April 2017 | Opinion | Seak-King Huang and Mary Sheargold
Last week, we saw charities and sector leaders and advisors write an open letter to our Prime Minister, Premiers and Chief Ministers imploring them to #fixfundraising. Their letter calls for the creation of one uniform fundraising regulatory regime as part of the Australian Consumer Law (ACL). Prolegis fully supports this proposed reform, whilst also identifying a number of practical and policy issues that will require attention so that no unintended consequences arise for the charity and not for profit sector.
Prolegis fully supports major reform to our States and Territories’ existing laws around fundraising. These laws are outdated and often contradictory. They have neither kept up with, nor efficiently regulate, the fundraising practices we commonly see today. These practices include Australia-wide fundraising, peer-to-peer fundraising by individuals reaching out to their own networks and, business to customer fundraising, where businesses fundraise as they sell products and services for causes they have chosen to support, much of which now takes place on the web. In this opinion piece we highlight areas of concern with the existing laws and identify some of the questions that will need to be considered in adopting one uniform regulatory regime under the ACL.
As a dedicated team of practitioners serving the charity and not-for-profit sector, the need to have a single, clear set of laws and regulations that govern fundraising activities for this sector is obvious to us. The following common questions that are often asked by charities and not-for-profits, as well as businesses and individuals undertake fundraising for them, whether commercially or otherwise, illustrate the need:
- Which of the State/Territory based fundraising laws apply when you are operating nationally? To what extent do they overlap with each other?
- How do we comply with one regime and also with another when they may be in conflict with each other?
- What fundraising activities do permits and licences actually cover in each jurisdiction?
- Does the ACL already apply? When does it apply? Over what sort of activities?
We agree that utilising the ACL is possible and sensible given the focus of fundraising regulation is also predominantly on the protection of consumers (the ultimate donors). At the launch event, the Shadow Minister for Charities and Not-for-Profits Andrew Leigh spoke of “dodgy charities” as significant threats to charitable giving by Australians.
There are however, some important matters that will need to be addressed before the ACL can fully ‘inherit’ regulation of fundraising across Australia.
The first matter is constitutional.
The ACL is Commonwealth legislation made on the basis of the Commonwealth’s powers under Section 51 of our Constitution, a provision which does not provide a head of power sufficient to cover the fundraising activities other than those which are conducted “in trade or commerce”. So, the question of whether this issue can be dealt with by a few simple changes to wording in the ACL, or whether an inter-governmental approach (in which contribution of effort and resources by all jurisdictions would be essential) may be necessary, turns on determining whether all forms of fundraising occur “in trade or commerce”.
The Federal Court decision concerning Belle Gibson is still topical. She was found to have contravened the prohibitions in the ACL for conduct that is, or is likely to be, misleading or deceptive and unconscionable conduct in connection with goods or services. In her case, it is easy to conclude that she was engaged in trade or commerce because she promoted and sold books and apps. But this will not, and perhaps should not, be the case for all fundraising activities.
Section 2 of the ACL defines “trade or commerce” to include “any business or professional activity (whether or not carried on for profit)”. This has led some to conclude that that the ACL already applies to all fundraising activities carried on by charities and not-for-profit organisations or those engaged by them. But is this so? And should every party involved in the chain of a transaction be caught?
The following scenario may be useful in illustrating the potential uncertainty about whether the ACL would, and should, apply to all fundraising efforts. Consider a vendor who sells tokens with the sale proceeds being directed to a charity. The activity of selling a token might lead one to a quick conclusion that the vendor is engaged in trade or commerce – there is a business activity carried on. However, the following questions highlight some of the issues involved in forming a definitive view about whether or not the ACL might apply:
- Would or should the conclusion be different if the vendor is an unpaid volunteer Does an unpaid volunteer carry on a business or professional activity? Should a person who is a volunteer be subject to this sort of regulation? If the conclusion is that volunteers should be exempt, are all of them to be exempt?
- What if the vendor is a personnel of a direct marketing company? Is the direct marketing company caught? Should the vendor be caught also?
- Is the charity which receives the proceeds also engaged in the trade or commerce activity of selling the tokens? And would the answer to that question be different if, on the one hand, the charity had engaged the vendor or the direct marketing company (say, as part of an overall campaign organised by the charity) to sell the tokens, or if, on the other hand, the vendor is an individual selling tokens of their own initiative, fuelled by the desire to raise money for their favourite charity?
These questions illustrate the fact that the answer to the “trade or commerce” question is not be straightforward.
They also illustrate that there are policy considerations that we should take into account in considering who should be subject to the ACL prohibitions. Many different types of organisations and their activities currently enjoy exemptions from some or all fundraising regulation. An important policy question is whether these exemptions are to be mirrored in an ACL which becomes the singular uniform law relating to fundraising.
The second consideration is how the current system of fundraising licences and permits, and requirements around matters such as identification, could be streamlined.
Currently, licences and permits, and identification badges, do serve to give the general public some confidence that the fundraising solicitations which may come their way are sanctioned. If the current State and Territory legislation are repealed, would the ACCC take on the role of administering and regulating licences and permits? Could the ACL contain the requirements around identification?
There are clear economic benefits in a harmonised approach to the legal regulation of charitable fundraising. The Commonwealth and the State and Territory governments constantly seek to reduce red tape for organisations in their jurisdictions, and there is a clear public benefit to simplifying and eradicating laws that are costly in terms of compliance and which are out-of-date. We believe that the Federal and State/Territory governments should cooperate to bring about these much needed reforms, and that given the magnitude of the contribution this sector makes to Australia’s economy, these reforms should be prioritised.
Prolegis would be delighted to add its experience to the development of these reforms.