Recommendation

The Commission has an active interest in issues of fuel
adulteration generally. This has been the case, in relation to
diesel, the use of toluene and ethanol as petrol additives, as well
as the contamination of aviation fuel.



The contamination of aviation fuel is a particularly important
issue, because in addition to the damage, detriment and
misrepresentations there are also serious safety
implications.



I would like to take this opportunity to provide you with an
outline of the following issues in the attachment:



* The consumer protection and fair trading roles and functions of
the Commission;

* The Commission's enforcement priorities and objectives;

* An outline of the relevant fair trading provisions of the Trade
Practices Act 1974; and

* The Commission's role in relation to your recommendations.



Should you have any questions regarding the attachment, or if you
would like to further discuss the issues raised, please contact
either [name provided] on [telephone number provided], or [name
provided] on [telephone number provided].



THE CONSUMER PROTECTION AND FAIR TRADING ROLES AND FUNCTIONS OF THE
COMMISSION



The objectives of the Commission and the Trade Practices Act 1974
('Act') that it administers, are to prevent anti-competitive
conduct, thereby encouraging competition and efficiency in
business, resulting in a greater choice for consumers (and business
when they are purchaser) in price, quality and service. The
legislation also safeguards the position of consumers in their
dealings with producers and sellers, and business in its dealings
with other business.



The Commission is a national statutory authority responsible for
ensuring compliance with the Trade Practices Act, State and
Territory application legislation and for administering the Prices
Surveillance Act 1983. The Commission also has additional
responsibilities under other legislation.



Essentially the Act is divided into two major parts:

* Part IV which deals with anti-competitive practices; and

* Part V which deals with unfair trading practices - consumer
protection



The Commission's role under Australian competition policy is
expected to continue to be both challenging and exciting. Effective
competition is the key to efficiency and productivity in business.
It is the factor that encourages innovation, cost and production
efficiency and enhanced consumer satisfaction by businesses
striving to keep ahead of their competitors. However, stiff
competition also creates incentives for unethical traders to 'cut
corners' to beat their rivals, and this is where the Commission
must step in.



Recent trends have shown that a culture of healthy and legal
competition between businesses has developed in Australia since the
introduction of the Trade Practices Act. However, the incentives to
cheat will always be too much for some businesses to resist, and
hence there will always is a need for Commission type
enforcement.



However, in addition to its enforcement role, the Commission views
itself playing an important part in developing and maintaining
industry compliance and awareness of the Trade Practices Act.



THE COMMISSION'S ENFORCEMENT PRIORITIES AND OBJECTIVES



In enforcing the Trade Practices Act the Commission initially asks
is the breach the subject matter of the complaint provable.



If the answer to this threshold question is yes, does the alleged
breach fit within the Commission's priorities for action.



The Commission is always keen to ensure that it chooses the right
enforcement tool to achieve its goals and objectives. In making
this decision, the Commission will take into account a series of
factors, including the following:



* Does the conduct involve blatant disregard of the law;

* Does it involve significant public detriment;

* What will be the educative or deterrent effect of any
action;

* Are there new market issues; and

* Is there a need to test the reach of the Act.



In choosing the appropriate method for enforcing a particular
section of the Act, the Commission will also take into account the
aims of any enforcement action. The types of aims that the
Commission would normally be concerned with include:



* Stop the unlawful conduct;

* Obtain compensation/restitution for the victim;

* Undo the effects of the contravention;

* Deterring/preventing unlawful conduct occurring/being repeated in
future; and

* Punishing the wrongdoer.



AN OUTLINE OF THE RELEVANT FAIR TRADING PROVISIONS OF THE TRADE
PRACTICES ACT 1974



Parts of the Trade Practices Act and mirror provisions in State and
Territory Fair Trading Acts which might apply to the contamination
of aviation fuel include:



1. The product liability provisions;

2. The implied warranty provisions; and

3. The misleading and deceptive conduct or misleading
representations provisions.



1. PRODUCT LIABILITY PROVISIONS



Part VA of the Act, (Liability of Manufacturers and Importers for
Defective Goods) provides a right of private action to secure
compensation for loss if it can be shown that on the balance of
probabilities, the goods did not meet the standard of safety which
persons generally are entitled to expect and as a result caused
injury or harm to property.



The Commission can take representative action for breach of Part
VA, on behalf of persons affected.



The Commission holds a unique position in bringing legal
proceedings under the Act as its presence in them is as a result of
being an accountable public authority fulfilling a role defined by
parliament. This stands in contrast to private litigants who are
seeking personal compensation in the action and do not have a wider
community interest.



The Commission's ability to bring representative actions for
defective goods under Part VA is, however, limited by the
legislation.



Section 75AQ of the Act provides that:



1) The Commission may, by application, commence a liability action
on behalf of one or more persons identified in the application who
has suffered the loss for whose amount the action is
commenced.





2) The Commission may only make an application under this section
if it has obtained the written consent of the person, or each of
the persons, on whose behalf the application is being made.



The impact of section 75AQ is to preclude the Commission from
bringing an action under Part VA even if it were to raise serious
public concerns or a case which could provide valuable precedent
for the future in these cases where the injured parties do not wish
the Commission to be a party to the proceedings.



It should, however, be noted that in the recent spate of cases
which have raised product liability concerns on a large scale there
has been no shortage of private law firms eager to run the cases.
This is not necessarily a bad outcome as the interests of consumers
are being looked after and the Commission is able to utilise its
resources in other areas.



The Commission's role is to stand in the footsteps of those injured
and others can do that also (Refer: Dowsett J's comments in
McDonalds [1999]).

There are no State or Territory Fair Trading Acts which mirror Part
VA of the Act.



2. IMPLIED CONDITIONS IN CONSUMER TRANSACTIONS



The Act implies the following conditions into contracts.

* The goods must be of merchantable quality. This means that they
must meet a basic level of quality and performance that would be
reasonable to expect of the particular goods, having regard to
their price and the manner in which they are described. (Sections
71(1), 66(2)).

* The goods must be fit for their purpose. This means they must be
suitable for any particular purpose the consumer made known to the
supplier when negotiating or arranging to purchase the goods, or a
purpose which is obvious from the circumstances in which the sale
took place. (Section 71(2)).

The Commission cannot bring an action for breach of any of the
statutory conditions.

However, a consumer may bring a private action for damages in any
court or tribunal of competent jurisdiction against a supplier who
supplies goods that are not of merchantable quality or are not fit
for their purpose.



3. MISLEADING OR DECEPTIVE CONDUCT / FALSE AND MISLEADING
REPRESENTATIONS



Misleading or deceptive conduct



Section 52 of the Act prohibits conduct by business which is
misleading or deceptive, or which is likely to mislead or deceive.
Whether or not conduct is held to be misleading or deceptive will
depend on the particular circumstances of each case.

Generally, sellers are required to tell the truth or refrain from
giving an untruthful impression. Failure to disclose material
information may in some circumstances be a breach of the Act.



False or misleading representations



Section 53(a) specifically prohibits false claims about the
standard, quality, value, grade,

composition, style, model or history of goods.



Enforcement issues



In these instances, an enforcement agency will need to show either
explicit or implicit representations.

It may be possible to show misleading conduct if there is
admissible evidence that:



1. in each case the performance characteristics of the
contaminated

aviation fuel differs significantly from the performance
characteristics of "normal" aviation fuel; and

2. the damage to aircraft engines and/or safety issues caused by
the contaminated fuel differs from "normal" levels.



The difficulty here is that there is no Mandatory Standard for
"normal" aviation fuel.



STATE AND TERRITORY FAIR TRADING ACT PROVISIONS



Section 52 of the Act (misleading or deceptive conduct), is
mirrored by the following State and Territory Fair Trading Act
provisions:



* NSW s 42 Fair Trading Act (NSW)

* VIC s 9 Fair Trading Act (Vic) 1999

* SA s 56 Fair Trading Act (SA)

* TAS s 14 Fair Trading Act (Tas)

* QLD s 38 Fair Trading Act (Qld)

* WA s 10 Fair Trading Act (WA)

* ACT s 12 Fair Trading Act (Act)

* NT s 42 Consumer Affairs and Fair Trading Act (NT)



Section 53 of the Act (false or misleading representations), is
mirrored by the following State and Territory Fair Trading Act
provisions:



* NSW s 44 Fair Trading Act (NSW)

* VIC s 12 Fair Trading Act (Vic) 1999

* SA s 58 Fair Trading Act (SA)

* TAS s 16 Fair Trading Act (Tas)

* QLD s 40 Fair Trading Act (Qld)

* WA s 12 Fair Trading Act (WA)

* Act s 14 Fair Trading Act (Act)

* NT s 44 Consumer Affairs and Fair Trading Act (NT)



The State and Territory Fair Trading Acts do not contain provisions
that mirror the product liability or implied condition provisions
of the Trade Practices Act.



THE COMMISSION'S ROLE IN RELATION TO YOUR RECOMMENDATIONS



In the current context of the aviation fuel contamination inquiry
it is the Commission's role in relation to your recommendations to
essentially provide an educative function.



The comments above regarding the application of the Act to this
issue are aimed at providing a basic outline of how the Act is
likely to apply to fuel contamination issues.



Commission staff are available to discuss and provide guidance to
industry as well as other government departments on the application
of the provisions of the Trade Practices Act to their specific
field of interest. We are therefore, available to further discuss
the issues raised above.



As previously mentioned, any enforcement action the Commission
takes on fuel contamination or adulteration issues will be assessed
on the facts of each case and pursued in accordance with the
Commission's enforcement priorities and actions. The Commission
will of course, always assess any such complaints received, or
referred from other agencies within this framework.



Mandatory Standards for Motor Vehicle Fuel



In the context of monitoring and compliance with fuel standards, I
would note that Environment Australia is currently preparing
Mandatory Standards for the content of motor vehicle fuel in
Australia.



It is my understanding that this Standard is being developed
pursuant to the Fuel Quality Standards Act 2000 which came into
effect on 1 January 2002.



While these particular Standards are being primarily introduced for
environmental policy reasons, the Standard will be supported by a
rigorous monitoring and compliance regime. This testing will ensure
motor vehicle fuel meets the content requirements of the Standards,
and thus minimise the opportunity for consumers to be mislead as to
the content of such fuel, its quality and fitness for
purpose.



It may well be worth the Australian Transport Safety Bureau
contacting Environment Australia directly to discuss the Standard
and its implementation and compliance processes. This information
may provide a useful basis should ATSB pursue such an avenue for
avoiding aviation fuel contamination.



I am able to provide the contact details of the Environment
Australia staff responsible for managing this issue.