Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2016-2017-2018
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TREASURY LAWS AMENDMENT (2018 MEASURES NO. 3)
BILL 2018
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Assistant Minister to the Treasurer, the Hon Michael Sukkar MP)
Table of contents
Glossary.................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Strengthening penalties under the Australian
Consumer Law ............................................................. 7
Chapter 2 Safe harbour for complying with an information
standard about free range eggs .................................. 21
Chapter 3 Confidentiality of information ....................................... 91
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
ACL Australian Consumer Law; Schedule 2 to the
Competition and Consumer Act 2010
ACL Review Australian Consumer Law Review
CCA Competition and Consumer Act 2010
COAG Council of Australian Governments
NEL National Electricity Law
1
General outline and financial impact
Strengthening penalties under the Australian Consumer Law
Schedule 1 to this Bill amends the ACL, to strengthen and align the
maximum penalties under the ACL with the maximum penalties under the
competition provisions of the CCA.
Date of effect: The later of 1 July 2018 and the day after this Bill receives
the Royal Assent.
Proposal announced: The measure was announced in the
2017-18 Budget and approved by the Legislative and Governance Forum
on Consumer Affairs on 31 August 2017.
Financial impact: The financial impact of this measure is an
unquantifiable gain over the forward estimates period.
Human rights implications: This Schedule does not raise any human
rights issue. See Statement of Compatibility with Human Rights --
paragraphs 1.35 to 1.61.
Compliance cost impact: Nil.
Safe harbour for complying with an information standard
about free range eggs
Schedule 2 to this Bill amends the ACL to provide that compliance with
an information standard about free range eggs made under the ACL will
provide a safe harbour defence to the provisions of the ACL prohibiting
false, misleading or deceptive conduct or representations.
Date of effect: The day after this Bill receives the Royal Assent.
Proposal announced: On 31 March 2016, Commonwealth, State,
Territory and New Zealand Consumer Affairs Ministers agreed to the
introduction of an information standard for the labelling of free range
eggs, along with a safe harbour in the ACL.
Financial impact: Nil.
Human rights implications: This Schedule does not raise any human
rights issue. See Statement of Compatibility with Human Rights --
paragraphs 2.18 to 2.25.
3
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Compliance cost impact: The safe harbour amendment and related
information standard about free range eggs are estimated to generate an
upfront compliance cost to business of $4.855 million, and an ongoing
annual compliance saving of $0.686 million. There are no compliance
costs to individuals, meaning the total average annual compliance cost
over ten years is a saving of $0.2 million.
Summary of regulation impact statement
The Australian Consumer Law (Free Range Eggs Labelling) Information
Standard 2017 (Information Standard) introduces a definition for 'free
range' used to market eggs to consumers and require the disclosure of the
maximum outdoor stocking density on the label. In addition to the
Information Standard, a safe harbour for false, misleading and deceptive
conduct provisions in relation to a 'free range' claim is introduced.
Regulation impact on business and consumers
Impact: Small. This measure will affect egg producers, some of whom
will face upfront costs to adjust labels to meet the disclosure requirements.
However, they will benefit from greater certainty about the standards that
need to be met to avoid misleading consumers in relation to a free range
claim. Consumers will benefit from an increase in the information
available and can have a greater degree of confidence in the 'free range'
label. This is a substantial improvement on the uncertainty being
experienced by consumers under the status quo.
Main points:
• The increased compliance cost of having to understand a new
information standard is balanced against the increased clarity
provided by the standard and the legal protection of a safe
harbour.
• This certainty would allow larger producers to reduce the
time spent monitoring and maintaining their compliance. It is
unlikely that secondary producers would see similar benefits
given their smaller scale of production.
• Flexibility would remain for producers to use alternative
labelling terms to differentiate and market their products -
particularly for smaller producers. This, combined with the
increased certainty and protection afforded to producers
4
General Outline and Financial Impact
making free range claims, means that this is likely to be a
significant improvement on the status quo for producers.
• A firm definition for 'free range' and increased disclosure for
the marketing of eggs will provide consumers with a
significant increase in the information available on eggs and
give consumers greater confidence in free range labelling.
Confidentiality of information
Schedule 3 to this Bill amends the CCA to ensure that confidential
supplier information obtained by the Australian Energy Regulator (AER)
in performing its wholesale market monitoring and reporting functions
under the NEL remains confidential under the Commonwealth law.
Date of effect: The day after the Bill receives the Royal Assent.
Proposal announced: On 1 July 2016, in accordance with the procedures
in the Australian Energy Market Agreement, the COAG Energy Council
agreed to establish wholesale market monitoring and reporting functions
for the AER. These amendments are necessary to support these functions.
Financial impact: Nil.
Human rights implications: This Schedule does not raise any human
rights issues. See Statement of Compatibility with Human Rights --
paragraphs 3.23 to 3.31.
Compliance cost impact: Nil.
5
Chapter 1
Strengthening penalties under the
Australian Consumer Law
Outline of chapter
1.1 Schedule 1 to this Bill amends the ACL, to strengthen and align
the maximum penalties under the ACL with the maximum penalties under
the competition provisions of the CCA.
Context of amendments
1.2 On 12 June 2015, Commonwealth, State and Territory
Consumer Affairs Ministers, through the Legislative and Governance
Forum on Consumer Affairs, asked Consumer Affairs Australia and
New Zealand to initiate a broad-reaching review of the ACL, the
ACL Review.
1.3 As part of this process, the effectiveness of the ACL penalty and
enforcement provisions and the flexibility of the provisions to respond to
new and emerging issues were reviewed.
1.4 The ACL contains a single set of enforcement powers, penalties,
remedies and redress provisions applicable to breaches of the consumer
protection provisions. The current maximum civil pecuniary penalty, and
fine for criminal offences, is $1.1 million for a body corporate and
$220,000 for a person other than a body corporate.
1.5 The ACL Review Final Report was released in April 2017,
following significant public consultation and an examination of relevant
overseas developments.
1.6 The ACL Review found that the current maximum penalties
available in the ACL are insufficient to deter non-compliant conduct that
can be highly profitable. Some entities see these penalties as 'a cost of
doing business'.
1.7 For example, the case of ACCC v Coles Supermarkets Australia
Pty Ltd,1 involved a $10 million penalty against Coles for unconscionable
1
[2014] FCA 1405 (Gordon J), at [106].
7
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
conduct in dealings with 200 of its suppliers. Gordon J suggested that the
maximum available penalty of $1.1 million under the ACL for each
contravention was arguably inadequate for a company with annual
revenue in excess of $22 billion.
1.8 The ACL Review also found that the existing ACL penalty
regime is inconsistent with the competition penalty regime in the CCA,
where the maximum financial penalty that can be imposed by a court is
considerably higher and can take into account the benefit gained from the
breach or the size of the perpetrator's business.
1.9 The ACL Review proposed increasing the maximum financial
penalties available under the ACL by aligning the penalties with the
penalty regime under the competition provisions in the CCA.
Summary of new law
1.10 Schedule 1 to this Bill aligns the existing ACL penalties with the
existing maximum penalties under the competition provisions in the CCA,
in order to strengthen the penalties regime, deter non-compliant conduct
and reduce the financial benefits and incentives for businesses to engage
in conduct in breach of the ACL.
1.11 The amendments commence from the later of 1 July 2018 and
the day after this Bill receives the Royal Assent. The amended penalty
regime will apply in relation to acts, omissions or offences that occur on
or after the commencement of Schedule 1.
8
Strengthening penalties under the Australian Consumer Law
Comparison of key features of new law and current law
New law Current law
The maximum penalty for a body The maximum penalty for a body
corporate is the greater of: corporate is $1.1 million.
• $10 million; or
• if the court can determine the
value of the benefit obtained from
the offence, or act or omission, by
the body corporate and any related
bodies corporate - three times the
value of the benefit; or
• if the court cannot determine the
value of the benefit - 10 per cent
of the annual turnover of the body
corporate.
The maximum penalty for a person The maximum penalty for a person
other than a body corporate is other than a body corporate is
$500,000. $220,000.
Detailed explanation of new law
1.12 Breaches of the ACL can significantly affect consumer
wellbeing, competition in the market and economic efficiency overall.
1.13 It is important that the penalties imposed under the ACL are set
so as to deter breaches. The amendments increase the existing financial
penalties of $1.1 million for a body corporate and $220,000 for persons
other than a body corporate, to align with the existing maximum financial
penalties available under the competition provisions of the CCA.
1.14 As a result, the penalties take into account the size of the
business and the benefit gained from the breach so as to make a
contravention or offence much more costly for the perpetrator.
1.15 Under the ACL, civil and criminal penalties are applied for a
range of conduct and behaviours, including unconscionable conduct, false
or misleading representations about goods or services and harassment and
coercion. Table 1.1 lists the circumstances where the new penalty regime
applies.
9
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Table 1.1
Conduct Civil Criminal
Unconscionable conduct
Engage in unconscionable section 20 no equivalent
conduct
Engage in unconscionable section 21 no equivalent
conduct for the supply or
acquisition of goods or services
Unfair Practices
False or misleading section 29 section 151
representations about goods or
services
False or misleading section 30 section 152
representations about sale of land
Misleading conduct relating to section 31 section 153
employment
Offering, with the intention of section 32 section 154
not providing, rebates, gifts,
prizes
Misleading conduct as to the section 33 section 155
nature of goods
Misleading conduct as to the section 34 section 156
nature of services
Bait advertising section 35 section 157
Wrongly accepting payment section 36 section 158
Misleading representations about section 37 section 159
certain business activities
Unsolicited supply of cards section 39 section 161
Assertion of a right to payment section 40 section 162
for unsolicited goods or services
Assertion of a right to payment section 43 section 163
for unauthorised entries or
advertisements
Participation in pyramid schemes section 44 section 164
Making a representation that an section 48 section 166
amount constitutes part of the
consideration for goods or
services
10
Strengthening penalties under the Australian Consumer Law
Unfair Practices
Referral selling section 49 section 167
Harassment or coercion in section 50 section 168
connection with the supply or
payment of a good or service, or
sale or payment of land
Safety of consumer goods and product related services
Supplying consumer goods that section 106 section 194
do not comply with safety
standards
Supplying product related section 107 section 195
services that do not comply with
safety standards
Supplying consumer goods section 118 section 197
covered by a ban
Supplying product related section 119 section 198
services covered by a ban
Non-compliance with a recall section 127 section 199
notice
Information standards
Supplying goods that do not section 136 section 203
comply with information
standards
Supplying services that do not section 137 section 204
comply with information
standards
1.16 All references in this chapter are to the ACL which is contained
in Schedule 2 to the CCA unless otherwise stated.
Civil contraventions
1.17 Under the ACL, civil penalties may be imposed where a person
engages in certain conduct including unconscionable conduct, making
false or misleading representations, and supplying consumer goods or
certain services that do not comply with safety standards or which are
banned (see Table 1.1).
1.18 The amendments impose new maximum civil pecuniary
penalties for a body corporate and a person other than a body corporate in
certain circumstances.
11
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Body corporate
1.19 The new maximum ACL civil pecuniary penalty for a body
corporate includes three possible penalty amounts taking into account the
benefit gained from the act or omission and the size of the business, based
on the body corporate's annual turnover.
1.20 If the court can determine the value of the benefit obtained from
the act or omission then the new maximum ACL civil pecuniary penalty is
the greater of:
• $10 million; or
• three times the value of the benefit obtained or attributable to
the body corporate and any related bodies corporate as a
result of the act or omission.
[Schedule 1, items 48 and 49, table items 1, 2, 9, 11 and 13 in subsections 224(3) and
224(3A)]
1.21 If the court cannot determine the value of the benefit obtained
from the act or omission then the new maximum ACL civil pecuniary
penalty is the greater of:
• $10 million; or
• 10 per cent of annual turnover of the body corporate during a
12 month period. The 12 month period is the 12 months
preceding and including the month in which the act or
omission occurred or started to occur.
[Schedule 1, items 48 and 49, table items 1, 2, 9, 11 and 13 in subsections 224(3) and
224(3A)]
Person not a body corporate
1.22 Where a person is not a body corporate, the new maximum ACL
civil pecuniary penalty is $500,000. [Schedule 1, item 48, table items 1, 2, 9, 11
and 13 in subsections 224(3)]
Criminal offences
1.23 Criminal penalties may be imposed for certain offences
committed under the ACL including where a person has made false
representations about goods or services, sought payment for unsolicited
goods and services or supplied consumer goods covered by a ban
(see Table 1.1).
12
Strengthening penalties under the Australian Consumer Law
1.24 The amendments impose new maximum penalties for certain
offences committed under the ACL.
Body corporate
1.25 The new maximum ACL penalties for a body corporate include
three possible penalty amounts taking into account the benefit gained from
committing the offence and the size of the business, based on the body
corporate's annual turnover.
1.26 If the court can determine the value of the benefit obtained by
committing the offence, then the new maximum ACL penalty is the
greater of:
• $10 million; or
• three times the value of the benefit obtained or attributable to
the body corporate and any related bodies corporate as a
result of committing the offence.
[Schedule 1, items 3, 5, 7, 9, 11, 13, 15, 17, 19, 21, 23, 25, 27, 29, 31, 33, 35, 37, 39, 41,
43, 45, 47, subsections 151(5), 152(2A), 153(3), 154(5A), 155(3), 156(3) 157(3A),
158(10A), 159(4), 161(7), 162(6), 163(5A), 164(4), 166(8), 167(3), 168(2A), 194(8),
195(4), 197(8), 198(4), 199(4), 203(9) and 204(4)]
1.27 If the court cannot determine the value of the benefit obtained as
a result of committing the offence then the new maximum ACL penalty is
the greater of:
• $10 million; or
• 10 per cent of annual turnover of the body corporate during a
12 month period. The 12 month period is the 12 months
preceding and including the month in which the offence was
committed or began committing the offence.
[Schedule 1, items 3, 5, 7, 9, 11, 13, 15, 17, 19, 21, 23, 25, 27, 29, 31, 33, 35, 37, 39, 41,
43, 45, 47, subsections 151(5), 152(2A), 153(3), 154(5A), 155(3), 156(3) 157(3A),
158(10A), 159(4), 161(7), 162(6), 163(5A), 164(4), 166(8), 167(3), 168(2A), 194(8),
195(4), 197(8), 198(4), 199(4), 203(9) and 204(4)]
Person not a body corporate
1.28 Where a person is not a body corporate, the new maximum ACL
penalty is $500,000. [Schedule 1, items 3, 5, 7, 9, 11, 13, 15, 17, 19, 21, 23, 25, 27,
29, 31, 33, 35, 37, 39, 41, 43, 45, 47, subsections 151(6), 152(2B), 153(4), 154(5B),
155(4), 156(4), 157(3B), 158(10B), 159(5), 161(8), 162(7), 163(5B), 164(5), 166(9),
167(4), 168(2B), 194(9), 194(5), 197(9), 198(5), 199(5), 203(10) and 204(5)]
13
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Annual turnover
1.29 The new penalty provisions for bodies corporate rely on the
concept of 'annual turnover'.
1.30 The amendments insert a definition of this term, which
replicates the definition used in the penalty regime for contravention of
the competition provisions in the CCA. [Schedule 1, item 1, subsection 2(1)]
1.31 Generally, annual turnover means the sum of all the supplies
made by the body corporate or related bodies corporate in connection with
Australia. There are exceptions such as supplies made between related
bodies corporate, supplies that are not made in connection with the body
corporate's business, supplies that are input taxed, or supplies that are not
for consideration and are not taxable.
1.32 The definition of annual turnover relies on terms and definitions
used in the A New Tax System (Goods and Services Tax) Act 1999.
Example 1.1: Application of increased penalty regime
An ACL regulator takes successful action against False & Mis Pty Ltd
for a false or misleading representation in relation to goods, which
generated a $15 million benefit. False & Mis Pty Ltd's annual turnover
is $500 million for the 12 month period ending in the month when the
false or misleading representation was made.
The court determines that three times the value of the direct or indirect
benefit to False & Mis Pty Ltd (and any related bodies corporate)
attributable to the act or omission is $45 million.
As the benefit can be determined, the maximum penalty that the court
could impose is the higher of:
• $10 million; or
• three times the value of the direct or indirect benefit to False & Mis
Pty Ltd (and any related bodies corporate) attributable to the act or
omission, which in this instance is $45 million.
Therefore the maximum penalty is $45 million.
However, if the benefit could not be determined, the maximum penalty
that the court could impose would be the higher of:
• $10 million; or
• 10 per cent of annual turnover of False & Mis Pty Ltd during the
12 month period ending at the end of the month in which the act or
14
Strengthening penalties under the Australian Consumer Law
omission occurred or started to occur, which in this instance is
$50 million.
Therefore, if the benefit could not be determined the maximum penalty
would be $50 million.
Consequential amendments
1.33 The amendments repeal the current maximum penalties in the
ACL in relation to the circumstances listed in Table 1.1 above. [Schedule 1,
items 2, 4, 6, 8, 10, 12, 14, 16, 18, 20, 22, 24, 26, 28, 30, 32, 34, 36, 38, 40, 42, 44, 46, 48,
subsections 151(1), 152(1), 153(1), 154(1), 154(2), 155(1), 156(1), 157(1), 157(2), 158(1),
158(3), 158(5), 158(7), 159(1), 159(2), 161(1), 161(3), 161(4), 162(1), 162(2), 162(3),
163(1), 163(2), 164(1), 164(2), 166(1), 167(1), 168(1), 194(1), 194(2), 194(3), 194(5),
195(1), 195(2), 197(1), 197(2), 197(3), 197(5), 198(1), 198(2), 199(1), 199(2), 203(1),
203(2), 203(3), 204(1), 204(2), and table items 1, 2, 9, 11 and 13 in subsection 224(3)]
Application provisions
1.34 Schedule 1 commences on the later of 1 July 2018 and the day
after the Bill receives the Royal Assent. This means the earliest the new
penalties will commence will be 1 July 2018.
1.35 The higher penalties apply in relation to acts or omissions that
occur on or after the commencement of Schedule 1. [Schedule 1, item 50,
section 295]
15
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Strengthening penalties under the Australian Consumer Law
1.36 This Schedule is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
1.37 Schedule 1 to this Bill aligns the existing ACL penalties with the
existing maximum penalties under the competition provisions in the CCA,
in order to strengthen the penalties regime, deter non-compliant conduct
and reduce the financial benefits and incentives for businesses to engage
in conduct in breach of the ACL.
1.38 On 12 June 2015, Commonwealth, State and Territory
Consumer Affairs Ministers, through the Legislative and Governance
Forum on Consumer Affairs, asked Consumer Affairs Australia and
New Zealand to initiate a broad-reaching review of the ACL, the
ACL Review.
1.39 As part of this process, the effectiveness of the ACL penalty and
enforcement provisions and the flexibility of the provisions to respond to
new and emerging issues were reviewed.
1.40 The ACL contains a single set of enforcement powers, penalties,
remedies and redress provisions applicable to breaches of the consumer
protection provisions. The current maximum civil pecuniary penalty, and
fine for criminal offences, is $1.1 million for a body corporate and
$220,000 for a person other than a body corporate.
1.41 The ACL Review Final Report was released in April 2017,
following significant public consultation and an examination of relevant
overseas developments.
1.42 The ACL Review found that the current maximum penalties
available in the ACL are insufficient to deter non-compliant conduct that
can be highly profitable. Some entities see these penalties as 'a cost of
doing business'.
16
Strengthening penalties under the Australian Consumer Law
1.43 Schedule 1 to this Bill increases, from the later of 1 July 2018
and the day after this Bill receives the Royal Assent, the maximum
penalties available under the ACL for certain contraventions and offences
that occur on or after commencement.
1.44 The ACL Review also found that the existing ACL penalty
regime is inconsistent with the competition penalty regime in the CCA,
where the maximum financial penalty that can be imposed by a court is
considerably higher and can take into account the benefit gained from the
breach or the size of the perpetrator's business.
1.45 The ACL Review proposed increasing the maximum financial
penalties available under the ACL by aligning the penalties with the
penalty regime under the competition provisions in the CCA.
Civil contraventions
1.46 The new maximum civil pecuniary penalties for contraventions
of certain provisions are:
• for a body corporate, the greater of:
- $10 million; or
- if the court can determine the value of the benefit that the
body corporate, and any related bodies corporate, have
obtained directly or indirectly and that is reasonably
attributable to the act or omission - three times the value
of that benefit; or
- if the court cannot determine the value of that benefit -
10 per cent of the annual turnover of the body corporate
during the 12 month period ending at the end of the month
in which the act or omission occurred or started to occur.
• for a person other than a body corporate, $500,000.
Criminal offences
1.47 The new maximum penalties for certain offences committed
under the ACL are:
• for a body corporate, the greater of:
- $10 million; or
17
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
- if the court can determine the value of the benefit that the
body corporate, and any related bodies corporate, have
obtained directly or indirectly and that is reasonable
attributable to the offence committed - three times the
value of that benefit; or
- if the court cannot determine the value of that benefit -
10 per cent of the annual turnover of the body corporate
during the 12 month period ending at the end of the month
in which the body corporate committed, or began
committing, the offence.
• for a person other than a body corporate, $500,000.
1.48 The amendments commence from the later of 1 July 2018 and
the day after this Bill receives the Royal Assent. The amended penalty
regime will apply in relation to acts, omissions or offences that occur on
or after the commencement of Schedule 1.
Human rights implications
1.49 This Schedule does not engage any of the applicable rights or
freedoms.
1.50 In forming this view, consideration has been specifically given
to the guidance in the Parliamentary Join Committee on Human Rights'
Practice Note 2: Offence provisions, civil penalties and human rights
(Practice Note).2
Increase to the maximum civil pecuniary penalty
1.51 The Practice Note observes that civil penalty provisions may
engage criminal process rights under Articles 14 and 15 of the
International Covenant on Civil and Political Rights (ICCPR), regardless
of the distinction between criminal and civil penalties in domestic law.
This is because the word 'criminal' has an autonomous meaning in
international human rights law. When a provision imposes a civil penalty,
an assessment is therefore required as to whether it amounts to a
2
Parliamentary Joint Committee on Human Rights, Practice Note 2: Offence provisions, civil
penalties and human rights, December 2014,
http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Human_Rights/Guidance
_Notes_and_Resources (last accessed on 1 September 2017).
18
Strengthening penalties under the Australian Consumer Law
'criminal' penalty for the purposes of the Articles 14 and 15 of the
ICCPR.
1.52 While the civil penalty provisions are not classified as criminal
under Australian law, consideration must be had to the nature, purpose
and severity of the penalties.
Nature and purpose of the penalty
1.53 While the purpose of the increase to the maximum civil penalty
is to deter non-compliant conduct, the penalties are restricted to people in
a specific regulatory context, that is, persons in trade or commerce who
breach the consumer protection law.
1.54 Additionally, while proceedings are instituted by an ACL
regulator (for example, the Australian Competition and Consumer
Commission), the penalty increase is to the maximum penalty that forms
part of the regulatory regime of a graduated series of penalties including
infringement notices, injunctions, disqualification orders, compensation
orders and non-punitive orders.
Severity of the penalty
1.55 The new maximum penalty is a substantial pecuniary sanction.
However, viewed in the context of the ACL Review findings (discussed
above) and the fact that the appropriate penalty will be set by a court
having regard to the nature of the conduct and the extent of the consumer
harm inflicted, the increased maximum penalty is appropriate in the
consumer protection regulatory context.
1.56 The penalty regime operates in a regulatory context where the
size and scale of traders varies considerably; the maximum penalty
amount ensures that a court is able to impose an appropriate penalty
having regard to the facts and circumstances of each individual case. This
is reflected in the fact that the maximum penalty that may be imposed on a
body corporate is much higher than that for a person other than a body
corporate.
1.57 The increase to the maximum penalties was recommended as
part of the ACL Review. The current penalties are seen by some as 'a cost
of doing business', rather than a deterrent. In some cases, the benefits
gained from a breach can generate profits greater than the value of the
penalty imposed.
19
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
1.58 A higher maximum penalty is justified where there are strong
incentives to not comply, or where the consequences of not complying are
particularly dangerous or damaging.3 Breaches of the ACL can
significantly affect consumer wellbeing, competition in the market and
economic efficiency overall. Aligning the maximum penalty amounts in
the ACL with the penalty regime under the competition provisions in the
CCA is considered appropriate to sufficiently deter repetition by traders
and by others who might be tempted to contravene the ACL.
1.59 The maximum penalties are considered an appropriate level to
deter persons from the conduct, which as a result should prevent or punish
the public harm.
1.60 While the civil penalty provisions are intended to deter people
from not complying with the obligations imposed by the ACL, none of the
civil penalty provisions carry a penalty of imprisonment and there is no
sanction of imprisonment for non-payment of any penalty. The civil
penalty provisions should not be considered 'criminal' for the purpose of
human rights law due to their application in a consumer protection
regulatory context. As such, the civil penalty provisions do not create
criminal offences for the purposes of articles 14 and 15 of the ICCPR.
Increase to maximum fine for criminal offences
1.61 The amendments increase the maximum penalty for criminal
offences, but do not amend or engage any criminal process rights that
currently exist under the ACL criminal penalty framework.4 In addition,
the increased penalties apply prospectively. That is, the increased
penalties will apply to offences that are committed after the Bill
commences.
Conclusion
1.62 This Schedule is compatible with human rights as it does not
raise any human rights issues.
3
A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers
(September, 2011), 38.
4
The Bill does not create reverse burden offences, strict and absolute liability offences or deal
with mandatory minimum sentencing.
20
Chapter 2
Safe harbour for complying with an
information standard about free range
eggs
Outline of chapter
2.1 Schedule 2 to this Bill amends the ACL. The amendments
provide that compliance with an information standard about free range
eggs made under the ACL will provide a safe harbour defence to the
provisions of the ACL prohibiting false, misleading or deceptive conduct
or representations.
2.2 All legislative references in this chapter are to the ACL, unless
otherwise stated.
Context of amendments
2.3 On 31 March 2016, Commonwealth, State, Territory and
New Zealand Consumer Affairs Ministers agreed to the introduction of an
information standard for the labelling of free range eggs, along with a safe
harbour in the ACL.
2.4 An information standard relating to the display and labelling
requirements for free range eggs was registered on the Federal Register of
Legislation on 26 April 2017. It commences on 26 April 2018.
2.5 Compliance with the requirements of an information standard
made under the ACL is not a defence to an allegation of false, misleading
or deceptive conduct under the ACL.
2.6 Schedule 2 to this Bill gives effect to the agreement reached by
Commonwealth, State, Territory and New Zealand Consumer Affairs
Ministers to introduce a safe harbour for compliance with the information
standard relating to the display and labelling requirements for free range
eggs.
21
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Summary of new law
2.7 Schedule 2 to this Bill amends the ACL to provide for a safe
harbour defence to an allegation of false, misleading or deceptive conduct
where a person has complied with the labelling or display requirements
that are specified in an information standard for free range eggs.
Comparison of key features of new law and current law
New law Current law
Compliance with an information No equivalent.
standard for the display and labelling
of free range eggs is a safe harbour
defence to certain allegations of false,
misleading or deceptive conduct or
representations.
Detailed explanation of new law
Safe harbour
2.8 Schedule 2 to this Bill amends the ACL to provide that
compliance with an information standard made under section 134 about
free range egg labelling or display requirements is a safe harbour defence
to an alleged contravention of:
• section 18 (misleading or deceptive conduct);
• paragraph 29(1)(a) (false or misleading representations about
goods); or
• paragraph 151(1)(a) (offences relating to false or misleading
representations about goods). [Schedule 2, item 2, subsections
137A(1), (3) and (4)]
2.9 The representations covered by the safe harbour defence are
those limited to complying with the labelling or display requirements for
free range eggs that are specified in the information standard. Other
conduct, including representations, contravene the false, misleading or
deceptive conduct or representation provisions where the conduct falls
outside the scope of the information standard.
22
Safe harbour for complying with an information standard about free range eggs
Evidential burden
2.10 The evidentiary burden for an applicant initiating proceedings
for false, misleading or deceptive conduct or representations is not
changed by this amendment.
2.11 In proceedings that allege false, misleading or deceptive conduct
or representations, a person seeking to rely on the safe harbour defence
bears an evidential burden in relation to that matter. [Schedule 2, item 2,
subsection 137A(2)]
2.12 In placing an evidential burden on the respondent/defendant,
consideration has been given to the Attorney-General's Department's
Guide to Framing Commonwealth Offences, Infringement Notices and
Enforcement Powers, September 2011 edition.
2.13 This evidential burden is appropriate in these circumstances
because the evidence as to whether a respondent/defendant has complied
with the information standard and the free range egg labelling or display
requirements is peculiarly within the knowledge and control of the
respondent/defendant.
2.14 For the current Information Standard, compliance would require
consideration of whether:
• the hens had meaningful and regular access to an outdoor
range during daylight hours during a laying cycle;
• the hens were able to roam and forage on the outdoor range;
and
• the eggs were laid by hens subject to a stocking density of
10,000 hens per hectare or less.
2.15 It is the respondent/defendant who can readily access evidence
of this kind, which would not be easily accessible and available to the
applicant/prosecution. It would be significantly more difficult and costly
for the applicant/prosecution to obtain evidence that could be easily
adduced by the defendant.
Minor technical amendments
2.16 Schedule 2 also makes a minor technical amendment to include
the definitions of egg and free range egg, as defined in the new section
137A. [Schedule 2, item 1, subsection 2(1)]
23
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Commencement
2.17 Schedule 2 commences on the day after the Bill receives the
Royal Assent.
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Safe Harbour for complying with an information standard about free
range eggs
2.18 This Schedule is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
2.19 Schedule 2 to this Bill amends the ACL. The amendments
provide that compliance with an information standard about free range
eggs made under the ACL will provide a safe harbour defence to the
provisions of the ACL prohibiting false, misleading or deceptive conduct
or representations.
2.20 An information standard relating to the display and labelling
requirements for free range eggs was registered on the Federal Register of
Legislation on 26 April 2017. It commences on 26 April 2018.
2.21 Currently, compliance with the requirements of an information
standard made under the ACL is not a defence to an allegation of false,
misleading or deceptive conduct under the ACL.
2.22 Schedule 2 to this Bill amends the ACL to provide for a safe
harbour defence to an allegation of false, misleading or deceptive conduct
where a person has complied with the labelling or display requirements
that are specified in an information standard for free range eggs.
24
Safe harbour for complying with an information standard about free range eggs
Human rights implications
2.23 This Schedule does not engage any of the applicable rights or
freedoms, as this Schedule impacts companies or other incorporated
bodies, and does not impact individuals and groups of individuals.
2.24 In forming this view, consideration has been specifically given
to the guidance in the Parliamentary Joint Committee on Human Rights'
Guidance Note 1: Drafting statement of compatibility.5
Conclusion
2.25 This Schedule is compatible with human rights as it does not
raise any human rights issues.
REGULATION IMPACT STATEMENT
Summary
2.26 The Legislative and Governance Forum on Consumer Affairs
(CAF) agreed in June 2015 to develop options to enhance consumer
certainty and confidence around free range egg labelling.
2.27 Consumers rely on the information provided on labels to choose
eggs that meet their expectations. Currently there is not a single national
definition of free range eggs. Recent evidence of misleading labelling and
producer uncertainty regarding their labelling obligations under the
Australian Consumer Law (ACL) means a case for government
intervention can be made.
2.28 Feedback on the consultation Regulation Impact Statement
(RIS) indicated a high level of consumer interest in the issue of free range
egg labelling, with the vast majority of consumer submissions arguing for
better regulation of the term 'free range' in egg labelling (See Section 5 -
Consultation). However, clear evidence of broad-ranging consumer
5
Parliamentary Joint Committee on Human Rights, Guidance Note 1: Drafting Statements of
compatibility, December 2014,
http://www.aph.gov.au/~/media/Committees/Senate/committee/humanrights_ctte/guidance_
notes/guidance_note_1/guidance_note_1.pdf?la=en (last accessed on 10 October 2017).
25
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
detriment was not forthcoming. Those consumers that engaged with the
consultation process seemed well-informed regarding animal husbandry
practices and argued that certain practices should not be considered 'free
range'. Additionally, it is evident that those consumers who actively seek
out eggs that meet their expectations are being catered for.
2.29 The risk, however, remains that the 'average consumer' may be
purchasing eggs labelled as free range that do not meet their expectations
even though consultations failed to establish a consistent set of
expectations shared by all free range egg consumers.
2.30 While a level of consumer detriment can be identified and there
is an identified need for some government intervention, overall any
intervention should be commensurable with the size of the problem.
Therefore any regulation that would have significant compliance costs or
impact on the market cannot be justified.
2.31 Four options are outlined in this RIS:6
• The status quo - continued enforcement of the ACL's
misleading and deceptive conduction provisions, together
with ongoing education campaigns;
• An information standard for eggs labelled as free range that
requires the disclosure of outdoor stocking density and sets a
maximum outdoor stocking density of 10,000 birds per
hectare;
• An information standard under the ACL for eggs labelled as
free range that provides a definition of 'free range' based on
birds having meaningful and regular access to an outdoor
range, requires the prominent disclosure of outdoor stocking
density, and sets a maximum outdoor stocking density of
10,000 birds per hectare; or
• An information standard that, in addition to setting standards
for 'free range' and requiring disclosure of outdoor stocking
density, as in Option 3, also creates an additional category for
the labelling of eggs, 'open range', for eggs produced in
circumstances with an outdoor stocking density of 1,500
birds per hectare or fewer.
6
Note that the exact wording of the options as outlined in the RIS may be subject to review in
drafting the legislative instrument, should legal advice suggest alternative wording is
necessary. The intent of the Ministers' preferred option will be preserved.
26
Safe harbour for complying with an information standard about free range eggs
2.32 Drawing on substantial stakeholder consultations, a qualitative
assessment of costs and benefits and quantification of compliance costs,
the RIS concludes that Option 3 is likely to have the greatest net benefit to
consumers and producers. It is expected to provide consumers with
greater confidence in free range labels, while also offering producers
greater certainty, primarily because:
• Stocking density disclosure would allow consumers to make
their own judgement as to whether eggs labelled free range
met their expectations;
• The minimum standards for free range would be defined for
consumers and producers; and
• Producers would have certainty about the standards they
should meet to avoid misleading consumers in relation to a
free range claim.
2.33 In addition to providing consumers with additional information
to address concerns raised in consultations, Option 3 is estimated to have
a net regulatory compliance saving for business of $0.2 million on average
over ten years. This is because the upfront compliance costs for businesses
of $4.855 million would be outweighed over time by the $0.686 million in
annual compliance savings, as businesses reap the benefits of greater
regulatory certainty.
2.34 It is also expected that Option 3 would not risk the creation of
significant distortions in the market or unintentional conflicts with
agricultural or food safety policies, which might arise if regulations
significantly impeded on current industry practice or involved
terminology different to that currently in regular use (for example under
Option 4).
2.35 While Option 2 would also have a small net regulatory
compliance saving of $0.036 million on average over ten years ($2.536
million in upfront costs balanced by $0.29 million per annum in ongoing
savings), it is not likely to provide consumers or producers with the same
level of confidence provided under Option 3 as it does not create a
minimum standard for free range egg labelling.
2.36 Option 4 could introduce significant complexity to the egg
labelling system for both consumers and producers, without providing
improvements in consumer information or producer confidence beyond
those provided under Option 3. Option 4 is estimated to generate a
regulatory compliance cost of $0.346 million on average over ten years,
27
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
with much more significant upfront costs ($8.596 million) and less
significant ongoing savings ($0.513 million annually).
2.37 While the status quo (Option 1) would have no regulatory
compliance cost, it is unlikely to address the problem as it does not
provide more information to consumers and the effectiveness of
enforcement guidance in reducing producer uncertainty is unclear.
2.38 More detailed analysis of the likely costs and benefits of each
option for key stakeholders is contained in Section 4.
1. The problem
2.39 Eggs sold to consumers are labelled in many different ways. The
words used to label eggs influence consumer choices. Some labels
represent eggs as produced by hens that are 'free range,' 'barn' or 'caged'.
Other variations such as 'happy hens', 'free to roam' and 'farm fresh' are
used to suggest that hens are less confined than barn or caged hens
without explicitly making a free range claim. Some packaging also shows
pictures of hens in open pastures instead of, or as well as, a free range
claim.
2.40 An increasing number of consumers are prepared to pay more
for eggs that have been laid by freely ranging hens -- owing to ethical,
animal welfare and health preferences. In response, the proportion of eggs
labelled as free range has increased substantially in recent years (see
Appendix A). Over the last decade egg producers have made significant
investments in infrastructure in response to these consumer preferences
and new voluntary animal welfare standards.
2.41 Consumers rely on the label in order to tell the difference
between free range, cage and barn laid eggs, since the eggs themselves do
not look any different. Eggs labelled as free range sell at a higher price
both because such production systems are more expensive to run and
because consumers place extra value on eggs produced by hens in those
systems.
2.42 The problem is that, in some cases, eggs labelled as free range
have been found to come from hens that either cannot or do not go outside
regularly (see Appendix B). It is relatively easy to mislead consumers and
there is a financial incentive for producers to do so.
2.43 There has been some debate about what consumers'
expectations of free range eggs actually are. A range of recent consumer
surveys have reached different conclusions. A common theme is that
28
Safe harbour for complying with an information standard about free range eggs
consumers expect that free range eggs come from birds that are not in
cages and have access to the outdoors. Some consumers have expectations
of greater animal welfare outcomes, particular production practices, or
health benefits. (See Appendix C for a summary of stakeholder
expectations identified in consultations.) One key element that influences
the consumers that purchase free range eggs is the images and phrases
used by producers on labels, which often show hens outdoors, or on
grassy fields. Consumers lose out when they willingly pay more for eggs
labelled as free range only to discover that they do not match expectations
of how the eggs were produced. The producers of eggs who genuinely
meet those expectations also lose out.
2.44 Consultation has failed to definitively establish what consumer
expectations are, meaning that reaching a clear assessment of consumer
detriment is extremely challenging. Evidence suggests that there is no
single homogenous consumer expectation beyond birds being unconfined
and having regular access to the outdoors (see Section 5 - Consultation
and Appendix C).
2.45 What constitutes free range egg labelling is already addressed to
some extent via existing regulation and voluntary schemes, including the
Australian Consumer Law (ACL), a voluntary code of animal welfare
(adopted by many producers), state and territory laws and industry-led
accreditation schemes. (These are discussed in more detail in the
description of the status quo, Option 1.) In recent years, the Australian
Competition and Consumer Commission (ACCC) has succeeded in court
action against some egg producers for misleading and deceptive conduct
under the ACL (see Appendix B for further details of recent ACCC
actions) which has contributed to the current guidelines and interpretation
of free range.
2.46 While an understanding of free range in relation to the labelling
of eggs is emerging from case law, no single national definition currently
exists. Egg producers choose whether to make a free range claim, using
own judgement to determine whether the claim is not false or misleading.
Estimates of consumer detriment
2.47 Misleading labelling of free range eggs -- whether deliberate or
not -- could distort the Australian retail grocery egg market and could
inhibit competition if genuinely labelled products are losing out to
misleading claims. Misleading labels mean that consumers are unable to
confidently distinguish between products that do and do not meet their
expectations. A 2012 market survey reported that 2 out of 3 egg
29
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
consumers found egg labels misleading and found that they were
uncertain if they got what they expected when they bought eggs that made
free range claims (Appendix C).
2.48 Consumers may be disadvantaged because certain egg
production methods that they value, and for which they have paid a
premium, were not used. Research indicates that consumers who purchase
free range eggs do so for a number of reasons, including ethical and
animal welfare considerations.7 Higher egg prices may be -- rightly or
wrongly -- taken as an indicator of 'quality' by some consumers. The
stocking densities of hens are sometimes used as indicators of the freedom
of movement available to layer hens in free range egg production.
However, research by consumer advocacy group CHOICE8 found that
there is not a strong correlation between the stocking density of hens and
the price of eggs labelled as free range. 9
Stakeholder comment:
The main detriment is when people choose a higher welfare option but
in actual fact they [are] being ripped off by not getting the welfare
outcome for the chickens they are paying for. I got to the point I didn't
know what I was buying any more so I got my own chickens.
Jodie McQueen,
Submission to consultation process
2.49 Submissions to this process, citing research into consumer
expectations, have not provided conclusive evidence for a single set of
expectations for the term 'free range'. Expectations about outdoor
stocking densities, use of the outdoor range, and other production
practices differ amongst consumers.
2.50 Uncertainty among producers about what is required to label an
egg as free range may also cause consumer detriment if it discourages new
investment in barns and equipment. This could result in higher prices over
time. A number of submissions from producers indicated an unwillingness
to invest further until their concerns regarding regulatory uncertainty were
7
Julie Dang & Associates Pty Ltd, Production methods understanding & QA evaluation: A
market research report, Prepared for Australian Egg Corporation Ltd, May 2012, and
CHOICE October 2015 online survey cited in submission to consultation process.
8
CHOICE, Free Range Eggs: Making The Claim Meaningful, June 2015; CHOICE
submission to consultation process.
9
This paper does not assert that 'quality' or better animal welfare outcomes necessarily
equate to 'free range', but notes the common consumer assumption that this is so.
30
Safe harbour for complying with an information standard about free range eggs
addressed. Free range egg producers that have already invested in barns
and equipment may experience financial losses if consumers lose faith in
the accuracy of free range labels and are no longer willing to pay a
premium.
2.51 One estimate of consumer detriment was calculated by CHOICE
in June 201510 based on the assumption that eggs were only free range
where the production involved an outdoor stocking density of less than
1,500 hens per hectare. However, feedback from the consultation process
did not show conclusively that this assumption aligns with consumer
expectations of free range.
2.52 The large number of responses received through the consultation
process from individual consumers (in the form of emails, brief comments
and submissions) indicates there is some level of uncertainty amongst a
segment of consumers, which sometimes affects buying decisions.
However due to the number of factors that contribute to estimating
consumer detriment this cannot be accurately quantified.
2. Objective of reform
2.53 The policy objective is to enhance consumer confidence and
certainty about egg labelling, including to better ensure that consumers are
not misled by egg labels. This should support producer confidence and
investment in the industry, although addressing producer uncertainty is
not the primary objective of consumer affairs Ministers.
2.54 Confident and empowered consumers secure better outcomes for
themselves and society as a whole. Markets cannot operate efficiently
where consumers do not have reliable information with which to make
meaningful choices that reflect their preferences. This can lead to a
distortion in demand, incorrect price signals and a misallocation of
resources.
2.55 As a result, in some markets there can be a role for governments
in ensuring the right information is disclosed to consumers to support their
decision making. Governments can also play a role in ensuring that
producers do not mislead consumers by misrepresenting information
about the characteristics and quality of their goods.
10
CHOICE, Free Range Eggs: Making The Claim Meaningful, June 2015
31
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
2.56 Based on feedback received through consultations and
submissions, consumer detriment arises from the lack of certainty
regarding free range egg labelling. Industry and producers have also
expressed the need for clarity as to the conditions they must meet to label
their eggs as free range, to restore a level playing field within the egg
market and to ensure eggs are labelled appropriately and without false or
misleading representations. Recent court actions have provided some
clarity (see Option 1 and Appendix B), but further government action may
be necessary to provide more detailed guidance about when it is
appropriate to label an egg as 'free range'.
2.57 The objective is to increase consumer certainty, not to prescribe
a particular set of production practices or regulate animal welfare.
3. Policy options
2.58 The policy options identified in this RIS propose alternative
ways to provide guidance to consumers and producers on egg labelling
requirements. These proposals seek to make it easier for concerned
consumers to identify some of the conditions under which eggs are
produced; and improve producer understanding of what is required for
eggs to be legitimately promoted to consumers as free range.
2.59 A range of options were proposed in the consultation RIS
released on 5 October 2015. Following stakeholder feedback (see Section
5), the options have been refined to the following four.
Option 1: Status quo, with revised ACCC guidance
2.60 Under the existing regime, the problem of free range egg
labelling is already being addressed to some extent by the interaction of
the Australian Consumer Law (ACL), a voluntary model code for poultry
welfare, state and territory laws and industry-led accreditation initiatives.
32
Safe harbour for complying with an information standard about free range eggs
The Australian Consumer Law
2.61 The ACL is the national law applied in all states and territories
since 1 January 2011 which aims to protect consumers and ensure fair
trading in Australia.11
2.62 Under the ACL, a person must not engage in misleading or
deceptive conduct, or make false or misleading representations with
respect to goods or services.12 The ACCC or state and territory fair trading
regulators may choose to take a case to court to prove an alleged
misleading conduct. Successful court action can require producers to stop
making false claims and impose penalties. It may also increase consumer
awareness of non-compliant producers and encourage other egg producers
to accurately label their products.
2.63 The ACCC has successfully taken court action against four egg
producers under the ACL in response to allegations that producers were
making false or misleading claims that eggs were free range and that
certain production methods were being used. In these cases the courts
considered the fundamental feature that sets free range egg production
apart from cage and barn laid egg production, according to consumers'
understanding. ACCC court actions instigated against egg producers are
summarised at Appendix B.
• On 23 September 2014, the Federal Court found that Pirovic
Enterprises Pty Ltd (Pirovic) had engaged in misleading
conduct and made misleading representations in its labelling
and promotion of eggs as free range. The Court stated that
eggs should only be labelled as free range where the hens
that laid the eggs were able to, and did, move around freely
on an open range on most ordinary days, where an 'ordinary
day' is every day other than a day when on the open ranges
weather conditions endangered the safety or health of the
laying hens or predators were present or the laying hens were
being medicated.
• On 11 August 2015, the Federal Court found that R L Adams
Pty Ltd (trading as Darling Downs Fresh Eggs) had also
engaged in misleading conduct and made misleading
representations in its labelling and promotion of eggs as free
range. This finding was made because the hens were not able
11
The ACL is Schedule 2 of the Competition and Consumer Act 2010 (Cth).
12
Sections 18, 33 and 34 of the ACL.
33
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
to move around freely on an open range on an ordinary day
and did not do so on most days.
2.64 This case law has established guidance on what constitutes free
range. Consumer law regulators can (to the extent that resources allow)
continue to pursue legal action against non-compliant egg producers so
that the courts can continue to refine this proposition. The types of
complaints received by ACL regulators regarding free range egg labelling
are at Appendix D.
2.65 The ACCC has increased awareness of the false and misleading
conduct provisions in the ACL and the recent ACCC initiated court
actions, by drawing the court rulings to the attention of producers.
Following the Pirovic decision, the ACCC alerted peak industry bodies
that there are a number of farming conditions that affect whether hens are
able to, and do, move freely on an open range each day. While the Court
pointed out that this decision should not be seen as a resolution of what
constitutes free range eggs, it provides guidance on factors to consider in
determining whether an egg producer has made a misleading claim that
their eggs are free range.
2.66 The success of recent misleading and deceptive conduct cases
pursued by the ACCC suggest that the existing law is effective in ensuring
that the most egregious cases of eggs being misrepresented are addressed.
2.67 However, the effectiveness of case law in clarifying the meaning
of free range eggs is reliant upon producers and consumers staying up to
date with case law, which can be expensive and difficult for the average
person to understand. It may also take some time for a clear definition of
free range to be established.
2.68 Larger producers have argued that the recent enforcement
actions and interpretation of the misleading and deceptive conduct
provisions have led to significant regulatory uncertainty, resulting in
postponed investment in the industry and potentially undermining the
value of recent capital investments. However, it is not clear that this
uncertainty is any greater than that faced by other industries under the
enforcement of the ACL's principle-based legislation.
The Model Code
2.69 The Model Code of Practice for the Welfare of Animals --
Domestic Poultry 4th Edition (Model Code) is a national code endorsed in
2002 by the Australian Commonwealth, state and territory, and
New Zealand ministers for primary industries. The objective of the Model
34
Safe harbour for complying with an information standard about free range eggs
Code is to detail minimum standards for the welfare and husbandry of
layer hens in cage, barn and free range systems. The focus is on
production systems and the needs of poultry rather than consumer
expectations. Any new consumer protection regulation should try to limit
confusion for producers and consumers by avoiding inconsistency and
overlap with the Model Code where possible.
2.70 Consultation revealed inconsistent interpretations of the Model
Code, specifically the recommendations in relation to stocking density for
free range layer hens. Some stakeholders (primarily consumer advocacy
groups, animal welfare groups and smaller pasture-based egg producers)
interpret the Model Code as prescribing a maximum stocking density of
1,500 hens per hectare. Others (notably the larger egg producers and
industry associations) note that the section on range rotation means that
the Model Code does not specify a maximum outdoor stocking density if
certain conditions are met. The latter interpretation has been supported by
governments' primary industry departments.
2.71 The NSW Department of Primary Industries is currently leading
a review of the Model Code and converting it into to standards and
guidelines. This project is expected to be completed by November 2017.
Draft standards and guidelines are being prepared in consultation with
industry and welfare groups, which will be taken to a wider group of
national stakeholders in March 2016.
State and territory laws
2.72 States and territories have responsibility for animal husbandry
and welfare. Compliance with the Model Code is voluntary, although
some state and territory governments have chosen to incorporate it into
their own regulatory frameworks for animal welfare (summarised at
Appendix E). For example, Queensland has legislated a maximum
outdoor stocking density for free range, which was initially set at 1,500
birds per hectare and increased to 10,000 birds per hectare (where
additional animal welfare parameters are met) in 2013.13 This legislation
is specifically for animal welfare purposes, rather than consumer
protection or information purposes.
2.73 Such state and territory laws and regulations relating to animal
husbandry and welfare aim to provide greater certainty of required
13
Animal Care and Protection Amendment Regulation (No. 2) 2013 (QLD). See also
www.choice.com.au/food-and-drink/meat-fish-and-eggs/eggs/articles/free range-eggs.
35
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
minimum standards; the issue is the extent to which marketing claims
directed to consumers are valid.
2.74 As such, some states and territories have gone further in
regulating egg labelling. In the Australian Capital Territory (ACT) eggs
are required to be labelled as cage, barn, aviary or free range at the point
of sale, and these terms are defined in legislation.14 In South Australia
(SA), a voluntary code and trademark for the labelling of free range eggs
was proposed, under which South Australian egg producers that meet
certain conditions would be able to use a trademarked tick of approval.15
No other jurisdiction has laws or regulations related to free range egg
labelling. The majority of regimes outlined in Appendix E relate to
minimum standards for animal welfare rather than informing consumers.
Industry initiatives
2.75 Several industry organisations have created voluntary industry
accreditation and certification trademark schemes16 on how free range
eggs should be produced, based on their own objectives. These schemes
generally relate to factors such as stocking density, shelter requirements,
outdoor area requirements, beak treatment and method of egg collection.
All are consistent with the Model Code (based on the interpretation that
stocking density above 1,500 hens per hectare is acceptable when
appropriate range rotation is practiced).These are summarised at
Appendix F.17
2.76 Research and consultation suggests there is scope for industry
certification to play a greater role in informing consumers. The wide range
of industry initiatives has some potential to confuse consumers who may
not be aware of differences between production method standards without
undertaking intensive research. However, given the lack of conclusive
evidence of a single set of consumer expectations for free range eggs, the
continued use of industry certification regimes and marketing practices
may be the least interventionist means of ensuring those consumers that
are interested in additional information regarding egg production can
14
Eggs (Labelling and Sales) Act 2001 (ACT)
15
More information on the draft framework can be found on the Consumer and Business
Services website.
16
Industry-accreditation schemes are determined by industry associations and bodies whereas
certified trademarks are approved for use in the market via application to the ACCC.
17
These certified trademarks all comply with, or set lower, maximum stocking density
boundaries as outlined in the Model Code of Practice. Producers must also comply with
standards (other than stocking density) to qualify for certification.
36
Safe harbour for complying with an information standard about free range eggs
identify products that meet their preferences. Industry would need to play
a greater role in promoting such regimes and trademarks to consumers.
2.77 More recently other definitions have been proposed, but not
formalised in regulation, including a definition of free range suggested by
Egg Farmers of Australia (EFA).18
Details of Option 1
2.78 By maintaining the status quo under Option 1, ACL regulators
would continue to enforce the ACL requirement for traders' statements on
free range to not mislead consumers. Approved certified trademarks, the
Model Code and some states' and territories' industry-specific legislation
would continue to operate. This option would not involve any additional
regulation.
2.79 This option would also see the development and publication of
additional ACCC enforcement guidance to industry.
2.80 The ACCC considers that there has been some convergence on
principles as part of the consultation process and that it is well-placed to
adjust its guidance to encompass the principles of meaningful access and
hens that regularly access the range.
2.81 The ACCC guidance will seek to address any confusion
regarding the appropriate use of the term in the labelling context and,
together with appropriate enforcement by ACL regulators, should improve
consumer confidence that free range egg labels truthfully reflect the
conditions under which the eggs were produced.
2.82 Certified trademarks and existing industry certification regimes
will continue to have an important role. Industry could be encouraged to
improve the marketing and promotion of free range eggs within the
framework established by the case law and forthcoming ACCC industry
guidance. Market incentives will continue to encourage producers to
identify these 'premium' factors without government intervention. A
number of eggs producers are voluntarily providing information about
18
Egg Farmers of Australia is a group of egg farmer representative organisations, including
the Victorian Farmers' Federation Egg Group, the NSW Farmers' Association Egg
Committee, the Commercial Egg Producers Association of Western Australia, the
Tasmanian Commercial Egg Producers Association, Queensland United Egg Producers and
the South Australian Local Egg Section. A copy of the Egg Farmers of Australia definition
can be found on the Egg Farmers of Australia website.
37
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
stocking densities to better market their products to consumers who prefer
eggs produced in environments with lower stocking densities.
Importantly, these industry-led initiatives can respond flexibly to meet
consumer demands today and as they evolve into the future.
Option 2: Cap outdoor stocking density and require
disclosure of maximum outdoor stocking density on label
2.83 Option 2 creates an information standard under the ACL that
would require those producers that label their eggs as 'free range' to
disclose outdoor stocking density and set a maximum outdoor stocking
density of 10,000 birds per hectare for the production of free range eggs.
See Appendix G for a summary of the role of information standards under
the ACL.
Option 219
Free range eggs must have been produced with an outdoor stocking density of
no more than 10,000 hens per hectare.
If eggs are labelled as 'free range', the maximum outdoor stocking density
(hens per hectare) must be prominently disclosed.
2.84 While by no means the sole or key determinant of a bird's
ability to access the outdoors, consumer expectations of 'free range' seem
to correspond primarily to outdoor space and external stocking density.20
2.85 Lower stocking densities are more expensive for producers as
they require more land per hen and fewer hens per flock. Many consumers
perceive stocking density as a proxy for hen welfare and other animal
husbandry practices. Different free range egg accreditation and certified
trademark schemes, for example, each require producers to keep different
outdoor stocking densities and can therefore assist consumers in
distinguishing between free range egg products. In this way, it may be
beneficial to compel egg producers to label their farm's stocking density
19
Note that the exact wording of the options as outlined in the RIS may be subject to review in
drafting the legislative instrument, should legal advice suggest alternative wording is
necessary. The intent of the Ministers' preferred option will be preserved.
20
See Appendix C, and specifically the August 2015 QMR survey on behalf of NSW Farmers
Association, 'Defining consumer expectations: what production practices are necessary to
underpin confidence in free range labelling', and the October 2015 CHOICE survey 2015
'Free Range Egg Labelling'.
38
Safe harbour for complying with an information standard about free range eggs
on packaging where eggs have been labelled as free range, to help
consumers choose between free range eggs produced in different
circumstances.
2.86 There is little conclusive scientific evidence to support the
specification of a particular stocking density that is most beneficial to
hens, noting that some stakeholders point out that the inclusion of a
maximum outdoor stocking density for free range hens in the Model Code
was initially an environmental management consideration. However, there
seems to be an increasing industry consensus about the maximum outdoor
stocking density appropriate for free range hens. There is also some focus
by industry on the indoor stocking density of hens' laying facilities.21
2.87 Research suggests that no added benefit would be gained from
packaging eggs with extra descriptors, such as beak treatment or stocking
density descriptors.22 This is because these extra animal husbandry
practices are perceived by consumers as difficult to interpret without a
high degree of knowledge and interest.23 Similarly, with regard to
stocking density, consumers generally find it difficult to conceptualise
what a certain amount of hens per hectare looks like.24 Consumers
finding quick and easy cues, like the words 'free range', price, size and
colour of eggs, to be more valuable when deciding which eggs to
purchase.25
2.88 One way to overcome this could be to require producers to
disclose the number of hens per square metre or per A4 size, as these are
easier for the average consumer to conceptualise compared to hens per
hectare. Another option is to use a graphic to show the number of hens
that would fit into a designated area.
2.89 However, recent media and consumer focus on outdoor stocking
density in relation to free range eggs, particularly surrounding stocking
levels above or below 1,500 birds per hectare, suggests this terminology
may be the best one to adopt in any disclosure requirement.
21
For example see:
www.rspca.org.au/sites/default/files/website/what-we-do/working-with-farming-
industry/RSPCALayerhensStandards.pdf.
22
AECL 2012 focus group research, page 45.
23
Ibid, pages 47-52.
24
Ibid, pages 30-32.
25
Ibid, pages 47-52.
39
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Stakeholder comment:
Most Australian consumers [want] accurate egg labelling. We
choose and pay extra for eggs that we believe have been
produced using humane methods. Those humane methods are
based on the number of hens per hectare ...
... There must be set standards for what can be called a free-
range hen. i.e. max 1500 per hectare.
Judy Hungerford,
submission to consultation process
2.90 As with Option 1, no definition of free range is created. Rather,
the enforcement of the misleading and deceptive conduct provisions
remains the main form of regulation.
Option 3: Definition of 'free range' and disclosure obligations
2.91 Option 3 would define the term 'free range' used to market eggs
to consumers and require the disclosure of the maximum outdoor stocking
density on the label.
Option 326
Free range eggs must come from laying hens that had meaningful and regular
access to an outdoor range where the hens were free to roam and forage during
daylight hours except on days when on the open ranges such things as weather
conditions endangered the safety or health of the laying hens, or predators
were present, or the laying hens were being medicated.
The eggs must have been produced with an outdoor stocking density of no
more than 10,000 hens per hectare (as per Option 2).
The maximum outdoor stocking density (hens per hectare) must be
prominently disclosed (as per Option 2).
Compliance provides a safe harbour for misleading and deceptive conduct
provisions in relation to the free range claim, but this does not extend to other
representations.
26
Note that the exact wording of the options as outlined in the RIS may be subject to review in
drafting the legislative instrument, should legal advice suggest alternative wording is
necessary. The intent of the Ministers' preferred option will be preserved.
40
Safe harbour for complying with an information standard about free range eggs
2.92 The objective of requiring disclosure of maximum outdoor
stocking density is to assist consumers to differentiate between the various
stocking densities of free range eggs, should they wish to do so.
2.93 Note that this option is largely consistent with preferred option
outlined by CHOICE in its June 2015 report 'Free range eggs: Making the
claim meaningful'27 (although the CHOICE submission to the
consultation process outlined a more prescriptive preferred option) and is
largely consistent with the definition of free range developed by Egg
Farmers Australia.
'meaningful and regular access'
2.94 The component of the proposed definition in Option 3 subject to
the most debate during consultations was the concept of birds having
'regular access' to the outdoors.
2.95 A number of consumer groups and smaller producers argued for
a definition of free range based around birds regularly going outside or
being 'free to regularly roam and forage', as opposed to having access to
an outdoor range. This is consistent with ACCC industry guidance based
on 'most birds outside on most days'. (See also Section 5: Consultation.)
2.96 Aside from the ACCC guidance, all other definitions of 'free
range' currently in use imply that birds go outside but do not make this the
measurable threshold for the definition. For example:
• The Model Code is legislated in all States and Territories
except South Australia and the Northern Territory as a
(voluntary) animal welfare safe-harbour and requires all birds
to have 'ready access through openings to the outdoor range
during daylight hours for a minimum of 8 hours per day';
• The existing ACT and Queensland industry-specific
legislation mandate 'access' and other requirements but do
not explicitly specify 'birds outside';
• The proposed South Australian Government voluntary
industry code is based on 'unrestricted access';
27
CHOICE, June 2015.
41
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
• Bills tabled in the NSW, Tasmanian and Western Australian
parliaments over the period 2011-2013 all defined free range
in terms of the Model Code and 'access to range';
• All of the operating accreditation and trademark schemes
relevant to free range define numerous requirements based on
'access to range' but do not mention 'birds outside'
explicitly, including Australian Certified Organic, Humane
Choice, RSPCA, Free Range Egg & Poultry Australia
(FREPA), Free Range Farmers Association (FRFA) and AEC
Assured (Australian Egg Corporation);
• The relevant EU Directives and Regulations, and the US
Department of Agriculture definition, focus on access to an
outdoor range. See Appendix H for details of US and
European regulation.
• For further detail, see Appendices E, F and H.
2.97 EFA outlined its concerns regarding any requirement that hens
regularly go outside (see Consultation section). The EFA noted the hens
regularly going outside is the natural consequence of meaningful access to
the outdoors, but that quantifying the proportion of hens that are outdoors
is impractical and unworkable as a standard.
2.98 The phrasing 'meaningful and regular access' is therefore
proposed as a means of ensuring free range birds have ready and frequent
access to an outdoor range. It would not explicitly require nor imply that
producers should quantify the number of birds outdoors. Also implicit in
this phrase is the expectation that hens would be unconfined within the
barn when not outdoors - that is, not held in cages when in the barn.
2.99 The intent behind 'meaningful and regular access' to a range
could be further explained in the Explanatory Statement to the information
standard, to guide the court's interpretation. The ACCC would also issue
revised enforcement guidance for producers, which would provide advice
to producers on how regulators will interpret the information standard.
2.100 However, it should be noted that the exact wording of the
information standard will be finalised following legal advice as the formal
legislative instrument is drafted.
Amending the ACL to create a safe harbour
2.101 The creation of a safe harbour for producers that comply with
the information standard will require an amendment to the ACL.
42
Safe harbour for complying with an information standard about free range eggs
2.102 Under the ACL, safe harbour defences provide certainty for
businesses by deeming certain conduct not to be misleading or deceptive
if it complies with specific criteria.
2.103 The information standard would compel egg producers to meet
certain conditions if they choose to use the term 'free range' on labels.
However, an information standard is a legislative instrument, and
therefore cannot alter primary legislation to create a safe harbour.
Legislative amendment is required to achieve that objective. For Option 3
(and Option 4) the criteria for the safe harbour defence would be
compliance with the requirements of the information standard.
2.104 Implementation of Option 3 (or Option 4) would require both
the making of an information standard by the Commonwealth Minister
and an amendment of the ACL to create the corresponding safe harbour.
(See Section 7 - Implementation and review and Appendix G for further
details.)
Option 4: Definition of 'free range' and 'open range' and
disclosure obligations
2.105 Option 4 builds upon Option 3 and defines an optional second
category for egg labelling - 'open range'.
Option 428
In addition to the term 'free range', producers may use the term 'open range'
where eggs are free range (as defined in Option 3) and produced with a
maximum outdoor stocking density of 1,500 birds per hectare.
The label must disclose the maximum outdoor stocking density.
2.106 Compliance provides a safe harbour for misleading & deceptive
conduct provisions in relation to the free range claim, but this does not
extend to other representations. The objective of Option 4 would be to
accommodate consumers and smaller scale producers who prefer a lower
stocking density model of 1,500 hens per hectare or less.
28
Note that the exact wording of the options as outlined in the RIS may be subject to review in
drafting the legislative instrument, should legal advice suggest alternative wording is
necessary. The intent of the Ministers' preferred option will be preserved.
43
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
2.107 Eligible producers could choose to label their eggs as 'open
range' as a means of conveying to consumers that the eggs are produced
at a lower stocking density. Producers would not be obliged to adopt the
'open range' label. Consumers seeking to purchase free range eggs
produced at a lower stocking density would be able to search for eggs
labelled as 'open range.'
2.108 The introduction of such a category could warrant CAANZ
officials consulting further on other factors that could be considered as
part of an 'open range' category. However, there has been insufficient
time for meaningful consultation on additional factors prior to CAF.
Ministers could choose to explore further factors following CAF, noting
that this would significantly delay a decision on the issue.
4. IMPACT ANALYSIS
2.109 Undertaking a quantitative analysis of the costs and benefits of
each of the four options, beyond specific and identifiable compliance
costs for stakeholders, presents a number of challenges.
2.110 Producer submissions flagged that the uncertainty created by the
current regulatory environment could have a range of impacts, from lost
opportunities as businesses hold off further investment in the innovation
of production practices, to real losses if future court rulings or other
actions leave businesses exposed to claims of false and misleading
conduct. As future changes in the regulatory environment cannot be
predicted, these impacts cannot be quantified with any certainty.
2.111 Furthermore, the benefits for consumers in a more stable and
transparent regulatory regime are mostly intangible. Consumers could be
expected to benefit from greater confidence in 'free range' labels, and
from easier comparison between products afforded by stocking density
disclosure, but these impacts are likely to reflect the various levels of
engagement of individual consumers with the issue.
2.112 The analysis of the impacts of each option is therefore mainly
qualitative and focussed on reflecting the impacts presented by
stakeholders throughout consultation, but does quantify the compliance
costs of proposed regulations where possible.
44
Safe harbour for complying with an information standard about free range eggs
Calculating compliance costs
2.113 The compliance costs for businesses are outlined in the analysis
of each option below. These compliance cost estimates are based on data
and assumptions drawn from consultation.
2.114 There are estimated to be 277 primary enterprise egg farms
(covering 79 per cent of egg production) and 5,400 secondary enterprise
egg farms (9 per cent of egg production) in Australia.29 An estimated 39
per cent of grocery eggs are sold as free range.30 Applying this ratio to the
total provides an estimate of 108 primary and 2106 secondary free range
egg producers in Australia, which has been used as the base population of
businesses affected by any regulatory change.
2.115 Compliance cost estimates have been based on these figures, and
on additional estimates of compliance impacts developed through the
consultation process. These estimates were included in the original
consultation RIS on which numerous submissions were received, and have
been refined to further reflect stakeholder views expressed through
subsequent consultation (see Section 5). While in some instances
assumptions have been unavoidable, these have been based on qualitative
assessments developed in conjunction with stakeholders. The full
quantitative compliance costing can be found at Appendix I.
Analysis of Option 1
2.116 Option 1 represents the status quo, and there are therefore no
compliance costs generated under this option. However, the challenges
faced by businesses and consumers under the status quo provide a
baseline from which the impact of other options can be measured.
Producer impacts
2.117 Maintaining the status quo would have benefits for some
businesses where they use existing labelling practices to differentiate their
products. Avoiding any new regulation of free range egg labelling would
ensure no interference with accreditation and certified trademark schemes
that are already in use, and would also leave flexibility for businesses to
adapt to any changes in market conditions, industry best practice or
consumer expectations without coming into conflict with the law.
29
ABS, June 2013.
30
Australian Egg Corporation Limited, Australian egg industry overview -- December 2014,
2014, www.aecl.org/dmsdocument/462.
45
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
2.118 However, under the status quo, producers face a number of costs
arising from uncertainty in the regulatory settings that govern egg
labelling. As the standards for free range eggs evolve and change through
developing case law, producers need to stay up to date with the latest
requirements and any new guidance from regulators. Stakeholders have
indicated through consultation that it is reasonable to assume that this
would require about 8 hours of work by each business over any given
year.
2.119 Producers also need to monitor their compliance with these
settings, for instance by undertaking quality checks across their properties
and infrastructure, assumed to require around 60 hours per year for large
primary producers, or 30 hours for smaller secondary producers.
2.120 Beyond these regular requirements for maintaining compliance
in a shifting regulatory environment, producers face the risk that their
assets might become stranded, or their investments wasted, if significant
changes to the legal interpretation of free range were to occur. Producers
indicated in consultations that this was a very significant concern across
the industry.
Consumer impacts
2.121 Consumers also face uncertainty in the current regulatory
environment. While terminology such as 'free range', as well as other
marketing claims like 'organic', 'biodynamic' and 'fat free', provide a
mechanism for consumers to differentiate between products, individuals
have little capacity to investigate the meaning or veracity of such claims.
2.122 Submissions indicated that, to varying degrees, many consumers
lack confidence that eggs marketed as 'free range' have been produced
under the conditions they would expect. Products do not all provide the
same level of information about their production methods, and there is no
minimum standard that consumers can expect has been met.
2.123 Further, there is a risk that if substantial and sudden regulatory
changes were to emerge from case law, these could affect the supply of
free range eggs, potentially leading to price rises or other impacts in the
egg market.
Other impacts
2.124 Some regulators are of the view that the status quo arrangements
have been sufficient for successful court action to be taken against
producers to address misleading claims. Maintaining the status quo
46
Safe harbour for complying with an information standard about free range eggs
ensures that there are no unintended conflicts between consumer
regulations and agricultural policy and food standards.
2.125 Additionally, the lack of a national standard for free range has
allowed states and territories to develop regulations that reflect
expectations in their jurisdictions. Some states, however, have viewed
taking such action as less preferable than adopting a national standard to
align state and territory labelling practices.
Total average compliance costs
2.126 There are no specific compliance cost impacts resulting from the
status quo.
Analysis of Option 2
2.127 Option 2 would introduce an information standard setting a
maximum stocking density for free range eggs at 10,000 hens per hectare,
with mandatory stocking density disclosure where eggs are labelled free
range.
Producer impacts
2.128 This option would generate some upfront costs for producers, as
they would need to take the time to understand what the new regulations
are, read any guidance from the ACCC on interpretation and enforcement,
and consider how the information standard would impact their current
business practices. Given the straightforward nature of this change, this is
only expected to require around 8 hours (one working day) per business.
2.129 Some producers would need to make amendments to their labels
to meet the mandatory stocking density disclosure requirement. This
would be a one off change to their label to reflect production practice
(stocking density) at that time (any subsequent label design changes
would be the result of individual business decisions about marketing, or
decisions to change practices). Research suggests changes to labels would
cost approximately $3,000 for each primary producer (with more
sophisticated labels) and $500 for each secondary producer (using simpler
labels).31
31
PwC, 'Cost Schedule for Food Labelling Changes'
www.health.gov.au/internet/main/publishing.nsf/Content/CF7E670597F383ADCA257BF00
01BAFF5/$File/2014%20Cost%20Schedule%20for%20Food%20Labelling%20Changes%2
0.pdf, April 2014.
47
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
2.130 Costs from Option 2 would be offset by the benefits of increased
certainty provided by the information standard. The information standard
would reduce the scope for regulatory shifts based on court rulings from
year to year, and would be expected to reduce the time producers would
need to devote to staying abreast of these developments.
2.131 Consultations suggested a reasonable assumption is a reduction
from 8 hours per year to 6. This reflects the fact that under Option 2, an
amount of uncertainty would remain, for instance, over the specific
interpretation of how hens access outdoor spaces, as well as minimum
standards for housing and other welfare standards. This Option is also
unlikely to reduce the amount of time producers spend monitoring their
practices to ensure they are meeting current standards.
2.132 Given that some aspects of the regulatory environment would
remain uncertain, some risks for businesses such as stranded assets32 and
lost investments could also remain. However, this option would retain the
flexibility afforded under the status quo for producers to differentiate their
products using labels, accreditations and trademark schemes outside of the
term 'free range'.
2.133 Importantly, it is expected that most producers currently
marketing their eggs as free range already comply with a maximum
stocking density of 10,000 hens per hectare (as advised during
consultations), so this new requirement is unlikely to generate significant
costs for producers to restructure. As such, Option 2 could be considered
an improvement on the status quo for producers, although some regulatory
uncertainty would remain.
Consumer impacts
2.134 Option 2 would generate some benefits for consumers by
ensuring stocking density is disclosed for all free range eggs. This would
provide consumers with a mechanism to compare and differentiate
between the production practices used to produce free range eggs, and
provide information not previously available in all cases.
2.135 Consumers would be expected to read and interpret labelling
information under normal circumstances, and so this is not estimated to
create a specific compliance impact on individuals. While this might lead
to genuine time savings for consumers, these impacts do not qualify as
specific compliance costs savings.
32
Assets that have become obsolete or non-performing earlier than expected.
48
Safe harbour for complying with an information standard about free range eggs
2.136 Despite being unquantifiable, consultations suggest that
consumers would consider better access to information about the
production methods of free range eggs to be of significant benefit. Based
on this feedback, while Option 2 might not provide consumers with
certainty about all aspects of egg production practices, it would be an
improvement on the status quo arrangements.
Other impacts
2.137 Option 2 would not restrict regulators from continuing to use
misleading and deceptive conduct provisions in the ACL to address
misleading labels. It would provide additional indicators to courts and
regulators about what might constitute misleading conduct, although it
would not provide certainty about all aspects of egg production.
2.138 This option could also be expected to have positive competition
impacts. By improving the information available to consumers, it should
help the market function more efficiently, with suppliers encouraged to
more accurately meet the standards that consumers expect.
2.139 While there would be a very low risk of unintended conflicts
with or implications for agricultural policy and food safety standards, this
option may conflict with the Model Code by defining a less flexible
maximum outdoor stocking density.
2.140 By creating a national standard for some aspects of free range
egg production, it is possible that Option 2 could lead to conflicts with
state and territory regulations should they develop independently.
However, the Option is limited enough that it would not conflict with
welfare requirements specific to certain jurisdictions (for instance, climate
factors in tropical and sub-tropical regions). This risk could be further
mitigated by states and territories considering the information standard
when developing future regulations.
Total average compliance costs
2.141 Option 2 is estimated to generate an upfront compliance cost to
businesses of $2.536 million, and an ongoing annual compliance saving of
$0.29 million. There are no compliance costs for individuals, meaning the
total average annual compliance cost over ten years is a small saving of
$0.036 million.
Analysis of Option 3
2.142 Option 3 would introduce a definition for 'free range' that would
give businesses a safe harbour from false and misleading conduct claims,
49
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
in addition to the stocking density limit and disclosure requirements
outlined under Option 2.
Producer impacts
2.143 As with Option 2, producers would face upfront costs as they
come to terms with the new regulation, and make adjustment to labels to
meet the disclosure requirement if necessary. Producers would face the
same label changing requirements as under Option 2, and therefore the
same costs. The broader information standard and safe harbour proposed
under Option 3 would be substantially more complex than under Option 2,
introducing a written definition of free range including a number of
criteria that producers would have to understand and interpret.
Stakeholders have indicated through consultation that it is reasonable to
assume that producers would require 24 rather than 8 hours to learn about
the new laws when they come into effect.
2.144 The benefits afforded to producers from a more stable and
detailed definition of free range would be significantly greater than the
benefits in Option 2. The clarity provided by the information standard,
paired with the legal protection of a safe harbour, would significantly
decrease the risk of the definition being subject to regular change in
response to court judgements, reducing the hours businesses would need
to spend monitoring these developments from 8 hours per year to an
estimated 4 (some time would still be required to monitor changes to other
related requirements such as animal welfare guidance and food safety
standards).
2.145 In addition, it is expected that this certainty would allow larger
producers to reduce the time spent monitoring and maintaining their
compliance from 60 hours per year to 45. This is because the clearer
definition would enable producers to 'set and forget' some aspects of their
production practices, and would reduce recurring concerns that they may
be non-compliant. Secondary producers, who already spend limited time
(30 hours) on this ongoing compliance given their smaller scale of
production, are unlikely to see similar benefits.
2.146 As with Option 2, the flexibility would remain for producers to
use alternative labelling terms to differentiate and market their products -
particularly for smaller producers. This, combined with the increased
certainty and protection afforded for producers making free range claims,
means that Option 3 is likely to be a significant improvement on the status
quo for producers.
50
Safe harbour for complying with an information standard about free range eggs
Consumer impacts
2.147 By establishing a firm definition for free range eggs, as well as
limiting stocking density and requiring disclosure, Option 3 would
provide consumers with a significant increase in the available information
about eggs, and a greater degree of confidence in the free range label.
2.148 While these benefits might be unquantifiable (as in Option 2),
they would help to address the lack of consumer confidence in the
meaning of the free range label. Consumers could also be protected from
market shocks or reduced investment in innovation that might occur from
any regulatory shifts that may potentially impact producers as outlined
under the 'producer impacts' analysis of Option 1.
2.149 A clear national standard that provides consumers with
confidence in the free range label, as well as more readily available
information about stocking density, would be a substantial improvement
on the uncertainty being experienced by consumers under the status quo.
Other impacts
2.150 Option 3 would prevent regulators from bringing misleading and
deceptive conduct actions against producers who satisfy the criteria in the
information standard, but would not restrict them taking action over other
aspects of labels outside of the term 'free range' (eg pictures). There
would also be further benefits to courts in having a clear standard to
compare conduct against, and similar competition benefits as described in
Option 2.
2.151 As with Option 2, there could be a risk of unintended conflicts
with agricultural or food safety policy, or with regulations in particular
states or territories, although the definition proposed is not prescriptive
enough to substantially conflict with welfare practices that are currently
required in some states or territories. This risk would be minimised by the
states and territories taking the national standard into account as future
regulations are developed and reviewed.
2.152 The proposed definition in Option 3 is also broadly consistent
with the Model Code (for instance, by referring to access to an open
range) but is notably more prescriptive than Option 2.
Total average compliance costs
2.153 Option 3 is estimated to generate an upfront compliance cost to
businesses of $4.855 million, and an ongoing annual compliance saving of
$0.686 million. There are no compliance costs for individuals, meaning
51
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
the total average annual compliance cost over ten years is a saving of $0.2
million. While still small when spread across all producers, this saving is
noticeably larger than that achieved under Option 2.
Analysis of Option 4
2.154 Option 4 would see the introduction of a new 'open range'
category, with a stocking density limit of 1,500 hens per hectare, in
addition to the changes under Option 3.
Producer impacts
2.155 The changes proposed under Option 4 are substantially more
complex than those in either Option 2 or 3. Producers would need to
understand the new category, its definition, its interaction with the free
range category, and its relevance to their own production practices, as
well as the free range definition and safe harbour provisions captured in
Option 3. Stakeholders have indicated through consultation that it is
reasonable to assume that this would require a significant amount of time,
when the new laws come into effect, estimated at 48 hours (six working
days).
2.156 Some producers would have label change costs to comply with
the stocking density disclosure requirements, as in the previous options.
However, a subset of secondary producers (assumed to be 25 per cent or
527 small producers), who could be expected to adopt the 'open range'
label, would need to make an additional (or more substantial) change to
their label to include the new classification, rather than the 'free range'
classification. It is assumed that producers will incur an additional $500
cost to make this change.33
2.157 Some producers have also indicated through consultations that
they would incur further costs from changing terminology in their
business name registration and marketing and promotional material, if
they were to take steps to market themselves as 'open range'. These costs
are difficult to quantify and may represent costs of business decisions
rather than regulatory compliance costs, so have not been calculated as
33
No reliable estimates exist for the number of producers that might meet an 'open range'
definition. However, it is likely that only a limited number of smaller producers would
currently maintain a stocking density below 1,500 hens per hectare. Larger producers may
decide to create an 'open range' product but this would be a business decision rather than a
compliance cost.
52
Safe harbour for complying with an information standard about free range eggs
part of the specific regulatory impost to business. They nonetheless
represent a cost that these producers would incur under Option 4.
2.158 Importantly, the annual compliance and monitoring time savings
from the introduction of an additional category is unlikely to be larger
under Option 4 than Option 3. The definition of 'free range' would be the
same under each of these options, and the additional 'open range'
category would not impact court interpretations of the base term 'free
range'. Once a producer has understood which category they fit and made
appropriate adjustments, their need to monitor any remaining changes to
animal welfare guidance and food safety standards would remain at 4
hours annually, as estimated in Option 3. Likewise, the annual 15 hour
reduction in the time taken to monitor compliance for large producers
would also remain unchanged under Option 4.
2.159 It is expected that those smaller producers that do meet the 'open
range' definition, and who choose to use it (estimated at 527 as above)
would need to take an extra 5 hours per year to ensure their compliance
with this additional standard, taking their time spent on maintaining their
compliance from 30 to 35 hours each year.
2.160 It is therefore unlikely that the introduction of an additional
category would generate any increased regulatory certainty for producers
as compared with Option 3. It would, however, generate additional costs,
both in adapting to a more complex system, and in making changes for
those businesses that choose to use the new category. Option 4 is likely to
represent a regulatory overreach from the perspective of businesses, and
be less favourable than Option 3.
Consumer impacts
2.161 For eggs labelled as free range, Option 4 would have the same
impacts on consumer confidence and information access as Option 3.
2.162 However, the introduction of an 'open range' category would
add complications for consumers. As this term is not currently in wide use
across the industry, consumers would need to take time to understand this
new term and research its meaning and relationship to free range. The new
category would also add to the variety of definitions and labels that
already confront consumers. Consultations revealed contradictory
interpretations of the term 'open range' and there was no consensus
among either consumers or producers on what terminology would
represent a higher standard than 'free range'.
2.163 Once understood, the new category could have some benefits for
consumers seeking to buy eggs that they perceive have been produced at a
53
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
higher standard. However, given that all options other than the status quo
require mandatory disclosure of stocking density, it is not clear that the
addition of a specific category for producers with a density below 1,500
hens per hectare would be of significant additional benefit.
2.164 The new category would also lack any further defining criteria
beyond this stocking density limit and the protections provided in the free
range definition in Option 3. As stocking density is only one aspect of egg
production, a new category defined by this aspect alone is unlikely to
provide the kind of assurance that consumers looking for eggs produced
under perceived higher welfare standards would desire.
2.165 Given these concerns, and the added complexity for consumers,
it is not clear that Option 4 would generate significant consumer benefits
beyond those provided under Option 3.
Other Impacts
2.166 While possible interactions with agricultural and food standards
might present similar risks under Option 4 as under Option 3, the
introduction of a new category would be clearly inconsistent with the
Model Code and existing state and territory regulations, as well as
international practices - none of which recognise the term 'open range'.
2.167 The new category would also introduce additional complexity
for regulators in monitoring and enforcing compliance with multiple
categories. These impacts would be inconsistent with the goal of
achieving a nationally consistent set of regulations.
Total average compliance costs
2.168 Option 4 is estimated to generate an upfront compliance cost to
businesses of $8.596 million, and an ongoing annual compliance saving of
$0.513 million. There are no compliance costs for individuals, meaning
the total average annual compliance cost over ten years is a cost of $0.346
million. This is therefore the only option that is estimated to increase the
regulatory burden on producers.
54
Safe harbour for complying with an information standard about free range eggs
5. CONSULTATION
Process
2.169 The Australian Treasury, on behalf of Consumer Affairs
Australia and New Zealand (CAANZ34) undertook an extensive public
consultation process. The objective of the consultation was to gather
additional evidence on the extent of the problem and the policy options.
2.170 The Commonwealth Minister for Small Business and Assistant
Treasurer commenced the consultation process with the release of the
consultation regulation impact statement on 5 October 2015 and
accompanying media statement. The paper was published on the
consultations page of the Australian Treasury website.
2.171 Those stakeholders already identified as interested in the issue
were notified of its publication by email. Treasury also announced the
consultation process on social media, references to the consultation
process and paper were added to the Australian Consumer Law website
and all consumer affairs Ministers also sought to bring the consultation
process to the attention of interested stakeholders.
2.172 While written submissions were originally due by 2 November
2015, significant public response to the consultation paper prompted an
extension of the period for written submissions to 27 November 2015. The
extension was to ensure that there was adequate time for all relevant
stakeholders to provide their views to governments.
2.173 The very high level of public engagement with the consultation
paper is indicated by the number of formal and informal submission
received. The consultation process received:
• 149 submissions from consumers, egg producers, consumer
advocacy groups, animal welfare groups, government
agencies, retailers, academics and other stakeholders,
• 2,043 brief consumer comments via www.treasury.gov.au
and email,
34
Consumer Affairs Australia and New Zealand (CAANZ) consists of senior officers of the
Commonwealth, state and territory and New Zealand Government agencies responsible for
consumer affairs or fair trading. The primary role of CAANZ is to support Consumer
Affairs Ministers.
55
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
• 7,505 emails from egg consumers as part of a campaign
coordinated by the RSPCA, and
• 106 emails from consumers and producers coordinated by
Egg Farmers of Australia (EFA).
2.174 Consumer affairs Ministers and CAANZ officials met with more
than 20 stakeholders over a number of bilateral and roundtable meetings
during November and December 2015 and January 2016. Ministers and
officials visited a variety of egg farms. A full list of all non-confidential
submissions received is at Appendix K.
Key findings
2.175 Consultation indicated most stakeholders support additional
regulation to clarify the meaning and use of 'free range', but views about
its form vary widely, particularly about the definition of 'free range' egg
production.
2.176 These views divide roughly between larger businesses that
supply cheaper 'free range' eggs to supermarkets using intensive
production systems and smaller businesses using pasture-based 'free
range' systems, with support from consumer and animal welfare groups.
• Larger egg producers and their associations (EFA, NSW
Farmers and others) generally argue for a definition of 'free
range' based on birds having meaningful access to the
outdoors.
• Almost all of the formal consumer feedback argues for a
strict definition of 'free range' based on the principle that
birds regularly range freely outdoors, together with various
animal husbandry or animal welfare conditions.
- Pasture-based producers, their industry groups and
associated organisations (for example PROOF) also called
for a strict definition of 'free range' (that is, animal
husbandry practices and/or 1,500 hens per hectare or less).
56
Safe harbour for complying with an information standard about free range eggs
Stakeholder comment:
Consumer interest in the term free range is highly associated with
perceptions of better standards of welfare for the hen so it is imperative
that the definition of free range meets this expectation. Simply being
able to move about freely on an open range does not guarantee good
welfare. There are numerous other factors that influence the welfare of
the layer hen, both inside and outside of the shed. For consumer
expectations to be met with conviction, the definition of free range
must also consider these influencing factors.
RSPCA Australia,
submission to consultation process
Stakeholder comment:
VFF Egg Group proposes a definition of free range in which hens
which are not in cages have access to an outdoor range during the day,
and the range has a stocking density of not more than 10,000 birds/ha.
Victorian Farmers Federation Egg Group,
submission to consultation process
Stakeholder comment:
In order to meet consumer expectations of animal welfare, it is
essential that the definition of 'free-range" includes specific conditions
like stocking density and husbandry practices.
Monique Sweetland,
submission to consultation process
Definition based on case law
2.177 Specifically, a variety of stakeholders objected to a definition of
'free range' based upon the outcomes of recent ACCC enforcement cases
for misleading labelling of eggs as 'free range' (as outlined in Options 2
and 3 of the consultation paper). While recent case law suggests that
consumers understand 'free range' eggs to mean most birds access the
outdoors on most ordinary days, a number of producers argued that this
definition would be difficult to enforce and may require farmers to
potentially force birds outdoors. EFA argued that larger producers, who
supply 80 per cent of the market, are uncertain as to whether they would
satisfy this definition, creating significant market disruption if
implemented. Advocates for a definition of 'free range' to encompass low
stocking density and animal welfare factors (for example, Humane
Society International) argued that a definition based on the case law
would be inadequate in terms of meeting those objectives.
57
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
• This feedback, in combination with additional research on
existing definitions of 'free range', is reflected in the revised
options outlined in this decision regulation impact statement,
as the case-law based definition is no longer proposed. See
the description of Option 3 for further analysis.
Stakeholder comment:
The ACCC definition is not workable as it would be very difficult to
implement at a farm level. A farmer would have to force his animals
out of the shed to comply. Hens, like humans have different behaviour
habits, some like being outside more than others. When managing
hens, the focus is on keeping hens as comfortable as possible. Should
the farmer be forced to move hens outside when they are unwilling to
do so themselves, means that farmers would be posing unnecessary
stress on the birds. The ACCC definition of "most hens going outside
on most ordinary days" lacks clarity as what is constituted by "most
hens" and "most ordinary days". The definition is difficult to
implement, difficult to measure and difficult to prosecute against.
Commercial Egg Producers' Association of Western Australia,
submission to consultation process
Defining new labelling terms
2.178 The original consultation RIS included a proposal to create
specific categories such as 'access to range' (for eggs from birds may not
go outside on most ordinary days), or 'premium free range' (for eggs from
birds kept in conditions that may be considered 'better' than standard free
range) met with a variety of criticisms, primarily due to the potential
impact on consumer understanding and market demand stemming from
the introduction of new labels.
2.179 In both cases, those producers who would be most likely to use
the new labels objected to any requirement to re-brand, instead arguing
that they should retain the use of the term 'free range'. However,
supporters of a definition of free range based on less-intensive farming
practices (for example, CHOICE and Katham Springs Bio-Dynamic Free
Range Eggs) supported the introduction of an 'access to range' category
for those eggs that they consider should not be permitted to use the free
range label.
58
Safe harbour for complying with an information standard about free range eggs
Stakeholder comment:
Consumer confidence would never recover if the waters were muddied
further with a term such as 'premium free range', confusing them
further and allowing intensive free range producers to continue to
hijack the free range market. Instead they should fall into the new
proposed category 'access to range' which would provide a much more
accurate and honest descriptor of their production system.
Humane Society International,
submission to consultation process
2.180 Some consumer affairs Ministers subsequently recommended
that the decision RIS should include analysis of an option to create both
the definition of free range similar to Option 3 in this RIS and an 'open
range' category for eggs produced at lower outdoor stocking density.
Further consultations on this proposal were conducted with organisations
representing larger and smaller producers. All stakeholders expressed
concern regarding the nomenclature of any fourth category. A number of
possible terms have been proposed, including 'open range', 'premium free
range', 'pasture-raised' or 'free range plus', but stakeholders were
concerned that none of these terms would accurately convey the nature of
the product to consumers, potentially increasing consumer confusion.
2.181 Smaller producer groups consulted as part of the subsequent
consultations on 'open range' - including FREPOSA 1500, Free Range
Farmers Association (Vic), and PROOF - had a mixed response to the
proposal. The Free Range Farmers Association (VIC) were supportive of
an additional category that included additional factors of continued access
to range and no beak treatment. However they were concerned that the
phrase 'open range' or 'pasture-based' may be misleading and preferred
'premium free range'. FREPOSA 1500 and PROOF were both
unsupportive of a specific additional category for small producers. Both
were concerned that the term 'open range' will not mean much to
consumers. FREPOSA 15000 suggested that the primary differentiation
for their product should be outdoor stocking density. PROOF suggested if
a new category was created it should only apply to mobile systems.
Kossies Free Range Eggs also argued for a distinct category for low
density farmers using mobile sheds.
2.182 Egg Farmers of Australia questioned the value of an arbitrary
fourth category, arguing that the uncertainty of what should be captured
by a fourth category underlines that it is unnecessary. The EFA also
suggested a new category would distort the market and conflict with
existing agriculture policy, including significant unintended flow-on
effects for the review of the Model Code.
59
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Mandating labelling of all eggs
2.183 One option proposed in the consultation paper was to mandate
the labelling of all eggs as either 'cage', 'barn' or 'free range'. While
some stakeholders (e.g. RSPCA and a number of individual consumers)
favoured this proposal, a lack of evidence regarding existing consumer
detriment suggests the regulation of 'cage' or 'barn' eggs would be
unwarranted.
Outdoor stocking density
2.184 One of the key points of contention between stakeholders is the
appropriate maximum outdoor stocking density for free range birds. Many
smaller producers, animal welfare and consumer groups want the 'free
range' outdoor stocking density capped at 1,500 birds per hectare. Larger
producers support 10,000 birds per hectare with range management. This
disagreement is due to differing interpretations of the Model Code.
• As the Model Code is due for review shortly, options
outlined in this paper have been carefully designed to avoid
pre-empting or limiting the outcome of that review.
Animal welfare factors
2.185 The majority of submissions from individual consumers, as well
as those from CHOICE, Humane Society International (HSI) and RSPCA
argue that consumers need extra information about 'free range' egg
production such as beak trimming or forced moulting, or that these and
other practices should be prohibited altogether for eggs labelled as free
range. The basis of this argument is that consumers buy free range eggs
because they believe that hen welfare is higher for free range hens, and
this includes factors beyond access to and use of an outdoor range.
2.186 Smaller pasture-based 'free range' producers also indicated
supported for either disclosing or banning such practices, so consumers
can distinguish their eggs from those produced in more intensive systems.
2.187 The extent to which all consumers (as opposed to a more
engaged subset)associate certain animal welfare practices with 'free
range' eggs is uncertain, as indicated by the variation in findings of
consumers surveys received as part of the consultation process (see
Appendix C).
2.188 Furthermore, the consultation process received references to a
variety of scientific studies with differing conclusions on the relationship
between animal welfare and various free range practices. While a bird's
60
Safe harbour for complying with an information standard about free range eggs
ability to exhibit natural behaviours was the most often cited indicator of
high animal welfare in the consumer submissions received, scientific
research suggests that 'to determine an animal's welfare in a given
housing system, indicators such as mortality rate, physiological measures
(typically of stress indicators), disease and health status, behaviour, and
productivity must be examined together. Analysing a sole indicator, such
as productivity, can often be misleading if other indicators suggest a
conflicting conclusion.'35 Notwithstanding the number of submissions
calling for a definition of 'free range' to incorporate animal welfare
factors, given the uncertainty outlined in Appendix C and the fact that
regulation of animal welfare remains the policy responsibility of state and
territory primary industry ministers, the options outlined in this regulation
impact statement do not attempt to regulate or proscribe certain animal
welfare practices.
Stakeholder comment:
Consumers may believe that the provision of a production system
alone will lead to better bird welfare, but the reality is often different as
the specific risks to bird health and welfare will have to be addressed in
each production system. It is also acknowledged that consumers value
egg parameters other than bird welfare such as food safety and
nutritional status and these qualities are also affected by different egg
production systems.
Animal Health Australia,
submission to consultation process
Other outcomes
2.189 While the consultation process explicitly requested quantitative
data from stakeholders regarding likely compliance costs of options or
benefits (beyond price elasticity of demand), to inform the cost-benefit
analysis to be conducted as part of this RIS, minimal such data was
provided.
35
Shields, S and Duncan, I (undated, c.2013), 'An HSUS Report: A Comparison of the Welfare
of Hens in Battery Cages and Alternative Systems', Human Society of the United States; p.2
61
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
6. CONCLUSION
2.190 As noted in the Summary, Option 3 is the recommended Option
as it is likely to be the most effective at meeting the policy objective
without imposing unnecessary costs. It establishes a clear baseline for free
range egg production consistent with existing industry practice, general
consumer expectations and current trademarks and legislation and
provides consumers with additional information to help them distinguish
between high and low intensity free range production.
2.191 Both a quantification of compliance costs and a qualitative
comparative analysis of the costs and benefits of the options indicate
Option 3 is likely to offer the greatest net public benefit.
7. IMPLEMENTATION AND REVIEW
2.192 According to consultation with Egg Farmers of Australia and
other egg producers, the recommended option is unlikely to result in
significant changes to production practices by most suppliers, but will
require changes to labelling in most situations where a producer wishes to
make a free range claim on the label, given the requirement to disclose the
maximum outdoor stocking density and the varied occurrence of this
practice in the market to date. It will also require an education campaign
for producers, to ensure clear understanding of obligations under the
information standard, and for consumers, to assist in informing consumers
of the new labelling requirement and its meaning.
Making an information standard and amending the ACL to create a safe harbour
2.193 An information standard is a legislative instrument. The precise
drafting of the legislative instrument will be subject to legal advice on
appropriate wording. Once made and registered by the Commonwealth
Minister with responsibility for consumer affairs, it must be tabled in the
Commonwealth Parliament and is subject to a 15 day disallowance period.
The information standard will also be subject to a ten year sunset period.
2.194 As a legislative instrument, an information standard cannot alter
primary legislation. Accordingly, it cannot operate as a safe harbour
against provisions of the primary legislation such as sections 18, 29 and
33 of the ACL (misleading and deceptive conduct). In order to create a
safe harbour reflecting the information standard, legislative amendment of
the ACL will be required. Under the intergovernmental agreement
governing the ACL, amendment of the law will require a vote of
62
Safe harbour for complying with an information standard about free range eggs
Consumer Affairs Ministers. Therefore when Ministers make a decision
on the information standard, agreement to the corresponding amendment
to the ACL will be sought.
Consumer education campaigns
2.195 Given the impetus for the development of an information
standard was consumers' widely- reported confusion regarding the
meaning of 'free range' in relation to egg labelling, an effective consumer
education campaign will be essential to the successful implementation of
the recommended option, and should allow consumers to be more
assertive and help drive competition.
2.196 Consumer affairs Ministers and fair trading regulators will have
a role in informing consumers and other stakeholders of the information
standard and its effect. In particular, it will be important that consumers
understand what is, and is not, meant by the use of 'free range' in egg
labelling under the information standard, and what the outdoor stocking
density, as disclosed on the label, means in practice.
2.197 However, given the high degree of consumer interest in the
issue, it is in the industry's best interests to also have a significant role in
informing consumers of how their eggs are produced and factors that are
important in egg production. As the consultation process revealed,
consumers have different levels of understanding of how and why eggs
are produced through different methods and under different conditions.
The education of consumers remains a key responsibility for the industry
should it wish to address the expectations and perceptions of consumers.
2.198 Once consumer affairs Ministers have decided what option to
adopt, CAANZ's Education and Information Advisory Committee (EIAC)
can consider the best means of developing and implementing an education
campaign, in concert with the egg industry, to inform consumers of the
information standard. This consumer guidance could raise awareness of:
• Details of the information standard and its purpose;
• The different types of production methods leading eggs to be
labelled as free range; and
• Other accreditation and certified trademark schemes.
63
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
2.199 For information campaigns to be effective they need to be
appropriately targeted and adequately resourced to ensure a wide range of
producers and consumers are reached.36 In particular, it would be
necessary to ensure that any awareness and guidance were extended to
difficult to reach regional areas, where many egg producers are likely to
operate. Providing additional information to consumers may also not be
effective given that they are time poor when purchasing grocery items and
often do not have time to digest detailed information. Funding for an
education campaign would depend upon consideration of budgets of ACL
regulators and their assessment of the importance of this work.
Transition period
2.200 Through consultations with egg producers, it was communicated
that a 12 month transition period would be sufficient to allow existing
stocks of labels to be used and for new labels to be printed in the event
that changes were necessary.
2.201 If Consumer Affairs Ministers were also to agree to the
Commonwealth proposal on country of origin labelling (CoOL) which has
a transition period proposed to run for two years, ending on 30 June 2018,,
an alignment of the transition period is sensible.
2.202 However, producers will be encouraged to adopt the new
labelling requirements as early as reasonable. In a number of
circumstances, it will be in producers' interests to adopt the new egg
labelling requirements earlier.
Stakeholder comment:
Obsolete packaging costs would most likely be higher for the smaller
producers, as the turnover of packaging is longer. Our preference in
this instance would be for a grace period to apply to allow for old
packaging to be utilised.
'Katham Springs' Bio-Dynamic Free Range Eggs',
submission to consultation process
36
For example a Parliamentary Committee, when commenting on ACCC guidance on country
of origin claims, noted that the success of such a campaign is dependent upon more than
publishing good guidance to raise business and consumer awareness, but also on conducting
an associated campaign to raise awareness of the guidance. Available at:
www.accc.gov.au/publications/country-of-origin-claims-the-australian-consumer-law.
64
Safe harbour for complying with an information standard about free range eggs
Producer education and compliance programs
2.203 The effectiveness of the information standard in addressing
consumer confusion regarding the term 'free range' when used on egg
labels will in part depend on producers awareness of their obligation and
their willingness and ability to comply.
2.204 An information standard made under the ACL applies nationally
in all jurisdictions in Australia and is enforced by all ACL regulators. As
such, any education and compliance campaign should be coordinated
between the ACL regulators. EAIC and CAANZ's Compliance and
Dispute Resolution Committee (CDRAC) will have a role in developing
and coordinating the education, compliance and enforcement action of
regulators, to ensure producers understand their rights and responsibilities
under the information standard and that enforcement of the standard is
coordinated between regulators.
Consideration of exemptions
2.205 The Office of the NSW Small Business Commissioner asked
that consideration be given to a possible small business exemption for
smaller producers. As the scope of the Australian Consumer Law is
limited to actions conducted in trade or commerce, any information
standard will necessarily apply only to the sale of eggs labelled as free
range. Egg producers not engaged in trade or commerce need not comply.
2.206 However, there are a significant number of small and micro egg
producers across the country that do sell their eggs commercially. Exact
data is very difficult to secure, with ABS data capturing primarily the
larger commercial producers. Qualitative statements made during the
consultations suggest smaller, less commercial producers make up the vast
majority of egg producers by number (but a clear minority by output or
bird).
2.207 The submission of the Office of the NSW Small Business
Commissioner cites as an example the NSW small business exemption
provided to the national Primary Production and Processing Standard for
Eggs and Egg Product requirement that an egg producer must not sell eggs
unless each individual egg is marked with the producers' unique
identification. Exemptions, where available, are made on a state-by-state
basis - for example, in Victoria there is an exemption from this
requirement for producers with fewer than 50 egg producing birds. In
NSW an exemption from stamping applies to small egg farmers that
produce less than 20 dozen (240) eggs/week and, either sell those eggs
direct from the farm gate, or use those eggs for a fundraising activity
where the eggs will be cooked. In Tasmania, all commercial egg
65
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
producers are required to stamp their eggs with the unique identification
mark, regardless of production levels.
2.208 Other food labelling requirements, including the revised country
of origin labelling requirements currently being developed, do not include
small business exemptions.
2.209 As the recommended option does not mandate specific action
from producers (but instead states that if a particular term is used on the
label then certain conditions must be met), and the primary compliance
cost of the option are transitional with a recommended long transition
period, no exemption for small business is proposed.
Integration with existing state and territory regulation
2.210 Regulation of the use of the term 'free range' on egg labels has
the potential to overlap significantly with existing regulation made by
states and territories, potentially creating additional compliance costs for
producers and potential confusion for consumers.
2.211 As noted in the discussion of Option 1, the regulation of animal
welfare and husbandry issues is the responsibility of the states and
territories, with some state and territory governments incorporating the
Model Code into their own regulatory frameworks for animal welfare (as
summarised at Appendix E). As the recommended option is consistent
with, although not identical to, the Model Code, its implementation should
not cause significant conflict with existing regulation linked to the Model
Code.
2.212 The Queensland and ACT regimes both include specific
definitions of free range. Upon initial examination, both these definitions
appear consistent with, although not identical to, the recommended option.
2.213 While there may be some benefit in identical definitions of free
range across jurisdictions regulation, it is worth noting that any
information standard under the ACL should not be seen to supplant or
determine animal welfare regulation.
Review
2.214 While the preferred option is not particularly prescriptive,
regular review will be required to ensure that remains consistent with
industry best practice, animal welfare regulation and consumer
expectations.
66
Safe harbour for complying with an information standard about free range eggs
2.215 As the industry innovates and consumer expectations evolve, the
practices outlined in the recommendation option may need to be refined.
In particular, a review of the information standard may be required once
the review of the Model Code is complete, to consider any potential
inconsistencies.
APPENDIX A -- THE SIZE AND VALUE OF THE FREE
RANGE EGG GROCERY MARKET
2.216 According to industry statistics provided by the Australian Egg
Corporation Ltd (AECL)37, the market value of grocery eggs has steadily
risen from $1.3 to $1.8 billion between 2010 and 2015:38
2
Grocery equivalent - gross value of egg production
1.8
billion dollars
1.6
1.4
1.2
1
2009-2010 2010-2011 2011-2012 2012-2013 2013-2014
Figure 1 Source: AECL.
2.217 In 2014, the grocery market share of eggs was predominately
made up of cage (52%) and free range (39%) eggs, with barn (8%) and
speciality (1%) eggs consuming only a small part of the market.39 The
grocery market share of cage eggs has declined over recent years, while
the free range egg share has increased from around 25 per cent in 2010 to
around 40 per cent in 2014.
37
AECL is an industry services body or provider of marketing, research and development
services for the benefit of all stakeholders, principally egg producers.
38
AZTEC, as cited in, Australian Egg Corporation Limited, Australian egg industry overview
-- December 2014, 2014.
39
ibid.
67
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Figures 2 and 3. Source: AZTEC reported by AECL.
2.218 A range of surveys have been undertaken to illustrate the
existence of a significant price premium for eggs labelled as free range.
These include:
68
Safe harbour for complying with an information standard about free range eggs
• Data provided by the AECL showing an almost 50 cent
difference in the retail price per dozen for eggs labelled as
free range compared to eggs labelled as barn laid.40
• NSW Fair Trading reported in 2013 that the average price per
100 grams of free range eggs in Sydney was $0.94, $0.76 for
barn eggs and $0.56 for caged eggs.41 With a medium egg
weighing in around 50 grams, a free range egg is therefore
around 10 cents more expensive than a barn egg and 20 cents
more expensive than a caged egg.
2.219 The higher price of free range eggs is generally attributed to
additional costs of production associated with free range egg production
(as compared to cage or barn eggs), for example the provision of an
outdoor area and, in some cases, lower stocking density; and a recognition
that free range is a premium claim for which some consumers are willing
to pay more for than cage or barn laid eggs.
40
ibid.
41
Research undertaken in Sydney on 8 August 2013 by NSW Fair Trading ,
www.fairtrading.nsw.gov.au/biz_res/ftweb/pdfs/About_us/Response_to_choice_super_com
plaint_on_
free-range_egg_claims.pdf.
69
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
APPENDIX B -- SUMMARY OF ACCC LEGAL ACTION TO
DATE
70
Safe harbour for complying with an information standard about free range eggs
Details of recent court cases
2.220 When a court decides whether labelling claims are false or
misleading, it must consider how a reasonable person would understand
the relevant claims (in the circumstances) and the ordinary meaning of the
claims being made (by words or pictorial representation or by other
means). That is, courts consider the general meaning of a representation
rather than whether it matches a legislated definition, including for
alternative claims such as 'free to roam' or 'farm range'. A producer who
complies with an accreditation or certified trademark scheme definition
may still mislead consumers where the scheme's definition does not
match the more common meaning of the words used.
2.221 In the case of Pirovic, the hens were found not to move about
freely on an open range on most ordinary days because a number of
factors reduced the ability and propensity of the hens to leave their barns
and move freely including:
• the stocking densities of the barns;
• the flock sizes in the barns; and
• the number, size, placement and operation of the physical
openings to the open range.42
2.222 Following the Pirovic decision, the ACCC alerted peak industry
bodies of the decision and that there are a number of farming conditions
that can impact on whether hens are able to, and do, move freely on an
open range each day, including:43
• the conditions of the internal areas the hens are housed in;
• the time of the day and how regularly the openings are
opened;
• the size and condition of the outdoor area, including any
shaded areas, the presence of food, water and different
vegetation and ground conditions;
42
ACCC v Pirovic Enterprises (No 2) [2014] FCA 1028
43
See
www.accc.gov.au/media-release/federal-court-orders-300000-penalty-after-finding-free-ran
ge-egg
-claims-to-be-misleading
71
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
• the stocking density of any outdoor area; and
• whether the hens have been trained or conditioned to remain
indoors.
APPENDIX C -- WHAT DO CONSUMERS THINK ARE
FREE RANGE EGGS?
2.223 Evidence received as part of the public consultation process
indicates that consumer expectations vary when it comes to the key
factors in producing free range eggs.
2.224 The majority of submissions received directly from consumers
called for a definition of free range that encompassed low-stocking
densities and regular use of an outdoor range. A large proportion also
asked that specific animal husbandry practices be banned or identified.
For example:
Example One:
I believe there should be a National Standard for eggs labelled 'Free
Range' that should include a maximum number of chickens that should
be kept inside a shed at night, and a maximum of 1500 birds per
hectare for outdoor facilities. Free range farms should have a low
density of birds as this determines their access to outdoors. I do not
feel that a farm that has 10,000 birds per hectare should be allowed to
be labelled free range. Free Range hens should not be subject to beak
trimming, should have access to outdoors and have access to green
areas and shade. There should be mandatory labelling of beak
treatment and outdoor stocking density on egg cartons.
Example Two:
When I buy free range eggs I expect that those hens have had at least 8
hours a day outside doing what comes naturally to hens, scratching in
dirt, picking at grass, lying in the sun and picking at insects. At night
for their safety to be housed in barns still with room to move freely. I
also expect there to be no more than 2500 hens per hectare.
Written comments received online during consultation period.
2.225 However, the majority of submissions from individual
consumers may be from those stakeholders that are most engaged in the
issue of egg labelling and most concerned with issues of animal welfare.
Therefore it is not clear that these submissions can be interpreted as
representative of 'average' consumer opinion.
72
Safe harbour for complying with an information standard about free range eggs
2.226 The outcomes of surveys of a broader set of consumers were less
consistent in terms of identifying consumers' expectations of stocking
density, use of an outdoor range and animal welfare factors.
Meaning of 'free range'
2.227 An October 2015 survey by CHOICE44 of a representative
sample of consumers found that 87 per cent of consumers surveyed
believe it is important, very important or essential that free range eggs
comes from birds that actually go outside regularly. When asked about
other elements that free-range buyers think should be in the standard, 91%
said birds should have room to move comfortably when outdoors; the
same proportion indicated birds should have room to move comfortable
inside the barn; and 89% said that farmers should undertake animal
welfare practices.
2.228 When asked about the definition of 'free range' proposed in the
Consultation Paper and based on the Pirovic case law (most birds outside
on most ordinary days), 22% of consumers found the 'Pirovic'-based
definition adequate, but 27% wanted animal welfare factors included too,
16% wanted an extra category for high welfare free range eggs and 14%
wanted a declaration of stocking density as well.
2.229 Humane Society International conducted an online survey in
October 2015 on its website.45 Of those surveyed, 98 per cent agreed 'free
range' egg cartons should display the outdoor stocking density for hens,
and 91 per cent that beak treatment should be displayed on the box.
2.230 An earlier 2014 CHOICE survey46 asked consumer about free
range eggs and found that the majority of respondents believe that free
range means 'free to roam', 'access to the outdoors' and 'cage-free'.
44
2015 CHOICE Free Range Egg Labelling Survey. GMI-Lightspeed administered and
managed the fieldwork for the October 2015 survey conducted among 1,695 Australians
aged 18-75 years with quotas to ensure the final sample was representative of the Australian
population by age groups, gender and state and data weighted to the latest ABS population
data.
45
The survey was completed by 1,400 respondents, which contained representation across all
groups for gender, age, and location.
46
2014 CHOICE Free Range Egg Survey. GMI-Lightspeed administered and managed the
fieldwork for the November 2014 survey conducted among 1,696 Australians aged 18-75
years with quotas to ensure the final sample was representative of the Australian population
by age groups, gender and state and data weighted to the latest ABS population data.
73
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
2.231 This earlier CHOICE survey is consistent with the findings of an
August 2015 survey commissioned by the NSW Farmers' Association.
The Survey found that when asked what they think are the minimum
conditions for hens for their eggs to labelled as 'free range', 53% said
'not in a cage' or 'unconfined' and 22% said 'access to the outdoors'.47 In
addition, 18% of those surveyed had no view on what the term should
mean. Other popular responses were 'not crowded' (18%), access to a
dust bath (10%), shelter at night (8%), stocking density (8%) and 'good
conditions' or 'well looked after' (6%).
Appropriate stocking density
2.232 The CHOICE October 2015 consumer survey also asked
consumers about what would be an appropriate outdoor stocking density.
When presented with little background information about the issue, 41 per
cent said they did not know or were unsure, 25 per cent said 750 hens per
hectare, 22% said 1500 hens per hectare, 9% said 2500 hens per hectare
and 2% said 10000 hens per hectare. Once the question was rephrased to
include data on certain other standards and definitions for free range, the
popularity of 750 and 1500 hens per hectare increased.
2.233 The survey on the HSI website found that 41 per cent of
respondents said 750 hens per hectare is an appropriate maximum outdoor
stocking density; 57 per cent said 1,500; 1 per cent said 10,000 and 1 per
cent said a maximum didn't need to be specified.
2.234 Alternatively, the August 2015 survey commissioned by NSW
Farmers found that, when presented by diagrammatic representations of
outdoor stocking density, 72% of respondents consider one hen per square
metre (the equivalent of 10,000 birds per hectare) to either meet or
exceeded their expectations of an appropriate stocking density. A stocking
density of one hen per six square metres (1500 birds per hectare) was
expected by 11% of free range buyers, and 10 birds per square metre by
7%.
Why purchase free range eggs?
2.235 The reasons why consumers purchase free range eggs also seem
to vary. The October 2015 CHOICE survey reported the following
responses: animal welfare (57%), to support genuine free range producers
47
Quantum Market Research August 2015 online survey of 1,200 free range egg buyers aged
over 18 across all states and territories, sourced from an ISO-accredited market research
panel and screened to ensure accuracy.
74
Safe harbour for complying with an information standard about free range eggs
(44%), better taste (34%), healthier (30%), better for environment (29%),
chemical free (28%), on special (20%) and more nutritious (19%).
2.236 In response to the 2015 HSI website survey, 97 per cent of
respondents said their primary motivation for buying free range eggs is
the welfare of the hens, 2 per cent choose free range because of the health
benefits for them, and 1 per cent due to care for the environment.
APPENDIX D -- COMPLAINTS TO ACL REGULATORS
2.237 Between 1 January 2012 and 30 June 2015 the ACCC received
179 contacts to its Infocentre related to egg labelling.
2.238 A breakdown of the issues in these contacts follows:
Percentage of
Issue Contacts
total
False representation of free range 88 49%
AECL certification trademark application 68 38%
Feedback on the definition of free range 9 5%
Producer enquiries on egg representations 7 4%
False green claims 3 2%
Feedback on the benefits of free range 3 2%
False representations as to origin 1 1%
ACCC total 179
2.239 The ACCC also received 1,600 submissions during its
assessment of the AECL certification trademark application.
2.240 During the 2013-14 and 2014-15 financial years, no complaints
were recorded by the ACT, New South Wales, Northern Territory,
75
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Queensland48 or Tasmania. One complaint was recorded by Victoria
related to rotten eggs which subsequently turned out to be mislabelled as
free-range; one complaint was recorded by Western Australia49 in relation
to eggs being labelled as 'farm fresh' despite being resold by the vendor;
and one complaint was recorded by South Australia related to
home-grown eggs being sold as free range at a market stall.
2.241 The lack of complaints could be attributed to consumers being
unaware that they have been misled, a lack of awareness of the current
labelling obligation or inadequate consumer interest in the issue to justify
the lodging of a formal complaint. Also, these complaints to consumer
protection agencies do not include complaints that may have been made to
food safety authorities.
48
Queensland received two complaints in the first six months of 2013, one provided for
information only and the other concerning claims of free range eggs and organic meats
(which was resolved with the trader).
49
Western Australia received four other complaints regarding the misrepresentation of eggs as
free range over the period from 2006 to 2013.
76
Safe harbour for complying with an information standard about free range eggs
APPENDIX E -- RELEVANT REGULATION ACROSS
JURISDICTIONS50
50
Currently the ACT is the only jurisdiction with specific regulation of egg labelling. South
Australia is developing draft regulation. In all other jurisdictions, any regulation in relation
to free range hens relates to animal welfare objectives, including the voluntary adoption of
the Model Code.
77
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
78
Safe harbour for complying with an information standard about free range eggs
APPENDIX F -- FREE RANGE EGGS ACCREDITATION
AND CERTIFIED TRADEMARK SCHEMES51
51
Labelling: Egg production systems, NSW Food Authority website, with some amendments.
79
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
APPENDIX G -INFORMATION STANDARDS UNDER THE
ACL
2.242 Information standards regulate the type and amount of
information provided to consumers about goods and services. An
information standard under the ACL is a written notice made by the
Commonwealth Minister and published on the internet.
80
Safe harbour for complying with an information standard about free range eggs
2.243 Under section 134 of the ACL, an information standard can be
made to:
• require the provision of specified information about
particular kinds of goods;
• make provision in relation to the content of the information
provided;
• provide for the manner or form in which the information is to
be given;
• provide that the information cannot be given in a specified
manner or form;
• provide that information of a specified kind cannot be given;
and/or
• assign meaning to specified information.
2.244 An information standard can be prescriptive about the
information messages and the requirements for its use. For example,
information messages could be required to be in a particular point size,
type face, case, bolded or un-bolded, be clear and legible or a particular
colour on a nominated background colour. These requirements would
ensure that the information message would be readily visible and
communicated to consumers at the point of sale. Alternatively, an
information standard can be basic and simply prescribe one or two
requirements.
2.245 A number of mandatory information standards are already in
force under the ACL, including prescribing requirements for care labelling
for clothing and textile products, and ingredients labelling on cosmetics
and toiletries.
2.246 Once an information standard is imposed, businesses must:
• ensure goods and services they supply comply with relevant
information standards, if sold within Australia; and
• be familiar with information standards relevant to those
goods and services.
2.247 Breach of an information standard can result in civil penalties or
a criminal conviction.
81
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
• A person who fails to comply with a relevant information
standard may be liable for pecuniary penalties of up to
$220,000 if they are an individual or $1.1 million if they are
a body corporate. Criminal penalties for the same amount
may apply.
• A range of other enforcement provisions and remedies also
apply with respect to a breach of an information standard,
including injunctions, disqualification orders, declarations,
compensation orders, redress for non-parties, public warning
notices, non-punitive orders and adverse publicity orders and
court enforceable undertakings.
• For a person who has suffered loss or damage as a result of
non-compliance with an information standard (for example, a
competitor) the court also has the ability to make an order for
damages, compensatory orders or injunctions.
2.248 An information standard made under the ACL is a legislative
instrument that applies nationally in all jurisdictions in Australia and
would be enforced by all ACL regulators.
Appendix H- International approaches
United States
2.249 The U.S. Department of Agriculture (USDA) requires that egg
producers be able to demonstrate that 'free range' (or 'free roaming') egg
layers have access to the outdoors. 52
2.250 There is no formal government oversight as to the quality of the
external environment, or the amount of time the hen has access to it.
Many producers label their eggs as cage-free in addition to, or instead of,
free-range. Recently, US egg labels have expanded to include the term
'barn-roaming', to more accurately describe the source of those eggs that
are laid by hens which cannot range freely, but are confined to a barn
instead of a more restrictive cage.
52
United States Department of Agriculture Food Safety and Inspection Service; 'Food Safety
Information'; www.fsis.usda.gov/wps/wcm/connect/e2853601-3edb-45d3-90dc-
1bef17b7f277/Meat_and_Poultry_Labeling_Terms.pdf?MOD=AJPERES
82
Safe harbour for complying with an information standard about free range eggs
Europe
2.251 Marketing standards are defined for the European market. Since
2004, the egg farming method used has to be stated on the eggs and on the
boxes with a code. The conditions cover continuous daytime access, the
quality and size of the range and a maximum outdoor stocking density of
2,500 hens per hectare (with exceptions).
1. Commission Regulation (EC) No 589/2008 of 23 June 2008 laying down
detailed rules for implementing Council Regulation (EC) No 1234/2007 as regards
marketing standards for eggs
2.252 'Free-range eggs' must be produced in systems of production
which satisfy at least the conditions specified in Article 4 of Council
Directive 1999/74/EC.
2.253 In particular, the following conditions must be satisfied:
(a) hens must have continuous daytime access to open-air runs. However,
this requirement does not prevent a producer from restricting access for a
limited period of time in the morning hours in accordance with usual good
farming practice, including good animal husbandry practice. In case of
other restrictions, including veterinary restrictions, adopted under
Community law to protect public and animal health, having the effect of
restricting access of hens to open-air runs, eggs may continue to be
marketed as 'free-range eggs' for the duration of the restriction, but under
no circumstances for more than 12 weeks;
(b) open-air runs to which hens have access must be mainly covered with
vegetation and not be used for other purposes except for orchards,
woodland and livestock grazing if the latter is authorised by the competent
authorities;
(c) the maximum stocking density of open-air runs must not be greater
than 2 500 hens per hectare of ground available to the hens or one hen per
4 m2 at all times. However, where at least 10 m2 per hen is available and
where rotation is practised and hens are given even access to the whole
area over the flock's life, each paddock used must at any time assure at
least 2,5 m2 per hen;
(d) open-air runs must not extend beyond a radius of 150 m from the
nearest pophole of the building. However, an extension of up to 350 m
from the nearest pophole of the building is permissible provided that a
sufficient number of shelters as referred to in Article 4(1)(3)(b)(ii) of
Directive 1999/74/EC are evenly distributed throughout the whole open-
air run with at least four shelters per hectare.
83
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
2. Article 4 of Council Directive 1999/74/EC
1. Member States shall ensure that from 1 January 2002 all newly built or
rebuilt systems of production referred to in this chapter and all such
systems of production brought into use for the first time comply at least
with the requirements below.
1. All systems must be equipped in such a way that all laying hens have:
(a) either linear feeders providing at least 10 cm per bird or circular
feeders providing at least 4 cm per bird;
(b) either continuous drinking troughs providing 2,5 cm per hen or
circular drinking troughs providing 1 cm per hen.
In addition, where nipple drinkers or cups are used, there shall be at least
one nipple drinker or cup for every 10 hens. Where drinking points are
plumbed in, at least two cups or two nipple drinkers shall be within reach
of each hen;
(c) at least one nest for every seven hens. If group nests are used, there
must be at least 1 m2 of nest space for a maximum of 120 hens;
(d) adequate perches, without sharp edges and providing at least 15 cm
per hen. Perches must not be mounted above the litter and the horizontal
distance between perches must be at least 30 cm and the horizontal
distance between the perch and the wall must be at least 20 cm;
(e) at least 250 cm2 of littered area per hen, the litter occupying at least
one third of the ground surface.
2. The floors of installations must be constructed so as to support
adequately each of the forward-facing claws of each foot.
3. In addition to the provisions laid down in points 1 and 2,
(a) if systems of rearing are used where the laying hens can move freely
between different levels,
(i) there shall be no more than four levels;
(ii) the headroom between the levels must be at least 45 cm;
(iii) the drinking and feeding facilities must be distributed in such a way
as to provide equal access for all hens;
84
Safe harbour for complying with an information standard about free range eggs
(iv) the levels must be so arranged as to prevent droppings falling on the
levels below.
(b) If laying hens have access to open runs:
(i) there must be several popholes giving direct access to the outer area, at
least 35 cm high and 40 cm wide and extending along the entire length of
the building; in any case, a total opening of 2 m must be available per
group of 1000 hens;
(ii) open runs must be:
- of an area appropriate to the stocking density and to the nature of the
ground, in order to prevent any contamination;
- equipped with shelter from inclement weather and predators and, if
necessary, appropriate drinking troughs.
4. The stocking density must not exceed nine laying hens per m2 usable
area.
However, where the usable area corresponds to the available ground
surface, Member States may, until 31 December 2011, authorise a
stocking density of 12 hens per m2 of available area for those
establishments applying this system on 3 August 1999.
2. Member States shall ensure that the minimum requirements laid down
in paragraph 1 apply to all alternative systems from 1 January 2007.
85
APPENDIX I -- COMPLIANCE COST ESTIMATES
Assumptions and key data:
No. of primary (large) producers: 108 Labour cost/hour: $65.45
No. of secondary (small) Producers eligible for 'open
2106 527
producers: range':
Compliance cost estimates:
Option 1 Option 2 Option 3 Option 4
Awareness of new laws
Hours required - 8 24 48
Businesses affected - 2,214 2,214 2,214
Total cost - $ 1,159,250 $ 3,477,751 $ 6,955,502
Label change (large
producers)
Cost per label - $ 3,000 $ 3,000 $ 3,000
Business Costs
Businesses affected - 108 108 108
Total cost - $ 324,000 $ 324,000 $ 324,000
Label change (small
producers)
Cost per label - $ 500 $ 500 $ 500
Businesses affected - 2,106 2,106 2,106
Total cost - $ 1,053,000 $ 1,053,000 $ 1,053,000
Label change ('open
range')
Cost per label - - - $ 500
Businesses affected - - - 527
Total cost - - - $ 263,250
86
Safe harbour for complying with an information standard about free range eggs
Total upfront cost to
businesses - $ 2,536,250 $ 4,854,751 $ 8,595,752
Awareness of changing
laws
Hours required - -2 -4 -4
Businesses affected - 2,214 2,214 2,214
Total cost - -$ 289,813 -$ 579,625 -$ 579,625
Compliance (large
producers)
Hours required - - -15 -15
Businesses affected - - 108 108
Total cost - - -$ 106,029 -$ 106,029
Compliance ('open
range')
Hours required - - - 5
Businesses affected - - - 527
Total cost - - - $ 172,297
Total annual ongoing
cost to businesses - -$ 289,813 -$ 685,654 -$ 513,357
Total upfront cost to
individuals - - - -
Total annual ongoing
cost to individuals - - - -
Net average annual cost
to businesses over 10
years - -$ 36,188 -$ 200,179 $ 346,218
Net average annual cost
to individuals over 10
years - - - -
87
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Total average cost (all) - -$ 36,188 -$ 200,179 $ 346,218
APPENDIX J - SUBMISSIONS RECEIVED
CAANZ received 149 submissions in response to the consultation paper. Of these
submissions, 35 were confidential. The 114 non-confidential submissions are listed
below and available on the Commonwealth Treasury consultations website.
In addition, the consultation process received 2043 informal comments via the website
and 7611 emails.
1. Allan, Janet 16. Bourne, James
2. Animal Defenders Office 17. Brown, Jennifer
3. Animal Health Australia 18. Brown, Robert
4. Animal Justice Party 19. Buckman, James
5. Animal Law Institute 20. Burke, Bede
6. Animals Australia 21. Castles, Julie
7. Ansara, Martha 22. Cate ten, Roel
8. Australian Chicken Meat 23. CHOICE
Federation
24. Coles
9. Australian Food and Grocery
Council 25. Commercial Egg Producers
Association of Western Australia
10. Australian Veterinary
Association 26. Cooper, Sylvia
11. Baker, Lisa MLA 27. Cottle, Jenny
12. Baker, Robert 28. Cox, Russell
13. Barristers Animal Welfare Panel 29. Crichlow, Audrey
14. Barton, Sue 30. Davis, Charles
15. Boulton, Alison 31. De Burgh, David
88
Safe harbour for complying with an information standard about free range eggs
32. Edwards, Margaret 56. Kidd, Andy
33. Egg Farmers of Australia 57. Koci, Stephen
34. Eichenberger, Ayshea 58. Kossies Free Range Eggs
35. Eynon, Sarah-Jane 59. Lashbrook Farm
36. Fleurieu Free Range Eggs 60. Laurence, Dinny
37. Fraser, Todd and Jessica 61. Law Society of South Australia
38. Free Range Farmers Association 62. Lewis, Johanna
Victoria
63. Londey, Michael
39. Freeranger Eggs
64. Mackenzie, Jane
40. FREPOSA 1500
65. Marshall, Duncan
41. Gelman, Julie
66. Matheson, Anne Louise
42. Glasencnik, Traudy
67. McIsaac, Kevin
43. Greig, Lynn
68. McKibben, Mervyn
44. Gumnut Gardens
69. McQueen, Jodie
45. Hanstead, Garry
70. Morrison, Karen
46. MacLaren, the Hon Lyn MLC
71. Neal, Trevor
47. Humane Society International
72. Nelson, Serena Faber
48. Humane Society International -
additional submission 73. NSW Department of Primary
Industries
49. Hummerston, Beth
74. NSW Farmers
50. Hungerford, Judy
75. Nugent, Michael
51. Hunt, Elaine
76. Oates, Jayson
52. IdleWilde Open Range Farm
77. Office of the NSW Small
53. Isaac, Geoff Business Commissioner
54. Katham Springs 78. O'Leary, Janis
55. Kendall, Jan 79. Panvino, Calogero
89
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
80. Park, Samuel 104. Thompson, Kramer
81. Parry, Rob 105. Tskchenko, Oksana Alekseevna
82. Power, Julie 106. Vernon, Kay
83. PROOF 107. Victorian Farmers Federation
84. Prus, Sarah 108. Voiceless
85. Queensland United Egg 109. Walsh, Linda
Producers
110. Werner, Greta
86. Rattenbury, Shane MLA
111. Williams, Senator John
87. Rechten, Rebekka
112. Winners Circle Free Range Eggs
88. Rhoades, Marlene
113. World Animal Protection
89. Rothfield, David
114. Yamstick
90. RSPCA Australia
91. Ruhnke, Isabelle
92. Safe Food Production QLD
93. Santi, Isaliah
94. Scarborough, Geoff
95. Sentient
96. Sin, Su Li
97. South Australian Local Egg
Section
98. Sullivan, Corinna
99. Sweetland, Monique
100. Swick, Robert
101. Tabar, Golnaz Bassam
102. The Greens NSW
103. Thomas-Wurth, Jehni
90
Chapter 3
Confidentiality of information
Outline of chapter
3.1 Schedule 3 to this Bill amends the CCA to ensure that
confidential supplier information obtained by the AER in performing its
wholesale electricity market monitoring and reporting functions under the
NEL remains confidential under the Commonwealth law.
Context of amendments
3.2 On 1 July 2016, in accordance with the procedures in the
Australian Energy Market Agreement, the COAG Energy Council agreed
to introduce explicit wholesale market monitoring and reporting functions
for the AER. In this role the AER will monitor the wholesale electricity
market to determine if features of the market may be detrimental to its
effective functioning. This includes analysing whether there is effective
competition.
3.3 In order for it to perform its monitoring function, the AER will
collect confidential information from wholesale electricity suppliers
which will be subject to stringent conditions to govern the use and future
disclosure of the information. These conditions will be set out in the NEL.
3.4 The CCA also regulates the use and disclosure of confidential
information obtained by the AER. It lists a number of organisations and
bodies to whom confidential information may be released. These
exemptions would allow for the sharing of information collected by the
AER as part of its monitoring functions more broadly than is intended
under the conditions which will be set out in the NEL.
3.5 Under section 109 of the Constitution, where there is an
inconsistency between a Commonwealth law (such as the CCA) and a
State or Territory law (such as the NEL), the Commonwealth law prevails.
3.6 The amendments in Schedule 3 remove the inconsistencies
between the NEL and the CCA to ensure that where the NEL, enacted as
State and Territory legislation, restricts or prohibits the use or disclosure
of information by the AER obtained as part of its wholesale market
monitoring, the Commonwealth law similarly restricts or prohibits the use
or disclosure of that information.
91
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Summary of new law
3.7 The amendments support the role of the AER to monitor the
wholesale electricity market by removing inconsistencies between the
treatment of confidential supplier information in the NEL and CCA.
3.8 The amendments to the CCA provide that confidential supplier
information collected by AER may only be used or disclosed in the
circumstances provided for in section 18D of the NEL or equivalent State
or Territory law.
3.9 All references in this chapter are to the CCA unless otherwise
stated.
Comparison of key features of new law and current law
New law Current law
Confidential supplier information The AER must take reasonable
collected as part of the AER's measures to protect from
wholesale market monitoring role unauthorised use or disclosure,
may only be used or disclosed in the certain types of information, subject
circumstances provided for in section to a number of authorised use and
18D of the NEL or an equivalent disclosure exceptions in the CCA.
State or Territory law. The exceptions in the CCA are not
limited by section 18D of the NEL.
Detailed explanation of new law
3.10 Upon commencement, section 18D of the NEL53 will provide
that the AER must only use or disclose information collected as part of its
wholesale market monitoring and reporting functions for the performance
of those functions.
53
The National Electricity (South Australia) (Australian Energy Regulator - Wholesale Market
Monitoring) Amendment Bill 2016 amends the NEL to give the AER its extended
monitoring functions. The NEL is a cooperative legislative scheme in the energy sector. The
NEL is set out in the Schedule to the National Electricity (South Australia) Act 1996 (SA)
and is applied as law by legislation in force in those States and Territories participating in
the cooperative scheme, and by the Commonwealth in the circumstances provided for in the
Australian Energy Market Act 2004 (Cth).
92
Confidentiality of information
3.11 However, existing subsections 44AAF(1) and 44AAF(2) also set
out how the AER must protect information collected in confidence or as
part of its regulatory functions. The provisions provide that
Commonwealth, State and Territory laws can authorise the use and
disclosure of the information.
3.12 Existing subsections 44AAF(3) to 44AAF(7) include
exemptions which allow for the release of information to a number of
bodies including for example, the Australian Energy Market Operator and
the Clean Energy Regulator for the purpose of those bodies, or persons in
those bodies, performing their functions.
3.13 Disclosure to these organisations and in these circumstances will
be inconsistent with section 18D of the NEL once it has commenced.
However, under section 109 of the Constitution, where there is an
inconsistency between a Commonwealth law (such as the CCA) and a
State or Territory law (such as the NEL), the Commonwealth law prevails.
3.14 Schedule 3 amends the CCA to ensure that the exemptions in
subsections 44AAF(3) to 44AAF (7) are subject to the restrictions in
section 18D of the NEL or equivalent State or Territory laws. [Schedule 3,
item 6, subsection 44AAF(9)]
3.15 The amendments will ensure that, upon the commencement of
section 18D of the NEL, confidential supplier information can only be
used by the AER for the purposes of its wholesale market monitoring and
reporting functions, and can only be disclosed for the purposes of these
functions, and in such a way that does not reveal any confidential aspects
of the information or identify the wholesale electricity supplier to whom
the information relates.
3.16 It is expected that section 18D of the NEL will commence
immediately after the amendments in Schedule 3 commence.54
3.17 Existing subsection 44AAF(2) will continue to have effect, so
that if a Commonwealth law (other than the CCA), State or Territory law
requires or permits the confidential supplier information to be disclosed,
the AER may disclose the information despite section 18D of the NEL.
54
Subsection 2(1) of the National Electricity (South Australia) (Australian Energy Regulator -
Wholesale Market Monitoring) Amendment Bill 2016 provides that the Bill will commence
on a day set by proclamation.
93
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
Minor technical amendments
3.18 Schedule 3 also makes a number of minor technical amendments
to section 44AAF.
3.19 A new heading is inserted into the section to clarify and reflect
that information subject to the confidentiality provisions may be both
disclosed and used in certain circumstances and to certain bodies. The
existing heading may suggest that information may only be authorised for
certain uses. [Schedule 3, items 1 and 4, subsections 44AAF(2) and
44AAF(3)(heading)]
3.20 The amendments clarify that where the disclosure of information
is required or permitted by another law of the Commonwealth, a State or a
Territory, the disclosure of the information is only authorised to the extent
required or permitted by that law. [Schedule 3, item 2, subsection 44AAF(2)]
3.21 To reflect modern drafting conventions the amendments remove
the phrase 'taken to be authorised' so that the provisions directly state that
certain types of use and disclosure of information is authorised. [Schedule 3,
items 3 and 5, subsections 44AAF(2) and 44AAF(6)]
Application provisions
3.22 The amendments in Schedule 3 apply to the use or disclosure of
information after the Bill receives Royal Assent, regardless of when the
information was acquired. [Schedule 3, item 7]
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Confidentiality of information
3.23 Schedule 3 to this Bill is compatible with the human rights and
freedoms recognised or declared in the international instruments listed in
section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
94
Confidentiality of information
Overview
3.24 Schedule 3 to this Bill amends the CCA to ensure that
confidential supplier information obtained by the Australian Energy
Regulator (AER) in performing its wholesale market monitoring and
reporting functions under the NEL remains confidential under the
Commonwealth law.
3.25 The NEL is a cooperative legislative scheme in the energy
sector. The NEL is set out in South Australian legislation and is applied as
law by legislation in force in the States and Territories that participate in
the cooperative scheme, and by the Commonwealth in the circumstances
provided for in the Australian Energy Market Act 2004 (Cth).
3.26 The AER is the Commonwealth regulator established under the
CCA. The AER's functions, powers and duties are conferred under the
NEL. On 1 July 2016, in accordance with the procedures in the Australian
Energy Market Agreement, the Energy Council of the Council of
Australian Governments agreed to introduce explicit wholesale market
monitoring and reporting functions for the AER. These functions are set
out in section 18C of the NEL. Upon commencement, section 18D of the
NEL will regulate the use and disclosure of information obtained by the
AER in the course of performing these functions (confidential supplier
information).
3.27 Section 44AAF of the CCA also contains provisions regulating
the use and disclosure of confidential information obtained by the AER.
Under section 109 of the Constitution, where there is an inconsistency
between a Commonwealth law (such as the CCA) and a State or Territory
law (such as the NEL), the Commonwealth law prevails.
3.28 The amendments in Schedule 3 remove the inconsistencies
between section 18D of the NEL and section 44AAF of the CCA, and
ensure that confidential supplier information may otherwise only be
disclosed to the extent required or permitted by law.
3.29 The AER may obtain confidential supplier information from a
wholesale electricity supplier:
• to assist it in determining whether:
- there is effective competition within a wholesale
electricity market;
- there are features of the market that may be
detrimental to effective competition within the market; and
95
Treasury Laws Amendment (2018 Measures No. 3) Bill 2018
- there are features of the market that may be impacting
detrimentally on the efficient functioning of the market; and
• if there is an inefficiency identified, to analyse if the
inefficiency gives rise to competition in the market that is not
effective.
3.30 The amendments ensure that confidential supplier information
can only be used by the AER for the purposes of its wholesale market
monitoring and reporting functions, and can only be disclosed for the
purposes of these functions, and in such a way that does not reveal any
confidential aspects of the information or identify the wholesale electricity
supplier to whom the information relates, or if, and to the extent that, the
disclosure is required or permitted by another Commonwealth, State or
Territory law.
Human rights implications
3.31 This Schedule does not engage any of the applicable rights or
freedoms because the relevant information is market information relating
to suppliers and the nature of competition in the market, rather than
personal information.
Conclusion
3.32 This Schedule is compatible with human rights as it does not
raise any human rights issues.
96