When does persuasion become manipulation? Our lawmakers are weighing in

Privacy reform has dominated the compliance conversation for years. But a separate set of changes to Australian Consumer Law has been quietly advancing - and it has direct implications for how digital marketing is built and delivered. Peter Leonard, Chair of ADMA's Regulatory and Advocacy Working Group, explains what marketers need to understand now.

Most marketers have had their eyes fixed on the Privacy Act. This is completely understandable - Tranche 2 Privacy Act reforms program, and the Privacy Commissioner’s newly active enforcement stance on uses of pixels and other online tracking codes, have been the dominant compliance conversation for the better part of two years.

But while attention has been concentrated there, another significant regulatory development has been advancing with almost no visibility in the marketing industry.

That is the proposed extension of Australian Consumer Law to cover unfair trading practices. If you haven't been tracking it, now is a very good time to start.

The law has a gap - and regulators know it

Australian Consumer Law is very well understood by most marketers - prohibitions on misleading and deceptive claims, use of unfair contracts terms such as subscription traps and contractual provisions that allow contract terms or prices to be changed without prior notice to consumers, and so on.

But there is a gap. Australian Consumer Law does not currently address unfair trading practices more broadly, such as conduct that manipulates how consumers make decisions without necessarily making a false or misleading claim.

In some comparable jurisdictions, prohibitions address so-called ‘dark patterns’, such as making it difficult for consumers to refuse personalised advertising. This includes not giving an equal choice to 'accept all' or 'reject all' cookies, overly complicated privacy controls which confuse consumers or cause them to disengage and the use of leading language to influence consumers to hand over personal information.

These are regarded as going beyond marketing persuasion and unreasonably distorting the environment in which a consumer makes a decision about a product or service. That gap is what the government is now moving to close.

This is not a new conversation. The Treasury has been consulting on unfair trading practices reform for at least four years, publishing multiple consultation papers and canvassing various options for what legislative change might look like. While slow, progress has been deliberate.

But in February, the consultation reached a new and more consequential stage. The government released an exposure draft of proposed amendments to Australian Consumer Law that would introduce a general prohibition on conduct that unreasonably manipulates consumers or distorts the environment in which they make decisions, where likely to cause detriment to a consumer.

That is something all marketers need to sit up and take notice of because they need to understand where the line is between persuasion and manipulation.

Persuasion is the business of marketing. Presenting a product in a compelling way, creating emotional resonance, using urgency or social proof to prompt action - these are all legitimate tools used responsibly across the industry every day.

The question that any prohibition on unfair trading practices must answer clearly is: Where does reasonable persuasion end and unreasonable manipulation begin?

That distinction is easier to state than to legislate. I have no doubt many would default to the “pub test” - if you have to explain your marketing tactic to a stranger at the bar, would it seem legitimate or would it make them squirm? But legislation cannot be written on instinct.

Drafting a general prohibition broad enough to capture genuinely harmful practices without inadvertently catching legitimate marketing activity is a difficult exercise.

Get it wrong in one direction and the law fails to address the problem. Get it wrong in the other and marketers may face legal consequences for practices that are standard, reasonable and consumer-friendly - likely damping down the competition that makes this industry so distinctive.

This is why the detail of how the prohibition is framed is so important and why industry engagement in the consultation process matters.

Timing is uncertain but the trajectory is not

While change is on the horizon - it is not here yet.

It would be tempting to look at the four-year consultation timeline and conclude that there is plenty more time before anything changes. That could yet prove true. A process that has moved this slowly could continue to move slowly, particularly if the government's legislative agenda becomes congested.

But the release of an exposure draft is a different kind of signal to another discussion paper. It suggests the government has moved past exploring whether to act and into working out how. That is a meaningful shift in pace.

It also does not exist in isolation. The proposed unfair trading practices prohibition is one part of a significantly more active regulatory environment for digital marketing and online services.

The Privacy Commissioner is stepping up enforcement of privacy obligations. A broad digital duty of care for online service providers is also under development. The reform pipeline is flowing fast.

What marketers should do with this now

Marketers who wait for each piece of legislation to pass before they begin thinking about its implications are going to spend a lot of time playing catch-up.

The practical starting point is careful scrutiny of your own digital practices. Not with a view to assuming everything is problematic - most digital marketing is responsible and legitimate - but with the kind of rigour that a regulator might one day apply.

Look at your interfaces. Are there design patterns in your subscription flows, your checkout processes or your consent mechanisms that are designed to benefit your business at the cost of a clear, friction-free experience for the consumer? Are urgency signals genuine, or are they manufactured? Are opt-out pathways as accessible as opt-in pathways?

These questions are worth asking now, before they are asked by a regulator, because the answers will shape both your compliance exposure and your reputation with consumers.

More broadly, the convergence of privacy reform, consumer law reform and digital regulation signals something that marketers should understand - that responsible data and marketing governance is no longer a legal function that sits adjacent to the marketing department.

It is embedded in how campaigns are built, how interfaces are designed and how consumer relationships are managed. The organisations that understand this early will be better positioned to build the kind of consumer trust that is becoming a genuine competitive differentiator.

In a regulatory environment that is moving in one clear direction, the question worth asking isn't whether these changes will affect you. It's whether you want to be the organisation that figured that out early, or the one that left it too late?

Given the penalties being levied to businesses breaking existing laws, those in the second camp will likely pay a hefty price.

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