Evaluating consumer protections for the digital economy

Treasury and the High Court in Australia are separately considering statutory unconscionable conduct in the context of systems of conduct, “dark patterns” and technological change. In this article, we explore these two recent developments:

• Treasury is assessing possible amendments to the prohibition on statutory unconscionable conduct in the Australian Consumer Law or potentially introducing a new prohibition on “unfair trading practices”. This assessment seeks to address harm to consumers said to be caused by “dark patterns” and “technological change”. The ACCC has welcomed this consultation, stating: “The ACCC has been advocating for some time for an unfair trading practices prohibition to be introduced into the Australian Consumer Law to better protect consumers and small businesses”.
• Separately, the High Court has granted special leave in a case where the appellant’s business processes were found to have been a “system” of unconscionable conduct, notwithstanding that particular individuals were not necessarily identified as having been disadvantaged by the conduct. As a result, Australian businesses may receive High Court guidance as to when a business’s systems constitute a “system of unconscionable conduct” under the Australian Consumer Law.

1986 to now: the introduction of unconscionable conduct

In March 1986 (the same month that Microsoft listed on the New York Stock Exchange), the Australian parliament introduced “major amendments” to the Australian Consumer Law, including a prohibition on unconscionable conduct.¹ In 2011, the Government introduced further amendments including a clear expression that: “It is the intention of Parliament” that the prohibition on unconscionable conduct is “capable of applying to a system of conduct” “whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour”.  

Like Microsoft in tech, statutory unconscionable conduct now forms a cornerstone of the Australian Consumer Law. Some superficial keyword searches demonstrate a steady increase of published judgments referring to statutory unconscionable conduct:

However, two developments may further examine unconscionable conduct’s boundaries.

The first development is potentially legislative

Treasury recently released its consultation regulation impact statement in relation to “Protecting consumers from unfair trading practices”.²  Treasury’s paper seeks to address “an emergence of unfair trading practices” which are said to be “driven in part by the growing importance of digital platform services for small businesses and consumers”.

Treasury provides a number of examples of potentially “unfair trading practices”, including:

• “inducing consumer consent or agreement to data collection through concealed data practices”;
• using “opaque data-driven targeting or other interface design strategies to undermine consumer autonomy”; and
• “all or nothing ‘click wrap’ consents that result in harmful and excessive tracking, collection and use of data, and don’t provide consumers with meaningful control of the collection and use of their data”.

Treasury has noted harm posed to consumers from:

• digital platforms collecting and using “data and algorithms for multiple purposes, which may lead to personalising offers or pricing for individual consumers without their knowledge or explicit consent”;
• consumer harm resulting from “online designs known as dark patterns, which manipulate consumer choice and experience”. Two University of Chicago academics recently provided a number of examples of existing dark patterns, including:³
  • a false/misleading notice that others are purchasing a product;
  • costs being obscured or disclosed late in a transaction;
  • unanticipated or undesired automatic subscription renewals;
  • important information which is visually obscured;
  • “preselection”, where the seller’s preferred default product is preselected;
  • a choice framed in a way that makes one option seem unintelligent;
  • the “manipulative extraction” of information about other users;
  • consumers being tricked into sharing personal information;
  • “gamification” – ie, features earned through repeated use;
  • “forced registration” – eg, when a consumer is tricked into thinking registration is necessary;
  • a “low stock message” (where the consumer is informed that there are limited quantities of a good remaining) or a “high demand message” (where a consumer is informed that others are buying the remaining stock).

In response to these issues, some options Treasury is considering include:

• amending the current statutory form of unconscionable conduct: this would “extend the prohibition to capture unfair conduct” as a factor that must be assessed. It would “seek to broaden the scope” of unconscionable conduct under the Australian Consumer Law so that it considers “a range of misleading, harsh, oppressive or predatory conduct depending on how unfair conduct is defined”. Treasury has also said that unconscionable conduct “could be made prospective, so it applies to conduct that is likely to be unconscionable” (emphasis added);
• introducing a new general prohibition on unfair trading practices: if adopted, this would be consistent with the ACCC’s fifth interim report of the Digital Platform Services Inquiry, which recommended an economy-wide prohibition on unfair trading practices. Treasury notes that any definition of "unfair" in a new prohibition on unfair trading practices “would be determined through the policy development process, drawing upon its use and application in international jurisdictions”. It is said that the “intention of any proposal to introduce a general prohibition on unfair trading practices would be to ensure it adapts to technological and commercial change”; 
• introducing a combination of general and specific prohibitions on unfair trading practices: this would entail a general principles-based prohibition of unfair trading practices and a list of specified prohibited practices. Treasury has said that this would be the “most comprehensive and targeted policy approach”. Treasury’s paper notes that this combined regulatory approach has been enforced in overseas jurisdictions such as Singapore, the EU and the UK and no “international jurisdiction has introduced or enforced a stand-alone, specific unfair practices prohibition without also having a general unfair practices prohibition in place”.

The second development entails the High Court

Alongside Treasury’s consideration of an “unfair trading practices prohibition”, a case concerning unconscionable conduct has reached the High Court.

Section 21(4)(b) of the Australian Consumer Law ensures unconscionable conduct is “capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour”. In Productivity Partners Pty Ltd (trading as Captain Cook College) v ACCC (2023) 297 FCR 180, the Full Federal Court held that Captain Cook College had engaged in such a “system of conduct” that was, in all the circumstances, unconscionable.

Captain Cook College provided online VET diploma courses. The ACCC commenced proceedings against the College and the former CEO in November 2018, alleging (among other things) several unconscionable practices relating to its enrolment processes. The Full Federal Court upheld the trial judge’s finding that the College had engaged in a system of conduct that was, in all the circumstances, unconscionable. The Full Federal Court stated that “the College could not have had any basis for a belief that the elements of its business systems” “would materially reduce the risk” of persons being enrolled in the College’s online campus in circumstances where:

• the person did “not do so willingly”; or
• where the person was “unsuitable for enrolment because” they lacked “sufficient language, literacy or numeracy skills or technology skills or access”. 

The High Court has, however, granted the College special leave to appeal to the High Court. The appellant’s Notice of Appeal indicates the High Court will be asked to more clearly draw the boundaries of unconscionable conduct.  It asserts that:

• the trial judge and Full Federal Court erred by declaring that the College had engaged in an unconscionable “system of conduct”; and
• the Full Court “erred in holding that Productivity Partners’ conduct, in removing two system controls and operating an enrolment system without those controls, in the absence of an intention that the risks ameliorated by those controls eventuate, constituted unconscionable conduct”.

As a consequence, there is reason to suspect that the High Court will be asked to provide guidance as to when a business engages in a “system of conduct” that is unconscionable.

What next?

Potential law reform is on the horizon: Treasury is currently consulting on whether to change the scope of the existing prohibition on unconscionable conduct in the Australian Consumer Law.  Treasury is assessing whether Australia should enact a new prohibition on “unfair trading practices”. This consultation is directed particularly at harms to consumers which are said to have arisen from “technological change”. We can expect to hear more in 2024.  

The High Court may speak on unconscionable conduct: in Productivity Partners, the Court may provide guidance as to unconscionable conduct, including the circumstances in which a business’s “systems” constitute a system of unconscionable conduct.

These developments will be keenly watched by regulators such as the ACCC. They may in the future be invoked by regulators in their sustained scrutiny of the tech sector. We will of course keep you updated as these matters develop.            

1. See Explanatory Memorandum to the Trade Practices Revision Bill 1986 (Cth).
2. The consultation period is open until 29 November 2023. After this, Treasury will release a “decision regulation impact statement”. It is expected that the latter statement will be released in 2024.
3. Jamie Luguri and Lior Strahilevitz, ‘Shining a Light on Dark Patterns’ 13 Journal of Legal Analysis 43 (2021).