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The Death of Privacy
A submission to the Australian Competition and Consumer Commission under Section 90 of the Trade Practices Act 1974.
The privacy and consumer movement have strong views on the proposed Direct Marketing Code. As a participant in the debate about the Code, I have been preparing material on the content of the Code and the process of its development.
This material was to be submitted later this month to the ACCC, in accordance with the formal timetable and process of Code authorisation under Section 88-90 of the Trade Practices Act 1974.
Certain events - chiefly the premature "launch" of the Code today - have forced the early release of this material.
This submission summarises my concerns with the content of the Code,
and the process of its development. The comments and criticisms on
were initially directed at the Australian Direct Marketing Association.
However, I now find myself having to direct serious criticism at the
and their handling of the authorisation process. This criticism is
both for the Code in question, and the future of the authorisation
for other Codes.
The failure of self regulation
It is important to consider the proposed Australian Direct Marketing Association Code of Practice (the Code) in the context of the current debate about privacy regulation in Australia.
Australia is one of the only developed nations not to have comprehensive privacy legislation for the private sector. The alternative approach of the Coalition Government is to pursue a voluntary scheme of self regulation. But again and again we see that self regulation fails when difficult privacy issues arise.
In the case of Calling Number Display, for example, the industry has failed to produce a Code to protect the privacy of individuals, and has ignored the recommendations of the previous regulator (Austel) requiring an 80% level of understanding in the community before introducing CND.
In the case of smart cards, a satisfactory (at this stage of industry development) Code has been developed, but no major bank or financial institution has signed the Code.
Now, the direct marketing industry has a proposed Code that is completely unacceptable from a privacy or consumer perspective, that has been developed behind closed doors with no consumer input during the last twelve months, and which seeks to entrench some of the worst elements of business practice under the imprimatur of a Code authorised by the ACCC.
Self regulation is failing. Australia will soon find, just as was
case in Canada, that legislation is a more effective and ultimately
efficient method for dealing with difficult privacy issues - boosting
confidence and simplifying business regulation.
The Death of Privacy
If the Code was implemented in its current state, it would be the death of privacy as we know it. Unsolicited phone calls at practically any time of the day, any day of the week, even 8am on a Sunday, would become the norm. Unsolicited emails (spam) would continue completely unchecked.
Moreover, any ACCC approval of this Code would send a message that it is OK to develop a code in secret, to ignore the normal practice of consulting with consumers, to draft a document with no review process and to rush it through as quickly as possible.
If the development of this Code sets the standard for future regulation, we will be left with a series of privacy codes which are completely voluntary, which provide no level of adequate industry coverage, and which offer no compensation when you are wronged.
We fight this small battle now, because the future of privacy will
shaped by the decision on this Code.
History of the ADMA Code
This Code has been developed behind closed doors with no input from consumer or privacy representatives in the last twelve months.
A former draft Code - the Direct Selling Code - was discussed in the Ministerial Council of Consumer Affairs process in 1996-1997. Some consumer and privacy organisations were involved at that early stage, and discussions were held about the possibility of developing a co-regulatory Code. Efforts to develop that Code failed
Greenleaf and Waters (Footnote 1.) have written:
Authorisation under Section 88 of the Trade Practices Act 1974
Fortunately for privacy and consumer interests, ADMA sought authorisation under Section 88 of the Trade Practices Act 1974 for the Code, as it contained certain anti-competitive elements that required the consent of the ACCC. This triggered a "public benefit" test under Section 90 of the Act, forcing the Code to be revealed to the public for the first time in late October.
Section 90(8) states:
No decision can be made prior to that conference.
Prior to the Section 90 notification by the ACCC in late October, word had reached privacy and consumer advocates that the Code was going to be launched on November 9 in Sydney.
After advocates successfully convinced the ACCC to postpone the pre-decision conference to November 26, we (naively) assumed that the "launch" would also be postponed. The pre-decision conference had been initially scheduled for late October.
We were therefore shocked to discover on Friday November 6 that the launch would be taking place on November 9. We were even more shocked to discover that the launch would be held during the morning tea break of a high profile ACCC event (the Global Commerce conference), and that the Code would be launched by Professor Allan Fels - the Commissioner.
Advocates only discovered this information through contact from the
media. The ACCC and ADMA had not informed advocates of the launch. Even
organisations which had registered as "interested parties" under
90 of the Trade Practices Act 1974 and had called for the pre-decision
conference had not been informed of the launch.
The ADMA media release
ADMA sent copies of a media release to certain journalists on November 6. The release is headed "Direct marketers adopt tough consumer protection regime". The release does not mention the ACCC, the authorisation process, the pre-decision conference, or make any reference to the unfinished nature of the Code.
It simply states that certain activities have been adopted "under compulsory measures announced today by the Australian Direct Marketing Association". One section reads:
A question of process
Privacy and consumer advocates are bitterly opposed to the Code in its current form. This is not a situation where the Code has been developed through a consultative process, and the ACCC’s involvement is a legal formality.
In fact, the views on the Code are so strong, that the independence of the ACCC in applying the "public benefit" test will be paramount.
The effectiveness of the process to develop the Code is also
by the compressed timing of the authorisation process, and the complete
lack of prior consultation.
A question of timing
The Code is a very complicated document from a consumer perspective. The privacy and consumer advocates who have an interest in this issue generally work on a voluntary basis, are often extremely busy on a wide range of issues, and have very little funding or resources to dedicate to work on privacy issues.
The first time a copy of the Code was released to the public was on 7 October, when copies were sent to a limited number of advocates by the ACCC. I received my copy on October 14 via the Consumers’ Federation of Australia. The letter accompanying the Code called for submissions by 21 October and advised that if a pre-decision conference was to be called it would take place on 29 October.
This was a completely ridiculous situation.
I believe we had every right to be suspicious that the suggested (compressed) timing of the consultation period was influenced by the fact that ADMA had scheduled the launch for November 9, and had already sent out invitations or notices to the launch. I realise this is a strong point to make, but it reflects the feelings of some advocates, and certainly my own feelings, on receipt of the letter.
The initial fourteen days notices is the absolute MINIMUM notice period under Section 90A(2) of the Trade Practices Act 1974. The ACCC had complete discretion to provide a longer consultation period. Considering the fact that the Code had NEVER been seen by advocates prior to this process, a longer consultation period should have been allowed.
In addition, the Code was not provided to all interested advocates (including some of the leading commentators on direct marketing privacy issues), it was not made available on a web site, and no email address was provided for submissions or correspondence. All this served to add to the compression of the time available for consultation.
Accordingly, advocates complained about the short notice, and the ACCC postponed the pre-decision conference until November 26 and extended the deadline for written submissions.
Note: Advocates have been working under the assumption that the
conference is the final opportunity for discussion of the Code, and
the final deadline for written submissions is November 19. In a
with Allan Asher, Deputy Chairperson, on 6 November he informed me that
there would, in fact, be a further period for submissions after the
conference. This is the first time that this has been mentioned in any
conversation, and it was not mentioned in any correspondence. It is not
a requirement of the Trade Practices Act 1974.
A question of neutrality
The premature ‘launch’ of the Code is to take place during the morning tea break of the ACCC’s high profile "Global Commerce Conference" at the Sydney Hilton. It is not exactly neutral ground.
While this is understandable where there has been a consultative process leading up to the development of a Code, it is entirely inappropriate where the Code is the subject of a dispute between consumer and business interests, in which the ACCC will soon perform the role of independent arbitrator.
I understand that other industry/consumer developments will be announced or launched at the same Conference. However, I believe that those matters are not the subject of an adversarial debate between parties who are ‘miles apart’ on the issue, and who are seeking either massive changes to the Code or a complete denial of authorisation on November 26.
To proceed with the launch at this venue, when the ACCC is aware of the strength of feeling regarding the Code, may lead to an apprehension of bias, or real bias. There are certainly no good reasons why, in these circumstances, the Code cannot be launched at a neutral venue, if it is to be launched at all.
Indeed, the issue of the venue has already come up with one journalist, who tells me that he was advised by a spokesperson for the Australian Direct Marketing Association, that the launch was to take place at an ACCC event, and that the Code was to be launched by the Commissioner himself.
This latter point, the involvement of the Commissioner, Professor Allan Fels, in the premature launch of the Code, is a major disappointment to me, and to other privacy and consumer advocates.
Consumers have very few legal rights left in Australia, and we need to protect those that remain with great care. One right that still remains is the right to test the "public benefit" of a Code under Section 90 of the Trade Practices Act 1974. The regulator for that legal right is, in the first instance, the ACCC.
While it might be normal (indeed it should be encouraged) for the Commissioner to participate in a launch of a Code that is not in dispute, or that has been the subject of a fair consultation process, or one that has already been authorised under Section 90, none of those circumstances apply here.
In these circumstances, the privacy and consumer movement will have to give careful consideration to the question of requesting the Commissioner to disqualify himself from any further consideration of the Code under Section 90.
The principle of apprehended bias in Australia is:
On November 6 I specifically asked (by fax and phone) the Commissioner not to participate in the launch, and not to perform any act or make any statement that might undermine the formal authorisation process. I also asked the ACCC to issue a clarifying statement to journalists. Several other activists made similar requests, or contacted the ACCC supporting my requests on November 6.
In response, it is not known whether the ACCC has issued a clarifying statement to the media. It is known that the ACCC have contacted ADMA about this matter. Although the exact nature of the communication is not known, it was described to me by Commission staff as a "fax to ADMA and their lawyers warning them not to misrepresent the status of the Code".
This action, while going some way to improve the situation, is still
unsatisfactory and leaves the door open for the premature launch, and
Commissioner’s involvement in it, to completely undermine the formal
A question of undermining
If the premature launch goes ahead, and the Commissioner participates in it (or even conducts the launch as planned), and if the venue is not changed, and if other Commission staff attend, what will be the effect on the formal authorisation process?
I believe that the position of the privacy and consumer advocates will be totally undermined.
ADMA will have successfully launched a document which they claim "respects (customers’) privacy under compulsory measures announced today by the Australian Direct Marketing Association".
This statement will have been made without challenge. (No consumer or privacy advocates were invited to speak at the premature launch or even to attend the event).
The appearance of the Commissioner might give rise to an apprehension that he and/or the Commission has prejudged the matter, or at least that he and/or the Commission considers it is only a matter of time before the code is authorised. Why else would he participate? Why else would the launch take place at an ACCC event?
Will it be more difficult to deny authorisation of the Code, or to postpone its implementation pending further research and consultation, once the Commissioner has launched it? Will there be two launches? Would there ever be a ‘withdrawal’ in these circumstances? While it may be easy to answer these questions by stating that it is not the intention of the Commissioner to prejudge the matter, what is the public perception of such a situation?
All of these factors will serve to undermine our negotiating position in the pre-decision conference.
When I put this proposition to the Deputy Chairperson Allan Asher on November 6, he denied that any aspect of the premature launch or the Commissioner’s involvement in it would undermine the formal process. This is heartening, but much will depend on the actual words spoken on the day, their interpretation and coverage in the media, and the understanding of ‘fair minded people’ after the event.
Mr Asher further stated that the premature launch was in fact designed as an important part of the consultative process, and that it would encourage input prior to the pre-decision conference from a wider audience. It was, in his view, a normal part of the authorisation process.
We agreed to disagree on his interpretation of the event. For my part, I simply cannot believe that this was either the intention of the premature launch, or that it is likely to be the result of the premature launch. My reasons are:
A question of effective regulation
In the absence of privacy legislation, or even light touch regulation which might give the Privacy Commissioner power to register industry Codes, we must rely on the provisions of Section 90 to have any chance of achieving a consumer friendly outcome in the development of Codes.
Of course, this does not need to be the case. An industry group might choose to talk to consumer and privacy organisations during the development of the Code. A consensus might be reached, and the Section 90 process might run smoothly and without objection.
But in circumstances where consumers are excluded from the development process, we are entirely reliant on our Section 90 rights. Greenleaf and Waters conclude:
Once we are forced to rely on Section 90 we are also forced to rely on the effectiveness of the regulator - the ACCC. In this case I believe we got off to a bad start with the incredibly compressed timetable, we saw some improvement for a while with the postponement of the pre-decision conference, but we have fallen down again with the involvement of the ACCC in the premature launch.
The real question is how effective the next stage of the process
The "Big Picture"
Why all this fuss over a direct marketing Code? It is important to see the development of this Code in the broader context of the debate on privacy regulation, and the ACCC’s almost ‘accidental’ role in this debate.
Greenleaf and Waters (Footnote 1.) state that:
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
ADMA’s application to the ACCC may prove to be the first significant
of the Federal government’s policy of relying on voluntary industry
to protect privacy."
The scope of the Code is simply too narrow to deliver a positive or effective improvement to consumer protection in this field. The definition of ‘direct marketer’ limits it to ‘direct selling’ where there is a contract for sale of goods or services negotiated at a distance (by phone, email etc), but excluding telemarketing, mail or e-mail aimed at promoting goods or services available through retail stores or separate phone or mail response. It also limits the scope to where some record is kept of the transaction for further marketing purposes. Charities and other fundraisers are excluded because no contract is involved. There is little benefit to consumers of a code with such limited and arbitrary coverage, when the privacy issues are similar in all these varieties of direct marketing. (Note: there is extensive quotation from Greenleaf and Waters in this and the following sections. Quotes are taken with permission and are not footnoted on every occasion.)
Indeed, one of the main argued benefits of the Code is the provision
of a seven day cooling off period where a purchase is made following a
direct marketing contact. I would suggest that only a very small
of direct marketing contacts actually result in a sale. The most
aspect of the Code is therefore limited to a tiny fraction of the
of direct marketers - it is the constant intrusions by mail, phone and
email that are the real consumer concern.
Initially, it seemed unlikely to me, that ADMA’s claim that they cover 80% of direct marketing activity could be true. With so many organisations of varying size involved in direct marketing, this figure appeared quite high.
Probably less than 1% of unsolicited email received by Australians comes from members of ADMA.
I would be very surprised if more than 30% of unsolicited telephone calls received by Australians come from ADMA members.
However, when I looked more closely at ADMA’s definition of direct marketing, and realised that charities and fundraisers were excluded, as were market researchers, pollsters etc., I can see how the figure might be correct (except for unsolicited email, which simply can’t be right).
But this is the heart of the problem when the important question of coverage is raised.
A consumer’s understanding of what constitutes direct marketing will be much broader than the ADMA definition. Certainly a consumer’s understanding of what constitutes unsolicited mail, telephone calls and email would be much broader than the ADMA definition of direct marketing.
And it is these issues that consumers really want addressed: junk mail, junk faxes, unwanted telephone calls and spam. If this Code doesn’t deliver an improvement on these issues why bother?
On closer inspection of the ACCC draft determination we can see that the ADMA claim regarding coverage is quite specific:
Is there any independent research to indicate the scale of ADMA’s coverage? Have ADMA provided additional data, or have they just provided the 80% figure?
I would recommend that the extent of coverage is the subject of further research, investigation and independent assessment before the Code is authorised by the ACCC. Again, we face the problem posed by having a non-privacy regulator authorising a privacy specific code. The value of combined sales is meaningless form a privacy point of view. It is the volume of contacts that has meaning in relation to privacy protection. You could have 80% of the value of sales but only 50% of the volume of contacts - it is not an adequate measure for a privacy specific code.
Extent of coverage is one of the most important factors in assessing any likely ‘public benefit" from authorising the Code. If a Code is authorised which provides inadequate or fractional coverage, it actually worsens the position for consumers - many will believe (following the high profile launch of a Code) that their privacy is protected, when in fact in most cases it is not.
This Code should not be authorised until ADMA have shown that they
adequate coverage in terms of volume of contacts, in relation to junk
junk faxes, unsolicited telephone calls, and unsolicited email.
The Part E Principles
The ADMA Code Part E includes a version of the Commonwealth Privacy Commissioner’s National Principles, but these principles have not received endorsement from any consumer or privacy groups, and are still under re-consideration by the Privacy Commissioner
The direct marketing ‘exception’ to the limitation on use and disclosure in the current ‘National Principles’ (9.3 of Part E in ADMA’s Code), which allows some use of personal information for direct marketing unrelated to the primary purpose of collection on an ‘opt out’ basis, has been explicitly rejected by privacy and consumer groups. The ACCC’s draft Determination does not examine the substance of Part E, and should not accept that the implementation in Part E of the ‘National Principles’ is in the public interest without detailed further examination.
Related to the previous point is that the Commonwealth Privacy Commission has not released any recommendations about the necessary compliance and remedial measures for any industry Codes which are to implement the ‘National Principles’. Given the deficiencies in the compliance and remedial measures identified in part in the draft Determination, the ACCC should obtain the views of the Privacy Commissioner on adequate enforcement mechanisms in privacy Codes before deciding on the public interest aspects of this Code.
Respecting Consumer Preference
Part E of ADMA’s Code does not clarify how the ‘direct marketing exception’ (9.3 of Part E in ADMA’s Code) will operate in practice, merely reproducing it verbatim from the ‘National Principles’. A specific industry code should provide more detailed guidance. For example, how does the ‘direct marketing exception’ relate to ADMA’s ‘Respecting consumer preference’ clause?
The ‘Respecting consumer preference’ clause in ADMA’s code, which allows customers to ‘opt out’ from all direct marketing through ‘Do Not Mail / Do Not Call’ facilities, does not apply to ‘current customers’ even though these customers may have expressed a specific preference.
ADMA’s Code Authority can recommend unspecified ‘remedial action’ (clause 14 Part F), but the only sanction provided in the Code is revocation of ADMA membership (Clause 15 Part F). The ACCC’s recommended amendment 5 requiring that ‘the remedial orders and sanctions that the Authority is empowered to recommend are specified’ is completely inadequate to protect consumer interests. It will be no use ADMA specifying the powers unless those powers are in substance sufficient to protect consumer interests. If the remedies and sanctions are in substance inadequate, the principal function of this Code becomes one of providing justification to industry for otherwise controversial marketing practices, on the basis that the ACCC has endorsed these practices as being in the public interest. As the ACCC recognises in para. 6.5 of its draft, the ‘level of compliance’ is ‘most important’ in the determination of public benefit. ADMA should demonstrate that the remedies and sanctions it proposes will actually succeed in providing the consumer protection that the Code purports to deliver.
The content of the remedies and sanctions in any acceptable code should at least meet international standards for privacy protection. One of ADMA’s claimed public benefits is to ‘increase access to and demand from off-shore markets’. However, Australian direct marketing organisations will face prohibition on the import of any personal information for use in direct marketing from Europe, Hong Kong and other jurisdictions with personal data export prohibitions unless they meet international privacy standards, particularly those in the European Union’s privacy Directive. As the Code stands, it does not meet the EU’s requirements for appropriate enforcement mechanisms, particularly in that it does not provide for compensation to be paid, does not specify other sanctions, and (possibly) does not have a sufficiently independent system of arbitration.
Quite apart from international standards, it is hard to see how a
code in a consumer area such as this could provide adequate public
protection without provision for monetary compensation in appropriate
as is provided for in such schemes as the Telecommunications Industry
scheme, and as is provided for in the Commonwealth Privacy Act 1988 and
similar privacy legislation.
Part D of the proposed Code relates to the innocuously titled ‘Fair conduct relevant to electronic commerce’. Given that this is a Code concerning direct marketing, in the Internet context this includes what is generally know as spam, unsolicited direct marketing by email. The ACCC is being asked to authorise, inter alia, consumer and privacy protection in relation to spam. Spam is a very contentious marketing practice, and the factors which must be taken into account in deciding public interest matters in relation to it are different from those relating to telemarketing or unsolicited snail mail. Part D clause 1 of the Code only proposes ‘the same level of protection’ in relation to spam as it does for other forms of direct marketing, and this may not be appropriate. Many individuals and organisations consider that it should simply be prohibited, on the basis that only ‘opt-in’ unsolicited commercial email is acceptable.
Submissions are being made (or have already been made) to the ACCC detailing extensive concerns about this provision, by:
There is also a wide ranging discussion about these issues at the international level. The ADMA provision is completely inadequate in these circumstances.
It should be noted that as far as I can tell, ADMA had not itself
with experts or representative organisations in this field.
The permitted hours for telemarketing calls include 8am to 9pm even on Sundays, excluding only Christmas Day, Good Friday and Easter Sunday (and even on those days if the consumer has signed some ‘ring me anytime’ form) (clauses 9 and 10, Part C).
Where on earth did this come from?
Surely, if this is allowed, the Code will simply entrench the very worst aspects of business practice, the worst privacy intrusions.
This will be seen by other industries involved in unsolicited telephone calls as the benchmark for the hours in which they can ring - charities, fundraisers, religious recruiters, market researchers, pollsters, debt collectors and the rest. None of these organisations is covered by this Code, but once they hear of the "ACCC approval" for these hours they will certainly adopt these as their own.
Has there been any public consultation about these hours? Does anybody actually know anyone who wants to be called at 8am on a Sunday morning? Or 9pm on a school night? Or on boxing Day, Australia Day and Anzac Day? I ask again, where on earth did these hours come from?
This clause is the most obnoxious of all the measures in the Code, yet it is not even mentioned in the ACCC draft determination. Industry will, of course, be delighted to receive ‘government approval’ for these hours. It will be the perfect response when a sleepy customer complains about being rung at an early hour.
In addition, the approval of such extensive hours (only three private days a year) may see individuals turn to silent numbers. When they do, they will find that there is an outrageous $35 fee (a fee for NOT listing your number in directory assistance or the white pages!).
I note that Telstra are a member of the Australian Direct marketing Association. Is this really the type of industry behaviour which the ACCC wishes to encourage?
Again, it is a case where the Code provides a direct detriment to all consumers, that cannot be outweighed by the small benefit (the limited 7 day cooling off period) to those few consumers who actually make a purchase.
Cooling Off Period
The cooling off period is the one real (non-privacy) benefit of the Code, which goes beyond existing legal protections available in other statutes.
It has been trumpeted, quite rightly, as the stand out feature of the Code by ADMA in their press release for the premature launch.
However, as stated elsewhere, it is the privacy aspects of direct marketing which are the chief cause of concern in this field. For every consumer who makes a purchase, there will have been numerous contacts with other consumers, many of them unwelcome.
However, it is probably worth noting a few minor points in relation to the seven day cooling off period:
Services appear to be excluded where they are delivered at a future date. I can’t tell if this is a drafting error or the actual intention of the ADMA members. Perhaps the seven day cooling off period should start from the "commencement" of services?
There appears to be a drafting inconsistency between clauses 33.5, 33.6 and 35. Under 33.4 and 33.5 you cannot obtain a cooling off period if you ‘open’ computer software or ‘unwrap’ personal health goods, but clause 35 states that "for the purposes of clause 33, goods will be considered to be in their original condition despite their packaging or swing tags having been removed or tampered with".
Principle 6 of the Department of Industry Science & Tourism "Benchmarks for industry based customer dispute resolution schemes" states that:
6.12 The review, undertaken in consultation with relevant stakeholders, includes:
a) the scheme’s progress towards meeting these benchmarks;
b) whether the scope of the scheme is appropriate;
c) scheme member and complainant satisfaction with the scheme;
d) assessing whether the dispute resolution processes used by the scheme are just and reasonable;
e) the degree of equitable access to the scheme; and
f) the effectiveness of the terms of reference.
6.13 The results of the review are made available to relevant stakeholders."
Learning from this experience
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:
1 - Greenleaf, G & Waters, N, “Direct Marketing Code of Conduct hits ACCC Snag”, Privacy Law & Policy Reporter, forthcoming.
2 - Reg. V Watson ex Parte Armstrong (1976) 136 C.L.R. and Webb v the Queen (1994) 181 C.L.R. 41.
Converted to HTML by Robin Whittle, 16 December 1998, from Chris Connolly's Word document.