institutional arrangements for consumer protection agencies · follows that changes to...

Institutional arrangementsfor consumer protectionagencies

Research Paper No. 13 April 2008

Disclaimer

Because this publication avoids the use of legal language, information about thelaw may have been summarised or expressed in general statements. Thisinformation should not be relied upon as a substitute for professional legaladvice or reference to the actual legislation.

© Copyright State of Victoria 2008

This publication is copyright. No part may be reproduced by any processexcept in accordance with the provisions of the Copyright Act 1968. For adviceon how to reproduce any material from this publication contact ConsumerAffairs Victoria.

Published by Consumer Affairs Victoria121 Exhibition Street Melbourne Victoria 3000.

Printed by Big Print - Print Mint45 Buckhurst Street South Melbourne Victoria 3205.

Preface > i

Preface

Consumer policy in Australia is at a cross-road withnew directions likely to be followed after completionof the Productivity Commission’s Review of theNational Consumer Policy Framework. Greaterconsistency across jurisdictions, generic consumer lawand less reliance on industry-specific law is likely. It isnot sufficient, however just to have the right laws inplace; it is also necessary to have regulators with thecapability of ensuring these laws are complied with,including taking, as appropriate, effective enforcementaction.

This paper focuses attention on the issue of howregulators should best be structured to achieve theobjectives of consumer policy.

The paper reviews the literature in this regard andexamines recent overseas experience which highlightsthe establishment of regulators as independentstatutory boards. The relevance of this experience tothe Victorian context is considered and the currentstructure of Consumer Affairs Victoria is shown to beout of step with the overseas experience and with theposition of the other significant business regulatorsbeyond the consumer policy field.

The conclusion is clear. There is a strong case forestablishing an independent statutory agency headedby a board, rather than an individual, to leadconsumer protection regulation in Victoria.

This research paper is the thirteenth in a series ofpapers designed to stimulate debate on consumerpolicy issues. It does not necessarily representGovernment policy and is intended to provide a basisfor further discussion over coming months.

Consumer Affairs Victoria would like to acknowledgethe assistance of Mr Rod Overall in the preparation ofthis paper.

Comments on the paper can be forwarded to:The DirectorConsumer Affairs VictoriaLevel 17121 Exhibition StreetMelbourne VIC 3000

Dr David CousinsDirectorConsumer Affairs Victoria

Abbreviations

ACCC Australian Competition and Consumer Commission

ACMA Australian Communications and Media Authority

APRA Australian Prudential Regulation Authority

ASIC Australian Securities and Investments Commission

BERR [United Kingdom] Department of Business, Enterprise and Regulatory Reform

BPCPA British Columbia Business Practices and Consumer Protection Authority

BRTF [United Kingdom] Better Regulation Task Force

CAV Consumer Affairs Victoria

CB [Canada] Competition Bureau

CC [New Zealand] Commerce Commission

CEO Chief Executive Officer

COAG Council of Australian Governments

CPB [New York] Consumer Protection Board

CSG [Ireland] Consumer Strategy Group

CTSA [United Kingdom] Consumer and Trading Standards Agency’

DCA [California] Department of Consumer Affairs

DCO Danish Consumer Ombudsman

DGFT [United Kingdom] Director-General of Fair Trading

DTI [United Kingdom] Department of Trade and Industry

EU European Union

FCC [United States] Federal Communications Commission

FTC [United States] Federal Trade Commission

GPRA [United States] Government Performance Results Act 1993

LBRO [United Kingdom] Local Better Regulation Office

NCA [Ireland] National Consumer Agency

NDPB non-departmental public body

NMD non-ministerial department

OCA [Canada] Office of Consumer Affairs

OCABR [Massachusetts] Office of Consumer and Business Regulation

OCP Office of Consumer Protection, South African Department of Trade and Industry

OECD Organisation for Economic Cooperation and Development

OFT [United Kingdom] Office of Fair Trading

OMB Office of Management and Budget

PC Productivity Commission

SADTI South Africa Department of Trade and Industry

SANCC South Africa National Consumer Commission

SCOCA Standing Committee of Officials of Consumer Affairs

TGA Therapeutic Goods Administration

UK United Kingdom

UN United Nations

USA United States of America

VBLA Victorian Business Licensing Authority

VCEC Victorian Competition and Efficiency Commission

ii > Abbreviations

Contents > iii

Preface i

Abbreviations ii

Executive Summary 01

1 Introduction 05

2 Broad objectives of institutional design 07

3 General or industry-specific regulators? 09

3.1 Strengths of general and industry-specificregulators 09

3.2 Proliferation of industry-specificregulators 12

3.3 Other categorisations of regulators:‘economic’, ‘social’ or ‘technical’ 13

4 Independence of the regulator 15

4.1 Tensions in the independent regulatormodel 15

4.2 What makes a regulator independent? 16

4.3 Rationales for independent regulators 18

4.4 Evidence of benefits of independentregulators 19

4.5 Risks associated with independentregulators 19

4.6 Independence with accountabilityand integration 21

5 Allocation of consumer protectionfunctions 23

5.1 Major functions 23

5.2 Models of functional integrationand separation 24

5.3 Arguments for and against functionalseparation 25

6 National or State regulators? 27

7 Recent overseas reviews and examplesof arrangements 31

7.1 UK Consumer Policy and establishmentof the Office of Fair Trading 32

7.2 Ireland Consumer Strategy GroupReview and establishment of theNational Consumer Agency 32

7.3 South African Consumer Policy Reviewand the proposed National ConsumerCommission 33

7.4 OECD regulatory reform study 34

7.5 UK House of Lords SelectCommittee review 35

7.6 UK ‘Hampton Review’ 36

8 Conclusions 39

9 Relating the discussion to Victoria 41

9.1 Historical perspective 41

9.2 The broader Victoria regulatory context 42

9.3 Implications for the consumer protectionregime 43

9.4 Consumer affairs and social regulation 44

9.5 An ongoing issue 44

Appendix: Independent consumer protectionagencies in international jurisdictions 45

A.1 Summary of key features 45

A.2 Danish Consumer Ombudsman 48

A.3 Irish National Consumer Agency 49

A.4 New Zealand Commerce Commission 51

A.5 UK Office of Fair Trading 52

A.6 USA Federal Trade Commission 54

A.7 British Columbia Business Practices &Consumer Protection Authority 55

A.8 California Department ofConsumer Affairs 57

A.9 Massachusetts Office of Consumer Affairsand Business Regulation 58

A.10 New York Consumer Protection Board 59

References 61

Consumer Affairs Victoria research anddiscussion papers 63

Contents

The premise of this paper is that the effectiveness ofconsumer policy, in particular regulatory interventionsin markets, will be influenced by the nature of theinstitutions charged with managing its development,implementation, operation and enforcement. Itfollows that changes to institutional arrangementsare part of broader regulatory reform options forgovernments seeking improved effectiveness ofregulation and reduced regulatory burdens onbusiness.

Designing the institutional form of a consumerprotection agency is not straight forward. Trade-offsare inevitable and case-by-case judgement is requiredto balance a number of factors. The balance ofstrengths and weaknesses tends to favour generalregulators over industry-specific regulators toadminister industry specific regulation where itaddresses consumer problems. In the literature, thecase for independent regulators is strongly advanced,particularly where there are substantial incentives forcapture or business rent-seeking behaviour is facilitatedby concentrated industry structures or effectivecoordination of regulated entities by industry lobbyassociations. Careful consideration of adequateaccountability and integration mechanisms will benecessary where independent regulators areestablished.

Incorporating the complete range of functions relatedto regulation, particularly combining policy advice andevaluation with the administration and enforcementof regulation, in a regulator potentially createssufficient risks to justify reviewing such arrangements.The principal risk in an environment wheregovernments at all levels are concerned to reduceregulatory burdens on business is regulatory creep.

National approaches in national markets, or wherethere is no significant variation in consumerdetriments related to geographical location, seemhighly desirable on effectiveness and efficiencygrounds. This does not mean a single nationalregulator is necessarily warranted where there aremultiple existing regulators. Greater cooperation andcoordination among existing regulators to addressproblems through a variety of mechanisms mayproduce nationally effective and efficient protectionfor consumers.

The balance of the arguments in the paper suggeststhe following prima facie positions on key institutionalissues for consumer protection agencies:

• general regulators in preference to industry-specific regulators (although this requires a case-by-case assessment depending on circumstances)

• statutory independence of regulatory functionsin preference to their location in a unit of anadministrative department of government, and

• separation of policy development and advicefrom the administration and enforcement ofregulation.

There appears to be sufficient substance underlyingthese positions to constitute a case for a detailedexamination of existing institutional arrangementsrelating to consumer protection in Victoria.

Executivesummary

Issues designing institutionalarrangements

Executive summary > 01

In jurisdictions that conducted thorough reviews ofconsumer policy and legislation in recent years andconsequently overhauled their consumer protectioninstitutions, the new regulators established werestatutory corporate bodies with boards includingnon-executive directors. This was the case in all threeinstances of wide-ranging national consumer policyreviews identified in the literature search ─ the UnitedKingdom, Ireland and South Africa. Furthermore, moregeneral reviews of regulatory developments, forexample by the Organisation for EconomicCooperation and Development and the UnitedKingdom’s Better Regulation Task Force, haveidentified and supported a trend to statutory mandatesfor regulators, structural separation and autonomyfrom the executive branch of government and board-type corporate authorities instead of powers vested inindividuals.

In the sample of overseas jurisdictions in theAppendix, statute-based consumer protection bodiesgenerally fall into one of three broad categories interms of structure and status:

• a statutory authority board or Commission andan associated administrative entity, with twomain appointment methods forboard/commission members − either appointedby the head of government (the Governor insome American States) or Cabinet (rather thanthe individual portfolio Minister) or appointedby the Minister for consumer affairs, or

• a statutory administrative body with a prescribedchief executive controlling the body instead of aboard, or

• an individual statutory office-holder(‘Commissioner’, ‘Director-General’ etc.),appointed by the consumer affairs Minister, butwith administrative support not established bylegislation.

Consumer protection agencies less frequently take theform of non-statutory administrative units of broadergovernment departments, such as the nationalCanadian Office of Consumer Affairs in IndustryCanada and the Consumer Protection Division of theIllinois Office of the Attorney-General in the UnitedStates.

While the literature favours the separation of policydevelopment and advice function from theadministration and enforcement of regulation, inpractice there is variation across the examplesexamined. In some jurisdictions it is located in theregulator − for example the US Federal TradeCommission, the Californian Department ofConsumer Affairs, and the Massachusetts Office ofConsumer and Business Regulation. In others, it islocated in a department of government − for examplethe UK Department for Business, Enterprise andRegulatory Reform, the New Zealand Ministry ofConsumer Affairs and the Irish Department ofEnterprise, Trade and Employment. A further variableis whether consumer policy is located in a departmentprimarily addressing economic issues and policy(Treasury, Industry, or Commerce etc.) or legal issuesand policy (Attorney-General or Justice).

There are diverse institutional arrangements acrossregulators in Victoria. They range from statutoryauthorities with clear statutory objectives, powers andfunctions to units of administrative departments (suchas Consumer Affairs Victoria) embedded among arange of policy and service delivery functions.

A comparison across the larger Victorian regulatorsshows there is some commonality among the largerregulators, with the exception of CAV. The four largestVictorian regulators with functions affecting businessesacross a range of industries are the VictorianWorkcover Authority (VWA), CAV, the EnvironmentProtection Authority (EPA); and the Essential ServicesCommission (ESC). Comparing these regulators on thebasis of several institutional variables, such thestatutory basis of the organisational entity, whether theentity is a body corporate, the method of appointmentof the head of the entity and whether the head of theentity is subject to general public service employmentconditions, reveals common arrangements across theVWA, ESC and EPA. CAV lacks the statutory basiscommon to the other three major business regulators.

A second comparison of the same institutionalvariables across the major regulators within the Justiceportfolio that includes consumer affairs, similarlyreveals CAV to be the odd one out. Unlike CAV, theVictorian Commission for Gambling Regulation(VCGR), the Legal Services Board (LSB), the BusinessLicensing Authority (BLA) and the Equal OpportunityCommission (EOC) are all bodies corporate establishedby statutes and with heads appointed by the Governorin Council and exempt from Part 3 of the PublicAdministration Act 2004.

Relating the discussion toarrangements in Victoria

Developments in overseasjurisdictions and examples ofindependent agencies

02 > Executive Summary

Executive Summary > 03

Victoria’s current consumer protection institutionalarrangements reflect the historical circumstance of apast government translating the arguably low priorityit allocated to consumer affairs into institutionalarrangements through the removal in 1999 of theGovernor in Council appointment of the ‘Director ofFair Trading’ and that office’s exemption from publicservice employment. The statute-based Ministry ofConsumer Affairs was abolished in 1993-94, ostensiblyas part of the consolidation of departments into asmall number of ‘super departments’. Whatever theefficiency or other gains at the time from theconsolidation, since then Victoria’s consumerprotection agency has had a lesser institutional statusthan the State’s other major regulators.

Even allowing for the diversity across consumerprotection jurisdictions, an arguable ‘good practice’model emerges from the literature and overseasexamples. In comparison with this model, thestructure of CAV and associated arrangements differfrom the main features of the model in three majorrespects:

• the arrangements lack clear statutoryindependence for the regulator, particularlysince the above changes in the 1990s

• the absence of a board-type controlling body −with its likely benefits of a greater range of skillsand experience addressing complex matters,greater potential for stability and consistency andlesser risks than may arise from the judgement ofan individual, and

• the location of policy and regulationdevelopment within the regulator which carriespotential risks, such as regulatory creep withassociated growth in regulatory burdens onbusiness, compromised independence throughproximity to the political process and reducedaccountability.

This paper raises a number of issues for discussion.Only some of those are also part of the debate initiatedby the Productivity Commission’s Draft Report on theReview of Australia’s Consumer Policy Framework.The scope of its inquiry into Australia’s consumerpolicy framework includes ways to improve theharmonisation of consumer policy and itsadministration across jurisdictions in Australia,including ways to improve institutional arrangements.However, the draft report’s focus on institutionalmatters is mainly limited to general versus industry-specific and Commonwealth versus States issues.Wider issues in institutional arrangements are notcanvassed. The critical issue of the independence ofregulators in institutional design is not addressed indetail.

The Commission’s draft report favours a singlenational generic consumer law and a single nationalregulator, but acknowledges that there are severalconsiderations that militate against the adoption ofthe one-regulator model, at least in the short tomedium term. Clearly the multiplicity of consumerregulators and the existing key role of State andTerritory consumer affairs agencies in fair tradingcompliance and enforcement are going to continue forthe foreseeable future. Changes to institutional designremain part of regulatory reform options forgovernments at both Commonwealth and State levels.

Institutional arrangementsan ongoing issue

Introduction > 05

Institutional arrangements for consumer protectionagencies have consequences for the overall efficacyof consumer protection policies and costs to thecommunity through the administrative andcompliance burden on businesses facing multipleconsumer protection regimes within and acrossjurisdictions. The purpose of this paper is to identifyfrom a review of the literature the objectives ofinstitutional design, major issues that need to beaddressed and any trends evident in overseasinstitutional arrangements. Drawing on the findingson these, implications for consumer protectionarrangements in Victoria’s broader regulatory contextare set out. Victoria’s arrangements are illustrative inbroad detail of arrangements in the other States,although of course the details of organisationalstructures and the allocation of responsibilitiesbetween the various State agencies with some interestin consumer-related matters may differ to Victoria’s.

The Productivity Commission was requested by theCommonwealth Treasurer to undertake an inquiryinto Australia’s consumer policy framework, includingits administration. The scope of the inquiry wasspecified to include ways to improve, theharmonisation and coordination of consumer policyand to improve institutional arrangements and toavoid duplication of effort.1 The draft reportaccordingly considers institutional arrangements inAustralia’s consumer protection regime primarily from

the perspective of whether the current multi-jurisdictional nature of the regime is adequate forAustralian consumers’ future needs. This is clearlyimportant as even a cursory examination of consumerprotection regulation in Australia raises issues ofpotential overlap of functions, jurisdictional gaps,unclear boundaries and potential tensions betweenCommonwealth and State-based regulators andgeneralist and industry-specific regulators.

However, the ‘Commonwealth versus States’ issue isnot the full extent of issues requiring examination indesigning good consumer protection arrangements.Broader issues addressed in this paper, such as howbest to ensure transparency, consistency andaccountability of regulators, are also important.Whatever the response of governments to theCommission’s favoured single national genericconsumer law and single national regulator model,changes to institutional design remain an option inregulatory reform by governments at bothCommonwealth and State levels.

Sections 2 to 6 discuss issues such as the objectives ofinstitutional design, rationales for independentregulators, benefits and risks associated withindependent regulators and arguments for and againstfunctional separation in regulators. Section 7 examinesrecent overseas reviews of consumer protection toidentify any trends in the design of consumerprotection regulators. (The Appendix contains detailsof organisational structures and governancearrangements in a sample of overseas jurisdictions.)Section 8 sets out some conclusions from thediscussion of issues and the review of overseasexperience. Finally, Section 9 draws out someimplications in the Victorian context.

1Introduction

Purpose

Context

1 Treasurer, Terms of Reference: Review of Australia’s Consumer Policy Framework, 11 December 2006.

Outline

Broad objectives of institutional design > 07

Designing the institutional form of a consumerprotection agency is not straight forward. Decisions onstructure inevitably involve tradeoffs, for examplebetween cost and complexity and reducing risks suchas conflicts of interest, poor management, inefficiencyand industry capture.

The structure of the relationships between theregulator, other organisations and externalstakeholders – particularly the Minister responsible forconsumer protection – and the scope of the regulator’sfunctions will affect its incentives and capacity tomaintain a rigorous approach to regulation.

There are four main issues to consider in formulatinginstitutional arrangements in the Australian context:

1 General or industry-specific – should the regulatorhave responsibilities relating to a single industryor cover similar regulation across a range ofindustries?

2 Independence – should the regulator have statutoryindependence, separating it from government orbe an administrative unit of a department ofgovernment?

3 Functions – how much of the regulatory processshould the regulator be responsible for, shouldthe tasks of policy development, administrationof regulation and enforcement be separated?

4 National or State – should a State regulator beestablished or should responsibility rest with anational regulator?

Before examining the issues in more detail, it is usefulto define some objectives in selecting from the rangeof possible arrangements and structures. Consumerprotection regulation should aim to produce thedesired consumer protection outcomes set bygovernment policy, as cost-effectively as possible.

Whether this is achieved in practice will be influencedin part by:

• the framework for regulators established bygovernment, incorporating the rule-makingprocesses, coherence of design and evaluationprinciples

• the operational effectiveness and efficiency ofthe consumer protection regulator(s) within thatframework, and

• the level of resources allocated to regulators.2

There are some generally accepted characteristics ofregulators’ operations which institutionalarrangements should positively contribute toachieving. Commonly prescribed characteristics areoutlined in Box 1. Choosing the right institutionalarrangements involves a judgement as to how tomaximise the likelihood of realising thosecharacteristics when dealing with regulatory responsesto consumer problems.

There are various formulations of the desirableattributes of regulation and regulatory designwhich institutional arrangements should contributeto. Examples in the overseas and Australian literatureare the Organisation for Economic Cooperation andDevelopment (OECD) Reference Checklist for RegulatoryDecision-making3, the Principles of Good Regulationdeveloped by the United Kingdom's Better RegulationTask Force (BRTF)4, and the Council of AustralianGovernments’ Principles and Guidelines for NationalStandard Setting and Regulatory Action by MinisterialCouncils and Standard-Setting Bodies. In the Victorianjurisdiction, the Victorian Guide to Regulation publishedby the Department of Treasury and Finance also setsout ‘characteristics of good regulatory systems’ thatshould manifest in regulatory schemes.

2Broad objectives ofinstitutional design

2 Organisation for Economic Cooperation and Development, 1995 Recommendation on Regulatory Quality,http://www.oecd.org/subject/regreform3 OECD, Reference Checklist for regulatory decision-making, 1995, http://www.oecd.org/subject/regreform

4 Better Regulation Task Force, [United Kingdom] Revised Principles of Good Regulation, 2003, http://www.brtf.gov.uk

08 > Broad objectives of institutional design

Box 1: Examples of commonly prescribed characteristics of regulators

• Proportionality regulators should only intervene when necessary and remedies should beappropriate to the risk posed, and costs identified and minimised

• Accountability regulators must be able to justify decisions, and be subject to public scrutiny

• Consistency rules and standards must be joined up (with regulators consistent and workingwith each other), and predictable to give certainty and fairness in the treatment ofthe regulated

• Transparency regulators should be open, and regulations kept simple and ‘user-friendly’ topromote public trust in the integrity of processes, and

• Targeting regulators should focus on the object of the regulation and adapt guidance andsupport to the different needs of client groups.5

The Victorian Guide to Regulation adds:

• Effectiveness regulators should achieve intended policy objectives with minimal side-effects andencourage innovation and complement the efficiency of markets

• Flexibility regulators should pursue a culture of continuous improvement and regularly reviewregulatory restrictions

• Cooperation regulators should seek to build a cooperative compliance culture, with theregulation developed with the participation of the community and business and inco-ordination with other jurisdictions, and

• Subject to appeal transparent and robust mechanism exists to provide for appeals against decisionsmade by the regulator.6

5 BRTF, Revised Principles of Good Regulation.6 Department of Treasury and Finance, Victorian Guide to Regulation, April 2007, pp. 3-1 and 3-2.

General or industry-specific regulators?> 09

A major issue in institutional design is the market,industry or sectoral scope of the regulator’sresponsibilities, that is, should the regulator haveresponsibilities confined to a single industry or coversimilar regulation across a range of industries? Thearguments for and against general and industry-specific regulators reflect to a large extent thearguments about general and industry specificregulation which are contained in a separate CAVdiscussion paper, Choosing between General and IndustrySpecific Consumer Regulation.

The discussion in this section takes as its starting pointthat general or industry specific regulation has beenchosen to address a problem: the next step is to decidewhether that regulation is better administered by ageneral or industry specific regulator. Given that itwould be nonsensical to have (multiple) industryspecific regulators administering a general scheme ofregulation, the options boil down to two: whereindustry specific regulation is selected, should it beadministered by a general regulator (for example CAVin relation to about a dozen or so industry schemes);or should it be administered by a regulator establishedsolely for that purpose (for example the VictorianGambling Regulation Commission in relation togambling regulation)? The options in practice forchoosing the institutional form of the regulator are setout in Table 1. Consideration of the relative strengthsand weaknesses of each type of regulator helps informthe choice.

Both general and industry specific regulators have theirown strengths and each is likely to be preferred underdifferent circumstances. Some of the generalisedarguments for each type are outlined below. The list isnot exhaustive. The strengths of one, expressed in thenegative, are by implication largely the relativeweaknesses of the other. Although the weaknesses ofeach type are not explicitly recorded below, they mayarise and would enter a choice between the two.

General regulatorsFirst, general regulators are more likely to provideuniversal coverage and consistent approaches acrossindustries. This means that consumers who face thesame risks receive the same protection and traders thatengage in the same types of behaviour suffer the sameconsequences. Boundary problems, often withattendant legal expenses, are avoided, further reducingthe risks of gaps, overlap, uncertainty orinconsistency.7 As the OECD has noted:

Sector-specific regulation by definition creates a need todefine jurisdictional boundaries, and this in turn couldproduce three important problems:

1 uncertainty concerning which regulationsapply for firms operating in several distinctmarkets and even a risk that they will be subjectto inconsistent regulatory demands…

2 competitive distortions and consequentmisallocation of resources caused by competingfirms being subjected to different regulatoryregimes, and

General or industry-specific regulators?

3

Regulation type General Industry-specific

General � �

Industry-specific ? ?

Regulator

Table 1: Options for the regulator, given theregulation type

3.1 Strengths of general andindustry-specific regulators

7 These risks are greatest under industry specific regulation that exempts an industry from the application of generalregulation.

3 further competitive distortions due to regulatorstrying to preserve their jurisdiction over firms byrestricting the businesses that regulated firmscan engage in.8

Second, general regulators tend to have lower unitcosts of administration and compliance – there is noneed to develop and manage multiple regulatoryregimes and the cumulative costs of regulation aremore readily monitored and for businesses, not havingto understand and comply with multiple Acts reducescompliance costs. A United Kingdom study, Reducingadministrative burdens: effective inspection andenforcement (Hampton Report), has observed:

…fragmented regulators, which concentrate onspecialist areas of regulation, are oftenunderstandably unable to see that although theadministrative burden that they place on businessmay be small, it is only one part of a cumulativeburden. On the other hand, larger regulators have abetter view of the overall burden of regulation.9

Third, a general regulator reduces, but does notnecessarily eliminate, the risk of excessive influenceby industry-based interest groups. The OECD hascommented:

…the relative specialisation of the regulator by sectoris another dimension which needs to be considered.Regulators specialised in one single sector may developa more narrow perspective and are more prone toregulatory capture than regulators overseeing multiplesectors, which are necessarily farther away from theregulatees.10

Fourth, as the rationale and structure of a generalregulator will not be tied to a particular industry’s orsector’s outcomes and perhaps even its structure, ageneral regulator may better cope with marketdevelopments over time, including structural andtechnological change. An industry specific regulatorwill tend to reflect the problem (and industryarrangements) existing at the time of its establishment.

Finally, general regulators are more likely to developgreater expertise in regulatory issues – knowledge andinsights gained in regulatory practice in one industrycan be more readily distilled and applied across otherswithin a general regulator’s jurisdiction. The same staffexpertise can be applied to a number of relatedproblems across a number of industries.

Industry-specific regulatorsFirst, industry specific regulators can provide moretargeted solutions. The regulator is able to develop asolution that targets a particular problem within aparticular market, especially where there are highlytechnical issues, and there is less risk that theregulation would unintentionally apply to markets orindustries where it is not needed.

Second, enforcement may be more readily initiated bya sector specific regulator. Enforcement actions can befacilitated by specific or technical standards orpreconditions for entering an industry. It can be easierfor a specific regulator to detect and prove that abusiness breached a standard if the industry is subjectto ongoing compliance monitoring or reportingarrangements. Such arrangements across a number ofindustries would be difficult for a general regulator tomanage, as they probably would require it to digestsuch large amounts of information as to beprohibitive.

Third, an industry specific regulator may identifymarket problems earlier. The more intensiveknowledge of an industry likely to be developed by anarrowly-focused industry specific regulator (togetherwith monitoring or reporting requirements where theyexist) means the regulator is more likely to detectemerging consumer problems earlier and therefore bein a position to address them proactively. However, apotential weakness associated with intensiveknowledge of an industry may be that the regulatorbecomes unduly concerned with the minutiae of theindustry’s operations and overly prescriptive.

Finally, the existence of a number of specific regulatorscould facilitate regulatory improvement throughbenchmarking of performance.

If choosing between general or industry specificregulators is largely about maximising the likelihoodof realising desirable operational characteristics, such asthose summarised in Box 1, Table 2 provides anexample of a comparative analysis drawing on thepreceding discussion of strengths and weaknesses.

10 > General or industry-specific regulators?

8 Directorate for Financial Fiscal and Enterprise Affairs, OECD, Relationship between Regulators and Competition Authorities, Paris,1999, p. 31.9 Hampton, P., Reducing Administrative Burdens: Effective Inspection and Enforcement, HM Treasury London, March 2005, p. 58.10 OECD, Regulatory Reform in Norway: Modernising Regulators and Supervisory Agencies, Paris, 2003, p.16. See Section 4 for a moredetailed discussion of regulatory capture.

General or industry-specific regulators? > 11

Table 2: Illustrative analysis of regulator types against Box 1 characteristics

DesirableCharacteristic(from Box 1)

� = relative strength � = relative weekness

Regulator type

General Industry specific

Proportionality No likely differentiation?

No likely differentiation?

No likely differentiation?

Accountability � Susceptibility to industry captureraises concerns about accountability.

� Potential across regulators for differingapproaches to be taken on similar issues.

� Susceptibility to industry captureraises concerns about transparency ofdecision-making.

Consistency

Transparency

Targeting � Potential for focus to be diffusedand less responsive to the differentcircumstances/needs of ‘clients’.

� Potential for more unintendedconsequences of regulatory activitiesbecause of wider remit.

Effectiveness � If capture occurs, likely tocompromise objectives.

� Greater understanding of particularindustry and development of technicalexpertise.

Flexibility � Familiarity with a variety ofmarkets/industries facilitatesapplication of ‘regulatory lessons’across sectors.

� Resources can be re-allocated tomeet emerging problems or marketinnovations in particular sectors.Not wedded to a particular ‘client’industry structure.

Cooperation

Subject to appeal

The Victorian regulatory framework, and those inother States and the federal jurisdiction, ischaracterised by a significant amount of industryspecific regulation and multiple specialist regulators.In Victoria alone, there are 72 separate agencies withregulatory functions affecting businesses in some wayand about 40 of these regulators arguably haverationales in varying degrees related to consumerprotection and consumer safety.11 Of these, onlythree have responsibilities extending across numerousindustries.

It has been argued elsewhere that there are incentivesthat bias policy decisions towards the use of industryspecific regulation.12 The large number of industryspecific regulators, despite the absence of anyoverwhelming inherent advantage, as indicated in thepreceding analysis, suggests a similar bias may exist inselecting the type of regulator. A new industryregulator may be perceived as more directly ‘fixing theproblem’, even though the use of an existing regulator(and perhaps even existing legislation) could be morecost effective.

However, this can lead to situations of multipleregulators administering (perhaps differently)regulatory requirements which are essentially thesame. Box 2 contains examples of industry specificregulators which are outside the consumer affairsportfolio, but have consumer protection objectivesand enabling statutes prohibiting false, misleading ordeceptive advertising. Section 12 of the Fair TradingAct administered by CAV has the same prohibition.

The Victorian Competition and ConsumerCommission (VCEC) reports there are 34 regulators(including those listed in Box 2) having powers tomonitor or enforce false, misleading and deceptiveconduct. Of these regulators, just under half areresponsible for occupational licensing of variousprofessions. Seventeen of these 34 regulators haveidentified overlap and duplication with other

regulators at the State or Commonwealth level; oneregulator did not have information available on theextent to which there is overlap or duplication in theirregulation of misleading and deceptive conduct.13

A recent VCEC inquiry into food regulation notedthere is potential for overlap or gaps in regulatorycoverage because of multiple regulators (both generaland industry specific) operating in this area, includingunder the misleading and deceptive conductprovisions in the federal Trade Practices Act 1974 andthe Victorian Fair Trading and Food Acts. In foodregulation, not only is there overlap among variousVictorian regulators and between State agencies andthe ACCC, local councils also have a role inenforcement of the misleading and deceptive conductprovisions of the Food Act.14

In summary, there may be several reasons whystakeholders prefer an industry specific over a generalregulator:

• an industry association may consider it will havemore influence over the regulator because itsviews are not competing with those of otherindustries and the regulator will better‘understand’ its problems

• governments may perceive that establishing aspecialist regulator conveys to the community thepolitically desirable message of greatergovernment activity and commitment to fixingthe problem, compared to allocating the problemto an existing general regulator, and

• an individual Minister is more likely to gain anincrement to his/her portfolio status through anew specialist regulator, whereas an existinggeneral regulator may reside in another’sportfolio.


11 VCEC, The Victorian Regulatory System, April 2007, p. 5. The VCEC defined a business regulator as a State Governmententity (either independent or within a department) that derives from primary or subordinate legislation one or more of thefollowing powers in relation to businesses and occupations: inspection; referral; advice to a third party; licensing; accreditationor enforcement. Using this definition, the Commission identified 72 State-based regulators whose activities affect Victorianbusinesses, other private sector entities (such as private schools and hospitals) and occupations.12 CAV Discussion Paper, Choosing between General and Industry Specific Consumer Regulation, January 2006.13 ‘Conduct’ would include advertising. VCEC, The Victorian Regulatory System, April 2007, p. 10-11.14 VCEC, Simplifying the Menu: Food regulation in Victoria, (Draft report), April 2007.

3.2 Proliferation of industry-specificregulators

General or industry-specific regulators? > 13

There are other ways of categorising regulators inaddition to the scope of industries their functionsextend to. One categorisation sometimes used refersto the nature of the activity sought to be regulated andthe objectives of intervention: are they economic orsocial? ‘Social regulation’ can be defined asgovernment intervention addressing social activityprimarily to protect public health, minimise harm orto achieve social objectives, for example 'law and order'or regulation of drug consumption. This can becontrasted in principle with ‘economic regulation’which is government intervention to control marketactivity such as pricing, market entry, abuse of marketpower and the conduct of market participants (sellersand buyers). It could be argued that social regulationcentres on issues of health, safety, welfare, and workingconditions; whereas economic regulation concentrateson the efficient functioning of markets. This wouldsuggest that most consumer protection regulation isprimarily economic in character.

Regulation that deals with issues that have widerimpacts than just on the individuals most directlyinvolved in the sale or consumption of the goods orservices involved (externalities) is often regarded associal in character. An example of a consumptionexternality is where the excessive consumption ofliquor by a person gives rise to public disturbances,violence or dangerous driving. Regulation may seek tointernalise these externalities – to make the individualsinvolved take account of these external impacts – andthus improve the functioning of markets. However,while the objective sought may be regarded as social incharacter, in some cases economic regulation (forexample regulating entry of suppliers into a market) isused to help achieve it. The objectives of regulationand the instruments used to regulate in some caseshave a mix of social and economic elements. Thedistinction is more a continuum reflecting degrees ofemphasis than a clear dichotomy.

Of course, what makes for good design of regulationis the same whether the objectives are at the social oreconomic ends of the continuum. The diversity ofviews and the often strong emotions about some ofthe values implicit in social regulation require theregulator's practices to particularly emphasiseconsultation, responsiveness, transparency andaccountability.

Box 2 Victorian industry specific regulators administering legislativeprohibitions on misleading or deceptive advertising

Regulator Legislation

Chinese Medicine Registration Board Health Professions Registration Act 2005

Chiropractors Registration Board Health Professions Registration Act 2005

Dental Practice Board Health Professions Registration Act 2005

Food Safety Unit, Department of Human Services Food Act 1984

Legal Profession Legal Profession Act 2004

Medical Practitioners Board Health Professions Registration Act 2005

Nurses Board Health Professions Registration Act 2005

Optometrists Board Health Professions Registration Act 2005

Osteopaths Registration Board Health Professions Registration Act 2005

Pharmacy Board Health Professions Registration Act 2005

Physiotherapists Registration Board Health Professions Registration Act 2005

Podiatrists Registration Board Health Professions Registration Act 2005

Psychologists Registration Board Health Professions Registration Act 2005

Veterinary Practitioners Registration Board Veterinary Practice Act 1997

3.3 Other categorisations ofregulators: ‘economic’, ‘social’or ‘technical’

A third category of regulator can be identified:‘technical ‘regulators, by definition also industry-specific (and mostly highly technical industries suchas the telecommunications industry), that regulate thedetailed parameters of business operations or establishbusiness process and/or output standards for allindustry participants. A technical regulator willprobably also share the ‘regulatory space’ for theparticular industry with a more generalist economicregulator.

An example of a technical regulator is the AustralianCommunications and Media Authority (ACMA).ACMA issues spectrum licenses which authorise theuse of a parcel of spectrum space. The spectrum is acontinuous range of electromagnetic radiation.It extends from the longest radio waves, throughinfra-red, light, ultra-violet and x-rays, to gamma rays.The radiofrequency spectrum is the portion of thisspectrum that is used for transmitting radio waves.It is used for a range of communications, includingradio, radar and television. Licensees are able to deployany device from any site within their spectrum space,provided that device operation is compatible with thelicence conditions and the technical frameworkestablished for the band by ACMA. The AustralianCompetition and Consumer Commission (ACCC),the general competition and consumer protectionregulator, also regulates telecommunications businessesnot only through its general powers but also specificpowers to arbitrate telecommunications access disputesabout access to declared telecommunications services.


Independence of the regulator > 15

Another major issue to consider in formulatinginstitutional arrangements is the degree ofindependence of the regulator. A dictionary definitionof ‘independent’ includes ‘not subject to externalcontrol or rule, self-governing’ and ‘not influenced orbiased by the opinions of others…’15 The BRTF, byway of illustration, defines an independent regulatoras: ‘A body which has been established by an Act ofParliament, but which operates at arm’s length fromGovernment and which has one or more of thefollowing powers: referral; advice to a third party;licensing; accreditation; or enforcement’ [emphasisadded].16 However, it should be emphasised at theoutset that regulatory independence always existswithin the parameters of the regulatory framework setby the legislature. The issue concerns the nature andextent of external influences on a regulator’s day-to-day decisions and activities within a legislativeframework.

Before examining in detail what makes a regulatorindependent, the possible rationales for independenceand the benefits and risks associated with establishingindependent regulators, it may be useful to note theambiguous nature of the concept of an ‘independentregulatory agency’ and the implication of that forinstitutional arrangements.

Politicians delegate certain powers to regulatorsthrough legislation on the assumption that theregulators will exert them to fulfil the longer-termgoals that justified their establishment. Majone notesthat the term ‘independent regulatory agency’ is,strictly speaking, an oxymoron:

The core concept of agency implies a relationship inwhich the principal retains the power to control anddirect the activities of the agent. In which sense, then,can one speak of an “independent” agency? …thisquestion poses a serious conceptual ambiguity inprevailing ideas about the delegation of powers toregulatory agencies.17

The principal-agent problem arises almost invariablybecause even the most detailed legislation is unlikelyto be a sufficiently complete ‘contract’ to ensure aregulator performs exactly as the governmentestablishing it (or subsequent governments) desire. Inpractice much legislation is vague, general, ambiguous,and occasionally internally inconsistent, and increasesthe potential for discretion by regulators and hence thepossibility of regulators departing from governmentalobjectives or priorities.

Independence ofthe regulator

4

15 The Shorter Oxford English Dictionary on Historical Principles, Volume I, Oxford University Press, 1973, p. 1054.16 BRTF, Independent Regulators, October 2003, p. 6.17 Majone, G., Strategy and Structure: the Political Economy of Agency Independence and Accountability in OECD, DesigningIndependent and Accountable Regulatory Authorities for High Quality Regulation, Paris, January 2005, p. 126.

4.1 Tensions in the independentregulator model

Despite these complications, there can be benefits indelegating responsibilities to regulators. It can makethe regulatory process more certain and less susceptibleto short term political imperatives:

• delegation reduces decision-making costs – thetime and effort available to sufficiently refinelegislation to reach agreement on disputed policydetails can be economised by delegating to aregulator who can undertake that within anagreed broad policy framework

• delegation facilitates ‘unpopular’, thougharguably necessary, decisions in the long termpublic interest by shifting the responsibility todecision-makers other than politicians andthereby lessening the impact of miscellaneousshort term political pressures, and

• because statutory institutions are less easilychanged than government policies, delegation isa means for politicians to fix policies so that theywill last beyond their term of office. Politicianscurrently in office lose some control, but preventor impede future governments undoing theirpolicy choices.18 From the perspective ofregulated industries, this has the fortuitous by-product of providing more stability and certaintyin the regulatory environment for business.

The delegation problem, combined with the non-democratic nature of regulators (neither elected bythe people nor directly managed by elected officials),means that their accountability for regulatoryoutcomes automatically becomes an issue ininstitutional design and regulatory governance.Majone concludes that ‘What is most important isthat independence and accountability be perceived ascomplementary and mutually supportive, rather thanmutually exclusive values’.19 Expressed morecolloquially, having given up control to a regulator(for whatever reason), politicians are likely to be keen,at the same time, to ensure the regulator is not out ofcontrol.

The fundamental pre-condition of independence is theexistence of distinct, detailed legislation establishingthe organisation, governing the regulator’s objectives,powers and functions and requiring reports toparliament on activities and outcomes. This is incontrast to a situation where regulatory functions areembedded among a range of policy or service deliveryfunctions within a Ministerial department, oftenwithout a clear, unambiguous mandate.20 However,the BRTF observes that while in theory statute makesregulators independent, in reality it is a much morecomplicated condition.21

Even with well-defined statutory objectives andfunctions, a regulator’s independence can beconstrained in effect by government decisions andpolicies. There are a number of areas where statutoryindependence can be compromised, including finance,personnel, operations and enforcement. In practice theother major determinants of independence, inaddition to foundation in statute, are:

• an adequate resource base – the means of funding(such as government budget allocations, a levy onthe regulated industry or fees charged for licenceor inspections, or a combination of these), thelevel of funding and the certainty of funding overthe medium term – will have a bearing on thenature and scope of the regulator’s activities,either directly or indirectly

• staffing flexibility – the government maycentrally set salaries and conditions and staffingpolicies that affect the regulator’s ability to attractand retain competent staff, particularly if there isa need for highly specialised staff for certainregulatory functions

16 > Independence of the regulator

18 Gilardi, F., Evaluating Independent Regulators in OECD, Designing Independent and Accountable Regulatory Authorities for HighQuality Regulation, p. 103.19 Majone, Strategy and Structure in OECD, Designing Independent and Accountable Regulatory Authorities for High QualityRegulation, p. 153.20 For example, the objectives of Victoria’s regime for regulating the supply of liquor include contributing to the responsibledevelopment of the liquor and licensed hospitality industries and facilitating the development of a diversity of licensed facilities[emphasis added] (section 4, Liquor Control Reform Act 1998).21 For an elaboration of these points see BRTF, Independent Regulators, Chapter 4.

4.2 What makes a regulator‘independent’?


• operational clarity – the clarity of the regulator’sobjectives, their linkages to wider governmentpolicy and other agencies and any guidelines onthe exercise of regulatory powers will influencehow effectively the regulator develops the policiesand delivery mechanisms for achieving theobjectives, and

• enforcement decision-making – while there are awide range of enforcement powers and possibleapproaches to their use, any compromise of aregulator’s exclusivity of decision-making aboutenforcing its regulatory regime will jeopardise itsoverall independence.

A further area of relevance to the extent ofindependence in practice is the method and terms andconditions of appointments to regulatory boards andchief executive positions. Examples of views on what isrequired for independence are contained in Box 3.

Box 3: Two views on requirements for regulatory independence

(i) The OECD suggests that desirable requirements for independence include:

• a legal mandate

• structural separation and autonomy from the government

• a multi-party process for appointment of the regulator (for example involving both executive andlegislative bodies)

• protection from arbitrary removal (for example through fixed terms)

• defined professional standards and adequate remuneration for the regulator’s staff, and

• a designated reliable source of funding (for example through industry fees instead of governmentbudgets).

(ii)The United States Federal Communications Commission (FCC), the statutory authority directlyresponsible to the US Congress for the regulation of the American communications industry (includingconsumer information and education functions), describes the ‘defining features’ of an independentregulatory body as follows:

• independence from the regulated entities (the body and its staff have no direct or indirect interests inany of the entities)

• shielding from political pressure, and

• transparency in decision-making – the process of arriving at policies and other decisions is open,consistent and predictable.

In addition to these features the FCC adds effective independent regulators require:

• the full ability to regulate the market by making policy and enforcement decisions

• the authority and jurisdiction to carry out its regulatory and enforcement functions effectively andunambiguously, and

• adequate funding from reliable and predictable revenue sources.23

23 Federal Communications Commission, Connecting the Globe: A Regulator’s Guide to Building A Global Information Community,Washington DC, June 1999 at www.fcc.gov/connectglobe/sec1.html


It is useful to distinguish between rationales that havea normative element – prescribing standards for ‘good’regulation – and those that only aim to explain thepattern of establishing independent regulators withoutjudging its desirability. The empirical bases of thehypotheses identified below vary considerably.

Probably the main normative rationale for theindependent regulator model is to structurerelationships so as to shield market interventionsfrom interference from politicians, their advisers ordepartmental bureaucrats who may be undulyinfluenced by regulated firms and/or other interestgroups. Statute-based independence may also assist theregulator deflect attempts by particular interests suchas regulated firms, industry organisations or other non-government groups to directly exert influence. In turn,this is likely to contribute to improved objectivity,consistency and predicability in the administrationof regulation.

Regulators can become ‘captured’ and act in theinterests of the regulated entities or other interestgroups, particularly in relatively concentratedindustries. The OECD has commented on regulatorycapture and institutional design as follows:

One of the tasks of institutional design is…to find waysto reduce the influence that interest groups have inregulation. Many OECD countries aim at limiting thedanger of regulatory capture by attempting to createregulatory institutions that are “independent” of theexecutive branch of government…Making the regulator’sstatus less dependent on political power limits the riskthat private sector lobbies may use their politicalinfluence to affect regulatory decisions…

Independent regulators may severe the link withpoliticians, but they do not eliminate the danger ofcapture by the regulated industry. For example, the“revolving door” phenomenon where regulators leave totake jobs in the regulated industries…indicates that it isvery difficult in practice to establish regulatoryindependence.24

An autonomous regulator may create important‘checks and balances’ to the power of governmentdepartments and private interest groups.Independence, depending on other design variables,may also facilitate greater accountability, transparency,stability and expertise.

Other rationales for establishing independentregulators can be identified:25

• Expertise – independent regulators can gatherrelevant information from the regulated sectormore easily and their more flexible organisation ismore likely to attract technical experts than the‘ordinary’ bureaucracy

• Flexibility – independent regulators’ autonomymakes them more able to adjust regulation tomeet changing market conditions26

• Stability – distance from day-to-day politicalpressures on government means that the rules ofa regulatory regime will be less likely to be subjectto sudden and unexpected change

• Credible commitments – again due to distance fromday-to-day political pressures and electoralconstraints, independent regulators have longertime-horizons than politicians and their existencecan increase the credibility of governmentcommitments to concepts such as competitivemarkets, fair regulation or investor-friendly rules(depending on the political objectives)

• Efficacy and efficiency – as a result of the previousfactors, independent regulators lead to betterregulatory outcomes which are translated into abetter performance of markets

• Public participation and transparency – independentregulators’ decision-making processes are moreopen and transparent than those of ministerialdepartments and thus more sensitive to thediffuse and unorganised interests of consumers.This is likely to contribute to better informeddecision-making. Openness and transparency arenot only means but also ends in themselves asthey are related to accountability.

4.3 Rationales for independentregulators

24 OECD, Economic Studies, No. 32, 2001/I, p. 63.25 The rationales are taken from Gilardi, F., Evaluating Independent Regulators in OECD, Designing Independent and AccountableRegulatory Authorities, p. 102-3.26 However a criticism sometimes made is that independent regulators tend to be inflexible in practice. See Section 4.5 onrisks.


Independent regulators are expected to produce anumber of positive outcomes for the public andregulated entities as they work to achieve theobjectives set down by government. In summary, themajor expected benefit is the protection of theregulator’s market interventions from direct politicalinfluence and the influence of specific interests,particularly the regulated entities. Secondary, but stillsignificant, expected benefits are greater transparency,consistency and longer term focus than from aregulator that is part of a government department.The independent regulator model also readilyaccommodates the separation of policy and regulatoryfunctions discussed in detail later in Section 5.

Whether, and to what extent, these expected benefitsare delivered in practice would be difficult toempirically measure, not least because the benefits arerelative to what ‘non-independent’ regulators wouldhave delivered and involve a counter-factual analysis.A recent BRTF report on independent regulatorsprovided some anecdotal evidence based on theexperience of regulated entities in the UnitedKingdom. Nearly all regulated entities consulted byit expressed the view that being regulated by anindependent regulator was preferable to beingregulated by a department of government. The BRTFreported the following benefits from the perspectiveof the regulated:

• more consistency of decision-making

• long term decisions rather than short term

• more transparency

• better accountability

• more trust between the regulated and theregulator, and

• freedom from political interference.27

An OECD review of regulatory policies in membercountries in 2002 made the following conclusion fromits observation of international experience withindependent regulators:

There is little doubt that compared to regulatoryfunctions embedded in line ministries without clearmandates for consumer welfare, the independentregulators represent an important improvement. Thistheoretical point is supported by the empiricalobservation that the economic benefits of marketopening – in terms of both domestic and internationalinvestment – have been greatest in precisely those sectors– financial services and telecommunications – whereindependent regulators are most prevalent, though thecausality is not entirely clear. But independent regulatorsare not immune to serious risks, such as capture, or maycontribute to expensive regulatory failures. Furthermore,they can create new potential problems that have notbeen adequately assessed. A critical assessment of theperformance of independent regulators is needed todetermine if improved design can avoid future problemswith regulatory quality.28

As noted by the OECD, there are risks associated withindependent regulators and the need for mechanismsto ensure adequate accountability is universallyhighlighted in the literature on institutional design.

The risks associated with the independent regulatorinstitutional model broadly relate to:

• capture by the regulated entities

• inadequate accountability, and

• fragmentation of overall government policy andaction.

Independent regulators are likely to be more costlybecause a separate organisation with associatedaccountability mechanisms is established.

4.4 Evidence of benefits ofindependent regulators

4.5 Risks associated withindependent regulators

27 BRTF, Independent Regulators, p. 1128 OECD, Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance, Paris 2002, p. 95.


Capture by regulated entitiesIt is generally argued that statutory independencereduces the risk of political and administrativeinterference, it does not eliminate and it may notnecessarily reduce, the risk of regulated businessesexerting undue influence on regulatory decisions.Indeed some writers argue that ‘regulatoryindependence from political control enlarges thecollusive opportunities between regulators and interestgroups’ by stressing the importance of informationasymmetries in the principal-agent relationship of thegovernment and its regulator.29 This view argues thatthe political principal is informationally disadvantagedrelative to regulated firms. There is likely to be aneconomic rent associated with the information gap.The regulator is a means of bridging the informationalgap, but the regulator and the regulated shareinformation that is not available to the politicalprincipal and this creates scope for capture to preservethe information rent to the firms. Faure-Grimaud andMartimort comment:

This capture may take different forms that all rewardthe regulators in one way or the other for having takena lenient stance vis-à-vis the sector they are supposedto regulate. For instance, regulators may benefit fromin-kind favors or find attractive job opportunities in thissector when they leave the civil service. Capture thuscreates a control problem between the government andthe bureaucracy…30

Inadequate accountabilityAlthough independent regulators are created bylegislation and have powers delegated to them byelected officials, they are organisationally separate fromgovernments and are not directly managed by electedofficials. There is a risk of insufficient accountabilityand excessive discretion in the exercise of the basicdelegation from Parliament. The risk may arise fromthe actions and omissions of the regulator or fromthe drafting of the enabling statute. It may be a moresubtle phenomenon where over time a regulatordevelops a degree of prioritisation or method ofoperation that the Minister of the day may not alwaysagree with. There is no point in delegating functionsand powers to regulators to achieve certain objectiveswithout periodic checks by the principal on thecontinuing relevance of objectives in dynamic marketsand the regulator’s performance in relation to thoseobjectives.

Another dimension of accountability is therelationship of independent regulatory authorities withParliament and with the public as a whole. One of theimplications of independence is that regulatoryauthorities as agents of politicians have to beaccountable in a political sense, through a continuingdialogue with Ministers, Parliament and with publicopinion more broadly. Section 4.6 indicates ways toavoid or minimise these potential problems.

Fragmenting government policiesand actionAn area of risk that overlaps with the ‘general versusindustry-specific regulators’ debate is that offragmentation of overall government policies andinterventions. The risk is probably highest where thereare multiple independent regulators organised onsectoral lines. However fragmentation of policy canalso arise where there are multiple regulators existingas administrative units within Departments, so the riskof fragmentation is not exclusive to independentregulators. It is likely most regulators would have someimpacts, to varying extents, on other governmentpolicies and programs. There is potential for overlap,duplication and confusion and a lack of clear strategicdirection. A related issue is the relationships betweenindustry regulators and the authority responsible forimplementing overall competition policy. Industryregulators may fragment or undermine competitionpolicy and give rise to inconsistent approaches.Inconsistencies can affect incentives in markets andlead to businesses changing behaviours to avoidregulation rather than to more effectively serveconsumers.

The consequences of fragmentation can beunnecessary extension of regulation, higher budgetarycosts to government and higher businessadministration and compliance costs. The BRTFobserved in the British rail industry that a lack of clearstrategic direction can lead to ‘regulatory creep’ as eachbody pursues different objectives and takes a differentfocus.31 Also, those subject to regulation may findthemselves responding to competing or confusingdemands. The United Kingdom Hampton Reviewon reducing the administrative burden of regulationargued that there is less awareness of the cumulativeburden of regulation on businesses and thatcomprehensive risk assessment is more difficult in asituation where there are many smaller regulators.32

29 See for example Faure-Grimaud, A. and Martimort, D., Regulatory Inertia in RAND Journal of Economics, Vol. 34 No. 3,Autumn 2003, pp. 413-4.30 Faure-Grimaud, A. and Martimort, D., Regulatory Inertia in RAND Journal of Economics, p. 414.31 BRTF, Avoiding Regulatory Creep, October 2004, p. 36.32 Hampton, P., Reducing Administrative Burdens, p. 6.


The risks in the independent regulator model can beminimised and benefits maximised by carefulregulatory design. A major challenge is to ensure thatindependent regulators are adequately accountable fortheir activities.

There are a number of mechanisms which collectivelycan operate to ensure adequate accountability. Thestarting point is for the enabling statute to specifyclear, unambiguous outcomes sought from regulationand the types of activities the regulator should beinvolved in to achieve them. Other mechanismsinclude requirements for:

• regular public reporting on activities andoutcomes

• procedural transparency including due process,stakeholder consultation, regulatory impactassessments, announcement and explanations ofpolicy and enforcement decisions and actions33

and the establishment of:

• a system of appeals from decisions by regulators(but without transforming the appellate bodyinto the ultimate regulator), and

• a system for assessing performance ex post whichaddresses both

• performance against assigned objectives, and

• conformity with regulatory quality standardsfor transparency, responsiveness,consultation and so on.

Another major design challenge is to ensure thesatisfactory integration of individual regulators intothe government-wide policy framework. This probablyrequires explicit co-ordination procedures acrossregulators to identify and cope with interactive policyobjectives in a manner that ensures related policies aretreated coherently.34 Another co-ordination problemarises in Australia’s federal system of governmentwhere cooperation regarding national andinternational markets is necessary to avoid issues ofregulatory overlap and duplication, and, perhaps,issues of internal barriers to trade. (This is discussedfurther in Section 6.) In addition cooperation ongovernance issues relevant to independent regulatorsis essential if reform efforts by one level of governmentare not to be frustrated by the actions of othergovernments.

4.6 Independence with accountabilityand integration

33 Transparency in an operational sense is more than public consultation and regulatory impact assessment and refers to thecapacity of regulated entities to identify, understand and express their views on their obligations under the rule of law. See R.Deighton-Smith, Regulatory Transparency in OECD Countries: Overview, trends and challenges in Australian Journal of PublicAdministration, Volume 63 Number 1, March 2004, pp.66 -73.34 Ladegaard, P., ‘Good Governance and Regulatory Management’: a background note for an OECD Regulatory Managementand Reform Seminar, 19-20 November 2001, Moscow.

Allocation of consumer protection functions > 23

The third of the four main issues in formulatinginstitutional arrangements concerns the scope of thefunctions assigned to consumer protection agencies.How much of the range of functions involved inprotecting consumers should be assigned to bodiesresponsible for implementing regulatory interventionsto protect consumers?

Diagram 1 provides a schematic representation of themajor functions, although much simplified, involvedin dealing with consumer protection problems. Theleft-hand half illustrates the major generic stages inpublic policy-making. The right-hand half adds themajor functions involved in policy implementationwhere the response selected for dealing with aconsumer problem is regulatory intervention in amarket. The functions are not exclusive to regulation

to protect consumers but would apply to regulation forother objectives such as protecting the environment.The broad generic public policy functions identified inDiagram 1 are:

1 identifying issues and defining problemsrequiring public attention and consideration

2 analysing the causes and consequences of theproblem and formulating options to deal with it,including the possibility of positive action bygovernment

3 recommending the most suitable option based onan assessment of the costs and benefits of thevarious alternatives

4 implementing the selected option

where the solution to a consumer probleminvolves regulation of some aspects of a market(or markets), implementation broadly willinvolve:

4.1 making the rules for regulating the market

4.2 informing the regulated and marketparticipants generally of their rights andresponsibilities under the rules

4.3 administering regulatory requirements (egissuing licenses)

4.4 promoting compliance with the rules by theregulated, and

4.5 enforcing the rules where breaches occur

5 evaluating the effectiveness of the solutionimplemented and modifying as necessary.

Allocation of consumerprotection functions

5

Analysis& options

formulation

Issueidentification/

‘problem’definition

‘Solution’identification

Evaluation

Inform theregulated

Makedetailed

rules

Enforcethe rules

Administerrules (eg

issuelicenses

Promotecompliancewith rules

Generic policy functions Implementation function if‘solution’ is regulation

Governmentconsults &decides on

policy

Diagram 1: Simplified functions in consumerprotection policy

5.1 Major functions

The institutional design issue arising from thesefunctions is whether all of the functions should beperformed within a single organisation or splitbetween two or more governmental organisations and,if so, how? The functions particularly at issue as totheir location are:

• policy development(functions 1 to 3 above)

• regulation-making (function 4.1)

• enforcement (function 4.5), and

• evaluation (function 5).

For the purposes of illustrating the issue, the manypossible organisational arrangements of functionswhere regulation is the policy solution are simplifiedto two models – the ‘integration model’ and the‘separation model’. These models are more or lessobservable in practice and so provide a useful basisfor discussion.

The integration model, where all of the functionsoccur within a single organisation, is illustrated inDiagram 2. Here all of the functions portrayed inDiagram 1 except the decision on policy which is thepreserve of government are undertaken by a regulator– from issue identification through regulationimplementation to evaluation. The informal survey ofconsumer protection agencies by CAV for the SCOCAalso included information on the location of theconsumer policy function. The regulatory agencieswere asked: ‘Is your agency responsible for influencingand formulating policy for consideration byGovernment?’ Answers from the agencies indicate thatall of the State consumer protection agencies performpolicy and regulatory functions.

The separation model, where the functions are splitacross organisations (in this case two), is illustrated inDiagram 3. Here the generic public policy functionsplus the making of regulations are undertaken by agovernment department; but the implementation ofregulation is undertaken by the regulator. A practicalexample, though somewhat simplified, is the splitbetween the Commonwealth Treasury and ASIC whichis an independent statutory authority.

In practice the dividing line between regulator and therelevant ‘parent’ Ministerial department will not be asclear-cut as the model illustration suggests. Even wherethere is a formal separation of functions the regulatorwill at least have some input into policy development.

The UK DTI comparative study of consumer regimesnoted:

In some countries there tended to be a degree ofdelegation from the Ministry to the main enforcementbody in terms of policy development which was carriedout by the latter either on a formal (for example theFTC) or an informal (for example the ACCC) basis.35

5.2 Models of functional integrationand separation

24 > Allocation of consumer protection functions


policy

Analysis& options

formulation



Evaluation

ÔSolution’identification

Inform theregulated Administer

rules (egissue

licenses


Makedetailed

rules

Enforcethe rules

Regulator’s functions

Diagram 2: ‘Integration model’—regulatorundertakes all functions

Regulator’s functions

Department’s functions


policy

Analysis& options

formulation



Evaluation

‘Solution’identification

Inform theregulated Administer

rules (egissue

licenses


Enforcethe rules

Makedetailed

rules

Diagram 3: ‘Separation model’—functions splitbetween department and regulator

35 DTI, Comparative Report, p.15. The ‘ACCC’ referred to in the quote is the Australian Competition and ConsumerCommission.

Allocation of consumer protection functions > 25

The main arguments revolve around theappropriateness of one organisation carrying on thekey functions, particularly:

• should regulators undertake policy developmentand provide policy advice (including preparationof regulatory impact statements)

• should regulators enforce the regulations theyadminister, and

• should regulators evaluate the regulation theyformulate and administer?

Separating policydevelopment/advice and regulatoryfunctionsThe BRTF observed in its report on independentregulators:

It is too simplistic to say that Government sets policyand regulators deliver. In reality Ministers/Parliament setthe objectives for a regulator and the regulator developsthe policy and delivery mechanisms for delivering thoseobjectives.36

Similarly, the VCEC in its report on housingconstruction regulation posed the question as ‘…notwhether regulators should be involved in providingpolicy advice at all, but rather the extent to which theyshould be involved and the channels through whichthis policy advice should be provided’.37 Should theregulator have primary responsibility for developingpolicy and the regulatory instruments intended toachieve the government’s objectives? Or should itcontribute to the public policy process through itsparent department (or some other agency) which isresponsible for providing policy advice to the Minister?

The main argument for having a regulatory agencyundertake policy work is that the expertise developedat one stage of the policy process can be used toinform other stages, thereby making regulation moreeffective and responsive. Having expertise inimplementing policies (albeit by definition expertisewhich is limited to policies involving regulatory

responses to problems) means the regulator is wellplaced to identify problems and assess the technicalfeasibility of policy options.

However, the combination of policy and regulatoryfunctions carries a number of risks. The mainarguments against combining them are:

• the increased risk of regulatory ‘creep’38 becauseof the likely predisposition of a regulator to alignpolicy preferences with its institutional interest tomaintain or expand its role 39

• the potential for a regulator to be drawn intothe political process and thereby possiblycompromise its perceived and actualindependence and its capacity to makeimpartial decisions

• the greater likelihood of a narrower policyperspective being applied by a regulatorcompared to its parent department, particularlywhere the regulator is industry or sector specific –this may manifest in a bias towards regulatoryresponses to problems or inadequate cost/benefitassessments of alternatives through lack ofawareness of other government objectives andactions

• where a regulator is the advisor, the objectivity ofpolicy advice is potentially compromised byvirtue of its interest in the selection of a responsewhich involves regulation

• the risk of reduced accountability as there is abuilt-in incentive for a regulator to less rigorouslyspecify objectives against which its subsequentregulatory performance can be assessed

• the increased risk of a regulator being captured bythe regulated who will perceive the regulator asable to heavily influence policy development andtherefore devote commensurate resources toexerting influence

• the risk that regulated stakeholders may beunwilling to substantially engage in policydebates due to concerns that to do so may affectthe regulator’s attitude towards them or eveninfluence enforcement decisions, and

• the potential distortion of risk assessment inpolicy responses – a regulator may be more riskadverse and advocate regulation simply because itdoes not want to be criticised for missing aproblem after deciding not to regulate a risk thatlater materialises.

5.3 Arguments for and againstfunctional separation

36 BRTF, Independent Regulators, p. 20.37 VCEC, Housing Regulation in Victoria, p. 232. The following discussion draws on the Commission’s discussion in chapter 9 ofthe report.38 Regulatory creep is the extension of the scope or impact of regulation in a non-transparent manner either deliberately orunintentionally. BRTF, Avoiding Regulatory Creep, October 2004, p. 5.39 Another response by a regulator to poor regulatory outcomes also may be to blame the scope and detail of the regulationrather than its own performance and respond by expanding the scope, prescriptiveness or complexity of regulation.

Separating the political process fromenforcementRegulators' enforcement activities potentially lead tothe imposition of substantial sanctions againstindividuals and/or corporations with associateddamage to reputation and, in some cases, businessclosure or loss of personal livelihood. On the otherhand, while there are potentially serious consequencesfor the regulated from enforcement action, there canbe severe consequences for customers of the regulatedor members of the public where compliance is poorand breaches of regulation go undetected anduncorrected.

One aspect of enforcement related to institutionalarrangements is the potential for political influence,either directly or indirectly, in enforcement prioritiesor even, at the extreme, specific enforcement actions.The main consumer protection agencies in the Statesare non-statutory units of government departments.Under this type of structure State Ministers forconsumer affairs, and perhaps through them otherparticipants in the political process, have potentialinfluence over the regulators’ enforcement approachesand actions. This is not to say that such influenceoccurs, but rather to identify another way in whichregulators who are not statutorily independent riskbeing, or being perceived to be, drawn into thepolitical process.

Separating evaluation fromimplementation of regulationA longstanding issue in public policy is who shouldevaluate policy effectiveness. It should not be assumedthat the policy-maker, implementer and evaluatorshould be one and the same. Whether evaluations arecarried out by those delivering a policy (in thisdiscussion a regulator) can have importantimplications for the robustness of the evaluation andits usefulness to improve policy effectiveness.

The main argument for combining the functions sothat evaluation is undertaken by ‘insiders’ is that aregulator will have detailed knowledge of what isinvolved in administering and enforcing theregulations and of any problems affecting outcomesthat were not foreseen at the design stage. Anotherargument is that if the evaluation leads tomodifications of the regulatory scheme they will haveto be carried out by the regulator. If the regulator hasbeen actively involved in the evaluation the likelihoodof more effective implementation may be increased.

The main arguments against combiningimplementation and evaluation reflect some of therisks of combining policy and regulatory functions.In brief these concern increased risks of compromisedobjectivity due to institutional interests biasingevaluation assessments and reduced transparency andaccountability for performance due to the ability tokeep poor regulatory performance ‘in-house’ andminimise public scrutiny.

26 > Allocation of consumer protection functions

National or State regulator? > 27

The final issue in formulating institutionalarrangements concerns the constitutional basis andgeographic scope of consumer protection agencies andthe allocation of roles and responsibilities betweennational and State agencies. Australia’s current ninesets of consumer legislation, between probably one totwo hundred separate agencies with consumer-relatedpurposes and a mix of industry-specific and generalregulators in each jurisdiction are unlikely to be theoptimal institutional arrangement for consumerprotection.40

Like many aspects of regulatory design and practice,the answer to whether the institutional form is moreappropriately national or State-based depends onexactly what the problem is. One way of analysingconsumer problems in this context, after establishingwhether the consumer problem is new (not currentlydealt with by a regulator); or an old problem (alreadysubject to regulation in some way), is to ask the sortsof questions set out in Box 4 (on page 28).

These questions suggest at least four key issues relevantto determining the appropriateness of national or Stateregulators:

• What are the constitutional limitations on theroles of either a national or state regulator?

• How important is consistency of regulatoryapproach to achieving objectives and to whatextent is a national regulator necessary to ensurea consistent approach? Can State regulatorsoperating within a national framework deliverconsistency as cost-effectively as a single nationalregulator?

• What are the benefits to industry of only havingto deal with one regulator, rather than differentregulators in different States?

• What are the costs of a national regulator notaccounting for State differences?

There appears to be a growing concern with the overalladequacy of the current ‘architecture’ of multiplenational and State-based regulators dealing withconsumer protection issues (and other matters) due toa range of factors such as:

• the trend to increasingly national (andinternational) markets with rapid advances incommunications technology such as the use ofthe Internet for retail advertising and sales

• increasing business dissatisfaction with theadministrative costs of complying with growingregulatory demands (not necessarily for consumerprotection purposes)

• increasing business dissatisfaction with thesometimes conflicting or confusing informationdemands and other requirements of businessregulators

• government central agencies’ concerns about thecost-effectiveness of a multiplicity of smallregulatory agencies, and

• concerns about the equity of outcomes wherebusinesses (often the same business operating inseveral States) in the same circumstances can facedifferent regulation.

National or Stateregulator?

6

40 Victoria alone has about 40 separate business regulators that have some relevance to consumer protection issues. See VCEC,The Victorian Regulatory System, p. 10.

Box 4: Identifying issues in national versus State-basedregulatory structure

• What is the nature of the consumer problem?41

• What is the geographic dimension of the market in which affected consumersand suppliers operate? Is it international, national, State, regional or local?

• What constitutional powers are necessary for government intervention?

• Which level of government holds these powers? Commonwealth or State?

• Is the problem potentially within the jurisdiction of an existing regulator (orregulators)?

• If the market is a State market but the problem exists in all or several States,what are the benefits and costs of:

• a national regulator administering Commonwealth regulation applyingin each State

• State regulators administering common (template) State regulationwithin a national framework, and

• State regulators separately administering differing State-based regulation?

• If the market is a national market (and implicitly the problem is national),what are the benefits and costs of:


• State regulators administering common State regulation within anational framework, and


• What is the nature of the consumer problem? Has it changed since theinception of the existing regulation?

• What is the geographic dimension of the market in which affected consumersand suppliers operate? Has it changed?

• Are constitutional powers of the existing regulator adequate to address theproblem? Are there constitutional barriers to change?

• If the market is a State market and the existing regulator is national, are theredifferences across States material to the effectiveness of regulation and whatare the costs of the national regulator not accounting for these differences?

• If the market is a national market, is a national regulator necessary to ensureconsistent regulation? What are the benefits and costs of:


• State regulators administering common State regulation within anational framework, and


• What are benefits/costs to interstate businesses of dealing with a singleregulator versus multiple State regulators?

Problem notregulated

>

Problemcurrentlyregulated

>

28 > National or State regulator?

41 This in turn involves questions such as: What is the consumer detriment? How extensive is the actualdetriment? What is the risk of detriment? In what circumstances will the risk arise? Who is most at risk?

National or State regulator? > 29

Regulation for consumer product safety provides anillustration of the issues arising from multiplejurisdictions and considerations in national or State-based arrangements. The Productivity Commission(PC) discussion draft Review of the Australian ConsumerProduct Safety System concluded on the multi-jurisdictional regime underpinned by the TradePractices Act 1974 and the fair trading acts of the Statesand Territories:

Fragmented policy making, administration andenforcement impose an unnecessary compliance coston business and undermines the efficient operation ofnational consumer product markets. Inconsistenciesand duplication of effort across jurisdictions suggeststhat government resources could be better used.42

The PC considered that the main cost of differingproduct safety systems is extra business compliancecosts. These were considered to outweigh the potentialbenefits of a multi-jurisdictional system which may bemore prompt responses to (probably infrequent)jurisdiction-specific safety issues than a single nationalsystem might provide and possible short term gains inregulatory effectiveness through varying regulatoryapproaches.

Victoria has supported a harmonised product safetyregime and worked with the other jurisdictions toproduce a harmonised model based on one nationallaw with one national set of bans and standards andcooperative enforcement. This would address the issueof inconsistency for business and provide for a robustnational system. All States and Territories have agreedto a model. However, progress to implement this hasbeen delayed by an inability to obtain unanimousagreement with the Commonwealth Government.

The Hampton Report (discussed in more detail inSection 7) is an overseas example of recentconsideration of consumer policy institutionalarrangements, albeit from the particular perspectiveof reviewing regulatory inspection and enforcementfunctions. One of several issues under review was‘larger versus smaller’ regulators. While this is notthe same as ‘national versus State’ regulators in theAustralian federal context, as only national regulatorsin a unitary system of government were within itsscope, Hampton’s arguments could be extrapolated tothe Australian scene where State regulators, with theexception of a handful of the larger business regulatorsin the two largest States, tend to be small. Hamptonexpressed a clear preference for larger regulators andrecommended significant rationalisation of regulatorsin the United Kingdom. He recommended the

rationalisation of 31 of 63 national regulators intoseven bodies, one of which was a proposed ‘Consumerand Trading Standards Agency (CTSA) replacing fourexisting bodies.

Hampton concluded:

Small regulators’ although focussed, are less able to joinup their work, and are less aware of the cumulativeburdens on businesses. It is more difficult and moreexpensive to have a comprehensive risk assessmentsystem if data is split across several regulators withsimilar areas of responsibility. In such circumstances,a holistic view of business risk becomes difficult, if notimpossible. Small regulators are also more expensive.43

However, reforms in one country are not necessarilyappropriate in another and sweeping organisationalrationalisation towards national regulators is not theonly way to obtain the desired more consistent andefficient approaches to consumer problems, evenassuming political and constitutional feasibility.Cooperative arrangements among existing State andfederal agencies with consumer protection policy andregulation responsibilities can address problems ofoverlap, duplication and gaps in consumer protection.Greater cooperation within coordinated nationalframeworks may generate significant improvements inregulatory outcomes and/or reductions in theadministrative costs to regulated businesses andgovernment. Of course such cooperation requiressustained goodwill and a common vision for consumerprotection outcomes, not to mention considerablepatience and flexibility to negotiate workablecooperative arrangements.

42 Productivity Commission, Review of the Australian Consumer Product Safety System, (Discussion draft) August 2005, p.xxvii.43 Hampton, P., Reducing Regulatory Burdens,. p. 6.

Overseas reviews and examples of arrangements > 31

There is considerable variation in institutionalarrangements internationally. An internationalperspective is provided by a study by the UnitedKingdom government agency responsible forconsumer policy, then titled the Department of Tradeand Industry (DTI). After comparing consumer policyregimes in nine industrialised countries, includingAustralia, in 2003 it reported:

The institutional framework varied widely betweencountries because of differences in government structureand in particular, the extent to which state and federalpowers were divided constitutionally…In all thecountries studied consumer affairs tended not to becentral. It also varied as to whether it was linked tocompetition policy or not.

…Another factor present was that in a number ofcountries several ministries were responsible for differentareas of consumer policy with Justice Ministries oftenhaving a role via small claim procedures. Typically theMinister responsible for the consumer brief would have anumber of other demanding portfolios in addition to anyconsumer responsibility, for example financialregulation.44

In regard to regulatory arrangements more generally,the VCEC commented recently when addressing issuesof institutional arrangements in the particular case ofhouse building regulation then before it:

The…Commission would have liked to answer these[institutional] questions by comparing the functions ofthe building regulators with a best practice ‘template’for independent regulators, but it is not aware of sucha template.45

While a definitive best practice template may not exist,it is possible, in respect of consumer protectionagencies at least, to identify a trend in institutionalarrangements resulting from comprehensive reviewsof consumer policy in national jurisdictions overseas.A trend favouring independent board-type statutorycorporations as the new institutional arrangement isevident in all three jurisdictions where consumerpolicy and administration has been put up for review:the United Kingdom (over 1999 to 2002); Ireland(2004 to 2007) and South Africa (2004 to 2007).

This section firstly outlines the arguments, conclusionsand outcomes of the three consumer policy reviewsand then three studies of regulatory arrangementsmore generally are discussed: one by the Organisationfor Economic Cooperation and Development (OECD);one by a UK House of Lords Select Committee and theHampton review. In addition, the Appendix comparesthe organisational structures and governancearrangements of consumer protection agencies thatcould be characterised as ‘independent’ regulators.Examples are drawn from a sample of English-speakingcountries and countries with sufficient English-language information on government Internet sites.The examples include both national and sub-nationalinstitutions in federations.

Overseas reviews andexamples of arrangements

7

44 United Kingdom Department of Trade and Industry, Comparative Report on Consumer Policy Regimes, October 2003, p.15.45 Victorian Competition and Efficiency Commission, Housing Regulation in Victoria: Building better Outcomes, (Final Report)October 2005, p. 297.

32 > Overseas reviews and examples of arrangements

The United Kingdom Government undertook acomprehensive review of consumer policy andpublished a White Paper, Modern Markets: ConfidentConsumers, in 1999. The central hypothesis of thepaper was that confident demanding consumers aregood for business: they promote innovation andstimulate better value and in return, they get betterproducts at lower prices. A range of high-level reformmeasures was proposed in the White Paper. In relationto organisational arrangements, particularly theexisting consumer protection role of the Office of FairTrading (OFT), the White Paper concluded:

It is…time for a fundamental review of the OFT’sconsumer affairs functions to ensure it can rise to thechallenges. The Director General of Fair Trading willlead this review, involving consumer and businessrepresentatives as well as government departments.It will cover:

• consumer affairs objectives and powers, includingon consumer education

• resources

• liaison and co-ordination with other governmentdepartments

• liaison and co-ordination with other enforcementagencies.46

The body then known as the OFT was not a statutorybody, but the administrative support that had grownup around the Director General of Fair Trading (DGFT)− a statutory office for an individual person appointedunder the Fair Trading Act 1973. The OFT name wastraditionally used when publicising and explaining thework of the Director General of Fair Trading (DGFT).(Around the same period, Victoria established a similarstatutory office of ‘Director of Consumer Affairs’47 anda Ministry of Consumer Affairs, but the Ministry wasabolished in the early 1990s and the Director positionis now an employee under the Public Administration Act2004. See Section 9.1.)

The specific measures foreshadowed in the WhitePaper and the findings of the review of the OFT weregiven effect in the Enterprise Act 2002. This Actreformed existing competition, consumer and

insolvency legislation. Consumer protection powersthrough the ‘Stop Now Orders’ regime were extended,a new regime of approval of business-to-consumercodes of practice was established, and certaindesignated consumer bodies were given the right tomake ‘super-complaints’ which the reformed OFT isobliged to respond to within a specified time.

The Enterprise Act replaced the office of the DGFTwith a new statutory corporate body consisting of aChairman and at least four other members, most ofwhom are non-executive appointments. Currentdetails of the OFT regarding its statutory status,structure, appointment method and currentcomposition, scope of functions and accountabilityobligations are provided in the Appendix at A.5.

In March 2004, the Irish Minister for Enterprise, Tradeand Employment established the Consumer StrategyGroup (CSG) and asked it to make proposals for thedevelopment of a national consumer strategy. Thiswas against the background of a clear lack of a nationalconsumer strategy, the increasing international focuson consumer empowerment and the widespreadperception among Irish consumers that they werecontinually overcharged for goods and services. TheCSG was requested to examine best internationalpractice concerning the promotion and representationof consumer interests. The Group commissioned themost extensive research ever carried out in Ireland onconsumer issues. The CSG’s report, Make ConsumersCount: A New Direction for Irish Consumers, waspublished in April 2005.48

The CSG considered a consumer policy frameworkthat supports and empowers consumers mustincorporate the functions of information,enforcement, research, advocacy and education andawareness. It concluded these functions were addressedunevenly in Ireland by a wide range of GovernmentDepartments, State agencies, regulatory bodies andvoluntary organisations.

7.1 UK Consumer Policy andestablishment of the Officeof Fair Trading

7.2 Ireland’s Consumer Strategy Groupreview and the establishment ofthe National Consumer Agency

46 Department of trade and Industry (UK), Modern Markets: Confident Consumers, July 1999, p. 39.47 Under the Ministry of Consumer Affairs Act 1973 to administer the Consumer Affairs Act 1972. Section 6 of the Ministry ofConsumer Affairs Act provided the Director was not subject to the Public Service Act 1958.48 Consumer Strategy Group, Make Consumers Count: A New Direction for Irish Consumers, Dublin, April 2005


It noted that in other European countries the principleunderlying their consumer policies is that empoweredconsumers could make better choices and hence drivethe marketplace. Information and awareness is apriority and the state plays an important role inproviding services for consumers. Businesses in thosecountries play a greater role in consumer affairs andbenefit from the improved relationship. The businesssector recognises the importance of good consumerpolicy, works closely with consumer institutions andoperates sectoral codes of practice and disputeresolution procedures. These countries have strong andinfluential consumers’ associations which are also themain advocates for consumers. In some cases, these areprivately funded; in others, they are subsidised by thestate.

In contrast, the CSG observed the Irish Governmentprovides no services in research, advocacy, and ineducation and awareness which it regarded as centralpillars of consumer policy. Their absence fromgovernment support to the consumer in Irelandreflects the low priority that has been given toconsumer interests. Voluntary organisations have notfilled these gaps. In spite of the efforts of Consumers’Association of Ireland, in particular, the CSGconcluded the Irish consumer lacks a strong, interestedand well-resourced source of support.

On balance, the Group felt that the establishment of anew national agency would give Ireland acomprehensive and forceful consumer policy, and thatthe advantages would outweigh the cost ofestablishing the agency. Thus, the majorrecommendation of the CSG was to establish anindependent National Consumer Agency (NCA)—subsuming the existing Office of the Director ofConsumer Affairs49—to raise the profile of consumerissues and provide consumers with a strong andeffective voice. The agency proposed by the CSGwould be responsible for consumer research, advocacy,information, enforcement, and education andawareness. It would also develop a partnershipapproach with Government, regulators, business,consumer organisations and unions in promotingand safeguarding the interests of consumers.

The CSG recommended the NCA be an independent,statutory state agency, with a board appointed by theMinister for Enterprise, Trade and Employment, and achief executive appointed by the Board. In recognitionof the wide remit of the agency, the CSGrecommended that the chief executive position be onthe same level as the chair of the Irish CompetitionAuthority.

The NCA would be independent of the Department ofEnterprise, Trade and Employment and have theresources to carry out its functions effectively throughits own separate budget. The proposed agency wouldreport annually to the Minister and the Parliament.The Comptroller and Auditor-General would audit itsaccounts. The NCA was established by the IrishGovernment in May 2007 in response to the CSGreport. The Government largely adopted the Group’srecommendations and details of the arrangementsestablished are set out in the Appendix at A.3.

As in the United Kingdom and Ireland over the lastseven years, the national government of South Africainitiated a comprehensive review of consumerprotection and opted for an independent, board-typestatutory authority ─ the ‘National ConsumerCommission’ (SANCC) ─ to be the consumerprotection body.

South Africa’s Department of Trade and Industry(SADTI) is leading the establishment of new consumerprotection regulation. The SADTI initiated a review ofthe country’s consumer legislative framework thatculminated in the publication of a draft green paperon consumer policy in 2004. As part of the review, theSADTI commissioned research to assist in providingguidelines in the establishment of a new legalenvironment through which consumers will be givenrights that can be enforced and protected. The greenpaper provided a broad framework for consumerprotection, in particular, to promote consistency,coherence and efficiency in the implementation ofconsumer laws.

In order to achieve these policy objectives the SADTIformulated a draft Consumer Protection Bill 2007. Athird draft of the Bill has been finalised afterstakeholder consultation and further consultation willbe available when tabled in Parliament.

49 ODCA was responsible for enforcing consumer-related legislation and informing the public about consumer rights.

7.3 South Africa’s review ofconsumer policy and theproposed National ConsumerCommission


Enactment of the Bill would give statutory status andcontent to various consumer rights, largely derivedfrom the United Nations guidelines on consumerrights.50 Enforcement of those rights, among otherfunctions, would be the responsibility of the newSANCC. The Bill provides for the establishment of theSANCC which is ‘independent and subject only to theConstitution and the law’. The SANCC is to begoverned by Board consisting of a member appointedby each Minister with responsibility for socialdevelopment, education, transportation, housing,environment; and health. In addition, the chairperson,deputy chairperson and up to six other members are tobe appointed by the Minister for Trade and Industry.

The Board is to be responsible for:

• guiding the strategic development of theCommission

• overseeing and ensuring the efficient andeffective use of the resources of the Commission

• ensuring that the Commission is in compliancewith all of its legal requirements, and reportingand financial accountability obligations, and

• providing advice to the Chief Executive Officerconcerning the exercise of the functions andpowers of the Commission.

The Board may refer to the Minister any matterconcerning the functioning of the Commission. TheCEO must be a ‘suitably qualified and experiencedperson’ who with the advice, and subject to theoversight, of the Board, is responsible for all functionalresponsibilities pertaining to the Commission; and isaccountable to the Board. The CEO is an ex officiomember of the Board, but may not vote at itsmeetings. The Commission must report to the Ministerat least once every year on its activities, as required bythe Public Finance Management Act 1999. At least onceevery five years, the Minister must conduct an auditreview of the exercise of its functions and powers.

An OECD study in 2001, The Implementation and theEffects of Regulatory Reform: Past Experience and CurrentIssues,51 reviewed regulatory developments in OECDcountries and summarised the main lessons to bedrawn from recent policy experience. It concentratedon several dimensions of regulatory reform: its scopeand impact on performance, issues of regulatory designin network and transportation industries and, of mostrelevance for the purpose of this paper, what theauthors termed the ‘political economy’ issues related tothe design of regulatory institutions and mechanisms.The regulatory reforms the study considered involvedliberalising prices and access to markets which hadpreviously been restricted by legal and regulatorybarriers or handing (or returning to) the private sectoractivities that had been run directly by thegovernment. The industries concerned were electricity,telecommunications, railways, air travel, road freightand retail distribution. The authors concluded that,‘looking at this sample of industries makes it possibleto highlight features of the regulatory reform process,and of its economic impact, and draw lessons that areapplicable to other industries as well.

The regulatory agencies in the review had substantialregulatory powers encompassing the promotion ofcompetition, tariff setting and consumer protection.Thus, the regulatory provisions examined werejustified on the basis of both economic and non-economic reasons. Often, government ministriesretained a policy-making role in the industry (such asdefining the entry regime or ‘universal serviceobligations’), while independent regulators had a legalmandate to define and enforce detailed regulations.

On the issue of institutional arrangements, the OECDauthors concluded:

Political economy considerations suggest that regulatoryinstitutions should be designed to i) ensure independenceof the regulator from the executive branch of thegovernment; ii) impose constraints on the regulator’sdiscretion (for example by allowing appeal procedureswith general competition authorities); iii) enhancetransparency of the regulatory process so as to limitinformation asymmetries and reduce regulatorydiscretion; and iv) ensure consistency of regulatoryapproaches across industries.52

50 Department of Economic and Social Affairs, United Nations Guidelines for Consumer Protection (as expanded in 1999) UnitedNations, New York, 2003, http://www.un.org/documents.51 Göneç, R., Maher, M. and Nicoletti, G., The Implementation and the Effects of Regulatory Reform: Past Experience and CurrentIssues, OECD Economic Studies No. 32, 2001/I, pp. 11-98.52 Ibid., p. 15.

7.4 OECD regulatoryreform study


Although complete independence may not be attainablein practice, desirable requirements may include i)providing the regulator with a legal mandate (coveringalso the cases and procedures for overruling itsdecisions); ii) ensuring that it is structurally separatedand autonomous from the government; iii) defining amulti-party process for its appointment (e.g. involvingboth executive and legislative bodies); iv) protecting itfrom arbitrary removal (e.g. through fixed terms); v)defining its professional standards and adequateremuneration levels; and vi) designing a reliable sourceof funding (e.g. through industry fees instead ofgovernment budgets).53

BackgroundIn 2004, the House of Lords Select Committee on theConstitution inquired into the workings ofGovernment-appointed regulators; the extent to whichtheir activities are monitored by Parliament; theiraccessibility to the public and the regulated; and theirresponsibility to the citizen and those whom theyregulate. The Committee saw the existence ofregulators as also raising fundamental questions ofaccountability, how the performance of regulators ismonitored to ensure that the public interest is properlyserved.

The Committee’s report, The Regulatory State: Ensuringits Accountability, noted that the direction of UKGovernment regulatory policy in recent years has beenthe establishment of independent regulators, acting atarms-length from ministers, empowered andconstrained by their own statutory authority but oftenresponsible for issues hitherto dealt with bygovernment departments. In addition, regulators withpowers vested in the individual (for example, theDirector Generals covering the utility and networkindustries) have been replaced with regulatoryAuthorities, comprising a board. The board is generallyto be structured on lines consistent with the Code ofPractice on Corporate Governance applying tocompanies: this includes the separation of the role ofchair and chief executive and the appointment of amajority of independent non-executive directors.

Replacement of individual regulatorsby boardsThe Committee commented on the trend to board-type arrangements for regulators as follows:

We received considerable evidence on the reasons for themove from individual regulators to boards. The move inmany respects mirrors practice in most companies,which have a Chairman, Board and Chief ExecutiveOfficer. The move has been generally welcomed, thoughthere were caveats expressed by some who had served asindividual regulators… The move towards boards hasbeen motivated by the need to bring in a greater range ofskills – even individual regulators variously appointed abody or board of experienced people to advise them –and to avoid the pitfalls that may occur from relying onthe judgement of a single regulator.

The creation of boards also facilitates a more efficientuse of resources, with a clear division between chairmanand chief executive, rather than combining theresponsibilities in a single post. The board structure alsoenables the burdens of regulation to be borne by severalpeople, especially valuable in those sectors where theregulatory responsibility is broad and heavy, as forexample with the newly created Ofcom framework.

Boards, like individual regulators, work within a clearlystipulated statutory framework. Experience has enabledthat framework to be refined and enhanced. Therequirement on a regulator to apply the principles ofgood regulation in their decision-making, and to beaccountable for that, applies equally whether it is aboard or an individual…55

The Committee argued than the transition fromindividual regulators to board structures was anevolutionary or ‘developmental’ one:

We recognise that individual regulators were importantin the initial stages of establishing a regulatoryframework. They enabled a regulatory regime to bebrought into being relatively quickly and for decisions tobe made with some expedition…However, we take adevelopmental view. We believe that it is appropriate onthe whole that regulators appointed as individuals giveway to the appointment of boards. Once a regulatoryframework is in place, boards can offer not only anefficient structure but also the potential for greaterstability than may be possible with an individual.By drawing on the expertise of the different members,they can test propositions and take a wider view thanis possible with a single individual. We believe that aboard is better placed than an individual regulator toavoid some of the pitfalls identified…and to managerisk better.56

7.5 UK House of Lords SelectCommittee review

54 House of Lords Select Committee on the Constitution, The Regulatory State: Ensuring its Accountability, HL Paper 68-I,London, May 2004.55 House of Lords, op. cit., p. 39.56 Ibid., p. 40.


Regarding regulatory structure the Committeerecommended that there be a move to more collectiveboard structures, rather than sole regulators, as one ofthe principal mechanisms for improving the qualityand consistency of regulatory decision-making, andurged that this should be the norm for regulatoryregimes. To ensure that there is no loss ofaccountability it recommended that boards designateone of their number as the public face of the regulatorin order not to lose engagement with the public and toperform the role of building confidence andunderstanding. In the Committee’s view, this normallythis should be the Chairman or Chief Executive.57

The Committee’s report also considered institutionalarrangements and the principles of independence andaccountability. The Committee concluded that therewas no conflict in principle between independenceand accountability:

The Committee’s report also considered institutionalarrangements and the principles of independence andaccountability. The Committee concluded that therewas no conflict in principle between independenceand accountability:

We have received clear evidence that independence ofregulators from Ministers is welcomed by Ministers andis seen as a vital ingredient for maintaining consistency,for ensuring that regulatory decisions are taken by‘competent authorities’…, and for promoting confidenceabout regulation among the regulated, those investing inregulated enterprises, and the customers and citizens onwhose behalf regulation is carried out.

Ministers have clearly given up some freedoms, andregulators’ decision-making is protected. However, whilsttheir decision making may be protected, they should beno less - and need not be any the less - accountable fortheir decisions. They have a duty to explain, they shouldbe exposed to scrutiny, and be subject to the full rigoursof the possibility of legal challenge. We have receivedmuch evidence that these disciplines apply. We havefound no conflict in principle between independenceand accountability.

In 2005, the UK Chancellor commissionedPhilip Hampton to identify ways in which theadministrative burden of regulation on businessescould be reduced, while maintaining or improvingregulatory outcomes. The review concluded that someof the problems identified are rooted in, or exacerbatedby, the complicated structure of regulation in the UK,particularly the division of regulatory inspection andenforcement between national regulators and tradingstandards offices and environmental health offices inlocal authorities.

The review report strongly supported the principle ofregulatory independence which it regarded as astrength of the present regulatory system. The reviewrecommended regulators should be structured aroundsimple, thematic areas, in order to create fewerinterfaces for businesses, to improve risk assessmentand to reduce the amount of conflicting advice andinformation that businesses receive.58 More specificallyHampton recommended 31 national regulatory bodiesbe consolidated into seven. In relation to consumerprotection he recommended a new ‘Consumer andTrading Standards Agency’ (CTSA) incorporating thework of four existing regulators, to coordinate work onconsumer protection and trading standards. This bodywould have lead policy responsibility for tradingstandards nationally and responsibility of overseeingthe work of local authorities on trading standardsissues, as the Food Standards Agency does in respectof food.

A number of structural options were identified in asubsequent Government consultation paper onHampton’s recommendations.59 The NationalConsumer Council (NCC) is an independent, publicly-funded body undertaking research, informationprovision and policy advocacy work on consumer-related issues. The relationship between the proposedCTSA and Ministers was one of the variablesdifferentiating the structural options.

57 Ibid., p. 858 Philip Hampton, Reducing administrative burdens: effective inspection and enforcement, HM Treasury, London March 2005.59 See UK Department of Trade and Industry (DTI), Reducing Administrative Burdens – the Consumer Trading Standards Agency,Consultation, July 2005 and Reducing Administrative Burdens – the Consumer Trading Standards Agency, Consultation, Summary ofResponses to the Consultation, March 2006.

7.6 UK ‘Hampton Review’


Regarding this, the NCC submitted:

The CTSA should be demonstrably independent fromgovernment with the freedom to make policy and tochoose where to allocate its resources. At the same time,while the CTSA must be able to achieve maximum cloutfor consumers, it must also be accountable to theparliaments and assemblies, either directly or throughministers…60

Our preference is for the CTSA to operate as a non-ministerial department. The non-ministerial department(NMD)61 model would give the CTSA the greatestfreedom and flexibility to evolve policy in its own right,while retaining some government input into the widerpolicy context…Similarly, the NMD model would givethe CTSA the most freedom to allocate resources whereit sees fit. The experience of the Food Standards Agencyis that this model enables it to put the interests ofconsumers as its first priority, and to use its legal powersto openly publish its views and advice to Ministers, onany issue that may affect consumers. Thesearrangements guarantee its independence, and enable itto inspire consumer confidence - a key consideration forthe CTSA.62

In November 2006, the Chancellor announced theGovernment was not going to proceed withestablishing the proposed CTSA. Rather, it broughtforward the timetable for establishing the Local BetterRegulation Office (LBRO) and split the areas of workoriginally envisaged for CTSA between LBRO and theOFT. LBRO is to implement the Hamptonrecommendations in relation to trading standards toimprove national co-ordination between Governmentdepartments and local regulators and consistency inenforcement between local authorities. OFT is tobecome ‘the champion for consumer enforcementissues’.63

60 National Consumer Council, The Consumer and Trading Standards Agency – Response to the DTI consultation, October 2005,p. 23.61 ‘Non-Ministerial Department’ is a small Government Department in its own right, established to deliver a specific service.General Ministerial relationship varies, but the rationale is to distance day-to-day functions from Ministerial control.62 Ibid., p. 24. ‘Non-Departmental Public Body’ permits a service or function to be carried out at arm’s length from theGovernment and one stage removed from Ministers. It operates under statutory provisions and is legally incorporated.63 DTI, Reducing Administrative Burdens – the Consumer Trading Standards Agency, Consultation, Summary of Responses to theConsultation, March 2006, p. 4.

Conclusions > 39

Designing the institutional form of a consumerprotection agency is not straight forward. Trade-offs areinevitable and case-by-case judgement is required tobalance a number of factors. The balance of strengthsand weaknesses tends to favour general regulators overindustry-specific regulators to administer industryspecific regulation where it addresses consumerproblems. In the literature, the case for independentregulators is strongly advanced, particularly wherethere are substantial incentives for capture or businessrent-seeking behaviour is facilitated by concentratedindustry structures or effective coordination ofregulated entities by industry lobby associations.Careful consideration of adequate accountability andintegration mechanisms will be necessary whereindependent regulators are warranted.

Incorporating the complete range of functions relatedto regulation, particularly combining policy advice andevaluation with the administration and enforcementof regulation, in a regulator potentially createssufficient risks to justify reviewing such arrangements.The principal risk in an environment wheregovernments at all levels are concerned to reduceregulatory burdens on business is regulatory creep.

National approaches in national markets, or wherethere is no significant variation in consumerdetriments related to geographical location, seemhighly desirable on effectiveness and efficiencygrounds. This does not mean a single nationalregulator is necessarily warranted where there aremultiple existing regulators. Greater cooperation andcoordination among existing regulators to addressproblems through a variety of mechanisms mayproduce nationally effective and efficient protectionfor consumers.

The balance of the arguments in the paper suggests thefollowing prima facie positions on key institutionalissues for consumer protection agencies:

• general regulators in preference to industry-specific regulators (although this requires a case-by-case assessment depending on circumstances)

• statutory independence of regulatory functions inpreference to their location in a unit of anadministrative department of government, and

• separation of policy development and advicefrom the administration and enforcement ofregulation.

There appears to be sufficient substance underlyingthese positions to constitute a case for a detailedexamination of existing institutional arrangementsrelating to consumer protection in Victoria.

Developments in overseasjurisdictionsIn jurisdictions that conducted thorough reviews ofconsumer policy and legislation in recent years andconsequently overhauled their consumer protectioninstitutions, the new regulators established werestatutory corporate bodies with boards including non-executive directors. This was the case in all threeinstances of wide-ranging national consumer policyreviews identified in the literature search ─ the UnitedKingdom, Ireland and South Africa. Furthermore, moregeneral reviews of regulatory developments, forexample by the Organisation for EconomicCooperation and Development and the UnitedKingdom’s Better Regulation Task Force, haveidentified and supported a trend to statutory mandatesfor regulators, structural separation and autonomyfrom the executive branch of government and board-type corporate authorities instead of powers vested inindividuals.

Conclusions 8

40 > Conclusions

In the sample of overseas jurisdictions in theAppendix, statute-based consumer protection bodiesgenerally fall into one of three broad categories interms of structure and status:

• a statutory authority board or Commission andan associated administrative entity, with twomain appointment methods forboard/commission members − either appointedby the head of government (the Governor insome American States) or Cabinet (rather thanthe individual portfolio Minister) or appointedby the Minister for consumer affairs, or

• a statutory administrative body with a prescribedchief executive controlling the body instead of aboard, or

• an individual statutory office-holder(‘Commissioner’, ‘Director-General’ etc.),appointed by the consumer affairs Minister, butwith administrative support not established bylegislation.

Consumer protection agencies less frequently take theform of non-statutory administrative units of broadergovernment departments, such as the nationalCanadian Office of Consumer Affairs in IndustryCanada and the Consumer Protection Division of theIllinois Office of the Attorney-General in the UnitedStates.

While the literature favours the separation of policydevelopment and advice function from theadministration and enforcement of regulation, inpractice there is variation across the examplesexamined. In some jurisdictions it is located in theregulator − for example the US Federal TradeCommission, the Californian Department ofConsumer Affairs, and the Massachusetts Office ofConsumer and Business Regulation. In others, it islocated in a department of government − for examplethe UK Department for Business, Enterprise andRegulatory Reform, the New Zealand Ministry ofConsumer Affairs and the Irish Department ofEnterprise, Trade and Employment. A further variableis whether consumer policy is located in a departmentprimarily addressing economic issues and policy(Treasury, Industry, or Commerce etc.) or legal issuesand policy (Attorney-General or Justice).

Relating the discussion to Victoria > 41

This section examines current arrangements in Victoriain the light of the discussion in the preceding sectionsand identifies some implications for the reform ofarrangements.

In 1974 Victoria established a statutory office of‘Director of Consumer Affairs’ under the Ministry ofConsumer Affairs Act 1973 to administer the ConsumerAffairs Act 1972 and the Ministry of Consumer Affairs.Section 6 of the Ministry of Consumer Affairs Actprovided for the Director to be appointed by theGovernor in Council and that the Director was notsubject to the Public Service Act 1958 in respect of theoffice.64 The Ministry of Consumer Affairs Act alsoexplicitly provided for a ‘Ministry of Consumer Affairs’consisting of a Minister of Consumer Affairs, a Directorof Consumer Affairs and ‘such other officers andemployees’ as were necessary for the purposes of theAct.

The Ministry of Consumer Affairs was abolished in1993-94, ostensibly as part of the consolidation ofdepartments into fewer ‘super departments’. Whateverthe efficiency or other gains at the time from theconsolidation, Victoria’s consumer protection agencyhas since had a lesser institutional status than theState’s other major regulators. The currentorganisational entity administering consumer law,‘Consumer Affairs Victoria’, is not established by, or inany other way provided for or referred to, in Victoria’sconsumer law, the Fair Trading Act 1999.

From 1974 until 1999, the Director of ConsumerAffairs statutory office remained a Governor in Councilappointment. However, since late 1999, under section 98of the Fair Trading Act, the ‘Director of ConsumerAffairs Victoria’ position is no longer a Governor inCouncil appointment. Instead the Director is subject topublic service employment under Part 3 of the PublicAdministration Act 2004 and potentially subject todirection by a higher executive officer. There was noexplanation of this change at the time in the Minister’ssecond reading speech on the Bill introducing thechanges or in the course of parliamentary debate onthe Bill.65

Relating the discussionto Victoria

9

9.1 Historical perspective

64 This exemption meant that the Director was not in the public service ‘line management;’ and could not be subject todirection by an official more senior in the public service hierarchy.65 See Hansard, House of Assembly, 25 March (pp. 187-190,191) and 21 April (pp. 523-531) 1999.

42 > Relating the discussion to Victoria

Regulators with consumer protectionrelated objectivesIn addition to CAV as noted previously, there areapproximately 40 separate regulatory bodies inVictoria undertaking some consumer protectionrelated activity.66 In the health services sector thereare 12 bodies administering the practitionerregistration scheme.67 The Business LicensingAuthority (BLA) also issues business licenses undereight separate schemes largely justified by consumerprotection objectives. Skilled trades’ occupationallicenses come under another set of arrangements.

In addition to multiple regulators with some consumerprotection rationale, CAV administers about 50 piecesof mostly consumer-related legislation.68 Machinery ofgovernment changes in December 2002 resulted in theshift of Liquor Licensing Victoria and TradeMeasurement Victoria to CAV. The administration ofbodies corporate and retirement villages legislation wasalso transferred to CAV at this time, and gaming andracing regulation and policy were transferred to theDepartment of Justice.

Victorian regulators generallyThere is a mixture of institutional arrangements acrossthe jurisdiction as a whole. Regulators in Victoria rangefrom statutory authorities with clear statutoryobjectives, powers and functions to units ofadministrative departments (such as CAV) embeddedamong a range of policy and service delivery functionsand sometimes lacking clear mandates. Employmentsizes of consumer-related agencies range from about1,000 employees to less than one full-time equivalent.

The four largest regulators with functions affectingbusinesses across a range of industries, in order of sizeby number of staff, are:

• the Victorian Workcover Authority (VWA)

• CAV

• the Environment Protection Authority (EPA), and

• the Essential Services Commission (ESC).

Table 3 compares these regulators on the basis ofselected indicators likely to be relevant toindependence:

• the statutory basis of the organisational entity

• whether the entity is a body corporate

• the method of appointment of the head of theentity (appointed by the Governor in Council orby the head of the parent governmentdepartment the entity is part of), and

• whether the head of the entity is subject togeneral public service employment conditions(under Part 3 of the Public Administration Act 2004)and therefore potentially subject to direction by ahigher executive.

Table 3 shows there is uniformity of structuralarrangements among the largest regulators ofbusinesses, with the exception of CAV which standsout in contrast to the consistency of arrangementsfor the other three regulators. CAV lacks thestatutory basis and status of the other major businessregulators.

A second comparison, in Table 4, of the samevariables across the major regulators within theJustice portfolios similarly reveals CAV to be the ‘oddone out’. Unlike CAV, the Victorian Commission forGambling Regulation (VCGR), the Legal ServicesBoard (LSB), the Business Licensing Authority (BLA)and the Equal Opportunity Commission (EOC) areall bodies corporate established by statutes and withheads appointed by the Governor in Council andexempt from Part 3 of the Public Administration Act2004.

9.2 The broader Victorianregulatory context

66 Victorian Competition and Efficiency Commission, The Victorian Regulatory System, April 2007.67 The Health Professions Registration Act 2005 was passed by the Victorian Parliament in November 2005. It came intooperation on 1 July 2007 and repealed eleven separate health practitioner registration Acts previously in operation (and section108AL of the Health Act 1958 relating to medical radiation practitioners). The Act applies to the twelve health professionsregulated in Victoria and continues the operation of the 11 existing health practitioner registration boards, and theestablishment of a new Medical Radiation Practitioners Board of Victoria.68 As at 30 June 2007, Consumer Affairs Victoria Annual Report 2006-07.

Relating the discussion to Victoria > 43

Even allowing for the diversity across consumerprotection jurisdictions, an arguable ‘good practice’model emerges from the literature and overseasexamples. In comparison with this model, thestructure of CAV and associated arrangements differfrom the main features of the model in three majorrespects:

• the arrangements lack clear statutoryindependence for the regulator

• the absence of a board-type controlling body −with its likely benefits of a greater range of skillsand experience addressing complex matters,greater potential for stability and consistency andlesser risks than may arise from the judgement ofan individual, and

• the location of policy and regulationdevelopment within the regulator which carriespotential risks, such as regulatory creep withassociated growth in regulatory burdens onbusiness, compromised independence throughproximity to the political process and reducedaccountability.

Addressing these differences would also bring CAV intoline with the implicit structural model applied toVictoria’s other major regulators as revealed in Tables3 and 4.

VWA EPA EPA CAV

Approximate number of staff (2006-07) 981 386 62 413

Statute-based? Yes Yes Yes No

Body Corporate? Yes Yes Yes No

Head appointed by Governor-in-Council? Yes Yes Yes No

Head employed as public servant? No No No Yes

Table 3: Institutional arrangements of Victoria’s major business regulators

Table 4: Institutional arrangements of major Justice portfolio regulators

VCGR LSB EOC BLA CAV

Approximate number of staff (2006-07) 134 31 45 2.6 413

Statute-based? Yes Yes Yes Yes No

Body Corporate? Yes Yes Yes Yes No

Head appointed by Governor-in-Council? Yes Yes Yes Yes No

Head employed as public servant? No No No No Yes

9.3 Implications for the consumerprotection regime

44 > Relating the discussion to Victoria

Another issue for consideration is the ‘consumer-relatedness’ and industry scope of CAV’s currentlegislative responsibilities. The consumer affairsportfolio in Victoria contains sixteen industry-specificregulatory schemes involving licensing or registrationrequirements with varying policy objectives.69 Thisrange of schemes occurs to varying extents in otherState consumer protection jurisdictions. Two of theseindustry-specific schemes are the licensing of liquorsupply and prostitution services. The regulation of thesale and supply of liquor and of prostitution services ismore social regulation in character than is the casewith the other occupational licensing schemes withinthe portfolio.70 Both the liquor and prostitutionlegislation restrict who can run legal businesses andprohibit minors from supplying or consuming liquoror prostitution services on licensed premises. Theliquor legislation seeks to minimise the associatedharm and inconvenience caused by misuse, whilst theprostitution legislation seeks to protect the welfare ofworkers and prevent the spread of sexually transmitteddisease. The Prostitution Control Act 1994 also regulatesadvertising and street prostitution. The wider Justiceportfolio within which consumer affairs sits alsocontains gambling regulation. These three schemesare examples of social regulation as discussed inSection 3.3.

Social regulation generally raises broader and morecomplex issues and is more likely to impact across anumber of government departments and thereforemore likely to require a whole-of-governmentapproach. For example, liquor, gambling andprostitution regulation raise significant health,planning and policing issues as well as consumerprotection issues. The input of the range ofgovernment agencies working in these areas isnecessary to fully achieve policy objectives. Theconcept of social regulation may provide an optionfor at least a partial rationalisation of the multiplicityof industry-specific regulators. In considering thestructure of the consumer protection regulator,consideration could also be given to establishing a‘social regulator’ to draw together those schemespredominantly founded on society’s concerns tominimise harm, arising both directly and indirectly,from particular activities.

This paper raises a number of issues for discussion.Only some of those are also part of the debate initiatedby the Productivity Commission’s Draft Report on theReview of Australia’s Consumer Policy Framework. Thescope of its inquiry into Australia’s consumer policyframework includes ways to improve theharmonisation of consumer policy and itsadministration across jurisdictions in Australia,including ways to improve institutional arrangements.However, the draft report’s focus on institutionalmatters is mainly limited to general versus industry-specific and Commonwealth versus States issues.Wider issues in institutional arrangements are notcanvassed. The critical issue of the independence ofregulators in institutional design is not addressed indetail.

The Commission’s draft report favours a singlenational generic consumer law and a single nationalregulator, but acknowledges that there are severalconsiderations that militate against the adoption ofthe one-regulator model, at least in the short tomedium term. Clearly the multiplicity of consumerregulators and the existing key role of State andTerritory consumer affairs agencies in fair tradingcompliance and enforcement are going to continue forthe foreseeable future. Changes to institutional designremain part of regulatory reform options forGovernments at both Commonwealth and State levels.

9.4 Consumer affairs andsocial regulation

9.5 An ongoing issue

69 Machinery of government changes in December 2002 resulted in the shift of Liquor Licensing Victoria and TradeMeasurement Victoria to CAV. The administration of bodies corporate and retirement villages legislation was also transferredto CAV at this time, and gaming and racing regulation and policy were transferred to the Department of Justice.70 David Cousins, The Role of Social Regulation in Building a Civil Society: a Consumer Affairs Perspective, Institute of PublicAdministration Australia (Victorian Division), Forum Melbourne, 29 July 2003.

Appendix—Independent consumer protection agencies in interational jurisdictions > 45

The Appendix compares the organisational structuresand governance arrangements consumer protectionagencies that could be characterised as ‘independent’regulators − that is organisations which aredistinguishable from administrative units of adepartment of government. The Appendix adopts theUK BRTF’s definition of independent previouslyreferred to: ‘A body which has been established by anAct of Parliament, but which operates at arm’s lengthfrom Government and which has one or more of thefollowing powers: referral; advice to a third party;licensing; accreditation; or enforcement’.71

Examples of primary consumer protection agencieswith statutory independence are drawn from a sampleof English-speaking countries and countries withsufficient English-language information ongovernment Internet sites. The examples fall intotwo groups: (i) national institutions; and (ii)state/provincial institutions in federations. Thenational jurisdictions are:

• Danish Consumer Ombudsman

• Ireland’s National Consumer Agency

• New Zealand’s Commerce Commission

• United Kingdom’s Office of Fair Trading, and

• United States’ Federal Trade Commission.

The State and Provincial examples are from theAmerican and Canadian federations to providecomparisons with Victoria:

• British Columbia Business Practices & ConsumerProtection Authority

• California Department of Consumer Affairs

• Massachusetts Office of Consumer Affairs andBusiness Regulation, and

• New York Consumer Protection Board.

A summary of their features is contained in Table A1.Following Table A1, aspects of these independentregulators are described in more detail, agency-by-agency. The description covers:

• consumer protection context − outlines the broadallocation of consumer protection responsibilitiesacross levels of government and majorinstitutions, largely drawing on a UK Departmentof Trade and Industry comparative study in 2003

• statutory status − sets out the legal nature of theregulator and the statute establishing theregulator

• structure, appointment and current composition −outlines the structure of the regulator (forexample a board), the method of appointingstatutory officeholders and the backgrounds ofincumbents (where available from the regulator’sInternet site)

• scope of functions − describes the scope of theregulator’s functions, and

• accountability obligations − describes the reportingobligations placed on the regulator and currentpractice and any other particular accountabilitymechanisms between the regulator andgovernment.

Appendix—Independentconsumer protection agenciesin international jurisdictions

71 BRTF, Independent Regulators, October 2003, p. 6.

A1 Summary of key features

46 > Appendix—Independent consumer protection agencies in international jurisdictions

Table A1: Examples of overseas independent consumer protection agencies

Country Agency Minister Statutory basis Relateddepartment

Main functions

Denmark DanishConsumerOmbudsman(DCO)

Minister ofFamily andConsumerAffairs

The DCOappointed by theMinister ofFamily andConsumer Affairsunder the MarketPractices Act

Ministry ofFamily andConsumerAffairs

Ministry ofFamily andConsumerAffairs

Information provision to consumers andbusinesses. Promotes compliance withand enforces the Marketing Practices Actprohibiting unfair business conduct andthe Act on Certain Payment Instruments.Injunctive powers and can bring civilcases before the Maritime andCommercial Court. Refers criminalmatters to police.

ConsumerComplaintsBoard

Minister ofEconomicand BusinessAffairs

Board membersappointed byMinister ofEconomic andBusiness Affairsunder the Act onConsumerComplaints

Deals with complaints by privateconsumers concerning goods or servicesprovided by businesses. Decisions notbinding or enforceable.

Ireland NationalConsumerAgency(NCA)

Minister forEnterprise,Trade &Employment

Established by s.7of the ConsumerProtection Act2007. NCA BoardMembersappointed by theMinister.

Functions prescribed in s.8 includeresearch, information provision,education, advocacy, complaintshandling and investigation, disputeresolution, enforcement, referral ofcriminal prosecutions.

NewZealand

CommerceCommission

Minister ofCommerce

Established by s.8of the CommerceAct 1986.Functions andpowers re unfairtrading practicesprescribed underthe Fair TradingAct 1986.Commissionersappointed byGovernor-Generalon advice of theMinister ofCommerce.

Ministry ofEconomicDevelopment

Provision of information, investigationand enforcement of Fair Trading Act,Commerce Act and Credit Contracts andConsumer Finance Act 2003. Consumerprotection provisions of Fair Trading Actrelate to misleading and deceptiveconduct, unfair trading practices, productsafety standards and consumer goodslabelling.

UnitedKingdom

Office of FairTrading(OFT)

Secretary ofState forBusiness,Enterprise &RegulatoryReform

Established by s.1of the EnterpriseAct 2002.Membersappointed by theSecretary of State

A ‘non-Ministerialdepartment’

Research and analysis of markets,information provision, education andadvice to consumers, enforces consumerprotection provisions of variouslegislation including the Enterprise Act,Unfair Terms in Consumer ContractsRegulations, Control of MisleadingAdvertisements Regulations, and theConsumer Credit Act.

UnitedStates ofAmerica

Federal TradeCommission(FTC) –consumerprotectionfunctionsperformed byFTC’s Bureauof ConsumerProtection

Reports directto Congress

Established underthe Federal TradeCommission Act(15 USC Sec.41).Commissionersnominated by theUS President,confirmed by theSenate. Presidentselects Chair.

Does notappear to berelated to aDepartment

Consumer education, investigations andenforcement of a variety of consumerprotection legislation and trade regulationrules issued by the FTC intended toprotect consumers against unfair,deceptive or fraudulent practices. TheFTC’s Office of Planning Policyundertakes competition and consumerprotection policy development.


State orProvince

Agency Minister Statutory basis Relateddepartment

Main functions

BritishColumbia(Canada)

BusinessPractices &ConsumerProtectionAuthority ofBritishColumbia(BPCPA).

Minister ofPublic Safetyand SolicitorGeneral

Established as anot-for-profitcorporationunder s.2 of theBusiness Practicesand ConsumerProtectionAuthority Act.Minister mayappoint one ofup to 9 Directors.(The Public ServiceAct does notapply to theauthority’semployees.)

Notapplicable

Notapplicable

Handles consumer inquiries andcomplaints, educates business andconsumers about their rights andresponsibilities, investigates breaches ofconsumer protection laws (including theBusiness Practices and ConsumerProtection Act and Consumer ContractsRegulations) and takes enforcementactions, licences businesses in specificindustries and inspects these industriesand recommends improvement to theregulatory framework.

California(UnitedStates)

DepartmentofConsumerAffairs(DCA)

Secretary ofState andConsumerServicesAgency

DCA establishedby the Businessand ProfessionsCode (originallythe ConsumerAffairs Act 1970.The Director isappointed by theGovernor underthe Code.

Provides information to consumers, dealswith consumer inquiries and complaints,mediates disputes between consumersand traders, enforces consumer lawsthrough actions such as temporaryrestraining orders, ‘cease and desistorders, licence suspensions orrevocations. DCA licences more than100 business and 200 professionalcategories.

Massachusetts(UnitedStates)

Office ofConsumerAffairs andBusinessRegulation(OCABR)

OCABRestablished underChapter 24A ofthe General Lawsof Massachusetts.The Governorappoints theDirector.

Office of theAttorneyGeneral

Advocacy and education to promote fairbusiness practices among the companiesand licensees within its regulatoryjurisdiction. Licenses certain businessesand professions who provide services toconsumers and enforces the statutes andregulations of the boards of registration(29 boards of registration regulating morethan 40 trades and professions). OCABRalso offers mediation services to helpresolve lemon law disputes.

New York(UnitedStates)

ConsumerProtectionBoard(CPB)

Governor Established underss550-553 of theExecutive LawArticle 20 - StateConsumerProtection Board.Board Membersare statutoryoffice holders72and an ExecutiveDirector. EDchairs the Boardand is appointedby the Governor‘with advice andconsent of theSenate’.

Notapplicable

Provides information and education forconsumers, operates a complaints lineand mediates and resolves complaints,develops policy on consumer issues,investigates breaches and enforces certainconsumer protection laws and representsconsumer interests in utility-relatedmatters before the Public ServiceCommission (State regulator of thetelecommunications, electricity, gas andwater utilities.) CPB operates as the StateGovernment’s ‘think tank’ on consumerissues.

[The Department of State licences andregisters certain occupations andbusiness.]

72 Chairman of the Public Service Commission, Superintendents of Banking and Insurance, Commissioners of Agriculture andMarkets, Environmental Conservation, Commerce and Health and the Secretary of State.

Table A1: Examples of overseas independent consumer protection agencies continued


In Nordic law the word ‘Ombudsman’ is commonlyused about an official whose task is to protect theordinary citizens against misuse of political oradministrative power, a guardian of the civil rights.The Danish Parliamentary Ombudsman has that task,whereas the Consumer Ombudsman makes sure thatprivate and public business activities are conducted inaccordance with good market practices. He decides onhis own priorities and does not deal with individualcomplaints. He is an independent powerful figuresupported by staff from the National ConsumerAgency.

Consumer protection context73

Denmark’s consumer policy traditionally focused onprotecting weak or vulnerable consumers. In the1990s, the focus shifted to empowering consumers tomake better choices by providing them with betterinformation and greater transparency and moreeffective means of allowing them to get redress. A newconsumer policy announced in January 2003 carriedthis process further by re-organising the variousconsumer institutions, improving the level of andaccess to information and increasing the level ofchoice available in various services including thoseprovided by the State. There is also an emphasis onimproving the dialogue between business andconsumer so that they take greater responsibility forsolving problems via self-regulation, in particular byplacing greater reliance on private rather than publicmechanisms to resolve complaints.

The Danish Consumer Ombudsman (DCO) is one ofthree related entities involved in implementingDenmark’s national consumer protection regime. Theother entities are the National Consumer Agency ofDenmark and the Consumer Complaints Board. TheDCO is characterised by the Danish Government as‘the Consumer Watchdog’ because of his role insupervising and enforcing compliance with keyconsumer legislation The Marketing Practices Act 2006and The Act on Certain Payment Instruments.

The National Consumer Agency provides informationand advice to consumers and businesses (for exampleguidelines on good marketing practice) in conjunctionwith the DCO) and refers complaints fordetermination by the Consumer Complaints Board.The Agency has primary responsibility for consumerproduct safety in Denmark. The development of policyon consumer issues is the responsibility of the Ministryof Family and Consumer Affairs through the Agency.The Agency provides staff and other resources to theDCO and is the secretariat to the ConsumerComplaints Board.

The Consumer Complaints Board deals with anddecides complaints from private consumers regardinggoods, labour or services provided by businesses withinminimum and maximum price limits.74 Decisions arebased on written documentation and are not bindingor enforceable. After a Board decision, either party maytake the matter to the courts and a decision notcomplied with may be taken to court by the NationalConsumer Agency at the request of the consumer.

The Danish Consumer Council represents the interestsof consumers and is independent of public authoritiesand commercial interests. Founded in 1947, theConsumer Council is the spokesperson for consumers'interests, lobbying vis-à-vis the Government, theParliament, public authorities and the businesscommunity. The Council is involved in a wide rangeof consumer issues: food quality, environmentalprotection, health services, financial and legal services,and issues connected with media,telecommunications, universal services, etc.

Statutory statusThe Marketing Practices Act establishes the institutionof the DCO. Section 22(3) of the 2006 Act provides foran Ombudsman to be appointed by the Minister forFamily and Consumer Affairs.

A.2 Danish ConsumerOmbudsman

73 Department of Trade and Industry (UK) Comparative Report on Consumer policy Regimes: Country Reports – Denmark, October2003.

74 Certain goods and services are exempt (eg vehicle repairs and services provided by ‘craftsmen’) under regulation.


Structure, appointment and currentcompositionThe structure is a single-person statutory office of anOmbudsman appointed for a period of six years withno extension or reappointment permitted. The personappointed is to fulfil ‘the general conditions forappointment as a judge’. The Ombudsman can onlybe removed from office for health reasons or if unfit toremain in the post because of criminality, misconductin service or fraud. Staff assisting the DCO is providedby the National Consumer Agency which is an arm ofthe Ministry of Family and Consumer Affairs. Thecurrent Ombudsman is a lawyer and former head ofthe Property Law Division in the Danish Ministry ofJustice.

Scope of functionsThe DCO monitors compliance with the MarketingPractices Act and orders made under the Act,‘especially in the interests of consumers’. He caninitiate investigations on his own motion or followingsubmission of a complaint, but the DCO is not obligedto investigate all complaints submitted. In deciding onwhether to investigate complaints, the DCO ‘mustprimarily take into consideration his duty to prioritiseconsumer protection activities.’75

The DCO is required to influence traders’ compliancewith the Marketing Practices Act by negotiation in thefirst instance. Where a trader’s negotiated undertakingto comply is disregarded, the DCO may imposeinjunctions on the trader necessary to ensurecompliance with the undertaking. The DCO may, asmay any other party with ‘a legal interest’ in an actionin conflict with the Marketing Practices Act, seek aninjunction or prohibition against such action beforethe Maritime and Commercial Court ofCopenhagen.76 If the purpose of an injunctionobviously would be lost waiting for the court’sdecision, the DCO has power to impose a provisionalprohibition with subsequent review by the court.

The DCO is able to require the disclosure of all detailsconsidered necessary for his activities, including adecision as to whether a matter falls within the scopeof the Marketing Practices Act.

Accountability obligationsExecutive Order no. 890 of 26 October 1994concerning the rules governing the organisation of theOmbudsman institution and its work states:

The Ombudsman must keep the public informed aboutcases of general interest or of particular importance inrelation to the definition of the rules set out in theDanish Marketing Practises Act whether investigated bythe institution itself or the court system. (Section 2)

Cases and judgements are posted on theOmbudsman’s website among other consumer-relatedinformation such guidelines, statements andobservations.

Section 5 of the same Order requires the NationalConsumer Agency to report annually on theOmbudsman’s activities and administration. TheAgency publishes an annual report which is alsoavailable on its website.

The NCA was established by the Irish Government inMay 2007 in response to the CSG report. Theconsumer policy context of its establishment isdiscussed in section 7.

Statutory status and appointmentmethodThe Consumer Protection Act 2007 establishes the NCAas a body corporate with perpetual succession and haspower to sue, and may be sued, in its corporate name.Section 10 provides for membership of the Board ofthe Agency, its numbers, how they are to beappointed, paid, replaced, removed etc. The Sectionprovides that the Board shall consist of a chairpersonand 12 ordinary members and that the chief executive(CEO) shall be a member of the Board. The Minister isobliged to appoint to the Board persons of experienceor capacity in matters relevant to the functions of theAgency and to ensure an equitable balance betweenmen and women in the composition of the Board.The Minister designates one member of the Board asthe chairperson with a term of office of five years anda term may be renewed.

75 Executive Order no. 890 of 26 October 1994.76 Section 27 of the Marketing Practices Act. Cases concerning prohibitions, damages and remuneration may also be broughtby anyone with a legal interest.

A.3 Irish National ConsumerAgency


Section 13 provides that the Board may establishcommittees to assist performing its functions, withcommittees including persons who are not on theBoard or staff of the Agency. The Board is obligedwhen appointing a committee to have regard to thequalifications and experience necessary to enable thecommittee to discharge its functions and the genderbalance of the committee.

Section 14 provides for a CEO to be appointed (andmay be removed from office) by the Board with theapproval of the Minister. The CEO is appointed undera contract for not more than five years subject to termsand conditions determined by the Board with theapproval of the Minister and the consent of theMinister for Finance. The contract may be renewed.

Governance arrangements andcurrent compositionThe CEO is subject to the control of the members ofthe Board and specifically the chief executive isanswerable to the Board for the performance of his orher functions and the implementation of the Agency’spolicies. The Act requires the Agency to submit anannual work program to the Minister at least twomonths before the commencement of the financialyear and that the Minister may issue guidelines ordirections to the Agency in relation to the preparationof the work program.

Section 10 provides that members of the Board ‘shallbe persons who in the opinion of the Minister haveexperience of or shown capacity in matters relevant tothe functions of the Agency. The NCA Board iscomprised currently of 11 members, a chairman andchief executive. The chairman is a former chiefexecutive of Marks & Spencer in Ireland; three are inbusiness; three are ‘consumer representatives’ (fromthe community services sector); one is a ‘consumerchampion (formerly a director of the Consumers’Association of Ireland); two are economics and lawacademics in the competition and consumerregulation fields; one is from the education sector andthe chairperson of the Irish Competition Authority isalso a Board member.

Scope of functions and powersThe Act establishes the NCA with a general function ofpromoting and protecting the interests and welfare ofconsumers with specific responsibility for investigating,enforcing and encouraging compliance with consumerprotection legislation including, where appropriate,referring cases involving possible indictable offences tothe Director of Public Prosecutions.

In addition, the NCA is to advise and makerecommendations to the Government on any policyor legislative proposals impacting or likely to impactupon consumer protection and welfare. The NCA mayinitiate proposals to the Government to amend anyexisting legislation or to introduce new legislation inrelation to consumer protection and welfare as well asenabling the Agency to advise and makerecommendations to the Government, public bodiesor other bodies prescribed under the Act in relation toany matter concerning consumer protection andwelfare. The Minister is empowered to direct the NCAto undertake reviews of existing consumer protectionlegislation and to request it to assist in the preparationof draft legislation. The Agency is obliged to consultwith appropriate persons prior to submitting proposalsto the Minister or other Ministers. The Agency is toconsult with consumer groups and representatives andco-operate with other competent authorities topromote consumer welfare and the enforcement ofconsumer protection laws.

The NCA has specific functions to promote alternativedispute resolution mechanisms for resolving consumercomplaints, conduct and commission research relatingto its functions and, where it sees fit, publishing anyfindings from such research, promote awareness andconduct information campaigns on consumerprotection and welfare, promote educational initiativesand activities for consumer protection. The NCA may,financially or otherwise, support the activities ofvoluntary bodies relating to consumer protection andwelfare. The Act also requires the Agency to prepareand publish guidelines to traders and to review andapprove Codes of Practice submitted to it.

Accountability obligationsThe Act provides that the CEO can be required toaccount for the general administration of the Agencybefore the relevant Parliamentary Committee. Section20 also obliges the NCA to submit a strategy statementfor the following three-year period to the Ministerevery three years and stipulates the information to beincluded in the strategy statement. The Sectionempowers the Agency to consult appropriate personsor bodies when preparing its strategy statement. TheMinister is obliged to table the statement in Parliamentas soon as practicable after it has been submitted tohim. The NCA is also required to provide the Ministerwith an annual report, which is to include suchinformation as the Minister may direct and theMinister is required to table it in Parliament. The Actalso provides that the Agency may submit to theMinister such other reports, advice or information inrelation to its functions as it feels appropriate or asrequested by the Minister.


Consumer protection contextAs in Denmark, responsibility for various aspects ofconsumer protection in New Zealand is spread acrossseveral entities. The Ministry of Consumer Affairs, partof the Ministry Economic Development, providespolicy advice to the Government on consumerprotection matters generally, product safety and trademeasurement. It also provides information forconsumers and businesses on their responsibilities andrights under consumer legislation. The Ministryenforces product safety and trade measurementlegislation. However, it does not enforce the FairTrading Act 1986 nor give advice to, or take civilactions on behalf of, aggrieved consumers.

The Commerce Commission (CC) enforces the FairTrading Act’s provision intended to protect consumersfrom misleading and deceptive conduct and unfairtrading practices. The CC also is the primarycompetition regulator and has responsibility for someindustry-specific regulation in the energy,telecommunications, finance and dairy sectors.

The volunteer-based Citizens Advice Bureaux (CAB)provides general consumer information and advice.CAB is the only organisation in New Zealand whichprovides a free, national, face-to-face service tomembers of the public regarding consumer rightsissues. The service is confidential and impartial andcan be accessed in person, by phone or by email.

Statutory statusThe CC is an ‘independent Crown entity’ establishedunder section 8 of the Commerce Act 1986. The Actrequires that ‘the Commission must act independentlyin performing its statutory functions and duties andexercising its statutory powers’ except as expresslyprovided otherwise in the Act or other legislation.The Commission is not subject to direction from theGovernment in carrying out its enforcement andregulatory control activities.77 Section 105 of theCrown Entities Act 2004 provides that ‘a responsibleMinister of an independent Crown entity…may notdirect the entity or company to have regard to or togive effect to a government policy unless specificallyprovided in another Act. The Commerce Act providesthat in exercising its powers, the Commission ‘shall

have regard to the economic policies of theGovernment as transmitted in writing from time totime to the Commission by the Minister’ (section 26).The Minister is required to table in Parliament everystatement of economic policy transmitted to theCommission. A statement of economic policytransmitted to the Commission is not a direction forthe purposes of section 105 of the Crown Entities Act2004.

Structure, appointment method andcurrent compositionThe Commission comprises no less than four, and nomore than six, members. No less than three, and nomore than five, of these must be appointed by theGovernor-General on the recommendation of theresponsible Minister. One of these must be appointedas Telecommunications Commissioner under theTelecommunications Act 2001. The Minister may onlyrecommend a person who, in the responsibleMinister's opinion, ‘is qualified for appointment,having regard to the functions of the Commission, byvirtue of that person’s knowledge of or experience inindustry, commerce, economics, law, accountancy,public administration, or consumer affairs’ (section9(4)(b). At least one member appointed by theGovernor-General must be a barrister and solicitor ofat least five years’ standing and the Minister must haveconsulted the Attorney-General prior torecommending that person.

The Commission currently comprises a Chair andDeputy Chair, three Commissioners and theTelecommunications Commissioner. The current Chairwas formerly a senior public servant, the Deputy Chaira partner in a law firm, and the three commissionershave law, accounting and economics backgroundsrespectively.

Scope of functionsIn relation to direct consumer protection (as distinctfrom promoting competition which can be viewed asultimately also protecting consumers), as noted abovethe, CC is primarily the enforcement agency for theFair Trading Act which prohibits misleading anddeceptive conduct by traders. In ensuring compliancewith the legislation, the Commission undertakesinvestigation and where appropriate takes court action.

A.4 New Zealand CommerceCommission

77 Commerce Commission website ‘Overview’ Refer www.comcomgovt.nz/The Commission/Overview.aspx


Accountability obligationsMembers are accountable to the responsible Ministerfor performing their duties as members. Section 150 ofthe Crown Entities Act requires the Commission at theend of each financial year to report to the responsibleMinister who must then table the report in Parliament.The annual report must provide information necessaryto enable an informed assessment of the its operationsand performance for that financial year, including anassessment against the intentions, measures, andstandards set out in the statement of intent preparedat the beginning of the financial year.

The origins of the OFT are outlined in Section 7.1.


Consumer policy is the day-to-day responsibility of theParliamentary Under Secretary of State forEmployment Relations, Competition and Consumersin the Department for Business, Enterprise andRegulatory Reform (BERR) (formerly the Departmentof Trade and Industry, ‘DTI’). The Consumer andCompetition Policy Directorate is responsible for fairand safe trading issues in relation to the economicinterests and safety of consumers, although somespecific safety issues (for example gas and electricalproducts) fall to other Directorates in the Department.Legislation on consumer matters is a matter forWestminster in respect of England, Scotland andWales. Enforcement of consumer law is undertaken bythe Office of Fair Trading, local authorities and somespecified designated bodies.

The Consumers, Estate Agents and Redress Act 2007established a ‘new' National Consumer Council (NCC)as a body corporate to replace the company limited byguarantee of then same name, which was originallyestablished in 1975, and energywatch and Postwatch.It is funded by the Government which recovers someof the Council’s costs from payments made bylicensees in the utilities and postal services sectors.The Council has three core functions: to provideadvice and information, to make proposals aboutconsumer matters and to represent the views ofconsumers to Ministers, regulators, the EuropeanCommission and anyone else the Council considersmight have an interest. The NCC is also required to

enter into cooperation arrangements with otherbodies, including the Office of Fair Trading, to securethe coordination of activities relating to the provisionof advice or information to consumers.

The NCC is not required to act for individualconsumers (except in respect of utility disconnections),but is able to investigate complaints made byvulnerable consumers or where the Council considersthat the subject matter is of general relevance toconsumers. The main role of the Council is to act onbehalf of all consumers, as opposed to dealing withindividual complaints, which is the role of ConsumerDirect (the consumer advice service supported by theOFT) and other existing the redress schemes.

Statutory statusAs noted in Section 7.1, the Enterprise Act replaced theoffice of the Director General of Fair Trading with theOFT. The OFT is a statutory corporate body consistingof a Chairman and at least four other members, mostof whom are non-executive appointments. The OFTwas established as a Non-Ministerial GovernmentDepartment, is a Crown body and is staffed by civilservants.

Structure, appointment and currentcompositionThe OFT has a board structure with the chairpersonappointed by the Secretary of State; the other membersare appointed by the Secretary of State in consultationwith the chairperson. Terms of appointment cannotexceed five years. There is also a Chief Executive whomay be, and currently is, a member of the Board.

The current Board is comprised of ten members: fourexecutives (including the Chair) and six non-executives. The backgrounds of the current membersare:

• executive members

• Chairman − lawyer specialising in UK andEuropean competition law

• Chief Executive − economist and formerlyChairperson of the Irish CompetitionAuthority

• executive director − OFT Executive Director ofPolicy and Strategy and formerly competitionpolicy adviser in the Department of Business,Enterprise and Regulatory Reform

A.5 UK Office ofFair Trading

78 Department of Trade and Industry (UK) Comparative Report on Consumer policy Regimes: Country Reports – United Kingdom,October 2003.


• executive director − OFT Executive Director ofMarkets and Projects and formerly a partner ina consulting firm and adviser in the PrimeMinister’s Policy Unit

• non-executive members:

• a consumer advocate

• two company directors

• a business economist

• an academic economist specialising incompetition law and policy, and

• an academic lawyer specialising incompetition law and policy.

Scope of functionsThe OFT’s goal is to make markets work well forconsumers. It aims to achieve this through theenforcement of consumer (and competition) law, theinvestigation of markets, investigation of complaintsand communication with consumers, business,Government and others working in consumer andbusiness focussed organisations. Specific consumerprotection functions set out in the Enterprise Act are:provision of information and advice to the public,including publication of educational materials;provision of information and advice to Ministers;promoting good trading practices, including approvingconsumer codes79. Key consumer protectionlegislation where the OFT has responsibility forenforcement are:

• Consumer Credit Act 1974 (credit licensing)

• Unfair Terms in Consumer Contracts Regulations1999

• Consumer Protection (Distance Selling)Regulations 2000

• Estate Agents Act 1979 (estate agent licensing)

• Control of Misleading Advertisements Regulations1988, and

• ‘Stop Now Orders’ under the Enterprise Act 2002.

Accountability obligationsUnder the Enterprise Act the OFT is obliged to publishbefore the start of each financial year an ‘annual plan’containing a statement of its main objectives andpriorities for the year. A draft plan for consultationmust be published at least two months before the finalplan is published. As soon as practicable after the endof each financial year the OFT is also required toprovide an annual report on its activities andperformance during that year to the Secretary of State.Annual plans and annual reports must be tabled inParliament. The annual report must include:

• a general survey of developments relating to theOFT’s functions

• an assessment of the extent to which objectivesand priorities for the year (as set out in theannual plan) were met

• a summary of significant decisions, investigationsor other activities

• an assessment of enforcement performance andpractices, and

• a summary of the allocation of financial resourcesto its various activities.

A Minister may request the OFT to make proposals orgive other information or advice on any matterrelating to any of its functions; and the OFT is obligedto comply with the request, so far as is reasonablypracticable and consistent with its other functions.

The OFT is also accountable to the public throughParliamentary scrutiny both in Westminster and thedevolved administrations, for example throughinvestigations by select committees. The OFT'slicensing decisions under the Consumer Credit Actare subject to appeal heard by an independent panel.Where the OFT enforces consumer protection law,through the courts, its actions can be appealed there.

79 A code of practice or other document (however described) intended, with a view to safeguarding or promoting the interestsof consumers, to regulate by any means the conduct of persons engaged in the supply of goods or services to consumers.



Responsibility for consumer policy is split betweenfederal agencies (principally, in the economic field, theFederal Trade Commission (FTC) and consumerdepartments at state, county and city level. The resultis a ‘patchwork quilt’ of different state and federalrules, coupled with overlapping jurisdictions for tradersdoing business in more than one state. The FTC leadson policy, law and enforcement issues with a federal(multi-state or inter-state) dimension and is responsiblefor the core legislation on the protection of consumers’economic interests, the Federal Trade Commission Act.Product safety is the responsibility of a federal agency,the Consumer Product Safety Commission, which is to‘protect the public against unreasonable risks ofinjuries and deaths associated with consumerproducts’. Some particular types of products arecovered by other federal agencies, such as theDepartment of Transportation; the Food and DrugAdministration; and the Department of the Treasury.

Many of the states have their own consumerprotection statutes and sale of goods legislation (inuniform commercial codes) which mirror andsupplement federal laws. Federal statutes can end upas minimum requirements in the way that someEuropean Community directives are for MemberStates. States may also conduct investigations,prosecute offenders, provide information, mediatecomplaints and advocate in the consumer interest.Many states and some cities and counties license orregister professionals and traders such as doctors,lawyers, home improvement firms, car repairers, debtcollectors and child carers. City and county consumeroffices tend to administer local ordinances includinglicensing systems.

Enforcement at state level is usually the responsibilityof the Attorney-General, who is the chief legal officerand in most cases publicly elected. The Attorney-General’s Office, (or in some cases the Department ofJustice which the Attorney-General heads) may includea consumer protection division. Smaller states tend tohave this arrangement, rather than separate consumeraffairs departments or statutory bodies. Some statesalso have separate consumer affairs departments thatare responsible for work such as licensing. State

Weights and Measures Offices enforce laws andregulations about the labelling, weight, measure orcount of packaged items like food and householdproducts. They also check the accuracy of weighingand measuring devices such as supermarket scales andpetrol pumps. Some city and county offices also haveweights and measures functions. In addition to majorfederal regulators such as the Securities and ExchangeCommission and the Federal Reserve System, there arenetworks of state banking authorities, insuranceregulators and securities administrators.

Statutory statusThe FTC is an independent agency first establishedunder the Federal Trade Commission Act in 1914.

Structure, appointment and currentcompositionThe Commission is comprised of five membersappointed by the President of the United States ‘byand with the advice of the Senate’ for terms of up toseven years’ duration. The President selects oneCommissioner to act as Chairman. No more thanthree Commissioners can be of the same politicalparty. The current Chairman was formerly a lawyerspecialising in antitrust law and a senior official in theUS Department of Justice’s Antitrust Division. All ofthe four Commissioners have legal backgrounds, withspecialisations in antitrust law, and variously heldsenior positions in federal government departments oragencies, Senate committees’ staffs or law firms.

The FTC’s major organisational components are three‘Bureaus’ − Consumer Protection, Competition andEconomics − nine functional offices and seven regionaloffices.

Scope of functionsThe FTC Consumer Protection Bureau’s mandate is toprotect consumers against unfair, deceptive orfraudulent practices. The Bureau combinesresponsibility for both policy/lawmaking andenforcement. Its work includes company and industryinvestigations, administrative and federal courtlitigation, rulemaking proceedings, and consumer andbusiness information and education. The Bureaucontributes to the Commission’s work of informingCongress and other government entities of the impactthat proposed actions could have on consumers.

A.6 USA Federal TradeCommission

80 Department of Trade and Industry (UK) Comparative Report on Consumer policy Regimes: Country Reports – United States,October 2003


It enforces a range of consumer laws enacted byCongress and trade regulation rules issued by theCommission. The basic consumer protection statuteenforced by the FTC is Section 5(a) of the FTC Act,which provides that ‘unfair or deceptive acts orpractices in or affecting commerce are declaredunlawful’.81 The FTC also enforces a considerablenumber of specific consumer protection statutes, suchas the Textile Fiber Products Identification Act, the FairPackaging and Labeling Act and the Truth in LendingAct. These prohibit certain practices and generally treatviolations as unfair or deceptive acts or practices underSection 5(a). They rely heavily on informationdisclosures. The legislation also authorises or directsthe Commission to issue more detailed regulations,such as the rules on telemarketing, sales made athomes, funerals, franchises and mail or telephoneorders. The FTC publishes a series of detailed guides,statements and interpretations in relation to particularsectors or issues.

Accountability obligationsUntil 1998, the FTC reported annually to Congress.Since 1999, the FTC has published its annualperformance reports to the Office of Management andBudget (OMB) and since 2002 has published annualreports by the Chairman. In addition to theChairman’s report, the FTC currently prepares andpublishes each year two major statements related toaccountability.

• A Performance and Accountability Reportprepared pursuant to the requirements of theAccountability of Tax Dollars Act 2002 and subjectto regulations issued by the OMB. This containsannual performance information required by theOMB’s and the Government Performance Results Act1993 (GPRA) including a detailed discussion andanalysis of the FTC’s performance related to itstwo GPRA strategic goals and related objectives.

• A five-year period Strategic Plan in accordancewith the GPRA which includes:

• the FTC’s mission statement

• strategic goals and objectives defining how theFTC will fulfil its mission

• a description of the means and strategies thatwill be used to achieve the strategic goals andobjectives

• descriptions of the relation betweenperformance goals or measures in the annualperformance budget and the strategic goalframework

• identification of key factors that could affectachievement of the strategic goals andobjectives, and

• a description of program evaluations used inpreparing the Strategic Plan and a schedule forfuture evaluations.


The Canadian Constitution Act does not specificallyassign consumer affairs to federal or provincialjurisdiction. The federal government is responsible forthe broad rules of the marketplace relating to peace,order and good government, trade and commerce,criminal law, currency, banking and weights andmeasures. In practice the federal government isresponsible for national standards relating to foodsafety, transport safety, product safety (exceptelectrical), labelling, legal metrology, banking andinterest rates, competition policy. Federal legislationrelating to misleading advertising and unfair practicesis seen as competition not consumer policy, part ofensuring a level playing field for traders.

Provincial governments, under their power to regulateproperty and civil rights, regulate individualtransactions, contracts and sales of goods and services,and most industry specific issues. They are responsiblefor sale of goods and services, guarantees, licensing oftraders, electrical safety, credit unions and structuralsafety. Ontario, with the largest population, tends toset the standards that other provinces will follow, forexample in the area of electrical safety.

There also exist areas that require cooperation betweenthe two levels of government as both have somedegree of responsibility (for example, misleadingadvertising, company registration, financialinstitutions). Mechanisms for harmonisation in theseareas include the Agreement on Internal Trade, theUniform Law Conference and legislated codes (forexample, electrical code, building code).

81 Unfair practices are defined to mean those that cause or are likely to cause substantial injury which is not reasonablyavoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.82 Department of Trade and Industry (UK) Comparative Report on Consumer policy Regimes: Country Reports – Canada, October2003.

A.7 British Columbia BusinessPractices & ConsumerProtection Authority


The federal Office of Consumer Affairs (OCA) − part ofthe Ministry of Industry (‘Industry Canada’) − worksto: give consumers tools they can use to makeinformed decisions by creating information products;expand practical consumer protections in themarketplace by encouraging the development ofvoluntary codes and standards; build the capacity ofconsumer organizations so that they can contributemore meaningfully to public policy development; andto develop a co-operative agenda with the provincesand territories by facilitating harmonisation ofconsumer protection legislation and regulations.The federal Minister co-chairs the Federal-Provincial-Territorial Committee of Ministers Responsible forConsumer Affairs.

Statutory statusThe Business Practices and Consumer ProtectionAuthority (BPCPA) was established to strengthenconsumer protection in British Columbia and assumedthe consumer protection activities previouslyperformed by the Ministry of Public Safety and theSolicitor General. As an independent authority, theBPCPA is intended to have greater flexibility torespond quickly to a changing business environment.

The BPCPA is established under the Business Practices &Consumer Protection Authority Act 2004. The purposes ofthe Authority are ‘to deliver consumer protectionservices…to promote fairness and understanding inthe marketplace and to administer in the publicinterest any Act…delegated to the authority’ (section4). It is a not-for-profit corporation without sharecapital and consists of a board of directors appointedunder the Act. The BPCPA is not an agent of theGovernment of British Columbia and employees ofthe Authority are not public servants.

Structure, appointment and currentcompositionThe board of directors consists of up to nine directors,one of whom is appointed by the Minister. The initialboard appointed in 2004 under the Act’s transitionalprovisions was a chair appointed by the Minister andtwo other directors appointed by the chair from a listof candidates selected on merit according to theirknowledge, skills and abilities. The normalappointment process after the initial board is that theboard appoints directors from a list of candidatesrecommended by a nominating committee of theboard. The directors may appoint any director to bethe chair of the board, except the director appointedby the Minister. Eligibility for appointment to theboard requires that a person is not an undischargedbankrupt and has no convictions relating to businessactivities.

The current board of BPCPA has five directors.The Chair is a chartered accountant with public andprivate sector consulting experience, including a termas Assistant Auditor-General of British Columbia.Other directors are: a lawyer with extensive experiencein provincial criminal law; a partner in a privateconsulting firm specialising in corporatecommunication and planning; the chairman of aprivate consulting firm who also has substantialexperience in the pharmaceutical industry; and thepresident of a construction industry association.

Scope of functionsThe principal consumer protection law the BPCPAadministers is the Business Practices and ConsumerProtection Act. In addition, the BPCPA administers thefollowing regulations:

• the Business Practices and Consumer ProtectionRegulation

• the Consumer Contracts Regulation

• the Debt Collection Industry Regulation

• the Travel Industry Regulation

• the Telemarketer Licensing Regulation

• the Fee Setting Criteria Regulation

• the Cremation, Interment and Funeral ServicesRegulation

• the Administrative Penalties Regulation, and

• the Motion Picture Act Regulations.

The BPCPA protects consumers and encourages fairbusiness practices by:

• responding to inquiries and complaints fromconsumers and businesses

• informing and educating consumers andbusinesses about their rights and responsibilitiesand consumer protection

• licensing businesses in specific industries

• inspecting these licensed industries to ensure theyare complying with Business Practices andConsumer Protection Act consumer protectionlaws

• investigating alleged violations of consumerprotection laws and following up withappropriate enforcement action, and

• recommending amendments to consumerprotection laws to the British Columbiagovernment.


Accountability obligationsThe Business Practices & Consumer ProtectionAuthority Act requires the BPCPA to prepare andpublish an annual report on its operations, includingoperational programs showing a comparison of actualresults with expected results for the year. It is alsorequired to prepare and publish a business plan for thenext three fiscal years before the commencement ofeach fiscal year.

Consumer protection contextThe broader United States’ consumer protectioninstitutional context is outlined in Section 8.5 above.The Department of Consumer Affairs (DCA) includes40 regulatory entities (nine bureaus, one program,25 boards, three committees, one commission and oneoffice). The committees, commission and boards aresemi-autonomous bodies whose members areappointed by the Governor and the Legislature.DCA provides them with administrative support.Almost exclusively fees from licensing businessesand occupations fund DCA’s operations. DCA licencesmore than 2.4 million professionals in more than255 professions.

Statutory statusThe DCA is established by the California Business andProfessions Code (sections 100-144). It was originallyestablished by the Consumer Affairs Act 1970.83 TheCode provides for a civil executive office, the holder ofwhich is known as the Director of Consumer Affairs, tocontrol the Department. Personnel of the Departmentare employed under the State Civil Service Act.

Structure, appointment and currentcompositionThe Director is appointed by the Governor ofCalifornia under the Code and holds office at theGovernor's pleasure.

Scope of functionsThe role of the DCA is to promote and protect theinterests of by facilitating the functioning of themarket economy through: (a) educating and informingconsumers to promote rational consumer choice in themarketplace; (b) protecting consumers from the sale ofgoods and services which use of deceptive methods,acts, or other unfair practices inimical to the welfare ofconsumers; (c) fostering competition; and (d)promoting effective representation of consumers'interests in all branches and levels of government.The DCA operates a call centre to receive inquiries andcomplaints, publishes guides for consumers andbusinesses, mediates disputes between businesses andcustomers and enforces a wide range of consumer lawsincluding laws covering false advertising, unfair tradepractices, weights and measures, business names,trademark registration, second-hand goods, gamblingand franchise relations.

The director is under a statutory obligation to‘recommend and propose the enactment of suchlegislation as necessary to protect and promote theinterests of consumers’ and must maintain contactand liaison with consumer groups in California andnationally (section 310).

Accountability obligationsThe Director is required to submit annual reports tothe Governor and the Legislature. Each annual reportis to report programmatic and statistical informationregarding the activities of the DCA and its constituententities. The report must also include information onthe number and general patterns of consumercomplaints and the action taken on those complaints.

A.8 California Department ofConsumer Affairs

83 Chapter 4 of the current Code is referred to as the Consumer Protection Act.


Consumer protection contextThe broader United States consumer protectioncontext is outlined in Section 8.5. Within the Stateof Massachusetts, there are two main entities withconsumer protection responsibilities. The Office ofConsumer Affairs and Business Regulation (OCABR)is responsible for consumer advocacy and education,administration and enforcement of business licensingand mediation services to help resolve lemon lawdisputes. The Consumer Protection Division of theOffice of the Attorney General is the principal agencyenforcing consumer law and it funds local consumerprograms that receive and mediate written consumercomplaints.

Statutory statusChapter 24A of the General Laws of Massachusetts(GLM) provides for an ‘Office of Consumer Affairs andBusiness Regulation’ (OCABR). The law provides forOCABR to be headed by a full-time Director ofConsumer Affairs and Business Regulation.

Structure, appointment and currentcompositionThe GLM specifies the OCABR shall contain the StateRacing Commission, a Division of Business Regulation,a Division of Banks, a Division of Insurance, a Divisionof Standards (trade weights and measures), a Divisionof Professional Licensure, and a Division of ConsumerAffairs including boards of registration.

Scope of functionsThe OCABR’s broad consumer protection function is toprotect consumers through advocacy, education andensuring fair and honest business practices among thecompanies and licensees within its jurisdiction.Chapter 24A, Section 2 of the GLM specifies thefollowing duties for OCABR:

• maintaining a telephone information service

• conducting surveys of consumer needs

• investigating consumer problems in cooperationwith the attorney general

• publishing educational brochures

• establishing programs and services to assistconsumers in understanding their rights andresponsibilities in consumer transactions

• recommending and implementing consumerprotection policies

• monitoring the marketplace to promote fair andhonest competition, and

• establishing a trust fund for the purpose ofconsumer education and to further the Office’sother purposes.

Accountability obligationsUnder MGL Chapter 30A, the Director of ConsumerAffairs and Business Regulation is required to developperformance measures to evaluate the effectiveness ofthe Office‘s programs in accomplishing theirobjectives. MGL Chapter 98, Section 57 requires theDirector of the OCABR to prepare and submit to theGovernor, and Parliamentary committees on audit andoversight an annual report of the activities of theDivision of Standards, including the net loss restoredto consumers and merchants as a result of itsenforcement program.

A.9 Massachusetts Office ofConsumer Affairs and BusinessRegulation


Consumer protection contextThe broader United States consumer protectioninstitutional context is outlined in Section 8.5. WithinNew York State, there are two bodies with consumerprotection responsibilities: the Consumer ProtectionBoard (CPB) created in 1970 to be the State’s‘consumer watchdog’ and the Bureau of ConsumerFrauds and Protection in the Office of the New YorkAttorney-General. CPB is discussed in detail below.The Bureau prosecutes businesses and individualsengaged in fraudulent, misleading, deceptive or illegaltrade practices. In addition to litigating, the Bureaumediates complaints from individual consumers, alarge percentage of which are resolved satisfactorilythrough the mediation process. The Bureau providesinformation to consumers and seeks to ensure a fairand vigorous market place. The Bureau also draftslegislation and conducts studies and writes reports onemerging consumer problems and issues. At firstglance, there seems to be duplication between thesetwo bodies around consumer information, complainthandling and dispute resolution and policydevelopment. However, under State law, the CPB isgiven the role of coordinating the activities of all stateagencies performing consumer protection functionsand the Attorney-General is required to coordinate theenforcement powers of his office with the activities ofthe CPB.84

Statutory statusThe CPB is established under Article 20 (‘StateConsumer Protection Board’) of the New York StateExecutive Law, sections 550-553. The Law alsoestablishes the office of executive director.

Structure, appointment and currentcompositionThe Board consists of an executive director and,ex officio, a number of appointed State statutoryofficeholders (effectively heads of various Statedepartments and regulatory agencies): the Chairmanof the Public Service Commission; the Superintendentof Banking; the Superintendent of Insurance; theCommissioners of Agriculture and Markets,Environmental Conservation, Commerce and Health,and the Secretary of State. Members of the Board otherthan the executive director receive no remunerationfor their services as members, other than expensesincurred.

The executive director is the chair of the CPB. Theexecutive director is appointed by the Governor ofNew York ‘with the advice and consent of’ the NewYork Senate and holds office ‘during the pleasure of theGovernor’. The executive director has broad statutorypower to ‘establish, consolidate, reorganize or abolishany organizational units under the Board as hedetermines to be necessary for efficient operation’.The executive director can appoint staff, agents andconsultants as considered necessary and fix theirremuneration within the CPB’s budgetaryappropriation.

Scope of functionsThe Board coordinates the activities of all stateagencies performing consumer protection functions.The executive director supported by staff, at thedirection of the Board, has the following functions:

• conducting investigations, research, studies andanalyses of matters affecting the interests ofconsumers

• cooperating with and assist the Attorney-Generalin the carrying out of his legal enforcementresponsibilities for the protection of consumers

• cooperating with and assisting consumers in classactions

• representing the interests of consumers beforefederal, state and local administrative andregulatory agencies

• studying the operation of consumer protectionlaws and recommending to the Governor newlaws and amendments of laws for consumerprotection

• conducting (or organising through contractors)product research and testing

A.10 New York ConsumerProtection Board

84 Article 20 of the New York State Executive Law, sections 550 and 553.


• initiating and promoting consumer educationprograms

• cooperating with and assisting local governmentsin the development of consumer protectionactivities

• establishing advisory councils to assist in policyformulation on specific consumer problems, and

• encouraging business and industry to maintainhigh standards of honesty, fair business practicesand public responsibility in the production,promotion and sale of consumer goods andservices.

The CPB is organised into three main bureaus ordivisions to achieve its mission of protecting,educating and representing consumers: The Outreachand Program Development Bureau developscomprehensive consumer education programs.A Consumer Assistance Unit within the Bureau takescomplaints on a variety of topics including productrefunds and returns, credit card disputes, Internetservices, home improvement and identity theft andmediates to resolve them. The Counsel, Policy andResearch Bureau is responsible for the agency’s legalfunctions including, enforcement of the New YorkState ‘Do Not Call’ law; implementation of legislativeprograms; conducting investigations; developingpolicy; filing comments on state and federal consumerissues; conducting public hearings; and, collaboratingwith federal and local consumer protection agencies.The Utility, Telecommunications and NewTechnologies Bureau intervenes on behalf ofconsumers regarding utility-related matters before thePublic Service Commission and handles consumercomplaints about the Long Island Power Authority.Additionally, the Bureau considers matters relating tonew technologies; landline and wirelesstelecommunications, radio frequency, satellite andbroadband communication. The CPB serves as theconsumer “think-tank” for the State, initiating policydevelopment and providing consumers with greateraccess to the information and tools they need to makeeducated marketplace decisions.

Accountability obligationsThe legislation establishing the CPB requires the Boardto prepare quarterly a report to the Governor andlegislature on the category and number of consumercomplaints received by the board. The executivedirector is required to prepare an annual report to theGovernor and to the legislature on the CPB’s activities.

References > 61

Better Regulation Task Force [United Kingdom],Independent Regulators, October 2003,http://www.brtf.gov.uk

_________ Revised Principles of Good Regulation 2003,http://www.brtf.gov.uk

_________ Avoiding Regulatory Creep, October 2004http://www.brtf.gov.uk

Consumer Affairs Victoria, Choosing between Generaland Industry Specific Consumer Regulation, CAVDiscussion Paper, January 2006

Consumer Strategy Group [Ireland], Make ConsumersCount: A New Direction for Irish Consumers, Dublin,April 2005.

Cousins, D., The Role of Social Regulation in Building aCivil Society: a Consumer Affairs Perspective, Instituteof Public Administration Australia (Victorian Division),Forum Melbourne, 29 July 2003.

Deighton-Smith, R., 'Regulatory Transparency in OECDCountries: Overview, trends and challenges' inAustralian Journal of Public Administration, Volume 63Number 1, March 2004.

Department of Treasury and Finance, Victorian Guide toRegulation, February 2005.

Department of Trade and Industry [United Kingdom],Modern Markets: Confident Consumers, July 1999.

_________ Comparative Report on Consumer PolicyRegimes, October 2003.

_________ Comparative Report on Consumer policyRegimes: Country Reports – Denmark, October 2003

_________ Comparative Report on Consumer policyRegimes: Country Reports – United Kingdom, October2003

_________ Comparative Report on Consumer policyRegimes: Country Reports – United States, October 2003

_________ Comparative Report on Consumer policyRegimes: Country Reports – Canada, October 2003

_________ Reducing Administrative Burdens – theConsumer Trading Standards Agency, Consultation, July2005.

_________ Reducing Administrative Burdens – theConsumer Trading Standards Agency, Consultation,Summary of Responses to the Consultation, March 2006.

Faure-Grimaud, A. and Martimort, D., ‘RegulatoryInertia’ in RAND Journal of Economics, Vol. 34 No. 3,Autumn 2003, pp. 413-4.

Federal Communications Commission, Connecting theGlobe: A Regulator’s Guide to Building A GlobalInformation Community, Washington DC, June 1999www.fcc.gov/connectglobe/sec1.html

Göneç, R., Maher, M. and Nicoletti, G., TheImplementation and the Effects of Regulatory Reform: PastExperience and Current Issues, OECD Economic StudiesNo. 32, 2001/I.

Gilardi, F., ‘Evaluating Independent regulators’ inOECD, Designing Independent and Accountable RegulatoryAuthorities for High Quality Regulation, Paris, January2005. http://www.oecd.org/subject/regreform

Hampton, P., Reducing Administrative Burdens: EffectiveInspection and Enforcement, HM Treasury London,March 2005.

House of Lords Select Committee on the Constitution,The Regulatory State: Ensuring its Accountability, HL Paper68-I, London, May 2004.

Jacobzone, S., ‘Independent Regulatory Authorities inOECD Countries: an overview’ in OECD, DesigningIndependent and Accountable Regulatory Authorities forHigh Quality Regulation, Paris, January 2005.http://www.oecd.org/subject/regreform

Ladegaard, P., ‘Good Governance and RegulatoryManagement’ background note for OECD RegulatoryManagement and Reform Seminar, 19-20 November2001, Moscow.

References

62 > References

Majone, G., ‘Strategy and Structure: the PoliticalEconomy of Agency Independence and Accountability’in OECD, Designing Independent and AccountableRegulatory Authorities for High Quality Regulation, Paris,January 2005. http://www.oecd.org/subject/regreform

Organisation for Economic Cooperation andDevelopment, Recommendation on Regulatory Quality,1995. http://www.oecd.org/subject/regreform

__________ Reference Checklist for regulatory decision-making, 1995, http://www.oecd.org/subject/regreform

_________ ‘The Implementation and the Effects ofRegulatory Reform: Past Experience and CurrentIssues’, OECD Economic Studies, No. 32, 2001/I.

__________ Regulatory Policies in OECD Countries: FromInterventionism to Regulatory Governance, Paris 2002.

Productivity Commission, Review of the AustralianConsumer Product Safety System (Discussion draft),August 2005.

__________ Review of National Competition PolicyReforms, Inquiry Report No. 33, February 2005.

Smith, F. and Ward, S., ‘Regulatory Architecture:Practitioners Perspectives’, paper presented at theNational Consumer Congress, Melbourne, 16 March2004.

Victorian Competition and Efficiency Commission,Housing Regulation in Victoria: Building Better Outcomes(Draft Report), July 2005.

United Nations Department of Economic and SocialAffairs, United Nations Guidelines for Consumer Protection(as expanded in 1999) United Nations, New York, 2003.

Consumer Affairs Victoria research and discussion papers > 63

1 Consumer Education in Schools: Background Report,November 2003

2 What do we Mean by ‘Vulnerable’ and‘Disadvantaged’ Consumers?, March 2004

3 Information Provision and Education Strategies,March 2006

4 Social Marketing and Consumer Policy, March 2006

5 Designing Quality Rating Schemes for ServiceProviders, March 2006

6 Regulating the Cost of Credit, March 2006

7 Consumer Advocacy in Victoria, March 2006

8 Choosing Between General and Industry-specificRegulation, November 2006

9 Using Licensing to Protect Consumers’ Interests,November 2006

10 Consumer Detriment in Victoria: a Survey of itsNature, Costs and Implications, October 2006

11 Stopping Rogue Traders, November 2006

12 Unfair Contract Terms in Victoria: Research intotheir Extent, Nature, Cost and Implications,October 2007

13 Institutional Arrangements for Consumer ProtectionAgencies, April 2008

Consumer Affairs Victoriaresearch and discussionpapers

April 2008C-65-01-1080

Consumer Affairs Victoria

Victorian Consumer & Business Centre113 Exhibition StreetMelbourne 3000Telephone 1300 55 81 81 (local call charge)Email [email protected] www.consumer.vic.gov.au

Regional offices are located in Ballarat,Bendigo, Geelong, Morwell, Mildura,Wangaratta and Warrnambool.

institutional arrangements for consumer protection agencies · follows that changes to...

Documents