As online marketplaces continue to boom, can consumers be confident the products we buy online are safe?
On Wednesday, independent consumer advocacy group Choice lodged a “super” complaint with the key regulator, the Australian Competition and Consumer Commission (ACCC).
Choice is calling on the ACCC to investigate “a significant volume” of potentially dangerous toys and other banned products it found for sale on various online marketplaces. The regulator must respond within 90 days.
Such scrutiny may belatedly encourage all online marketplaces to take mandatory safety standards more seriously. But the Australian Consumer Law still lacks a general safety provision. This would require businesses to proactively ensure only safe products are put on the market.
Australia is lagging behind the European Union and several other countries, where stronger laws have been in place for decades to try to prevent unsafe products being sold online.
Online marketplaces in the spotlight
Choice’s super complaint came only a day after the ACCC issued takedown notices to Amazon, eBay, Kogan and Fruugo over concerns some of their products may contain small, high-powered magnets banned under Australian law.
Last Friday, the ACCC also announced it was suing online retailer Amazon, alleging kids’ backpacks previously listed and sold on the site failed to comply with mandatory safety requirements for button batteries.
Amazon has reportedly already taken down these listings and contacted affected customers.
But in both cases, these actions relate to bans on, or mandatory safety standards for, specific products. They are not based on a general regulatory requirement for product safety.
Australia lags behind on stronger laws
The EU first implemented a general product safety provision in 1992. The regulations were recently revised and strengthened, including around recall requirements.
Countries including Malaysia, Canada and Thailand have adopted a similar general product safety provision.
From 2019, the Australian government consulted on the possibility of adding a similar measure. But the process stalled, despite online shopping booming since the pandemic.
The problem with a patchwork approach
In practice, this gap in the law means too often Australian regulators only step in to ban or recall dangerous products after people get hurt.
Button batteries illustrate this point. These became subject to a mandatory standard from 2022 – only after multiple deaths and injuries to babies and children who had ingested them.
Australia only has such mandatory standards for 50 product categories. Even for those products (often for babies or kids) some suppliers may continue to deal in them – until caught out through occasional checks by regulators, or an organisation such as Choice, leading to voluntary recalls.
Regulators have further powers to ban or force recalls of unsafe products once already sold. But this too usually only happens after many serious accidents.
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Why other protections fall short
Suppliers themselves have some incentives to do the right thing. They don’t want to face fines or the reputational damage that could result from selling unsafe products.
They also face the risk of class actions or compensation claims from consumers.
One avenue is to claim a seller or manufacturer has breached the mandatory consumer guarantee of acceptable quality, including safety.
A second avenue under the Australian Consumer Law is strict product liability. This is Australia’s adaptation of a 1985 EU directive that holds manufacturers liable if a product with a safety defect causes injury or property damage.
But individually, in practice, small-scale harms are not worth consumers bringing even before tribunals. Regulators such as the ACCC do not use their powers to sue on individual consumers’ behalf.
And class-action law firms typically only bring the biggest and easiest claims – plus then mostly settle them (leaving few precedents for other suppliers to use to up their game).
Seller, manufacturer or platform?
A specific limitation for bringing these types of compensation claims is that online platforms such as Amazon have argued (even in the United States) that they are mere intermediaries – not even sellers, let alone manufacturers.
The EU recently tried to close this loophole when updating its Product Liability Directive. An online platform is caught if presenting products leads an average consumer to believe the platform itself, or a seller under its control, is the supplier.
But even then, platforms might avoid such joint liability through disclaimers, which consumers might not understand even if prominently displayed.
Other ways to hold platforms to account
Another argument – included in Choice’s complaint – is that platforms are engaged in misleading or deceptive conduct in trade by offering goods that are unsafe.
This was the uncontested premise of the ACCC’s 2016 case against Woolworths. That litigation then focused instead on the amount of fines – ultimately more than A$3 million in penalties – for misleading consumers by continuing to offer five types of products, despite having received safety-related complaints.
It is unclear whether the ACCC’s current lawsuit against Amazon adds this argument. But similar claims have been made in the US under broader prohibitions on unfair commercial practices (also belatedly being added to the Australian Consumer Law).
Instead, the ACCC’s lawsuit reportedly alleges Amazon commercially possessed or had control of products violating the button battery standard, through its warehousing and so on. This neatly avoids having to prove Amazon was a product supplier or manufacturer.
Prevention is usually better than cure
For online marketplaces operating in Australia, it shouldn’t be too hard to comply with the 50 product-specific standards. Nor should it be too hard to monitor public recalls of risky products. Consumers and non-governmental organisations such as Choice shouldn’t have to do this for them.
Amazon, Ebay and AliExpress have already signed the ACCC’s Australian Product Safety Pledge. This commits them to take various voluntary steps to ensure product safety. In contrast, the revised European regulation mandates stricter duties.
To keep Australian consumers safe, the government should similarly strengthen Australia’s laws. This includes revisiting product liability provisions and reviving consultation on adding a general safety provision to our consumer protection laws. Prevention is usually better than cure.
