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Chapter 1: Introduction

Date



On 12 August 1999, the Minister for Financial Services & Regulation, the Hon Joe Hockey MP, who is also the Minister with responsibility for Consumer Affairs, established an independent Taskforce to advise him on a range of issues regarding industry self-regulation in Australia.

The Taskforce members to undertake this inquiry were drawn mainly from the private sector, with the emphasis placed on representation from key stakeholders, with knowledge of, and involvement in, self-regulation.

Inquiry process

The Taskforce met for the first time on 30 September 1999, to discuss the format and direction of the inquiry. One of the most important objectives of the Taskforce was to ensure all stakeholders had ample opportunity to contribute to the inquiry. The Taskforce considered that consultations with stakeholders across industry, business, consumers groups and government were imperative to explore a variety of experiences in the field and generate an informed and comprehensive report.

The Taskforce agreed that the first step to achieving effective consultation was authorising the release of the Issues Paper.1 The purpose of this Issues Paper was to provide information on the scope of the Terms of Reference and the inquiry methodology to assist stakeholders in preparing submissions to the inquiry. The call for submissions was advertised nationally on Friday, 15 October 1999 (the Australian Financial Review) and in The Australian and major metropolitan dailies in each State and Territory on the weekend of 16 October 1999.

To supplement this national advertising campaign, the Chair of the Taskforce wrote to a wide range of industry, consumer groups and government agencies (over 80 organisations) likely to have an interest in the inquiry, inviting then to make a submission and attend consultative meetings with the Taskforce. In addition, other organisations, including the Council of Small Business Organisations of Australia and the Australian Communications Industry Forum, widely distributed the Issues Paper to interested parties to ensure thorough saturation across Australia.

Regional Australia was also targeted with one-page fliers, prepared by the Taskforce, for distribution to country areas with assistance from the Business and Professional Women of Australia. Letters were also sent to all regional development councils around Australia inviting them to participate in the inquiry through encouraging submissions on issues such as access to self-regulatory schemes for regional consumers and industry. A number of regional development councils took up the Taskforce's offer to receive a copy of the Draft Report with and participated in the second round of consultations.

In addition to this media and promotional campaign, the Taskforce set up its own webpage on the Treasury site ( http://www.treasury.gov.au/self-regtaskforce) and electronic letterbox for lodgement of submissions and queries (selfregtaskforce@treasury.gov.au). Links were also established to the Taskforce webpage from other sites that stakeholders were likely to visit. The Issues Paper and Draft Report were published on the website, together with reference documents such as the Codes Policy Framework and Grey-letter Law.

The Taskforce was pleased at the numerous responses elicited from stakeholders throughout the inquiry. The Taskforce received 59 submissions (listed at Appendix A) which are used extensively within the body of the report.

In addition to calling for submissions, the first round of consultations was undertaken during November and December 1999 and March 2000. Public consultations were held with industry, business, consumer groups and government agencies located in Canberra, Melbourne and Sydney. The consultations were conducted in a variety of formats with a number of individual and roundtable discussions held. A list of organisations consulted during the inquiry is listed at Appendix B.

The second meeting of the Taskforce was held on 14 December 1999. The Taskforce reviewed the inquiry process to date and was enthused by the response received by stakeholders. The Taskforce examined the trends of information received. The Taskforce was also concerned at the short timeframe attributed to the inquiry considering the large amount of work that was still required to be undertaken. The Taskforce was anxious to avoid shortening the public consultation period due to a lack of time. Hence, the Taskforce applied to the Minister for a three month extension on the reporting date. The Minister granted this extension. The Taskforce also commissioned a number of special research tasks to further investigate the Terms of Reference.

The importance placed on a comprehensive and thorough analysis of market circumstances where industry self-regulation was likely to be most and least effective, became the catalyst for the Taskforce to engage a consultant. The Taskforce required the consultant to structure its research around case studies where industry self-regulation had been implemented. As part of its research strategy, the consultant met with stakeholders in each of the identified industries to gain a comprehensive insight into the market. The aim of this research was not to identify self-regulatory success and failure in particular industries but to more broadly identify the characteristics of the environment and market that have influenced the effectiveness of self-regulation. This report can be found on the Taskforce's webpage and has also been incorporated into chapter 5 of the report.

The Taskforce was also keen to research the changing regulatory environment within the international arena, with special attention to be given to developments in industry self-regulation. To ensure Australia could potentially learn from this research, the Taskforce supported the need to focus on governments that had already implemented some form of industry self-regulation policy. The Secretariat to the Taskforce undertook this research with the view to investigate current issues and trends in the international environment.

In addition, the Taskforce Secretariat subscribed to an international on-line forum on voluntary codes, hosted by the Canadian Office of Consumer Affairs. The members of this forum come from a wide variety of government and non-government organisations throughout the world and provide invaluable information, networks and links to self-regulatory practices and voluntary codes in operation. The Terms of Reference of the Taskforce inquiry were posted on this forum and consequently generated a large amount of interest. The numerous replies provided valuable information on self-regulatory practices, from a variety of international governments, organisations and individuals. Further detail on the international work can be found at Appendix D of the Draft Report.

The third meeting of the Taskforce was held on 8 May 2000. As requested in the Terms of Reference for the inquiry, the Taskforce authorised the release of a Draft Report for comment by interested parties. The Draft Report drew heavily on the submissions received together with the findings from consultations and research undertaken by the consultant and Secretariat.

The purpose of this Draft Report was to gather feedback on the Taskforce conclusions and find out whether there were further issues it should raise in this report. The Taskforce sought both written and oral comments. In seeking comments, the second round of consultations was undertaken during June and July 2000. Public consultations were held with industry, business, consumer groups and government agencies located in Canberra, Melbourne, Sydney, Brisbane, Adelaide, Perth and in regional centres (see below for more
detail). Although the focus of the inquiry was on self-regulation in consumer markets where the Commonwealth Government has constitutional responsibility or where there is a national scheme in place, the Taskforce was also keen to learn from States' experiences with self-regulation and consulted with a number of State bodies including some State Fair Trading agencies.

On 23 August 2000, the Taskforce met for the last time to finalise the report. The Taskforce was very pleased with the positive feedback on its Draft Report which resulted in some material being added and refined. However, the Draft Report forms the nucleus for this report.

Consultation in regional areas

The Taskforce was very keen to ensure that organisations in more regional areas had an adequate opportunity to participate in the inquiry. As a result, the Taskforce travelled to Mildura, Rockhampton, Tamworth and Bunbury to enquire about the self-regulatory issues facing rural Australians. The Taskforce also offered to travel to other regional areas if there was sufficient interest.

The Taskforce heard from these consultations that rural Australians can have trouble accessing services in comparison to metropolitan residents. Accessing self-regulatory schemes was not so problematic in itself given the technology available, but problems lay with knowing how to lodge complaints with schemes, having the time to write letters of complaint, the lack of personal contact and the time associated with having complaints investigated.

During some its regional consultations, the Taskforce also heard that rural primary industries like to have some level of government involvement as a safety net. In particular, concern was expressed over rogue traders being able to keep operating under a self-regulatory scheme and potentially undermining it.2 The Taskforce acknowledges these concerns but also recognises that similar problems exist with rogue players in regulated and deregulated industries.

Structure of report

The main body of the report addresses the six broad issues that the Taskforce was asked to inquire and report on.

In particular, chapter 2 sets out the framework for the Taskforce inquiry and discusses the steps involved in assessing whether self-regulation is the most appropriate tool.

Chapter 3 discusses the reasons for the initiation of self-regulatory schemes and the spectrum of schemes in Australia ranging from guidelines to more sophisticated codes of practice. The directory of self-regulatory schemes also lists a host of self-regulatory schemes operating at the national level in consumer markets.3

Chapter 4 then discusses gaps and overlaps in the coverage of self-regulation. There has been considerable growth in the number of self-regulatory schemes across many industries. In addition, these self-regulatory schemes operate in dynamic markets, which are influenced by globalisation, increasing vertical integration, and the growth of `hybrid' products that span traditional markets or industries. As a consequence, gaps and overlaps can emerge in the coverage of various products, services, sectors and industries.

Chapter 5 maps out the industry environment and market circumstances where self-regulation is likely to be most effective. It is necessary to ensure that self-regulation is the appropriate form of intervention given particular industry environment and market circumstances, otherwise inappropriate intervention could create new problems. As discussed above, the consultant's report also analyses the circumstances where industry self-regulation is likely to be most and least effective.

Chapter 6 discusses good practice and cost-effective self-regulatory methods. Good practice in self-regulation can be understood as significantly improving market outcomes for both business and consumers at the lowest cost to businesses. A particular self-regulatory scheme may not be appropriate in circumstances where other forms of regulation are able to provide better outcomes at a lower cost.

Chapter 7 then discusses approaches to promote and co-ordinate self-regulation. The roles of industry, government and consumer groups are dynamic, adapting to the changing face of the Australian economy and, in particular, responding to competitive pressures, regulatory reform, new technologies and the increasing globalisation of consumer markets. This chapter first examines the role that industry has played in promoting and coordinating self-regulatory schemes. It then discusses the role of government as a stakeholder, developer, promoter, monitor and enforcer of schemes, as well as the crucial role that consumer groups have played and will continue to play in the development of industry self-regulation. Finally, the chapter analyses a number of options to co-ordinate and promote self-regulation including discussion of whether a centralised government agency, an oversight committee, or model codes would be appropriate.

Finally, chapter 8 discusses options to facilitate the improvement and harmonisation of dispute resolution schemes. Effective dispute resolution is a crucial element of industry self-regulation offering redress to consumers and it can also identify systemic problems in the industry. However, dispute resolution schemes come at a cost. In particular, they can be costly for small industry groups.


1 The Issues Paper can be found at http://www.treasury.gov.au/self-regtaskforce.

2 For example, Taskforce consultations held in Tamworth on 28 June 2000 and Bunbury on 20 July 2000.

3 The directory of self-regulatory schemes can be found at the Taskforce's website.

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