Introduction
In a joint media release, on 28th March 2019, the Hon Stuart Robert, MP, and the Hon Michaekia Cash, Senator, announced that the small business owners will be protected from unfair contract terms.
However, the ACCC, the regulatory body of the unfair contract term regime, said that the current laws i.e. The Australian Consumer Law (ACL) covers most of the small business transactions that are not enough and is inaccurate. The Joint media release told that the current regime is ambiguous, uncertain. There are practical difficulties which cannot be follow by the small business owner. They pointed out the major flaws in the existing laws which include:
- The laws do not make unfair contract terms illegal
- The ACCC and ASIC have no power to seek penalties if any unfair contract term is declared void by the court.
- They cannot even declare an infringement notice for the unfair contract terms.
The Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act 2001 (ASIC Act). It is presented the protections for the consumers against the Unfair contract terms. These were presented in standard contract forms. These protections were extended for the small business contracts if they meet the standard criteria. This extension was added in November 2016.
Here are the standard criteria for small business contracts:
- It will be a standard form contract;
- It will be for a supply of goods or services or sale of land;
- The terms specify that when the contract is enter, at that time; the business must have less than 20 employees, which includes casual employees.
- The upfront price of the contract to pay which should not exceed $300,000. In case the contract is of 12 months then the amount should not exceed $1 million.
Under the ACCC, the court has the power to declare a term of the contract to be unfair, making it void. In the current regime, there is no law; which prohibits any unfair contract term to be include in the standard contract form. Even, the regulatory bodies do not have any power to impose a penalty for any of the unfair contract terms. One more flaw in the regime is that the company cannot be for previous unfair contract terms if they amend it. The chairperson of the ACCC Rod Sims, highligh with the current limitations in the laws surrounding the unfair contract terms is in violation of the provisions of the Competition and Consumer Act 2010 (CCA)
2018 Government review of the Unfair Contract Terms Regime
The government undertook a review that started on 12 November 2018 to review. Whether to extend the protection of small businesses after 2 years of their commencement. The 2018 Media Release, the committee in the review found out that:
- Even though the current regime has supported and has shown better results in protecting the small businesses; in some of the industries. It still lacks the deterrence which would discourage the businesses to use unfair contract terms.
- There is a need for regulators in the regime to improve the protection and provide guidelines for complying with the law. It is to be able to work with the industry stakeholders.
Conclusion
With the results of the finding, government consultation was commenced to amend the current laws; regarding the unfair contract terms for small businesses:
- Declaring the unfair contract terms illegal and stipulating penalties attached to it.
- The number of employees in small businesses was increased from 20 to 100; when the contract is made and with a minimum turnover of $10 Million.
- Increasing the area of small businesses by removing the value threshold.
- Redefining the meaning of ‘standard form contract’.
- The regime might exempt the ‘minimum standard’ required for small businesses which are prescribed by the state and territory laws.
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