Treasury recently published an exposure draft of proposed amendments to the Australian Consumer Law (ACL) to prohibit certain unfair trading practices (Bill).
The Bill is currently open for public consultation. If the Bill is passed, the amendments will commence on 1 July 2027.
What you need to know
The proposed laws are intended to target three practices identified as harmful to consumers and small businesses: dark patterns, drip pricing and subscription traps.
The prohibitions on dark patterns and drip pricing will only apply to “consumers” in the traditional sense, i.e. a person acquiring goods of a kind ordinarily acquired for personal, domestic or household use or consumption, whereas the protections against subscription traps will be extended to small businesses.
Businesses that breach these provisions will risk incurring a maximum pecuniary penalty of $50 million, three times the value of the benefit resulting from the breach, or 30 per cent of the corporation’s adjusted turnover during the breach period.
Dark patterns
“Dark patterns” refers to manipulative online design strategies that influence consumers towards making decisions in order to secure sales, for example by:
- gamification which gives users the impression they have “won” a discount, when in fact the same discount is offered to all users;
- creating false urgency through a countdown timer which gives a false impression of scarcity;
- notifications that other users have purchased the same product a user is browsing, which may or may not be true; and
- requiring consumers to create accounts to complete online purchases, which exposes users to the risk of a data breach and unwanted marketing material.
To address this issue, the Bill proposes a general unfair trading practices prohibition on conduct that:
- does, or is likely to:
- unreasonably manipulate a consumer; and/or
- unreasonably distort the environment in which they make decisions; and
- causes (or is likely to cause) detriment.
Drip pricing
“Drip pricing” refers to surcharges gradually added during a transaction, thereby obscuring the total amount.
Currently, consumers can only seek remedies for drip pricing under:
- the misleading and deceptive provisions in the ACL;
- the requirement for a single-price inclusive of taxes and charges; or
- the prohibition from including payment surcharges exceeding the actual cost of acceptance for a particular payment method.
The proposed amendment will explicitly require businesses to disclose transaction-based charges (e.g. transaction fees) not just prominently, but in close proximity to the base price for goods or services (i.e. not at the last step before payment). This is intended to ensure consumers are aware of these charges when considering the base price of the good/service, such that they can make informed decisions in relation to the transaction.
Subscription traps
Treasury has proposed to strengthen the ACCC’s enforcement toolkit against subscription traps, which were the subject of court action commenced by the ACCC against HelloFresh and YouFoodz late last year.
In summary:
- Businesses offering subscription contracts must ensure that the method of cancellation is easy to find, straightforward and only involves steps that are reasonably necessary.
- Before entering a new subscription contract, businesses will be required to give customers a notice specifying the term of the contract and explaining how to unsubscribe. A new statement must be given periodically – every six months for an indefinite contract or within a reasonable time before the contract is renewable if the contract is for a fixed term.
- Customers on a free trial period must be warned and given an opportunity to unsubscribe before the free trial converts to a paid contract.
What you should do now
While the Bill is still in consultation stage, it is likely that these laws will come into effect in these terms or with minor changes. As such, we recommend that your businesses:
- conduct an audit of the process consumers must follow to cancel subscriptions;
- review your website and marketing materials with a view to identifying and eliminating any “dark patterns”; and
- review your policies around display of prices to ensure that you display a single price including all mandatory/unavoidable surcharges. If there is no fee-free method of payment for a product, then the payment fee must be included in the single price you display for that product.
Please reach out to our competition and consumer law team should you have any queries.