Treasury Releases Draft Competition and Consumer Gift Cards Amendment Bill

Thursday 2 August 2018 @ 11.52 a.m. | Legal Research | Trade & Commerce

On 26 July 2018, the Federal Treasury released for public consultation an exposure draft of the Competition and Consumer Amendment (Gift Cards) Bill 2018 ("the Draft Bill") and explanatory materials.  The Bill is intended to address issues arising with respect to the expiry of gift cards and fees payable on them. Public submissions on the Draft Bill and the explanatory materials will be open until 9 August 2018.

What the Draft Bill Proposes

The Draft Bill proposes to define a gift card as an article that is commonly known to be a gift card or voucher, whether in physical or electronic form which is redeemable for goods or services.  The Draft Bill allows for Regulations to be made to add to or exempt items from the definition of gift card, which is intended to ensure only genuine gift cards are subject to the proposed reforms, and to allow flexibility to address any loopholes as they arise. Further, regulations will also be able to be made to avoid doubt about what is a gift card and provide certainty to industry and consumers.

The Draft Bill, if enacted as legislation, would:

  •  mandate a minimum three year expiry period for gift cards;
  •  require gift cards to display expiry dates; and
  •  ban post-purchase fees on gift cards.

The proposed legislation would also specify penalties for non-compliance.

These changes would be made by amending the Australian Consumer Law ("the ACL", in Schedule 2 to the Competition and Consumer Act 2010 (Cth)) and it is intended that the amendments will apply to gift cards supplied on or after 1 November 2019. 

What Is or Is Not a Gift Card

Items that are not commonly considered to be a gift card currently include "credit cards", "charge cards", "debit cards" and "public transport tickets", and as such none of these items are captured by the reforms.

It should be noted that items do not have to be "only promoted as a gift product" to be captured (as is the position required to obtain relief under ASIC Corporations (Non-cash Payment Facilities 2016/211). Gift cards can be purchased for use by the purchaser and do not have to be gifted to others, so  for example, people may choose to buy gift cards when they are on sale for their own personal use.

Under the definition, as described above, a gift card can include cards provided by insurance companies to policy holders to discharge a legal liability under the terms of a policy. An example might be where the card provided is in the same form as those available to the general public as a gift card.

Some Matters to Note

While the ACL does not apply to "financial services" and products, which are normally regulated by the Australian Securities and Investments Commission Act 2001 (Cth) and the Corporations Act 2001 (Cth), the amendments proposed in the Draft Bill provide that, even if certain gift cards are a financial product, they will now also be regulated by the ACL for the purposes of the proposed reforms.

Currently the ACL provides that a person is not considered  to be a consumer if they acquire a good for the purposes of re-supply. This Draft Bill provides that in relation to the re-supply of gift cards, a person is not considered a consumer only if the re-supply is for trade or commerce. This is to distinguish between the re-supply of gift cards for business purposes and ad hoc transfers between individuals. The effect of this is that, for example, when a gift card is bought for the purpose of providing it as a gift, the purchaser will still be considered a consumer and the transaction will be covered by the proposed reforms.

More Info on the Bill Mechanics

The materials accompanying  the Draft Bill include an Explanatory Memorandum for the Draft Bill and a consultation paper which provides additional information on how the new regulation making power will operate, including clarifying the definition of a gift card, specifying exemptions and defining allowable post-purchase fees. 

Reaction and Comment

The new laws will be similar in approach to those already enacted in New South Wales  (see Fair Trading Amendment (Ticket Scalping and Gift Cards) Act 2017 [NSW] Sch 2] and South Australia (see Fair Trading (Gift Cards) Amendment Bill 2018 (8 of 2018) [SA]).

It has been reported by SmartCompany that some of the larger retailers have already acted in advance of the legislatures on the issue of gift card expiry dates, with Woolworths for example. scrapping gift card expiry dates all together. SmartCompany has stated that scrapping rather than lengthening expiry dates has been the preference of those with knowledge of the the area, and has included the comments of Professor Michael Adams, a corporate law and governance expert at the University of Western Sydney, who has said:

“Obviously [the new rules] are better but it’s not sufficient — it does not resolve the issue, . . . I do not think they should have an expiry date as they are purchased with cash. If the gift card is bought with cash it should be redeemed as if it was cash. . . . Extending the expiry date will not solve the problem of businesses going broke and failing to honour gift cards, which was the major issue with the gift cards from Dick Smith Electronics.”

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