Background

1. Australians buy goods and services as part of their everyday activities—in 2014–15, Australian households consumed over $900 billion in goods and services.¹

2. Consumers are provided with rights, and obligations imposed on traders, by the Australian Consumer Law. Responsibility for enforcing this legislation—and managing compliance with fair trading obligations—is shared between the federal and state and territory governments. The federal regulator responsible for managing compliance with fair trading obligations is the Australian Competition and Consumer Commission (ACCC).

Audit objective and criteria

3. The audit objective was to assess the effectiveness of the Australian Competition and Consumer Commission in managing compliance with fair trading obligations.

4. To conclude against this objective, the ANAO adopted the following high-level criteria:

• appropriate governance arrangements are in place to support the effective management of compliance with fair trading obligations;
• compliance risks are identified, and a strategy is in place to guide the ACCC’s fair trading regulatory activities;
• appropriate actions are taken to encourage voluntary compliance with fair trading obligations; and
• responses to non-compliance are timely, effective and proportionate to the risks presented by the non-compliance.

Conclusion

5. The ACCC effectively carries out many of its regulatory activities relating to managing compliance with fair trading obligations. It has a sound compliance and enforcement strategy, based on an extensive consultative process for determining strategic priorities. The strategy has been implemented by providing relevant and well targeted information and advice about fair trading rights and obligations to encourage voluntary compliance, and through proportionate and graduated responses to non-compliance, where investigations and enforcement activities have led to identifiable improvements in trader behaviour.

6. In the context of sound management, there are meaningful opportunities for the ACCC to improve its performance in managing compliance with fair trading obligations. Of particular importance, the ACCC has made inadequate use of intelligence for targeting compliance and enforcement activities, focuses too narrowly on individual complaints (rather than trends and patterns) in case selection activities and does not have adequate arrangements for ensuring that complaints involving high levels of widespread consumer detriment are considered by appropriate senior officers. Improvements in these areas would provide greater assurance that the ACCC is targeting its regulatory activities at conduct involving the greatest level of widespread consumer detriment. Doing more to extend its suite of performance measures from the current focus on outputs or deliverables to outcomes would also enable the ACCC to better gauge the extent to which fair trading objectives are being achieved and the extent of its contributions to higher levels of compliance by traders with fair trading obligations.

Supporting findings

Assessing regulatory risks

7. The ACCC’s arrangements for managing risks only partially accord with the Commonwealth’s Risk Management Policy, and the ACCC does not apply the policy to its priorities. While the annual strategic review process has been effective in identifying the ACCC’s key strategic compliance risks, these priorities have not been managed through a consistent risk-based approach, including arrangements for evaluating outcomes. Addressing these gaps would facilitate more consistent risk management across the ACCC.

8. The ACCC has a sound compliance and enforcement strategy that outlines a set of proportionate and graduated approaches to encouraging voluntary compliance and addressing non-compliance.

9. The ACCC has access to a wide range of information sources, which it uses to identify systemic compliance risks, target compliance activities and support investigations into non-compliance with fair trading obligations. However, in undertaking these activities the ACCC relies too heavily on its own complaints data, and could make greater use of other sources of information, including public data and the complaints data of other regulators (see Recommendation No. 1). In analysing information, the ACCC’s Intelligence and Reporting team prepares a range of useful reports for intelligence purposes. To support better targeting of compliance and enforcement activities, these reports could focus more on identifying higher risk traders, industries and issues.

10. In accordance with current Commonwealth guidance, the ACCC uses a number of measures, including performance indicators, case studies and survey results, to monitor and report on its performance. While they have improved over time, most of these measures are output-based, and developing measures of outcomes would enable the ACCC to report in ways that better illustrate its effectiveness in improving trader compliance with fair trading obligations.

Promoting voluntary compliance

11. The ACCC’s information and advice about fair trading rights and obligations is clear and targeted to the main areas of consumer and business concern. This information is disseminated through traditional channels and social media such as Facebook and Twitter. Of primary importance is the ACCC website, which is clearly organised and easy-to-use. Consumer and business stakeholders contacted by the ANAO consistently commented positively on the ACCC’s engagement with them.

12. The ACCC’s fair trading compliance projects, which generally contain elements of education and enforcement, are targeted to priority areas and often achieve good results. Of eight projects that it had evaluated, six had positive results and two had mixed results. However, more frequent evaluation and better risk management would provide greater assurance that these projects are well managed, effective and achieve value for money.

13. In the ACCC’s most recent Consumer and Small Business Perceptions Survey, most consumers and many businesses felt that they did not need to know what the ACCC was doing until there was a problem that affected them personally, at which time they expected to be able to find out more about the ACCC’s roles. Nevertheless, a significant proportion of respondents wanted to know more about the work of the ACCC, indicating scope for the ACCC to increase the awareness of consumers and traders about where to get advice about their fair trading rights and obligations.

Managing complaints

14. The ACCC does not have fully effective arrangements to receive and respond to complaints as it has not consistently met the service standards outlined in its Service Charter, and quality assurance checks indicate low levels of quality in answering calls. Only 48 per cent of recent calls were answered within 60 seconds (against a target of 60 per cent) and 56 per cent of web forms were responded to within the target of 15 business days.

15. There are also shortcomings in the ACCC’s quality assurance processes, as assessments have not been conducted in line with internal guidelines, outsource staff are subject to different call quality criteria to in-house staff, and results from the quality assessments are at odds with largely positive responses to the most recent customer service satisfaction survey.

16. The ACCC records complaints in its client relationship management systems. The ANAO identified issues with the way complaints were recorded in this system, including duplicate trader entries and a low level of identification of vulnerable and disadvantaged consumers. These issues reduce the usefulness of complaints data for the purposes of strategic planning, case selection and targeting of voluntary compliance activities. To increase the usefulness of complaints data for these purposes, the ACCC should introduce processes for assuring data quality, and better identifying vulnerable and disadvantaged consumers at the point of contact.

Case selection and escalation

17. The ACCC has appropriate arrangements for consideration and selection of matters at its internal case selection meetings. However, these meetings only consider approximately one per cent of the 10 000 fair trading complaints that the ACCC receives each quarter and there are limitations in the arrangements for escalating complaints beyond the Infocentre, which is the initial response centre for all inquiries and complaints to the ACCC on competition and consumer issues in Australia. These limitations relate to the extent of assurance arrangements regarding the escalation of cases to the case selection meetings, which raise the possibility that the ACCC may ‘miss’ complaints and consequently not address instances of widespread consumer detriment.

18. More broadly, the ACCC’s case selection activities focus too heavily on individual complaints and instances of non-compliance. Greater use of intelligence in the case selection process, aimed at identifying trends and patterns of conduct suggesting widespread consumer detriment, would enable the ACCC to more effectively target its investigative and enforcement activities.

19. The ACCC’s processes for escalating cases for detailed investigation and enforcement action were effective in filtering cases to those falling within an ACCC priority. However, there were issues with the way that case progressions and escalations were recorded that have implications for the accuracy of reporting about the number of cases at various stages of investigation.

Managing investigations

20. Investigations were largely carried out in accordance with the Australian Government Investigation Standards. The ACCC has clear policies on its intranet, well-qualified staff and effective arrangements for the oversight of investigations. There was room for the ACCC to improve its practices in relation to the planning of investigations, as no investigation plan was in place for 14 of 50 investigations reviewed (28 per cent) and risks were not appropriately identified as part of investigation planning.

21. The ACCC has extensive processes to ensure that its investigative powers are used in a way that is proportionate to the risk presented by non-compliance, and also having regard to the burden and cost of compliance for a recipient. There was a high level of compliance with these processes and the ACCC exercised its powers in a proportionate way. However, there is room for the ACCC to ensure it more systematically considers ways to narrow the scope of information gathering notices that it issues.

Enforcement actions

22. The ACCC consistently made decisions about the appropriate enforcement action in particular cases in accordance with its Compliance and Enforcement Policy, proportionate to the identified non-compliance, and having regard to the objectives of specific and general deterrence. The ACCC makes use of a range of actions to respond to non-compliance. The most common action taken by the ACCC was accepting an administrative resolution (23 per cent of finalised cases in the ANAO’s sample).

23. Enforcement actions taken by the ACCC were effective in responding to and managing non-compliance. The ANAO identified a decline in the number of complaints about a trader in the period following an action being taken against that trader, suggesting that enforcement actions were effective in achieving specific deterrence.

24. The effect in terms of general deterrence is more difficult to measure, although particularly where the ACCC adopted an industry-wide approach, it appeared that enforcement actions did have an impact on compliance in the broader industry.

Recommendations

Summary of entity response

25. The Australian Competition and Consumer Commission’s summary response to the report is provided below, while its full response is at Appendix 1.

The ACCC welcomes the report and its findings that the ACCC has a sound compliance and enforcement strategy.

The ACCC notes the ANAO’s comments that there are opportunities for the ACCC to improve its use and gathering of intelligence to provide greater assurance that the ACCC is targeting its regulatory activities at conduct involving the greatest level of widespread consumer detriment.

The ACCC agrees with the three recommendations made in the report, which focus on intelligence and improvement of quality of complaints data. The ACCC response notes recent, current and possible future actions that might address the recommendations.

Audit Findings

Regulation of fair trading

1.1 The agency responsible for consumer protection at the national level is the Australian Competition and Consumer Commission (ACCC). The ACCC is an independent agency within the Treasury portfolio, established in 1995 by the merger of the former Trade Practices Commission and Prices Surveillance Authority. The ACCC has three main responsibilities:

• promoting competition—by educating traders about their responsibilities, assessing proposed mergers as part of the merger review process and taking action against anti-competitive conduct;
• protecting consumers (and small businesses)—by educating consumers and traders about their rights and responsibilities, taking action against conduct that contravenes the fair trading obligations in the Australian Consumer Law and administering, in conjunction with state and territory agencies, product safety laws (state and territory consumer affairs agencies administer mirror legislation in their jurisdictions); and
• regulating national infrastructure markets—by determining the prices and access arrangements for some nationally significant infrastructure services (such as telecommunications, rail and bulk water).

The Australian Consumer Law

1.2 Australian consumers are provided with rights and obligations are imposed on businesses by the Australian Consumer Law. The Australian Consumer Law is enacted as Schedule 2 of the Competition and Consumer Act 2010, and is a single, national law relating to consumer protection and fair trading. Key provisions of the Australian Consumer Law are shown in Figure 1.1.

Figure 1.1: Key provisions of the Australian Consumer Law

Note: The Australian Consumer Law does not cover the provision of financial products and services. Consumer protection in relation to these matters is dealt with by identical provisions (relating to misleading or deceptive conduct, unconscionable conduct and unfair practices) in the Australian Securities and Investments Act 2001, administered by the Australian Securities and Investments Commission.

Source: ANAO, based on Schedule 2, Competition and Consumer Act 2010.

Multiple regulator model

1.3 The Australian Consumer Law, when introduced in 2011, replaced a range of existing Commonwealth and state and territory fair trading laws. The Australian Consumer Law was the result of an Intergovernmental Agreement that was one of the regulatory reform programs of the Council of Australian Governments that aimed to deliver a seamless national economy.

1.4 To create a national consumer protection framework (shown in Figure 1.2), each state and territory has passed legislation applying the Australian Consumer Law as a law of its jurisdiction. The Australian Consumer Law, as passed by the Commonwealth, applies to the conduct of corporations as suppliers of goods and services, and to all transactions that occur across state borders. The legislative scheme in each state and territory governs the way in which consumers can access state courts and tribunals (for example, providing access to the state and territory-based small claims tribunals for breaches of the Australian Consumer Law). The state and territory laws also deal with specific enforcement issues and procedures (for example, providing powers to the various state and territory fair trading agencies).

Figure 1.2: Consumer protection framework

Source: ANAO analysis of the consumer protection framework.

1.5 Under the Intergovernmental Agreement, responsibility for enforcement and administration of the Australian Consumer Law is shared between the ACCC and the state and territory fair trading agencies, under an arrangement that has been referred to as a ‘multiple regulator model’. To support administration and enforcement of the Australian Consumer Law under this model, the ACCC, the Australian Securities and Investments Commission and the state and territory fair trading agencies entered into a Memorandum of Understanding in 2010. The ACCC also engages regularly with the other regulators individually, and through a range of committees of the Council of Australian Governments’ Legislative and Governance Forum on Consumer Affairs.

1.6 In practice, the ACCC is responsible for administering and enforcing the Australian Consumer Law in relation to conduct that is of a national character—that is, where the conduct is affecting, or has the potential to affect, consumers in multiple states. By contrast, the state and territory regulators have a greater focus on conduct occurring wholly within the state or territory, and especially in industries where there are specific state or territory laws applying (for example, in relation to residential tenancies). However, the nature of the consumer protection framework means that the state and territory regulators retain jurisdiction in relation to all conduct occurring within their geographic borders.

The ACCC’s regulatory approach

1.7 In its 2015–16 Corporate Plan, the ACCC stated that its budget for fair trading activities was $51.8 million and its average staffing level was 218.1 for these activities.²

1.8 The ACCC’s approach to administering and enforcing the Australian Consumer Law (including compliance with fair trading obligations) is illustrated in Figure 1.3.

Figure 1.3: The ACCC’s fair trading regulatory approach

Source: ANAO analysis of ACCC information.

1.9 Each year, the ACCC undertakes a strategic review in which it considers information and intelligence available to identify the issues that pose the greatest risk of widespread consumer detriment, including new and emerging issues. Following the strategic review, the ACCC publishes its Compliance and Enforcement Policy, which sets out the principles adopted to achieve compliance with the law and outlines the ACCC’s enforcement powers, functions, priorities, strategies and regime.³ Importantly, the Policy identifies priority areas for a given year, which are areas where the ACCC considers there is the greatest risk of widespread consumer detriment.

1.10 In managing compliance with fair trading obligations, the Compliance and Enforcement Policy states that the ACCC takes action to stop unlawful conduct and deter future offending conduct. It does this by: enforcing the law (including by investigation and taking administrative and court action in relation to non-compliance); encouraging voluntary compliance through educating and engaging with consumers and businesses; and working with other regulators. In deciding what actions to take, the ACCC assesses non-compliance or the risk of non-compliance (as identified through information and intelligence⁴, including complaints) against the priority areas in its Compliance and Enforcement Policy.

Audit objective, criteria and scope

1.11 The objective of the audit was to assess the effectiveness of the Australian Competition and Consumer Commission in managing compliance with fair trading obligations.

1.12 To form a conclusion against this objective, the ANAO has adopted the following high-level criteria:

• appropriate governance arrangements are in place to support the effective management of compliance with fair trading obligations;
• compliance risks are identified, and a strategy is in place to guide the ACCC’s fair trading regulatory activities;
• appropriate actions are taken to encourage voluntary compliance with fair trading obligations; and
• responses to non-compliance are timely, effective and proportionate to the risks presented by the non-compliance.

1.13 The scope of the audit was the ACCC’s activities in relation to fair trading. The ACCC’s activities in relation to product safety, competition and infrastructure regulation were not considered as part of the audit.

Audit methodology

1.14 The ANAO considered the ACCC’s processes to assess compliance risk, activities to promote voluntary compliance and its actions in responding to non-compliance.

1.15 The audit methodology included: examining relevant policy documents, guidelines and procedures; reviewing minutes of internal governance meetings; interviewing relevant ACCC staff and key stakeholders; and reviewing samples of projects, cases and enforcement outcomes from 1 July 2013 to 30 June 2015.

1.16 The audit has been conducted in accordance with ANAO auditing standards at a cost to the ANAO of approximately $340 000.

Does the ACCC’s risk management framework support the effective management of fair trading compliance risks?

2.1 Under the Commonwealth’s Regulator Audit Framework, the ACCC is expected to have a risk-based and proportionate approach to ensuring that traders comply with their fair trading obligations.⁵ As the ACCC is an ‘entity’ for the purposes of the Public Governance, Performance and Accountability Act 2013, it is also required to apply the Commonwealth Risk Management Policy (Commonwealth Policy).⁶

2.2 As a Comcare fund member, the ACCC is required to participate in the annual Comcover Risk Management Benchmarking Programme. The Programme measures the risk management capability of entities using a risk maturity model, and involves completion of an online self-assessment survey. In responding to the survey in early 2015, the ACCC assessed that:

• its three greatest strengths (in descending order of importance) were establishing a risk management policy, communicating and consulting about risk and defining responsibility for managing risk; and
• its three areas requiring greatest development were developing a positive risk culture, maintaining risk management capability and understanding and managing shared risk.

2.3 The Commonwealth Policy requires an entity to define its risk appetite (the amount of risk it is willing to accept or retain in order to achieve its objectives) and risk tolerance (the levels of risk taking that are acceptable to achieve a specific objective or manage a category of risk). The ACCC risk appetite is low to medium (that is, it does not accept risks that are high following risk treatments). However, the ACCC does not have a formal risk tolerance policy.

2.4 Each year, the ACCC updates its ‘risk profile’, which sets out its strategic, enterprise wide and divisional risks. At all risk levels, risk owners are designated, and risks are evaluated based on likelihood and consequence. The ACCC’s strategic risk profile is extensively considered by senior management committees and the Chairman prior to final endorsement by the Corporate Governance Board. The profile lists the divisional risks rated as high, enterprise-wide operational risks and strategic risks, and identifies the impact of the risk occurring, the initial risk level, any mitigation strategies, and the residual risk level. The risk registers for other risks record their likelihood, consequence and initial risk level. A comparison of the ACCC’s strategic risks for 2013–14 and 2014–15 indicated that the ACCC reviewed and revised many of its risks.

2.5 The ANAO examined the minutes of the ACCC’s Corporate Governance Board, which has a role to review and approve the ACCC’s annual risk management plan. According to the minutes, in 2014 the Board was extensively involved in setting the ACCC’s strategic risks and risk mitigation strategies. Also, the Board received briefings from the audit committee, demonstrating the committee’s close involvement in oversighting the ACCC’s risks. Further, divisions put significant effort into identifying their risks.

2.6 The nine essential elements of the Commonwealth Policy, and the ANAO’s assessment of the ACCC’s compliance with these elements, in respect of its responsibilities for fair trading, are set out in Table 2.1. As indicated in the table, the ACCC needs to undertake further work to comply with the Commonwealth Policy.

Table 2.1: The ACCC’s compliance with the essential elements of the Commonwealth Risk Management Policy

Source: ANAO analysis of ACCC information.

Identification of the ACCC’s priorities

2.7 The ACCC undertakes an annual process, called the strategic review, to determine its priorities for the following year and the risks to achieving its objectives. The result of this process is the publication of the ACCC’s Compliance and Enforcement Policy, which contains a list of priority areas for the year. Figure 2.1 outlines the timeline of the strategic review process for developing the 2015 Compliance and Enforcement Policy.

Figure 2.1: Strategic review process for developing the ACCC’s 2015 Compliance and Enforcement Policy

Source: ANAO analysis of ACCC information.

2.8 As part of the strategic review, to identify emerging issues the ACCC relies on information from a wide range of sources, including: internal complaints data; views of Commissioners; a survey of staff; a survey of, and meetings with, key stakeholders; and an assessment of media, research and other sources. In 2014, the ACCC sent a survey to 150 stakeholders, and received 21 responses. Stakeholders that were surveyed as part of this process included state/territory regulators, industry ombudsmen, consumer groups and business groups. A key aim of the strategic review process is to identify issues that should no longer be a priority, and new or emerging issues that warrant inclusion as a priority. Table 2.2 shows the ACCC’s fair trading priorities as outlined in the Compliance and Enforcement Policy documents for 2014 and 2015. The changes to the priorities between 2014 and 2015 were more significant than the changes between other years, with the removal of four priority areas, addition of four new priority areas and refocusing of three priority areas.

Table 2.2: The ACCC’s fair trading priorities, 2014 and 2015

Note a: Refocussed in 2015 from ‘drip pricing’ to include issues ‘associated with systemic failures by online retailers or retail sectors’.

Note b: Refocussed in 2015 to include ‘issues identified through the ACCC’s monitoring of the fuel sector’.

Note c: Refocussed in 2015 to ‘finalising its role in ensuring that carbon tax cost savings are being passed through to consumers’.

Note d: Credence claims arise where the consumer cannot independently verify the claims themselves and must trust the seller. An example of a credence claim is a claim that a product is ‘environmentally friendly’.

Source: ANAO analysis of ACCC information.

2.9 While the strategic review process provides a sound approach for identifying priorities, the ACCC does not have a systematic, risk-based approach for addressing these priorities⁷, or a clear basis for evaluating its performance in addressing existing priorities.⁸ As a result, when each subsequent strategic review is conducted, there is not as firm a basis as possible for retaining some priorities, and relegating others. To better address strategic priorities, the ACCC should more systematically apply a risk-based approach to managing mitigation treatments, and determine a basis for evaluating performance in addressing existing priorities.

Is there an effective compliance and enforcement strategy?

2.10 A risk-based and proportionate compliance and enforcement approach assists regulators to target their limited resources appropriately. As noted previously, the result of the ACCC’s strategic review process is a Compliance and Enforcement Policy, which outlines the ACCC’s annual priorities and its strategies and powers to achieve compliance with the law.

2.11 As set out in the Compliance and Enforcement Policy, to achieve its compliance objectives, the ACCC employs ‘three flexible and integrated strategies’: enforcement of the law; encouraging compliance with the law; and working with other regulators to implement these strategies. These strategies are employed using a range of compliance and enforcement tools, outlined in Figure 2.2.

Figure 2.2: The ACCC’s approach to compliance and enforcement

Source: ANAO analysis of ACCC information.

2.12 In deciding which compliance or enforcement tool to use, the ACCC states that its first priority is ‘always to achieve the best possible outcome for the community.’ The Compliance and Enforcement Policy makes clear that risk—in terms of detriment to consumers—is taken into account when making decisions about the appropriate compliance or enforcement action. The Policy says that an administrative resolution may be appropriate ‘for example, where the ACCC assesses potential risk flowing from conduct as low’. By contrast, court action is more likely where ‘the conduct is particularly egregious, where there is reason to be concerned about future behaviour, or the party involved is unwilling to provide a satisfactory resolution’.

2.13 The Compliance and Enforcement Policy is supported by other guidance, including its cooperation policy and guidance on the use of infringement notices and enforceable undertakings. The guidance on infringement notices and enforceable undertakings sets out instances where the ACCC is relatively more or less likely to use one of these regulatory tools. Many of these factors relate to the risk to consumers posed by a particular conduct—for example, the ACCC states it is less likely to issue infringement notices where: it considers the concerns are more serious in nature; there has been significant detriment; it has concerns that the conduct may be continuing; or it has previously taken action against the person involved in the contravention.⁹

2.14 The ACCC’s compliance and enforcement strategy is risk based, with lighter-touch, more persuasion-oriented actions more likely for those willing to comply and heavier-touch, enforcement-oriented actions for entities unwilling to comply, or where there is a significant level of consumer detriment or impact to competition. This approach is sound and provides a framework for the ACCC to direct its resources to those cases where the risk to consumers is greatest. The extent to which the ACCC undertakes its fair trading enforcement activities in accordance with the strategy is considered in Chapter 7.

Are there robust processes for gathering information and analysing and using it for intelligence purposes?

2.15 To enable the ACCC to appropriately identify regulatory risks and target compliance and enforcement activities, it is important that it has effective arrangements for gathering regulatory information, and analysing and using it for intelligence purposes. Regulatory intelligence can be used for three main purposes—identifying systemic compliance risks, targeting compliance and enforcement activities, and supporting investigations into non-compliance (for example, by providing leads to evidence). Chapter 4 considers the use of intelligence in case selection.

Gathering regulatory information

2.16 The ACCC makes use of a range of internal and external information sources to inform its intelligence and compliance activities. The more important of these are outlined in Table 2.3. Most of the information sources are primarily used in investigating instances of non-compliance with fair trading obligations.

Table 2.3: The ACCC’s main sources of regulatory information

Note a: Examples of industry ombudsmen are: the Telecommunications Industry Ombudsman, the NSW Energy and Water Ombudsman, the Financial Ombudsman Service and the Health Complaints Commissioner Tasmania.

Source: ANAO analysis of ACCC information.

2.17 The main source of information for the ACCC in targeting its compliance and enforcement activities (and a significant source for identifying systemic risks) is the contacts it receives from consumers. In 2014–15, approximately 165 000 contacts were recorded in the ACCC’s database, of which over 41 000 were related to consumer protection. Figure 2.3 shows the number of fair trading contacts the ACCC received in 2014–15, broken down by the issue to which the contact related.

Figure 2.3: ACCC fair trading contacts by category, 2014–15

Source: ANAO analysis of ACCC data.

2.18 Despite these many contacts, the ACCC receives only a small proportion of the total number of consumer contacts relating to potential instances of non-compliance with fair trading obligations throughout Australia. Like the ACCC, other Australian Consumer Law regulators and industry ombudsmen also receive complaints from members of the public raising instances of potential non-compliance with fair trading obligations. Figure 2.4 indicates that the ACCC only received around six per cent of the approximately 720 000 fair trading related complaints received by Australian Consumer Law regulators and industry ombudsmen in 2013–14.

Figure 2.4: Fair trading contacts received by fair trading regulators and industry ombudsmen, 2013–14

Source: ANAO analysis of regulator and ombudsman data.

2.19 Notwithstanding the importance of complaints information in selecting and conducting compliance activities, the ACCC receives complaints information from the states, territories and ombudsmen only on an ad-hoc basis, and usually in an aggregated form. Information sharing between the Australian Consumer Law regulators, for example, mainly occurs through ACLink, an online collaboration website. ACLink allows Australian Consumer Law regulators to request and post information about topics of interest—such as traders, industries and conduct. While this is useful in the context of individual investigations (such as in reducing duplication of investigative efforts), it is significantly less useful than complete disaggregated complaints data for the purposes of identifying trends, patterns and issues of concern.

2.20 Recognising the potential for better targeting of compliance activities, in 2005 the ACCC proposed the establishment of a National Consumer Complaints Database, which was not progressed due to lack of available funding. In view of advancements in processes to record and share information since that time, there is scope for the ACCC to re-examine opportunities to work with other regulators to obtain complaints data on a regular and disaggregated basis. This information could potentially be stored in a data warehouse to allow easy analysis by analysts and investigators, to support a greater understanding of non-compliance with fair trading obligations.

2.21 There is also scope for the ACCC to gather other publicly available information about potential consumer detriment in the market. Increasingly, consumers are using the internet—through social media and online review sites—to communicate and publicise difficulties they have had with traders. The ACCC could make use of this, and other information, in a systematic way to increase its understanding of issues facing consumers.

Analysis and use of information for intelligence purposes

2.22 As noted previously, the information that the ACCC collects, including from the sources listed in Table 2.3, is used for a number of intelligence purposes. These purposes include identifying priorities as part of the strategic review process and identifying potential non-compliance to target compliance and enforcement activities. At present, the main analysis and use of information to assess compliance risk is through regular and ad-hoc reports prepared by the ACCC’s Intelligence and Reporting team. The main types of intelligence reports are provided at Table 2.4.

Table 2.4: Main types of ACCC intelligence reports

Source: ANAO analysis of ACCC information.

2.23 The reports serve a number of useful functions. For example, the brief for the strategic review helps to identify potential priorities and developments in the external environment, while the trend analysis reports identify emerging issues. The trader briefs and industry profiles are valuable in identifying traders not complying with fair trading obligations, and support the ACCC’s project work.

2.24 As part of these reports, however, the ACCC does not identify traders, industries or issues of relatively greater or lesser risk. The Intelligence and Reporting team’s monthly report to the Commission, for example, is mainly limited to the number of complaints received about particular traders. It does not go further to identify the level of risk (in terms of consumer detriment) associated with those complaints. Also, while the team’s reports expressly refer to ACCC complaints, they less often refer to other relevant sources, such as environmental scans.

2.25 Importantly, the ACCC does not systematically assess and analyse the information that it receives to help target compliance and enforcement activities, instead relying on these to be identified through manual work of the Intelligence and Reporting team. It is noted that a number of other Commonwealth regulators have adopted a quantitative and systematic risk differentiation approach, including the Australian Taxation Office, the Australian Prudential Regulation Authority and the Australian Fisheries Management Authority. There would be value in the ACCC also adopting a quantitative and systematic approach to risk differentiation and prioritisation in order to better target its compliance and enforcement activities. There is scope for the ACCC to undertake risk scoring of information that it receives—particularly complaints.

2.26 In relation to complaints, risk scoring could work in two ways:

• matters could be scored by Infocentre staff at the time a contact is logged; and/or
• a computer-based risk scoring algorithm could be developed to provide assurance that staff are identifying and scoring matters correctly.

2.27 A computer-based risk scoring algorithm, in particular, would support a better understanding of the ACCC’s risk population. As part of such an algorithm, risk scores for complaints could reflect, for example: whether the complainant was vulnerable or disadvantaged; the type of non-compliance; whether the complaint relates to an ACCC priority area; and the trader and industry involved. These risk scores could also be used to generate a risk score and profile for traders, which could be monitored over time and could prove especially helpful for targeting compliance and enforcement activities towards the areas of greatest need.

Does the ACCC effectively monitor and report on its performance in managing fair trading compliance?

2.29 As an entity subject to the Public Governance, Performance and Accountability Act 2013, the ACCC is required to measure, assess and report on its performance in accordance with the Commonwealth performance framework. As a regulator, it is also required to measure and report on its performance in accordance with the Regulator Performance Framework.¹⁰

2.30 The ACCC’s approach to performance measurement comprises:

• a suite of performance indicators linked to its key organisational strategies and deliverables that it will measure and report against in its annual performance statement—to be supplemented with specific examples of actions and outcomes¹¹;
• in relation to the Regulator Performance Framework, the ACCC has adopted a self-assessment methodology to assess its performance against the six Regulator Performance Framework performance indicators—with external validation to be provided by the ACCC Performance Consultative Committee¹²; and
• a biennial consumer and small business survey that aims to gauge the level of consumer understanding of the ACCC’s roles and functions—and a proposed comprehensive biennial business-focussed survey measuring business views of the ACCC’s performance.

2.31 A selection of the ACCC’s key performance indicators for its fair trading activities, and the ANAO’s assessment of these indicators, is set out in Table 2.5.¹³

Table 2.5: Analysis of selected ACCC key performance indicators for fair trading

Source: ANAO analysis of ACCC information.

2.32 As shown in Table 2.5, the ACCC’s performance indicators are largely focused on measuring outputs and not on the extent to which the ACCC’s activities were effective, as may be shown, for example, by improved trader conduct following a compliance or enforcement action. The performance indicators taken together are not currently complete, as they do not provide an overall picture of the impact of the ACCC’s activities. It is noted, however, that the ACCC has been improving its key performance indicators over time (previously, they were more general and were less qualitative), and that the inclusion of specific examples of actions and outcomes that show the impact of the ACCC’s activities may go some way to presenting a more complete picture of the ACCC’s performance.¹⁴

2.33 In relation to its Regulator Performance Framework self-assessment methodology, the ACCC has developed a range of measures and examples of evidence to support its key performance indicators. Several of the evidence examples are useful, as they aim to demonstrate that the ACCC has: been timely in its enforcement actions; undertaken good practice consultation; or been effective. However, some other examples involve simply confirming that the ACCC has published a document or followed a process.¹⁵ It would be more meaningful if the ACCC included evidence of business awareness and satisfaction, or data such as the number of revisions of compulsory information-gathering notices.

2.34 The ACCC reports externally on its fair trading activities through its annual report and quarterly publication, ACCCount. In its 2014–15 annual report, the ACCC provides performance information, including about successful enforcement outcomes, case studies, and survey results. While helpful, the ACCC could give greater emphasis to instances where its interventions have led to changes in compliance behaviour, and to presenting both positive and negative survey results. The ACCCount publication is also focused on deliverables, such as the number of ACCC enforcement activities undertaken, its other fair trading outputs (such as publications) and stakeholder engagement and government liaison activities in the quarter.

2.35 Overall, there is scope for the ACCC to improve its performance measurement and reporting, to better demonstrate how its activities lead to an improvement in trader compliance with fair trading obligations. The surveys that the ACCC undertakes (and is planning to undertake) of consumers and businesses position it well to do this, as survey results can be proxies for the effectiveness of regulatory activities. There is also an opportunity for the ACCC to make greater use of data, ranging from complaints data to stakeholder feedback, to gain a better understanding of how its activities are influencing the level of consumer detriment within Australia. This variety of data, when used in systematic evaluations, would provide the basis for case studies and other examples of actions and outcomes in annual performance statements.

Do the ACCC’s guidance and engagement activities effectively support voluntary compliance?

3.1 Effective promotion of voluntary compliance, such as by informing consumers and traders about their fair trading rights and obligations, is an important component of regulators’ compliance strategies, as it minimises the need to apply more costly enforcement measures.

3.2 The ACCC’s Compliance and Enforcement Policy states that the ACCC seeks to strike the right balance between voluntary compliance and enforcement.¹⁶ The ACCC provides a range of information and advice to encourage compliance with fair trading obligations, which is disseminated through the ACCC’s website and other channels, including social media.

Providing guidance through the ACCC’s website and social media

The ACCC’s website

3.3 Between June 2014 and June 2015, the ACCC’s website had 2.5 million recorded visits. The website typically received around 550 000 visits per quarter over this period, as indicated in Figure 3.1.¹⁷

Figure 3.1: Visits to the ACCC’s website by quarter, June 2014 to June 2015

Source: ANAO analysis of ACCC data.

3.4 The ACCC’s website is clearly organised and easy-to-use, being structured around three main sections—consumers, business and regulated infrastructure. Relevant to fair trading, the business section provides information for traders on their rights in relation to business-to-business transactions and on their obligations to consumers under sections titled ‘treating customers fairly’, ‘advertising and promoting your business’ and ‘pricing’.

3.5 The consumer section provides information on a range of issues (such as consumer guarantees and misleading advertising) and industries (such as motor vehicles and telecommunications). There was a clear alignment between the topics listed in the consumer section of the ACCC’s website and the issues and industries that are an ACCC priority, and/or the subject of a large volume of consumer complaints (Table 3.1).

Table 3.1: Information on fair trading issues provided in the consumer section of the ACCC’s website

Note a: Drip pricing is where a headline price is advertised at the beginning of an online purchasing process and additional fees and charges that may be unavoidable are then incrementally disclosed.

Note b: The purchase of goods and services from an application on a mobile device, such as a smartphone or tablet.

Source: ANAO analysis of ACCC information.

3.6 In addition to the information available on web pages on its website, the ACCC makes a range of publications available via its website and in hard copy. In relation to fair trading, these cover a number of issues including providing detailed guidance to businesses on how they can comply with their obligations and to consumers on their rights. The publications that had the most web visits between January 2014 and June 2015 are set out in Figure 3.2.

Figure 3.2: Top five accessed publications relating to fair trading, 1 January 2014 to 30 June 2015

Source: ANAO analysis of ACCC data.

3.7 The ANAO examined the ACCC’s five most popular publications relating to fair trading for consumers and business. The consumer publications were accessible, easy to understand and sufficiently detailed. In line with the Government’s Regulator Audit Framework, the business publications were written in plain language, included pertinent examples, and contained consistent information.¹⁸ The ACCC’s publications were also well targeted, as shown in Table 3.2, which outlines that guidance was in place for issues that prompted the greatest number of consumer contacts.

Table 3.2: Targeting of ACCC publications

Source: ANAO analysis of ACCC information.

Social media

3.8 Social media provides regulators with the opportunity to communicate with a large audience quickly and at a low cost.¹⁹ While consumers still prefer to obtain their information about fair trading from the traditional media and the ACCC’s website, social media is becoming more important.

3.9 The ACCC has a social media strategy and currently manages three Facebook pages, three Twitter accounts and two YouTube channels.²⁰ Figure 3.3 shows the number of page likes/followers to the ACCC’s main fair trading (Consumer Rights) Facebook page and Twitter account in comparison to other selected regulators. The figure shows that the ACCC’s social media reach is comparable to the other regulators and that the ACCC’s most popular media channel is its main fair trading Facebook page, with 28 500 page likes as at September 2015.

Figure 3.3: Number of page likes/followers on the ACCC’s Twitter account and main Facebook page, compared to selected regulators, as at September 2015

Source: ANAO analysis of data from the ACCC’s and comparator regulators’ Twitter accounts and Facebook page.

3.10 The ACCC uses its Facebook pages and Twitter accounts for a variety of purposes, including to: build awareness of consumer rights; disseminate media releases and speeches; and promote ACCC activities and events. At 15 September 2015, the ACCC had made 559 posts to its Facebook page and sent 1696 tweets from its Twitter account.

3.11 Overall, there was a relatively high level of engagement with content posted on the ACCC’s social media channels—and the ACCC was a leader compared to the other selected regulators in terms of engagement with its Facebook page. This is shown in Figure 3.54, which presents the average number of times that posts were liked, shared and commented on at the ACCC’s Consumer Rights Facebook page compared to the other regulators. This high level of engagement (particularly shares and likes) makes it more likely that the ACCC’s posts are seen by a wider audience.

Figure 3.4: User engagement with the ACCC’s Facebook page, compared to other selected regulators

Source: ANAO analysis of posts from the ACCC’s and comparator regulators’ Facebook pages.

Stakeholder engagement

3.12 It is important for regulators to have a coordinated approach to engaging with regulated entities, consumers and other regulators with complementary responsibilities. When regulated entities have a clear understanding of their compliance requirements they are better able, and may be more willing, to comply. Also, coordinated engagement can help regulators to gain valuable insights into the behaviour of regulated entities that can be used to guide future compliance activity.

3.13 To support effective consultation with regulated entities and consumers, the ACCC has established a number of consultative forums²¹ with key stakeholder groups, particularly consumer and industry peak bodies. The ACCC also engages in other ways: for example, it has a team of Education and Engagement Managers who educate the small business sector across Australia about its rights and obligations.

3.14 As part of the audit, the ANAO met with a range of consumer, business and regulatory agency stakeholders. During these meetings, stakeholders mainly commented positively on the ACCC’s engagement with them. A selection of the more representative comments is set out in Table 3.3.

Table 3.3: Stakeholder views about the ACCC

Source: ANAO interviews with ACCC stakeholders.

Does the ACCC appropriately manage its compliance projects?

3.15 In industries or areas where the ACCC identifies a particular fair trading risk, it often initiates a compliance project aimed at reducing the level of consumer detriment. The most common type of activity undertaken as part of the projects was consumer education. Other activities undertaken included enforcement, media campaigns (including social media), engaging other regulators and strategies involving trader engagement and disadvantaged or vulnerable consumers.

3.16 The following case study provides an example of a project where the main activities were trader engagement and consumer education.

Note a: ACCC, Get to know your phone rights: World Consumer Rights Day 2014 [Internet], available from <https://www.accc.gov.au/media-release/get-to-know-your-phone-rights-world-consumer-rights-day-2014> [accessed 7 October 2015].

3.17 The ANAO examined all 26 projects that the ACCC commenced in 2012–13, 2013–14 and 2014–15. The ANAO examined whether they contained features that would be expected in such compliance projects, including if the projects: were based on information and intelligence (including from sources other than complaints); contained consumer and trader strategies; identified risks; contained performance indicators; and were subject to formal evaluation. The results are set out in Figure 3.5.

Figure 3.5: Key features of ACCC compliance projects, 2012–13 to 2014–15

Source: ANAO analysis of ACCC data regarding 26 compliance projects.

3.18 Figure 3.5 indicates that project teams were consistent in: outlining what intelligence was used (88 per cent), drawing on information sources other than ACCC complaints (85 per cent), and proposing a consumer strategy (81 per cent). However, only 62 per cent of projects identified risks. To better manage project risks, the project teams should identify risks more consistently, and also advise management whether or not risks had materialised and if so how they were addressed.

3.19 It was less common for projects to specify performance measures (58 per cent) or to be subject to formal evaluation (31 per cent). Including performance measures and undertaking evaluations are important for determining whether projects have achieved their objectives. The results of the eight evaluations undertaken for compliance projects are outlined in Table 3.4 and show that six projects had positive results and two projects had mixed results. While some projects and strategies, such as the mobile networks project, contributed to a reduction in complaints and an improvement in information provided by traders to consumers, others had outcomes that were more difficult to measure, although providing some ‘lessons learnt’ for ACCC staff.

Table 3.4: Projects subject to evaluation, 2012–13 to 2014–15

Note: The first six projects were a combination of education and enforcement, while the last two projects were solely educational campaigns.

Source: ANAO analysis of ACCC information.

3.20 In April 2015, the Consumer, Small Business and Product Safety Division undertook a Program Evaluation Model Project. The Division noted that it had identified an emerging business need to have objective tools for better understanding the effectiveness and impact of its business compliance and consumer education work, and to evaluate and report on its programs. While evaluations can be resource intensive, the development of evaluation tools and their regular use should help the ACCC better understand the impact of its activities.

Are consumers and businesses sufficiently aware of the ACCC’s fair trading responsibilities and activities?

3.21 For the ACCC to effectively promote voluntary compliance, it is important that consumers and businesses: are aware of the ACCC and its role; know where to access detailed information about their fair trading rights and obligations; and have a general understanding of those rights and obligations.

3.22 To inform understanding of its performance, the ACCC commissions periodic surveys of the perceptions of consumers and small businesses. The most recent survey was conducted in 2014–15, with results relating to overall knowledge of the ACCC’s responsibilities. The survey indicated that 86 per cent of consumers surveyed had some knowledge of the ACCC, with 69 per cent knowing a little and 17 per cent knowing a lot. In this regard, most consumers and many businesses felt that they did not have an in-depth understanding of the ACCC’s roles. However, for many participants, this was not of particular concern, so long as the ACCC was operating and doing as it should ‘in the background’. That is, participants felt that they largely did not need to know what the ACCC was doing, until there was a problem that affected them personally. Then, there was an expectation that they would be able to find out more about the ACCC’s roles should they require it.

3.23 Nevertheless, as shown in Figure 3.6, a significant proportion of respondents either wanted to know more about their consumer rights, did not know enough about the work of the ACCC, or were unsure when they should speak to the ACCC or to another consumer organisation.

Figure 3.6: Awareness of consumer rights and how to get help with consumer issues

Source: ACCC Consumer and Small Business Perceptions Survey 2014–15: Full Report, June 2015.

3.24 Consistent with these latter findings, the survey report made 12 recommendations aimed at improving perceptions of the ACCC. These included further promoting its roles and responsibilities (and its enforcement ‘wins’), and providing clearer guidance to businesses and consumers about which organisation to approach in particular circumstances (in conjunction with other state and territory regulators). Implementing these recommendations may help to increase the awareness of consumers and traders about where to get advice about their rights and obligations.

Does the ACCC have effective arrangements for receiving and responding to complaints from consumers?

4.1 As noted in Chapter 2, the ACCC’s main source of information and intelligence for identifying cases, traders and issues posing the greatest risk to the wellbeing of consumers are the complaints that it receives from the public. The ACCC receives these complaints from three channels: calls to its Infocentre; contacts submitted through a form on its website; and letters. The ACCC’s Infocentre team, within the Compliance, Small Business and Product Safety Group, is responsible for receiving and managing contacts from all of these channels. Calls for less complex matters (such as scams and consumer guarantees) are handled by an outsource provider.

4.2 The number of contacts (including complaints) is broken down by channel at Figure 4.1, which shows that the majority of contacts are by phone (around 13 500 on average per month), with a substantial proportion also coming through web forms (around 8 400 on average per month). On average, 86 per cent of the contacts that the ACCC receives in a given month are recorded as complaints, with the remaining 14 per cent recorded as enquiries. Of the contacts the ACCC receives, on average 3500 per month of these relate to fair trading related matters.

Figure 4.1: Number of contacts to the ACCC, by channel, July 2013 to June 2015

Note: The number of letter contacts was too small to be represented on this chart, averaging around 118 per month.

Source: ANAO analysis of ACCC Infocentre contact data.

Service standards

4.3 According to the ACCC’s Service Charter, the ACCC aims to answer 60 per cent of telephone calls within 60 seconds and to respond to letters and web forms within 15 business days of receiving them. The target duration for answering calls is relatively short compared to other Australian government departments, while the target for responding to written correspondence is broadly similar.²² As shown in Figure 4.2, in 2013–14 and 2014–15, the ACCC was consistently unable to meet its targets, with, on average, only 48 per cent of calls being answered within 60 seconds and 56 per cent of web forms being responded to within 15 business days.

Figure 4.2: The ACCC’s performance in meeting Infocentre service standards, July 2013 to June 2015

Source: ANAO analysis of ACCC Infocentre contact information.

4.4 In assessing performance against the service standards, the ACCC could consider whether the targets are appropriately calibrated, including in respect of encouraging a greater share of online complaints through an expectation of more rapid responses to webforms.

4.5 As discussed in Chapter 2, complaints data is a key source of information and intelligence and plays a vital role in the ACCC’s targeting of compliance and enforcement activities. Where a call is not answered in a timely manner, it may be abandoned, depriving the ACCC of potentially useful intelligence. Further, where a caller has an unsatisfactory experience (because their call was not answered promptly or their webform was not responded to in a timely manner), this may make them less likely to contact the ACCC in the future, with longer term implications for the ACCC’s ability to gather information. Table 4.1 sets out the proportion of calls abandoned over the period July 2013 to June 2015 along with the average call wait time and webform response time.

Table 4.1: Service level indicators, half-yearly from July 2013 to June 2015

Indicator	2013 2nd half	2014 1st half	2014 2nd half	2015 1st half	Monthly Trend
Calls abandoned Percentage of calls that were received by the ACCC, but not answered (generally because the caller hung up).	18%	33%	21%	26%
Call wait time The average number of minutes a caller had to wait in queue before speaking to a staff member.	03:13	05:53	06:39	03:17
Webform response time The average number of days taken to respond to webforms.	15	16	18	19

Source: ANAO analysis of ACCC Infocentre contact data.

Quality assurance

4.6 To manage the quality of services provided by the Infocentre, the ACCC has a quality assurance manual that sets out the procedure for the quality assessment of calls and written correspondence (web forms and letters) handled. The quality assurance procedures applicable depend on the type of contact, and whether the operator is an in-house or outsource staff member, and are outlined in Table 4.2.

Table 4.2: ACCC Infocentre quality assurance targets

Source: ANAO, based on ACCC information.

4.7 It is noted that compared to other call centres, the target number of calls to be quality assessed is relatively low.²³ Despite having a relatively low target, the ACCC has not undertaken quality assessments in accordance with its quality assurance manual. Figure 4.3 shows the performance of the ACCC in undertaking the target number of quality assessments for staff.

Figure 4.3: Percentage of in-house operators for whom the target number of quality assessments were undertaken, September 2013 to June 2015

Source: ANAO analysis of ACCC Infocentre quality assurance records.

4.8 On average, the target number of quality assessments was only undertaken for 24 per cent of in-house operators in a given month, from September 2013 to June 2015. In the case of outsource operators, data was only available for the period September 2014 to June 2015. For these operators, the target number of ACCC quality assessments was undertaken, on average, for approximately 38 per cent of operators in a given month. In both cases, there was an increase in the number of quality assessments undertaken in May and June 2015.

4.9 In undertaking quality assessments, the ACCC assesses calls as either quality, non-quality or exceptional, with the overall assessment depending on each call meeting specified call quality elements (for example, whether the operator provided accurate information and whether they advised the caller of the role of the ACCC).²⁴ Different quality assessment matrices apply to in-house and outsource operators, with the matrix applying to outsource operators more stringent as it contains a greater number of critical call quality elements that must be met to receive an overall assessment of quality (as opposed to non-quality). As Figure 4.4 shows, only a relatively low proportion (55 per cent) of in-house calls, and a very low proportion (12 per cent) of outsource provider handled calls received a rating of quality (or exceptional). To allow for greater comparability in the performance of in-house operators with outsource operators, there would be value in the ACCC applying a consistent set of criteria to the assessment of both types of operators.

Figure 4.4: Call quality results for in-house operators (from September 2013) and outsource operators (from September 2014) to June 2015

Source: ANAO analysis of ACCC Infocentre quality assurance records.

4.10 In addition to quality assurance assessments, the ACCC undertakes periodic Infocentre customer service satisfaction surveys. The most recent survey was conducted between November 2013 and 20 January 2014. When asked to rate their overall satisfaction with the service of the ACCC, 92.1 per cent of respondents gave a rating of ‘very satisfied’ or ‘satisfied’. It is noted, however, given that there has been a significant increase in the number of calls handled by the outsource provider since the last survey, the survey results should be treated with some caution. Nevertheless, the inconsistency between this result and the call quality results at Figure 4.4 suggests that the quality assessments of operators may not be a good reflection of the expectations of callers.

Does the ACCC have effective arrangements for recording and using the complaints it receives?

4.11 The ACCC records contacts that it receives in its client relationship management system, Dynamics CRM, and assesses complaints against its Compliance and Enforcement Policy. Where an Infocentre operator assesses that a complaint falls within one of the ACCC’s current priorities, the operator may escalate the complaint to the Infocentre round table meeting for assessment and potential escalation (the ACCC’s case selection process is considered in Chapter 5). The volume of contacts that the ACCC receives means that most are not escalated to the round table meeting or the under assessment meeting (see Chapter 5).

4.12 The ANAO identified issues with the recording of complaints that reduce the ACCC’s ability to draw meaningful insights from the complaints that it receives. These issues are outlined in Table 4.3 and have implications for the ACCC’s strategic planning and case selection processes.

Table 4.3: Issues identified with the quality of ACCC complaints data

Note: ANAO examined all non-scam contacts.

Source: ANAO analysis of ACCC data.

Identification of disadvantaged and vulnerable consumers

4.13 As noted in Chapter 2, two priority areas for the ACCC are consumer protection issues impacting on Indigenous consumers, and disadvantaged and vulnerable consumers.²⁵ These are long standing priorities for the ACCC, given these groups’ greater susceptibility to information asymmetries and the likelihood that misconduct will have a greater impact on these consumers compared to non-disadvantaged/vulnerable consumers. In order to be positioned to target traders who may be targeting disadvantaged or vulnerable consumers, it is important that the ACCC accurately captures information relating to whether a complainant is Indigenous or falls within a category of disadvantage or vulnerability.

4.14 Despite this, the ANAO found that only a small proportion of complaints received by the ACCC were correctly recorded as involving an Indigenous complainant, or a complainant with some form of disadvantage or vulnerability. Demonstrating this, Table 4.4 compares the proportion of the ACCC’s consumer protection complaints where a disadvantage/vulnerability checkbox was checked to the proportion of the Australian population that exhibits a disadvantage/vulnerability category. It shows that a much smaller proportion of the ACCC’s complaints report disadvantage/vulnerability compared to the share of the main disadvantaged/vulnerable groups in the Australian population.

Table 4.4: Proportion of ACCC complaints from disadvantaged/vulnerable complainants compared to Australian population

Source: ANAO analysis of ACCC complaints data and Australian Bureau of Statistics data.

4.15 While some level of variance is expected (because disadvantaged or vulnerable consumers may be relatively less likely to complain, for example because of lack of familiarity with government processes), a significant contributor to these variances is likely to be that the ACCC does not routinely identify disadvantaged or vulnerable consumers. An indicator of this is shown in Table 4.5, which classifies the remoteness of complaints based on the postcode of the complainant and for each classification, the number of complaints for which the remoteness box was checked. Only a small proportion (14 of 854 or two per cent) of people reporting postcodes in Remote Australia or Very Remote Australia was correctly identified as remote disadvantaged.

Table 4.5: Complaints by remoteness and whether remoteness was correctly identified

Source: ANAO analysis of ACCC complaints data and Australian Statistical Geography Standard.

4.16 The low level of identification of disadvantage/vulnerability factors in complaints makes it more difficult to: draw meaningful conclusions about the type of misconduct most affecting disadvantaged/vulnerable consumers; and identify potential patterns of conduct that may be disproportionately affecting disadvantaged/vulnerable consumers. This, in addition to the data quality issues identified in Table 4.3, has important consequences for the ACCC’s strategic review process, and its targeting of compliance and enforcement activities.

4.17 To manage the issues identified with the quality of the ACCC’s complaints (including the identification of disadvantaged/vulnerable consumers), the ACCC should:

• improve existing data where possible (by identifying duplicate entries and making better use of internal and external data);
• implement formal data quality processes and procedures—while the Intelligence and Reporting team undertakes some ad-hoc work in relation to data quality, this should be formalised and appropriate reporting arrangements put in place;
• subject to resourcing, consider whether more extensive quality assurance processes in the Infocentre would better support data quality; and
• review call scripts and data capture forms to ensure that the capturing of the most important information for planning and intelligence is prioritised.

Are there effective processes for identifying, prioritising and selecting cases for investigation?

5.1 The ACCC identifies instances of potential non-compliance with fair trading obligations from a number of sources (shown in Figure 5.1). Like most regulators, the number of identified instances of potential non-compliance far exceeds the ACCC’s investigative and enforcement capacity. Given this, it is imperative that the ACCC has a robust process for escalating and selecting for enforcement action, instances of non-compliance that pose the greatest risk to the wellbeing of consumers.

Figure 5.1: ACCC case selection and escalation process

Note: C&E Policy refers to ACCC’s Compliance and Enforcement Policy. Contacts received by the ACCC are assessed by Infocentre for whether they fall within a priority area or exhibit priority factors.

Source: ANAO analysis of ACCC information.

5.2 The ACCC’s Compliance and Enforcement Policy (discussed in Chapter 2) guides its decisions in respect of the selection and escalation of cases. The Policy sets out a number of priority areas where the ACCC will focus its activities. Cases are generally assessed to determine whether they fall within one or more of these priorities. There are also a number of priority factors²⁶ that the ACCC will consider when a matter does not fall within a priority area. As a principle, the ACCC seeks to direct its resources to conduct that results in, or has the potential to result in, widespread consumer detriment.

5.3 To assess the effectiveness of the ACCC in selecting and escalating cases, the ANAO reviewed 200 fair trading cases (consisting of 100 that ended during the under assessment stage, 50 during initial investigation and 50 that proceeded to in-depth investigation). Overall, 152 of the 200 cases (76 per cent) reviewed fell within a priority area, and of the remainder, many appeared to exhibit one or more priority factors. This indicates that cases were selected in accordance with the Compliance and Enforcement Policy. As shown in Figure 5.2, the most common priority area that cases fell within was credence claims followed by emerging issues in the online market place.

Figure 5.2: Most common priority areas of cases in the ANAO’s sample

Source: ANAO analysis of ACCC information.

Under assessment meeting

5.4 The ACCC’s main case selection forum is the under assessment meeting. This meeting is held weekly, subject to clear processes and procedures, and attended by key senior executives, including the Executive General Managers of Consumer Enforcement, Competition Enforcement and Consumer, Small Business and Product Safety. Matters considered at the under assessment meeting include complaints from the Infocentre that have come through the round table meeting process²⁷, direct contacts (such as from stakeholders or government agencies), internal referrals and intelligence briefs. These meetings were minuted and included consideration of the merits of matters escalated to the meeting.

5.5 The ANAO reviewed minutes of under assessment meetings for the period 1 July 2013 to 30 September 2015 to identify the source of matters to the meeting. As shown in Figure 5.3, the most common source of matters for the under assessment meeting are complaints (from the general public, businesses and stakeholders). By contrast, there are relatively few cases that originate from intelligence and other internal referrals.

Figure 5.3: Source of fair trading matters considered at under assessment meetings, 1 July 2013 to 30 September 2015

Source: ANAO analysis of minutes of under assessment meetings.

5.6 In its Compliance and Enforcement Policy, the ACCC states that it ‘cannot pursue all the complaints it receives’ and that ‘the ACCC’s role is to focus on those circumstances that will, or have the potential to…result in widespread consumer detriment.’ While there is a role for the consideration of individual complaints at the under assessment meeting (as individual complaints may raise especially egregious or serious conduct warranting ACCC attention), the focus on individual complaints at under assessment meetings at the expense of cases from other sources (such as intelligence) raises concerns about the extent to which the ACCC focuses its investigation and enforcement resources towards the resolution of cases that provide the greatest overall benefit for consumers.

5.7 The predominance of complaints as a source of cases in under assessment meetings may lead to a narrow focus on individual instances of misconduct rather than potential issues or trends relating to a trader, industry, consumer group or type of conduct. To manage this risk, the Intelligence and Reporting Team provides input on an ad-hoc basis into matters at under assessment meetings (for example, by informing the meeting of any trends or patterns of conduct relating to that trader). However, given that this input is only provided in relation to cases already selected, the input is unlikely to significantly broaden the focus beyond specific instances of misconduct. The Intelligence and Reporting Team also produces monthly reports on trends and issues of interest as well as ad-hoc briefs on particular industries, traders or issues. The monthly reports are prepared for the Enforcement Committee, although since October 2015, following an ANAO suggestion, they are now also considered in the under assessment meeting. The ad-hoc briefs are generally not considered by a decision-making body and are often prepared upon request by an investigation team for the purposes of an investigation, rather than for the purposes of case selection.

5.8 The ACCC’s focus on specific complaints is also of concern given that only a very small proportion of fair trading complaints (approximately one per cent) are ultimately escalated to the round table meeting and/or the under assessment meeting, raising the possibility that some matters may be ‘missed’. Figure 5.4 shows that about 60 matters are considered at the under assessment meeting each quarter, compared to the approximately 10 000 complaints that the ACCC receives in relation to fair trading related matters each quarter and that most matters considered at the meeting are escalated. The high level of escalations suggests that if more matters were considered, a similar trend would prevail with many of these likely to be considered appropriate for escalation (and by extension, there are a number of matters that may be being ‘missed’).

Figure 5.4: Fair trading matters considered in under assessment meetings between 1 July 2013 and 30 September 2015, by outcome

Source: ANAO analysis of minutes of under assessment meetings.

5.9 The importance of complaints to the ACCC’s case selection activities and the low number of cases that are escalated beyond the point of contact means that it is critical that the ACCC has effective arrangements for filtering complaints (and in doing so, ensuring that cases are not ‘missed’). There are four main ways that this is managed, however each has limitations:

• complaints are assessed against the priorities outlined in the Compliance and Enforcement Policy—however, many of the priorities outlined in the policy are broad and therefore afford significant discretion to Infocentre staff about whether they escalate a matter;
• Infocentre staff are present at the under assessment meeting and benefit from senior management feedback on strategic matters and considerations to take into account when assessing complaints—while valuable, this guidance is informal and does not provide assurance that Infocentre operators assess cases in accordance with the strategic direction provided at under assessment meetings;
• Infocentre staff are subject to the Infocentre’s quality assurance arrangements—as outlined in Chapter 4, the Infocentre’s quality assurance processes have not been consistently followed, undermining this as a source of assurance for the appropriate escalation of matters;
• the Intelligence and Reporting team reviews complaints as part of the preparation of monthly and ad-hoc reports, and as part of this process may identify complaints that should have been escalated—this is a valuable form of assurance, but could be enhanced by the Intelligence and Reporting team more explicitly and systematically reviewing complaints to identify complaints that should have been escalated.

5.10 Overall, the round table and under assessment meeting processes provide a sound basis for selecting matters for escalation.²⁸ However, these strengths are undermined by limitations in the process for escalating complaints to these meetings. In particular, despite the importance of individual complaints to the ACCC’s case selection activities, it does not have adequate arrangements to ensure that complaints that may raise widespread consumer detriment are escalated beyond the point of initial contact.

5.11 To provide greater assurance about targeting investigative and enforcement activities at issues involving the greatest level of widespread consumer detriment, there would be value in the ACCC improving assurance arrangements around the escalation of complaints from the Infocentre and increasing its use of intelligence as part of its case selection activities. In particular, the ACCC should seek to increase the extent to which it selects cases as the result of intelligence activities aimed at identifying trends, patterns of conduct, and other factors that may indicate the existence of widespread consumer detriment in relation to the activities of a trader and/or industry. Greater use of intelligence—and in particular, the use of a more quantitative approach to risk analysis and differentiation (as discussed in paragraph 2.25)—would provide more assurance that the ACCC is not missing potential issues and that it is focussing its limited resources on conduct involving the greatest level of widespread consumer detriment.

5.12 As noted in paragraph 5.7, the ACCC has recently taken a step towards making greater use of intelligence in case selection activities by considering monthly intelligence reports in the under assessment meeting. Beyond this, the ACCC should refocus the reports for a case selection purpose and consider introducing trigger points and/or risk scoring (as discussed in paragraphs 2.25 and 2.27), where matters are brought to the under assessment meeting for consideration if certain criteria are met (for example, a spike in complaints, or a trader with a high proportion of complaints relating to disadvantaged and vulnerable consumers).

5.14 A further challenge to the under assessment meeting process is that a significant number of cases bypass the under assessment process. As part of the review of the sample 200 cases, the ANAO assessed whether each of the cases was considered at the under assessment meeting. Only 96 of the 200 cases (48 per cent) were considered at the under assessment meeting, although the proportion was higher for cases that reached the initial and in-depth investigation stages (see Figure 5.5).

Figure 5.5: Proportion of fair trading cases considered at the under assessment meeting

Source: ANAO analysis of minutes of under assessment meetings.

5.15 In 41 of the 104 cases that were not considered by the under assessment meeting, the case was initiated as part of a project and accordingly it was reasonable that the matter was not considered. For the other 63 cases, there were circumstances that could explain why the matter was not considered by the under assessment meeting (such as it being a self-initiated matter, a direct approach from a stakeholder that the ACCC believed it could quickly resolve or a referral from another government agency). Overall, however, these reasons did not provide a firm basis for bypassing the under assessment process and there would have been benefit in the cases being considered at the under assessment meeting to: uphold the role of the under assessment meeting as the main process for case selection; support the consistent treatment of cases; and ensure that those matters were subject to appropriate senior management oversight and scrutiny before resources were dedicated to their resolution.

Are there effective arrangements for escalating cases for detailed investigation and enforcement action?

5.16 The ACCC process for escalating cases for investigation and enforcement action is outlined in Figure 5.1 and involves cases going through a series of increasingly intensive investigations. The first stage for a case is the under assessment stage, where a case is considered for whether it falls within a priority area or otherwise warrants attention. Following this, a matter may be escalated to an initial investigation. An initial investigation is intended to use minimal resources to determine if there is a prima facie breach of the Australian Consumer Law and if it should be pursued. An initial investigation may be escalated to an in-depth investigation, which is subject to oversight by the Enforcement Committee and generally involves conduct that warrants more serious action by the ACCC. Depending on the outcome of the investigation, an in-depth investigation may lead to the ACCC taking court action against a party.

5.17 Overall, this process was effective in terms of filtering cases down to those that fall within an ACCC priority (and therefore warrant investigative or enforcement action). As shown in Figure 5.6, as cases proceeded throughout the investigation process, they were more likely to fall within a priority area (as discussed in paragraph 5.3, overall 76 per cent fell within a priority area).

Figure 5.6: Proportion of cases within priority area, by case type, ANAO sample

Source: ANAO analysis of 200 sample cases that commenced in 2013–14 and 2014–15.

5.18 Although having a clear process, there were some issues with the recording of case escalations. One issue identified was that a large percentage (56 per cent) of in-depth investigations where an initial investigation was recorded as having occurred had in fact proceeded straight to in-depth investigation (skipping the initial investigation). This was usually due to: the case relating to a compliance project; the case being high-profile or involving a clearly high level of consumer detriment; compliance staff having already undertaken an extensive assessment; and/or peculiarities of the ACCC’s former case management system.

5.19 Another issue that the ANAO identified was that, of the 100 under assessment cases in the sample, approximately one-third remained open for 60 days or more, indicating that something more than an assessment was undertaken (13 of these cases resulted in either an administrative resolution, or a warning letter being sent to the trader). Commonly, this was a record-keeping issue that occurred because a case was referred at the under assessment meeting to a non-investigative team (such as the Consumer and Small Business Strategies branch) for trader engagement rather than an investigation.

5.20 While there were generally sound reasons for cases progressing in the way that they did, the issues identified have implications in terms of accountability and performance measurement and reporting. In terms of accountability, there are certain requirements that are attached to the particular stages of a case, such as the requirement for in-depth investigations to go to the Enforcement Committee. If the process is not followed (or if the details of case progression are not recorded in a timely and accurate way), this may limit the ACCC’s ability to ensure that the relevant requirements are being followed.

5.21 In relation to performance measurement and reporting, the ACCC publishes in its annual report and other publications, the number of under assessment cases, initial investigations and in-depth investigations, and has as a key performance indicator for the 2015–16 financial year the ‘number of in-depth ACL investigations completed’. Given the issues identified, there are questions about the accuracy of the information provided in these publications and the information reported against the stated indicator. This is significant as it means that these publications may under or over-report the true extent of the ACCC’s activities.

5.22 It is noted that the ACCC’s move to a new case management and workflow system on 1 July 2015 is likely to resolve some of the issues that the ANAO identified regarding the recording of case progression. Better reporting enabled by the new case management and workflow system will allow senior management to better monitor cases, and focus, in real-time, on identifying anomalous cases. The ACCC should also take the opportunity to revisit its processes and guidance in relation to case escalation, with the aim of improving clarity and ensuring consistency with current practice and expectations, particularly with regard to the accurate recording of case progression.

Does the ACCC conduct investigations into non-compliance in accordance with the relevant standard?

6.1 The Australian Government Investigation Standards are the ‘minimum standards’ for government entities ‘conducting investigations relating to the programs and legislation they administer’. The Australian Government Investigation Standards refer to an investigation as the ‘process of seeking information relevant to an alleged, apparent or potential breach of the law’, with the primary purpose being ‘to gather admissible evidence for any subsequent action, whether under criminal, civil penalty, civil, disciplinary or administrative sanctions’.²⁹

6.2 Accordingly, the Standards are relevant to ACCC cases once they reach the in-depth investigation stage. The ANAO therefore reviewed the 50 in-depth investigations into non-compliance with fair trading obligations in its sample of 200 cases (described in Chapter 5) for compliance with the Standards. Table 6.1 sets out a selection of the more important standards in the Australian Government Investigation Standards, and the ANAO’s high-level assessment for the sampled in-depth investigations.

Table 6.1: Selection of key Australian Government Investigations Standards and the ANAO’s assessment of the ACCC’s performance against the standards

Source: ANAO, based on Australian Government Investigations Standards.

Policies and staff capability

6.3 The ACCC has clear policies on its intranet dealing with the conduct of investigations. These policies cover: the investigation process; handling information; obtaining and handling evidence; civil case management; criminal matters; and the outcomes available to the ACCC. The policies are supported by reference to underlying legislation, outline procedures, and where appropriate, provide templates for investigators to assist them in carrying out investigative tasks. The ACCC’s guidance is reviewed for currency, to identify gaps in existing guidance and to identify areas for new guidance by the Transfer of Enforcement Knowledge Committee.³⁰

6.4 The ACCC has well-qualified staff to undertake investigations—nearly all staff had a tertiary qualification. The most common degree amongst investigators was a law degree (69 per cent of investigators). To support investigators, the ACCC has four core internal courses for investigators: basic investigation skills (to be completed within the first 12 months of commencing as an investigator); applied investigation skills (after 12–24 months); interview skills (after 18 months); and search warrant training (aimed at APS6 level staff and above). As shown in Figure 6.1, 66 per cent of investigators had completed the basic investigation skills courses, with approximately 40 per cent having completed the other forms of training.

Figure 6.1: Proportion of ACCC investigation staff that have undertaken internal training

Source: Information provided by the ACCC.

6.5 In addition, in 2012, the ACCC commenced a project to require investigation staff to be accredited in line with the Australian Government Investigation Standards (by requiring Australian Public Service-level staff to obtain the Certificate IV in Government (Investigations) and Executive Level staff, the Diploma). As shown in Figure 6.2, at the time of the audit, less than half had completed the relevant training. The ACCC expects all investigators to be certified by the end of 2016.

Figure 6.2: Proportion of ACCC investigation staff certified in line with the Australian Government Investigation Standards

Source: Information provided by the ACCC.

Planning investigations

6.6 According to the Australian Government Investigation Standards, investigations should commence with an overall planning process and result in a written investigation plan. The Standards also state that the planning process should identify and manage risks and that agencies should ensure risk management is incorporated in decision making throughout an investigation. This is supported by the ACCC’s internal policy on investigation plans, which states that ‘as a general rule, an investigation plan is required for in-depth investigations’.³¹ The ACCC has a standard investigation plan template that has sections for: the alleged conduct; the strategic alignment of the case; oversight; key dates; action plan; steps to be taken for the investigation; and an evidence matrix.

6.7 Of the 50 in-depth investigations in the ANAO’s sample, 14 (28 per cent) did not have an investigation plan. For these cases, the reason for not having an investigation plan was mainly that the investigation was not a substantive investigation and/or that extensive investigative inquiries were not made.

Risk management

6.8 In May 2013, an internal audit identified that the ACCC’s investigation plan templates did not ‘specifically reference risk management practices’. In response, in July 2014, the ACCC amended its investigation plan template to include a section for risk management.

6.9 While the ACCC has been improving its consideration of risk as part of the investigation planning process, there is a need for continual improvement of its practices. Of the 10 in-depth investigations with investigation plans that related to cases starting from July 2014 onwards, only five (50 per cent) of the investigation plans included risk assessments despite these forming part of the template. Further, even where a risk assessment was completed, only an average of 1.8 risks was identified, suggesting insufficient effort went into identifying risks.

Conduct of investigations

6.10 In conducting investigations, it is important that investigations are undertaken in a timely manner, subject to oversight by suitably senior officials, and key decisions in the investigation are documented.

Timeliness

6.11 In the ACCC’s Portfolio Budget Statements for 2015–16, the ACCC has as key performance indicators: ‘the percentage of initial ACL investigations completed within 3 months’ and ‘the percentage of in-depth ACL investigations completed within 12 months’. This indicator is reflected in the Enforcement Division’s Business Plan for 2014–15 and in the standard investigation plan template.

6.12 As outlined in Chapter 5, there were issues with the way investigators escalated investigations and recorded these in the ACCC’s case management and workflow system. The inconsistent recording of escalations limits the ACCC’s ability to report on compliance with these targets and during the audit, limited the ANAO’s ability to assess performance in this area.

6.13 In relation to initial investigations, inconsistencies with recording of information meant that it was not possible to make an assessment against the relevant target. In relation to the time taken for in-depth investigations, the ANAO assessed the length of time taken to complete the 50 in-depth fair trading investigations in the sample. Of these, 34 had been completed at the time of the audit. The ACCC completed most of these investigations within the specified timeframe, with 29 (85 per cent) of the investigations completed within 12 months. The distribution of time taken by the ACCC to complete in-depth investigations is shown in Figure 6.3.

Figure 6.3: Timeliness of completion of fair trading investigations

Source: ANAO analysis of the 34 completed investigations in the sample of 50 in-depth investigations.

Senior management oversight

6.14 In-depth investigations are overseen by the ACCC’s Enforcement Committee, which meets weekly and is comprised of six of the ACCC’s Commissioners (including the Chairman). The Enforcement Committee’s involvement with any particular matter will depend on the nature, size and complexity of the matter. Generally, the Enforcement Committee will be involved:

• at the start of a matter—within four months of the commencement of an investigation, staff are to present a paper (including the investigation plan) to the Committee outlining why the investigation should continue and how it will proceed;
• during the matter—particularly for higher profile or more complex matters, the investigation team may update the Enforcement Committee on the progress of the matter and seek guidance on how to proceed; and
• on resolution of a matter—the Enforcement Committee is responsible for approving enforceable undertakings, and for referring a decision to issue infringement notices or file court proceedings (these actions are covered in Chapter 7).

6.15 Overall, there was an appropriate level of oversight by the Enforcement Committee. Appearances before the Committee were generally accompanied by detailed papers outlining relevant matters, including: alleged conduct; background to, and progress on, the case; how the case fits within the ACCC’s priorities; and proposed options.

6.16 Importantly, of the 50 cases in the ANAO’s sample, 41 had been reviewed by the Committee (on average, appearing 2.6 times). Of those nine cases that did not come to the Enforcement Committee, eight were cases for which detailed investigative inquiries were not made (see the discussion of inappropriate escalations in Chapter 5), and the remaining case was not yet required to go before the Committee. Further, of the 50 in-depth investigations in the ANAO’s sample, 29 of these involved detailed investigative inquiries and were completed at the time of the audit. The Enforcement Committee was involved with the decision about an outcome for all 29 of these cases.

Documentation of key decisions

6.17 Key decisions were well documented and supported by detailed papers outlining the reason why a particular decision was recommended. Where decisions were made by a decision-making body (the Enforcement Committee or the Commission³²), these decisions were appropriately minuted. The ANAO found documentation to support all of the ACCC’s decisions to: use its investigative powers; issue an infringement notice; accept an enforceable undertaking; and file court proceedings.

Does the ACCC exercise its investigative powers in a way that is proportionate to the risk presented by non-compliance?

6.18 The ACCC has information gathering powers that include: the ability to apply to a magistrate for a search warrant; the power to require claims to be substantiated; and the power to obtain documents, information and evidence. These powers are outlined in Figure 6.4.

Figure 6.4: The ACCC’s main fair trading investigative powers

Source: ANAO, based on Competition and Consumer Act 2010.

6.19 The ACCC’s use of its main fair trading investigative powers between 1 July 2013 and 30 June 2015 is shown in Table 6.2. The table shows that the most commonly used powers are those under section 155 of the Competition and Consumer Act 2010 (‘section 155 notices’). Numbers for section 155(1)(a) and (b) notices have been combined, as the notices themselves are usually combined (the ACCC will usually make a request for information and the supporting documents). The ANAO reviewed all 180 section 155 notices (and one search warrant) issued in this period.

Table 6.2: The ACCC’s use of its investigative powers in fair trading cases, 2013-14 and 2014–15

Source: ANAO analysis of ACCC information.

6.20 In submissions to the Competition Policy Review in 2014, some businesses and business stakeholders raised concerns about the ACCC’s use of section 155 notices. These concerns mainly related to the scope and cost of compliance with the notices. In a submission to the review panel, one large public company stated that the average cost (in terms of legal fees) for them in complying with section 155(1)(a) and (b) notices was $300 000, but for some notices, was more than $1 million.

6.21 In recognition of the potential burden associated with section 155 notices, the ACCC has in place extensive processes that must be followed for a notice to be issued. These processes are set out in Figure 6.5. There was a high level of compliance with this process. Reason to believe minutes and signed section 155 notices were found for all 181 notices reviewed, and all notices substantially followed the process set out in Figure 6.5.

Figure 6.5: The ACCC’s process to issue section 155 notices

Legend: EC is Enforcement Committee; EGM is Executive General Manager; GM is General Manager; CCLU is Competition and Consumer Law Unit.

Source: ANAO analysis of ACCC documentation.

6.22 In the reason to believe minutes that accompany each section 155 notice, teams are required to give consideration to the burden placed on the recipient and state how the burden has been taken into account in drafting the notice. For section 155(1)(a) and (b) notices, the template requires investigators to identify ways that the notice has been limited—for example, by timeframe or topic (such as the category, products or personnel to which the notice relates). Despite this, explicit consideration was given to how the notice has been limited for only 57 of the 93 (61 per cent) section 155(1)(a) and (b) notices.

6.23 The template reason to believe minute also recommends that recipients are given three weeks to respond, but states that more or less time may be appropriate depending on the amount of information sought. Figure 6.6 plots the number of days provided for a recipient to respond to a notice against the length in pages of a notice (a rough proxy for the complexity of a notice). There is a moderate relationship with the recipients of longer notices (generally more complex and/or burdensome notices) being provided longer to respond than the recipients of shorter notices. This indicates that when drafting section 155 notices, investigators were conscious of the impact on the recipient.

Figure 6.6: Relationship between the length of section 155(1)(a) and (b) notices and the time provided for a response

Note: This chart excludes one outlier notice which was 15 pages and provided the recipient 45 days to respond.

Source: ANAO analysis of section 155(1)(a) and (b) notices in 2013–14 and 2014–15.

6.24 Between 1 July 2013 and 30 June 2015, the ACCC issued 34 variations to section 155(1)(a) and (b) notices. For 24 of these notices, the variation extended the length of time for compliance, one variation was to narrow the scope of a notice and in nine cases, the variation both extended the length of time for compliance and narrowed the scope of the notice. Where the variation extended the time for compliance, this extension was for an average of 18 days. The main reasons for an recipient requesting an extension were that:

1. searches associated with the notice produced a significant volume of information (70 per cent);
2. there were practical difficulties (such as issues in extracting the information from information systems) associated with complying with the notice (35 per cent); and
3. key staff that the recipient required to assist with complying with the notice were unavailable (32 per cent).³³

6.25 It is noted that the reason to believe minutes for section 155(1)(a) and (b) notices that were subsequently varied were less likely to have contained explicit consideration to how the scope of the notice may be limited (shown in Figure 6.7).

Figure 6.7: Whether reason to believe minute explicitly considered ways to limit the scope of the notice, by whether variation later issued

Source: ANAO analysis of section 155(1)(a) and (b) notices and variations issued between 1 July 2013 and 30 June 2015.

6.26 The reason to believe minutes for section 155(1)(a) and (b) notices where there was a later variation were also more likely to include, in the consideration of burden, a statement to the effect that ‘the information and documents are of a kind that should be readily available to the recipient’.³⁴ Given that the reasons provided by recipients for requiring extra time to comply with the notice invariably related to the difficulty of obtaining information and/or the significant volume of information, this suggests that the investigator’s views about the availability of information were not well founded. This, combined with the profile of variations shown in Figure 6.7, highlights the importance of giving appropriate consideration to the burden of a section 155 notice on a promisor and to opportunities to limit the scope of a notice.

Are enforcement actions proportionate to the identified non-compliance?

7.1 As outlined in Chapter 2, the ACCC’s Compliance and Enforcement Policy states that the ACCC uses a range of actions to encourage compliance with fair trading obligations. In making decisions about which enforcement action to take, the ACCC states that its priority is to achieve the best outcome for the community and to manage the risk proportionately. The Compliance and Enforcement Policy is supported by guidance available on the ACCC’s intranet about each type of enforcement action, their role and the process for resolving a case with that form of action.

7.2 Table 7.1 shows the actions recorded in the ACCC’s case management system for the 718 fair trading cases (including under assessment cases, initial investigations and in-depth investigations) commenced between 1 July 2013 and 30 June 2015. The data suggests that the most common result was no further action (60 per cent of all cases and 82 per cent of finalised cases). Because these numbers are taken at 1 July 2015, a large number of cases were ongoing. The numbers for more formal actions (such as litigation, enforceable undertakings and infringement notices) are relatively low because the longer investigations associated with these actions means that many will not yet have been finalised.

Table 7.1: Actions taken for fair trading cases commenced between 1 July 2013 and 30 June 2015, by case stage (at 1 July 2015)

Source: ANAO analysis of data from the ACCC’s case management and workflow system.

7.3 To assess whether actions were consistently recorded, for each of the 200 cases in the ANAO’s sample (referred to in Chapters 5 and 6) the ANAO reviewed each case and made an assessment about the action taken. The results of this analysis are presented at Figure 7.1 and demonstrate two main issues: cases were frequently recorded as no further action when in fact a warning letter was sent or the trader agreed informally to cease the relevant conduct; and cases were not always closed in a timely manner (therefore they were still recorded as ongoing).

Figure 7.1: Action recorded by the ACCC compared to the ANAO’s assessment of action, cases in the ANAO’s sample (at 1 July 2015)

Source: ANAO analysis of 200 sample fair trading cases in 2013–14 and 2014–15.

7.4 Inconsistent recording of enforcement actions raises issues for transparency and accountability, and for performance measurement and reporting, given that one of the ACCC’s key performance indicators is the ‘number of enforcement interventions’. In particular, these issues mean that in its annual report and other external publications, the ACCC is currently understating the number of cases that resulted in some form of action. The ACCC should take steps to more accurately record the actions taken in cases, including by mandating and monitoring accurate recording of information about enforcement actions, and making clearer to staff the meaning of particular actions at the time of recording in the case management and workflow system.

7.5 In terms of actions taken, the ANAO’s assessment at Figure 7.1 shows that in responding to potential misconduct, the ACCC used a range of enforcement actions. While the most common action was no further action (42 per cent of non-ongoing cases in the ANAO’s sample), there was also a meaningful proportion that resulted in an administrative resolution (23 per cent of non-ongoing cases in the ANAO’s sample) or the ACCC sending a warning letter (14 per cent of non-ongoing cases in the ANAO’s sample). The ACCC’s enforcement actions were broadly consistent with the graduated response model of regulation, with most enforcement actions taking the form of less serious and more persuasion-oriented actions (such as administrative resolutions and warning letters) compared to more serious actions such as litigation.

No further action

7.6 As noted in Chapter 5, the vast majority of complaints that the ACCC receives do not lead to it taking regulatory action, with most filtered out by the Infocentre. Even of those that do go beyond the Infocentre and are placed ‘under assessment’, the ACCC often later decides to take no further action. The most common reasons for the ACCC deciding to take no further action for the 69 cases assessed as ‘no further action’ in the ANAO’s sample of 200 are shown in Figure 7.2. The reasons are consistent with the ACCC’s Compliance and Enforcement Policy, in that they largely relate to a lack of widespread consumer detriment (either because there was no breach, or if there was a breach, there was an absence of significant consumer harm).

Figure 7.2: Most common reasons for ACCC deciding to take no further action, cases in the ANAO’s sample

Source: ANAO analysis of the 69 cases with no further action in the sample of 200 cases.

Administrative resolutions and warning letters

7.7 The most common action taken by the ACCC in response to identified non-compliance is to resolve a matter informally, through an administrative resolution. The nature of an administrative resolution can differ significantly depending on the particular matter, but will generally involve the trader: agreeing to stop the offending conduct; compensating those adversely affected by the conduct; and/or taking other measures necessary to ensure the conduct does not reoccur.

7.8 In most cases (32 of the 38 administrative resolutions in the ANAO’s sample), an administrative resolution was achieved where, at an early stage in the assessment/investigation of an investigation, the ACCC wrote to a trader expressing concerns and the trader very quickly agreed to cease the offending conduct. In other cases, an administrative resolution may follow extensive negotiations with the trader about the actions the trader will take to resolve the ACCC’s concerns. The following case study provides an example of an administrative resolution achieved by the ACCC.

7.9 In other cases, the ACCC has sent a ‘one-way’ warning letter to a trader. These letters typically drew the relevant non-compliance to the trader’s attention, informed the trader of the ACCC’s view about the conduct, and advised that if the ACCC receives further complaints about the misconduct, it may consider taking relevant enforcement action. These letters were usually sent in relation to cases that, while potentially involving non-compliance, the ACCC considered that: there was an absence of consumer harm; the case did not fall within an ACCC priority area; and/or a warning letter would provide sufficient deterrence.

Enforceable undertakings

7.10 An enforceable undertaking is a written undertaking given under section 87B of the Competition and Consumer Act 2010 to the ACCC by a trader that it will operate in a certain way. Between 1 July 2013 and 30 June 2015, the ACCC accepted 17 enforceable undertakings from traders related to non-compliance with fair trading obligations.³⁵ While undertakings were tailored to the particular circumstances of each case, some of the more common obligations in these enforceable undertakings are shown in Figure 7.3.

Figure 7.3: Common terms in enforceable undertakings accepted between 1 July 2013 and 30 June 2015

Source: ANAO analysis of enforceable undertakings accepted by the ACCC between 1 July 2013 and 30 June 2015.

7.11 Each enforceable undertaking was considered by the Enforcement Committee and/or the Commission, with a paper usually³⁶ prepared outlining the various options (in terms of enforcement actions) and the advantages and disadvantages of each option. Some of the more common reasons for accepting an enforceable undertaking included that an undertaking would: be a public outcome with the associated deterrence impact; send a stronger message to the trader and broader market than an administrative resolution; allow for flexibility in terms of remedy compared to court action (for example, more generous compensation for consumers); and provide a quicker, cost effective and more certain resolution to the case compared to court action. Six of the enforceable undertakings were coupled with the issuing of one or more infringement notices.

7.12 Although the ACCC issues media releases for each enforceable undertaking and publishes the full text of the undertaking on its website, it does not provide details on whether an entity has complied with an undertaking. In 2014 the Senate Economics References Committee recommended that the Australian Securities and Investments Commission consider ways to make the monitoring of ongoing compliance with undertakings more transparent. In this context, the ACCC should consider the relevance of the Senate Economics References Committee recommendation in relation to enforceable undertakings that it accepts.

Infringement notices

7.13 The ACCC may issue an infringement notice where it has reason to believe a trader has breached certain provisions of the Australian Consumer Law.³⁷ The infringement notice will provide an amount that the trader can pay (in 2015–16, $108 000 per notice for a listed corporation, $10 800 for any other corporation and $2160 for an individual) to resolve the matter. If the party does not pay the amount specified on the notice, the ACCC may take court action against the trader in relation to the conduct specified in the notice. Figure 7.4 sets out the outcomes for the 37 infringement notices worth a total of $822 000 issued by the ACCC between 1 July 2013 and 30 June 2015.³⁸

Figure 7.4: Outcomes of infringement notices issued by the ACCC between 1 July 2013 and 30 June 2015

Source: ANAO analysis of infringement notices issued by the ACCC between 1 July 2013 and 30 June 2015.

7.14 The relevant procedures—including the preparation of a reason to believe minute—were followed for all infringement notices. A media release was issued for all notices that were paid, and details of the notice were available on the ACCC’s infringement notices register. The ACCC’s reasons for issuing an infringement notice in a given case depended on the circumstances, but generally related to: the timeliness and efficiency of infringement notices compared to court action; the specific deterrence effect in terms of preventing future non-compliance by the trader; and due to an infringement notice being a public enforcement action, the general deterrence effect in sending a message to the broader industry.

Court action

7.15 Between 1 July 2013 and 30 June 2015, the ACCC commenced 32 court proceedings relating to breaches of fair trading obligations.³⁹ At 18 September 2015, court proceedings had concluded for 18 of these cases, with the remaining 14 still in progress. The ACCC was successful in one or more of its claims for all of the 18 cases, with penalties ordered totalling $18.9 million. Most cases also resulted in further orders being made (such as a requirement for the trader to implement a trade practices compliance program, to refrain from certain conduct and/or publish corrective notices).

Are the enforcement actions taken by the ACCC effective in addressing non-compliance?

7.16 As indicated in the preceding section, in general and consistent with a risk-based approach to regulation, when taking an enforcement action, the ACCC seeks to: cease the non-compliance; deter future non-compliance by the trader; and send a message to the broader industry (and in this way, deter other industry participants from engaging in the relevant conduct).

7.17 To assess the effectiveness of enforcement actions in ceasing the non-compliance and deterring future non-compliance by a trader, the ANAO analysed the trend of complaints about traders’ non-compliance with fair trading obligations in the period six months before and after an enforcement action was taken against them (Figure 7.5). Overall, ACCC enforcement actions appeared to have some impact in terms of ceasing the non-compliance and deterring future non-compliance by the trader. On average, the six-month period after an enforcement action was associated with a 21 per cent decrease in complaints compared to the six-month period before an enforcement action (the largest single decrease for a trader was 72 per cent).

Figure 7.5: Average trend of complaints about traders’ non-compliance with fair trading obligations for the period before and after an enforcement action

Note: The change in complaints is not a perfect measure; however the ANAO nevertheless considers it a useful metric. Factors that may influence the usefulness of a change in complaints include: an enforcement action and the related publicity could lead to more complaints due to greater consumer awareness of an issue; for most traders, the low number of complaints that the ACCC receives means that increases/decreases could be attributed to statistical variance; and for large traders, an action in relation to one part of the business may not always have an impact on the compliance behaviour of other parts of the business.

Source: ANAO analysis of ACCC complaints data.

7.18 Assessing the effectiveness of an enforcement action in terms of the effect on the behaviour of the broader industry is more challenging. In particular, it can be difficult to: determine what changes in behaviour are relevant for an assessment of effectiveness; measure these changes; and establish a cause-effect relationship between the enforcement action and the change in behaviour. One useful measure is to assess whether industry participants are aware of the actions that the ACCC takes against other traders (including other traders in their industry) and their perceptions of those actions. If traders are aware of the ACCC’s actions and perceive those actions as being appropriate and effective, then this suggests that the ACCC’s actions are having the desired general deterrence effect.

7.19 As described in Chapter 3, in 2015 the ACCC engaged an external firm to conduct a survey of consumer and business perceptions of the ACCC. This survey provides a useful guide to the awareness and perceptions of businesses of the ACCC’s enforcement actions. Figure 7.6 shows the proportion of businesses that agreed to selected statements from the survey relevant to whether the ACCC is achieving general deterrence through its enforcement activities.

Figure 7.6: Business responses to selected questions in the ACCC Consumer and Small Business Perceptions Survey

Source: ACCC Consumer and Small Business Perceptions Survey 2015.

7.20 The survey presents mixed results for the ACCC in relation to the effectiveness of its enforcement outcomes. A number of the results indicate that many businesses do not know enough about the work of the ACCC or its activities. Further, a sizeable minority of people questioned have negative views about enforcement work that the ACCC undertakes (with 34 per cent believing that the ACCC is a ‘toothless tiger’). Despite this, the results of the survey indicate that most business believe that the ACCC has an important deterrent impact (81 per cent agree that ‘without the ACCC, businesses would be more dishonest’).

7.21 One way that the ACCC seeks to maximise the effectiveness of its regulatory activities is by taking an industry-wide approach to problems in the market and/or attempts to ‘multiply’ the impact of enforcement actions through awareness activities. This is often seen in the context of projects (discussed in Chapter 3) that include an enforcement component. As part of these projects, the ACCC usually: generates trader awareness about the ACCC’s interest in an issue (through media releases and engagement); undertakes consumer education; and commences multiple investigations into non-compliance. An example of the effectiveness of this approach is shown in Case Study 3.

Figure 7.7: Door-to-door energy sales complaints to the ACCC, 1 July 2011 to 30 June 2015

Source: ANAO analysis of ACCC complaints data.

7.22 The ACCC also seeks to leverage the effectiveness of its non-project enforcement activities. The ACCC issues a media release with each formal enforcement action (enforceable undertakings, infringement notices and court action) and some informal actions (administrative resolutions) to make other traders aware of the ACCC’s views about certain conduct. In some cases, the ACCC also specifically contacts other traders to bring the ACCC’s enforcement action to their attention. An example of this is provided in Case Study 4.

Please refer to the attached PDF of the report for the Appendices:

• Appendix 1: ACCC’s response