

If a list of specific prohibited practices (ie a “blacklist”) was adopted in Australia alongside a more general prohibition on “unfair trading”, the general prohibition would be relevant to practices which are not on the blacklist and may entail “emerging”, novel or disruptive engagement with consumers.^[6] The “blacklist” adopted would then set out “specific instances of prohibited conduct that commonly result in consumer and/or small business harm”.^[7] In this respect, the Government has identified “dark patterns” as conduct which currently fall outside the Australian Consumer Law and “may be described as unfair”.^[8]  The examples of “dark patterns” set out in the Government consultation paper include:

• “Forced action”. For example, forcing consumers to provide more personal information than desired or requiring access to consumers’ contacts in order to use a service.
• “Interface interference”. For example, visually obscuring important information, preselection of options by default, or “confirmshaming” (ie, interfaces which seek to ensure consumers select a particular option by using emotive language/framing).
• “Social proof”. For example, notifications about other consumers activities and testimonials about recent purchases.
• “Urgency”: temporal or qualitative limits on purchases – for example, language such as “low stock”, “high demand”, or “countdown timers”.

We will keep you updated as the Government continues its consideration of this proposed new addition to the Australian Consumer Law.

[1] Treasury, Consultation Regulation Impact Statement: Protecting Consumers from Unfair Trading Practices (Consultation Paper, August 2023) 25 (“Unfair Trading Consultation Paper”).

[2] Note that the Digital Markets, Competition and Consumers Bill 2023 (UK) will repeal the CPR. However, it is intended to “‘recreate the legal effect” of the CPR: Explanatory Notes, Digital Markets, Competition and Consumers Bill 2023 (UK) 184. As at the date of this article, the Digital Markets, Competition and Consumers Bill 2023 (UK) is currently at the third reading stage. The proposed prohibition on “unfair commercial practices” would prohibit a commercial practices that: (a) is likely to cause the average consumer to take a transactional decision that the consumer would not have taken otherwise as a result of the practice involving one or more of a misleading action, a misleading omission, an “aggressive practice”, a “contravention of the requirements of professional diligence”; or it is set out in a specified list of commercial practices “which are in all circumstances considered unfair”.

[3] Unfair Trading Consultation Paper (n 1) 25.

[4] Ibid 27.

[5] See Australian Consumer Law, ss 23 to 25.

[6] Ibid.

[7] Unfair Trading Consultation Paper (n 1) 27-28.

[8] Unfair Trading Consultation Paper (n 1) 9.