NOTES OF PRE-DECISION CONFERENCE
in relation to application for authorisation A40077 lodged by the Australian Direct Marketing Association Ltd
[Converted to HTML from the ACCC's Word file by Robin Whittle 9 December 1998. http://www.firstpr.com.au/issues/tm/ . ]
The conference was held at the Commission’s Sydney office, on Thursday 26 November 1998 and was linked by video to the Commission’s Melbourne office where certain interested parties were in attendance. The conference commenced at approximately 10.10am.
A list of persons who attended the conference is attached as Appendix A.
Mr Allan Asher, a member of the Commission, opened the conference and welcomed attendees. He explained the conference procedures and asked for statements and comments from attendees. The main issues raised by parties in statements and by way of comment are outlined below.
ADMA had prepared a written statement dated 26 November 1998 that was presented to the conference by Mr Rob Edwards. Mr Edwards also spoke about some specific provisions in the ADMA Code of Practice that he submitted would give rise to public benefit. These provisions included:
consumers would be provided with a seven day cooling off period;
direct marketers are required to clearly identify themselves; and
direct marketers are unable to represent that they are engaging in market research.
Mr Edwards said that it was difficult to sustain an argument that no public benefit arose from the Code. He said that the Code was a result of three years of consultation, it incorporated the National Principles for the Fair Handling of Personal Information and the OECD Guidelines for Electronic Commerce.
Mr Edwards also informed the conference that in November 1997, MCCA advised ADMA that it had one year to review its Code of Practice in accordance with the MCCA Model Code. He said that ADMA has worked hard to meet this deadline.
Mr Chris Connolly advised that he would initially comment on process issues, other privacy and consumer representatives would comment on the content of the ADMA Code. He advised that he would comment on any content issues that were not addressed by other representatives later in the conference.
Mr Connolly made the following submissions with respect to process issues:
He said that consumer groups and privacy groups were unaware of ADMA’s Code of Practice until the ACCC released its draft determination, and even then it was only distributed to a few key groups. He said that ADMA had never consulted directly with consumer groups with respect to the content of the Code. He submitted that the amount of criticism that the Code had received indicated how useful consultation with the privacy/consumer movement would have been.
Mr Connolly said that he had concerns regarding the authorisation process, for example that the time for input during the authorisation process was quite compressed and many privacy/ consumer groups lacked knowledge about the process. He said that these issues would be addressed in a different forum; and
He criticised ADMA for claiming that it had consulted with a variety of consumer groups in developing the Code. He said that some of these groups denied that they had engaged in such consultation.
Mr Timothy Pilgrim, deputy Privacy Commissioner, tabled a submission dated 26 November 1998 on behalf of the Privacy Commissioner and spoke briefly to that submission. Mr Pilgrim stressed that the submission represented the Privacy Commissioner’s preliminary view and that further discussions were to take place with industry representatives next week.
Dr Roger Clarke submitted that in its current form, ADMA’s Code gave rise to inadequate public benefit. He said that it had not been the subject of appropriate consultation and did not reflect the changes in community attitudes towards telemarketing. Dr Clarke submitted that if the ACCC authorised the Code in its current form it would damage the Commission’s standing in the community and would establish a low threshold standard of conduct for direct marketers who are not members of ADMA and who would view the Code as best practice.
Dr Clarke said that the wording of the Code was seriously against the public benefit on the basis that there had been a change in attitude towards unsolicited commercial e-mail (‘spam’). He said that the P3P system advocates an opt-in process rather than opt-out and was more appropriate for the regulation of spam and the promotion of effective Internet commerce. He said that this was an important issue as increasingly it is the receiver of messages on the Internet that incurs direct dollar costs. He said that while the cost of receiving commercial e-mail is very low when users are receiving text-based messages, it is now possible to deliver larger messages that incorporate sounds and images. He said that there is a clash in ethos on the Internet that was originally community based but is now becoming increasingly business oriented.
Dr Clarke said that the ACS is concerned about the behaviour of computer professionals who play a large role in the direct marketing industry. He said that he felt the OECD Guidelines on electronic commerce were insufficient.
Mr Tim Dixon spoke on behalf of the APF and the APCC. He said that he did not wish to comment on the details of the Code but stated that it was his understanding that the National Privacy Principles would be developed on a general level and would then be adapted to apply to specific industry sectors. He said that consumers had not been directly consulted on the Code and that better consultation would have resulted in a better product.
Mr Robin Whittle said that his submission would focus on outbound telemarketing. He said that such marketing places a direct cost on residential and business consumers in terms of wasting their time and has no public benefit. He said that the incidence of telemarketing was increasing due to cheaper local calls. It was his submission that people expected government to protect them from the telemarketing intrusion and that it was the ACCC’s responsibility to consider the consequences of telemarketing and protect consumers from it.
Mr Whittle said that ADMA’s Don’t Call list is inadequate in that consumers are required to give their names, addresses and phone numbers which are then distributed in list form to ADMA members. He said that ADMA had no way of controlling what its members or their employees did with these lists. Mr Whittle submitted that the best way to protect consumers is to have an opt in procedure but that there were, in addition, better ways of organising an opt-out system. He then briefly explained the workings of the Telephone Preference Scheme in the United States of America. That system is described in Mr Whittle’s written submission to the Commission dated 23 November 1998.
Mr Denis Nelthorpe referred to the Dispute Resolution Benchmarks laid down by DIST and the Guide to the Development of Codes of Conduct published jointly by the state and federal consumer affairs agencies. He said that before authorisation was granted the Code needed to be assessed against these standards, for example:
Accessibility to consumers,
Independence – he was unsure whether the ACCC’s suggested changes went far enough; and
Fairness and transparency.
Mr Nelthorpe stated that he believed that the Code should be the subject of further consultation and that with this consultation he did not believe it would be difficult to get consumer approval.
Graham Greenleaf
Professor Greenleaf stated that the Commission’s draft determination does not explain how public benefit arises from Parts D and E of the Code. He said that these two sections were not part of the MCCA Code and that it was therefore necessary to consider their public benefit separately.
Professor Greenleaf said that as he understood it, the Commission had relied on the fact that Part E was based on the National Privacy Principles (NPPs) for its finding that the Part contained public benefit. He said that in developing the NPPs the Privacy Commissioner did not consider public benefit issues, her concern was principally to find a consensus between business and privacy groups, where a consensus was not available, the Commissioner formulated her own view. He said that the NPPs might have been different if they had been based on the public benefit. Further, he submitted that the NPPs were not developed according to statutory rules, but were the result of an informal consultative process.
Professor Greenleaf said that there was no single standard that could be substituted for the NPPs. He said that relevant sources would include the NPPs, the OECD Privacy Principles, the Commonwealth Privacy Act and the European Union Privacy Directive.
With respect to competition issues, Professor Greenleaf submitted that the Code was anti-competitive in so far as it discourages competition with respect to the achievement of the highest privacy standards. He based this argument on the following:
If the Commission authorised the Code, it would be legitimised as the highest standard in the direct marketing industry;
Direct marketers would be encouraged to think of the Code as the industry standard and would not strive for a higher standard; and,
Consumer demand for higher privacy standards will not be met.
In order to offset this anti-competitive detriment, Professor Greenleaf submitted that the content of the Code needed to be of the highest order. If these considerations did not fall within the definition of anti-competitive detriment contained in the Trade Practices Act, Professor Greenleaf said that he would formulate the same arguments on the ground of lack of public benefit.
Professor Greenleaf said that the Code appeared to advocate an opt-out approach to telemarketing but submitted that an opt-in procedure provides a much higher standard of consumer protection
Ms Catriona Lowe stated that any public benefit arising from the provisions contained in the Code would not accrue unless it was properly enforced. She said that while she supported the changes suggested in the Commission’s draft determination, she believed that they did not go far enough. She submitted that:
The Code Authority should comprise three consumer representatives, three industry representatives and an independent chair;
The role of the Code Compliance Officer should be clarified, it was not clear, for instance,
whether the Officer was an ADMA employee.
The Code Authority should have the capacity to compel compensation and the removal of consumer information from lists.
There should be concern regarding the level of sanctions given that the ADMA Code is voluntary. Ms Lowe cited an example with respect to the Insurance Code where one insurer refused to comply with decisions made by the relevant enforcement body and it was necessary to pass legislation requiring the insurer to comply.
Consumers should be able to participate fully in the complaint process.
With respect to an acceptable span of hours for receiving telemarketing calls, Ms Lowe suggested that the hours contained in the Tasmanian door to Door Trading Act may be more appropriate or that they should be the subject of further consultation.
Ms Carolyn Bond made submissions with respect to the coverage of the ADMA Code and the cooling off period. Ms Bond said that if read strictly most sections of the Code only apply to direct marketers rather than participants in the direct marketing industry. She submitted that given the definition of direct marketer it was unclear whether all mail houses etc would be covered by the Code, it was Ms Bond’s views that all ADMA members should be required to comply with the Code. Ms Bond was also concerned that there was no requirement that a direct marketer require a supplier to comply with the Code.
Ms Bond stated that the cooling off period needed to be stated clearly. She was also concerned that the exemptions contained in the Code were too broad.
The ACA provided a written submission dated 25 November 1998 that was presented to the conference by Ms Mara Bun.
Ms Bun also said that at the beginning of 1995 there were many consultations concerning the development of a Model Direct Marketing Code of Practice. When it became obvious that the Code would not be mandatory, the ACA was of the view that it must be changed substantially. This did not occur.
Comments by parties
CSFPC
Mr Connolly made the following comments with respect to the detail of the Code:
He suggested that the following clauses be clarified or added: clause 9.3 of the Code was intended to apply only to existing customers, this should be clarified; consumers should be given the right to have personal information about themselves removed from lists; clause 3.4 should be amended to state that organisations are required to reveal whether the consumer’s information is contained on a list; and that if asked, organisations must tell consumers where they got their name from.
The ADMA Code should not be authorised due to its lack of coverage. Mr Connolly submitted that the estimate that ADMA covers 80% of the participants in the direct marketing industry is based on the percentage of sales that are made by direct marketers. He suggested that a more appropriate test would be the percentage of volume of calls made. He also suggested that independent research be undertaken in order to determine what ADMA’s coverage of the direct marketing industry is. It was his submission that coverage is very important in terms of identifying whether a Code should be given effect to.
The Code Authority lacks independence. Mr Connolly was concerned that ‘consumer representative’ was defined to include a person with industry or consumer experience. He was concerned that the consumer representative could potentially have no consumer experience.
A third party should hold any database of people on ADMA’s opt-out list.
ADMA members are able to access documents through the dispute resolution process; this is a right that should also be made available to consumers. Consumers should have the right to have their names removed from lists. With respect to the enforcement procedures it was important that the principles of natural justice be applied.
The history of Codes shows that it is essential to have an independent review system. The review process under ADMA’s Code is not independent. This was a change that Mr Connolly saw as essential.
Mr Connolly submitted that telemarketing is cold calling and that surveys have shown that many consumers consider such calls offensive. With respect to the span of hours contained in the Code; he submitted that acceptable hours should be further limited on the weekend, or the question of whether silent numbers should be free should be re-considered, or research should be conducted in order to determine at a span of hours that is considered acceptable by consumers.
Mr Connolly stated that it was essential that the enforcement provisions contained in the Code set out specific and adequate remedies. He said that the sanctions as they stand at the moment are too weak and that financial compensation should be provided. He said that ADMA argues that this is legally impossible for them to do and asked that some research be undertaken into this issue.
He submitted that there has been a backlash against ‘spam’ and that the electronic commerce provisions contained in the Code should either be strengthened or excluded. Mr Connolly said that while the ADMA Code was based on the OECD principles, the view of the Australian government is that these principles are not strong enough.
With respect to the cooling off period Mr Connolly said that he had some concerns regarding the breadth of the exemptions and was particularly concerned that it did not apply to the delivery of services after a particular date.
Mr Connolly submitted that clause 1 in Part F should refer to consumer complaints rather than customer complaints.
Privacy Commissioner
The Deputy Privacy Commissioner said that in their current form the NPPs were based on the OECD Principles and the Principles contained in the European Union Directive. He said that developing privacy principles in a self-regulatory environment was a difficult task and that the Commissioner intended to have a final version of the NPPs in place by the end of December.
XC and the ACS
Dr Clarke commented that the Code should be amended according to the following:
Clause 9.3(c) should read ‘and’, not ‘or’.
The opportunity to decline receiving further direct marketing communication should come first in the telephone call and direct marketers should also be able to infer that a consumer does not want to receive further communications even if this is not clearly stated.
Professor Graham Greenleaf
Professor Greenleaf stated that DG.15 of the European Directives said that a data subject must be able to obtain compensation. Professor Greenleaf submitted that the Code must have teeth and that punitive damages should be included. He said that according to the guidelines contained in clauses 18 and 19 it was unlikely that the expulsion and named publication of members found in breach of the Code would be utilised extensively. He submitted that ADMA has not specified the remedial action available to the Code Authority as requested by the Commission and that the Code does not require ADMA members to observe the rulings of the Code Authority. Professor Greenleaf also stated that clause 9.3 of Part E needed to be clarified in line with the Privacy Commissioner’s submission.
Professor Greenleaf also submitted that equivalent protection for electronic commerce was insufficient. He said that for telemarketers to make 10,000 calls they would require a large number of people and equipment, in comparative terms it is much easier to send e-mails to 10,000 people.
Ms Julie Eisenberg said that she did not want to make a submission other than to say that the CLC supported further consultation.
Mr Nelthorpe said that Part F of the Code contained no time line for advising consumers about the result of their complaint and did not provide for appropriate redress for consumers.
Mr John Riley said that ADMA had done what MCCA had asked them to do in adopting the Model Code and that the Model had been developed in consultation with a range of consumer bodies. He noted that both the Model Code and the ADMA Code provided for a process of review. Mr Riley said that the Treasury had released an exposure draft for Prescribing Codes and that this had not received a great deal of comment. He said that the comments of bodies present at the conference were encouraged. Mr Riley also submitted that while the electronic commerce provisions were an important issue, they should not hold back authorisation of the ADMA Code.
ADMA
Mr Peter Ludemann made the following comments on behalf of ADMA:
The purpose of the conference was to consider whether the anti-competitive effect of the Code outweighed the public benefit;
ADMA was disappointed that the conference and the submissions appeared to be dominated by agendas, for example, that the relevant regulatory regime goes beyond a voluntary Code and that there had been a lack of consultation. These issues are different from the issues that are relevant with respect to the authorisation process.
Parties other than Professor Greenleaf had not raised issues of anti-competitive detriment at the conference.
A member voluntarily submitting him or herself to a regulatory regime increases the level of protection rather than lowering it.
Whatever the extent of public benefit contained in the Code, it exceeds the anti-competitive detriment. The argument that there is no public benefit contained in the Code is specious.
ADMA will continue to engage in discussion and will address the important issues raised in another forum. Members of ADMA have consented to submit themselves to a higher range of regulation than would otherwise be the case.
Nothing that has been said today changes ADMA’s view that the public benefit arising from the Code is greater than the anti-competitive detriment.
Conference Closed
Mr Asher requested that participants provide any further submissions and information to the Commission within three weeks. He closed the conference at approximately 1.30 pm.