Privacy Law and Policy Reporter
Graham Greenleaf and Nigel Waters
The Australian Direct Marketing Association (ADMA) is facing coordinated opposition from consumer and privacy organisations in relation to its attempt to obtain from the Australian Competition and Consumer Commission (ACCC) an authorisation for its proposed Direct Marketing Code of Practice. ADMA will have to justify that its Code is in the public interest in hearings before the ACCC.
These proceedings have a broader significance than direct marketing. One of the main elements of the ADMA Code is a version of the Australian Privacy Commissioner’s ‘National Principles for the Fair Handling of Personal Information’ (see (1998) 4 PLPR 165). Consumer and privacy organisations are arguing that the direct marketing aspects of these Principles, at least in their current form, are not in the public interest (see (1998) 5 PLPR 41). They are also arguing that the ADMA Code is against the public interest because it does not include effective enforcement mechanisms.
The Privacy Commissioner has not yet completed discussions on enforcement of voluntary privacy codes, so there is as yet no formal guidance from the Commissioner on what constitutes adequate implementation of her ‘National Principles’. The ACCC proceedings will bring this question into the foreground, and could potentially set a standard of enforcement which must be met before any industry voluntary self-regulation in relation to privacy can be regarded as in the public interest.
The results of the ACCC proceedings will affect other industries. For example, the Insurance Council of Australia released in August 1998 the General Insurance Information Privacy Principles, and the banking industry is among others considering a privacy code. For all these reasons, ADMA’s application to the ACCC may prove to be the first significant test of the Federal government’s policy of relying on voluntary industry self-regulation to protect privacy.
ADMA applied to the ACCC under s 88(1) of the Trade Practices Act 1974 (Cth) for an authorisation for its Code on the basis that the Code might have the effect of substantially lessening competition within the meaning of s 45. The ACCC can only give such an authorisation if the conduct it authorises ‘is likely to result, in a benefit to the public and that benefit ... would outweigh the detriment to the public constituted by any lessening of competition that ... is likely to result’ from giving effect to the Code of Conduct (s 90 Trade Practices Act 1974). The Commission can approve an application subject to conditions, and can also refuse an application while indicating amendments which would assist a revised application to succeed.
ADMA’s application therefore makes the case for the Code of Practice being anti-competitive, but then argues why, in its view, this detriment is outweighed by the public benefits of the Code.
The ACCC made a draft determination (see accompanying extracts) which states its opinion that ‘the extent to which these core provisions [of ADMA’s Code] will in practice benefit the public will depend upon the level of compliance with the provisions’, and that ‘the core provisions will not be subject to effective enforcement, and therefore increased compliance’, unless seven specified amendments are made to the Code of Practice. If these seven changes are made, the ACCC says it ‘is satisfied that implementation of [the Code] will give rise to public benefits which would outweigh any anti-competitive detriment that may arise’. The Commission therefore proposes to grant the authorisation, for four years, on the condition that the seven amendments are included in the Code of Practice.
Numerous consumer and privacy organisations made submissions opposing the draft determination by the deadline of 21 October 1998, and the ACCC is now required to hold a conference on the application within 30 days (s 90A Trade Practices Act 1974). The ACCC had scheduled such a conference (if one was needed) for 29 October, but after receiving submissions postponed the conference until 26 November. ADMA had planned to launch its Code in mid November.
Determinations by the ACCC can be reviewed by the Australian Competition Tribunal.
ADMA’s Direct Marketing Code of Practice (see accompanying extracts on p65) is a very lengthy document of over 100 clauses. A substantial part of it (Part B) deals with fair conduct relating to matters broader than privacy (misleading conduct, delivery of goods etc), and will not be discussed here. The rest relates directly to privacy issues: Part C to telemarketing, Part D to ‘electronic commerce’ (essentially, direct marketing using the internet), and Part E is a version of the Privacy Commissioner’s ‘National Principles’. Part F provides enforcement procedures relating to all parts. Clauses of the Code which are of particular significance to privacy are in the following extracts.
The ADMA Direct Marketing Code of Practice is based partly on the Model Code of Practice for the Direct Marketing Industry released in November 1997 with the approval of the Ministerial Council on Consumer of Affairs (MCCA). Part E is, of course, new. ADMA chose not to consult broadly with privacy and consumer organisations during the development of the specifics of the new Code, with the result that the ACCC draft determination and call for submissions was the first they knew of the proposed content and compliance and enforcement mechanisms.
The ACCC in its Draft Determination has identified some significant weaknesses in the proposed mechanisms (see extracts following), assessed against the ‘Fair Trading Codes of Conduct, Why Have Them, How to Prepare Them Guide’ and the ‘Benchmarks for Industry-Based Customer Dispute Resolution Schemes’and the Australian Standard for Complaints Handling AS 4269.
Consumer and privacy organisations have criticised on many grounds both the ADMA Code, and the proposal in the Draft Determination to grant it authorisation. Some submissions may be available at the ACCC web site (http://www.accc.gov.au), but are also on the home page of privacy advocate Robin Whittle, who is hosting documents relevant to the ADMA application (http://www.firstpr.com.au/issues/tm/). A selection from these criticisms follows.
Consumer and privacy organisations are taking the approach that the lack of public benefit in the Code as it stands, and the adverse effect of the very fact of approval of such a Code by the Commission, is such that it should not be approved, despite the fact that its potential anti-competitive detriment is not very substantial. The argument is that the authorisation processes of the Trade Practices Act should not be able to be used to help legitimise practices which are seriously deficient in protecting the public interest.
This experience of the attempted introduction of a self-regulatory information privacy or data protection Code of Practice tends to confirm the suspicions that privacy and consumer advocates have raised about the inherent weaknesses of the government’s preferred way of dealing with privacy in the private sector since it was first announced in March 1997. These weaknesses include:
The ACCC has almost inadvertently stepped into part of the gap left by federal and state governments’ abdication from establishing an effective regulatory scheme for the private sector. Their draft determination on the ADMA application serves notice to business in general that self-regulatory alternatives may have to have real teeth if they are to be credible enough to jump the hurdle of anti-competitive conduct.
Depending on the outcome, ADMA and other business groups considering adopting privacy principles on a voluntary basis may need to learn some lessons from a flawed attempt and come up with better designed and more effective schemes. Unless there are a significant number of voluntary privacy codes which satisfy the requirements of the Trade Practices Act, this will strengthen the argument that the only way in which adequate privacy protection is to be achieved is through legislation. The ACCC’s consideration of ADMA’s Code will be an important test case.