Change is coming to the Australian Competition and Consumer Law: civil penalties to increase and be introduced for unfair contract terms
Introduction
The Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 (Bill) was introduced into the Australian Parliament on 28 September 2022 as a response to the Government’s election commitment to ease the cost of living by increasing penalties for breaches under the Competition and Consumer Act 2010 (Cth) (CCA) and to increase protections for small businesses from unfair contract terms. The Bill proposes to amend the CCA and the equivalent sections under the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
Proposed Changes to Maximum Penalties for Competition and Consumer Laws
Maximum penalties for contravention of the CCA and Australian Consumer Law (ACL) set to increase for companies are showcased below:
| Current Penalties | Proposed Penalties |
|---|---|
| $10 million | $50 million |
| 3x the value of the benefit obtained, if that benefit can be determined | 3x the value of the benefit obtained, if that benefit can be determined |
| If the value of benefit cannot be determined the penalty is only 10% of annual turnover in the 12 months prior to the breach | If the value of benefit cannot be determined, 30% of the company’s adjusted turnover during the breach turnover period for the offence (with a minimum of 12 months) |
Maximum penalties for contravention of the CCA and ACL set to increase for individuals as showcased below:
| Current Penalties | Proposed Penalties |
|---|---|
| $500,000 | $2,500,000 |
What is the purpose of the Bill?
The Bill strengthens existing protections against unfair contract terms in the ACL and the ASIC Act. The intention is to better protect consumers and small businesses by reducing the prevalence of unfair contract terms in standard form contracts. The aim is to improve consumer and small business confidence when entering standard form contracts.
The proposed amendments introduce civil penalty provisions prohibiting the use of, and reliance on, unfair standard form contracts. This proposal will allow a regulator to seek a civil penalty from a court.
How could the proposed changes affect you:
Current and proposed changes to unfair contract term penalties are showcased in the below table:
| Current Penalties | Proposed Penalties |
|---|---|
| Unfair contract terms are void |
|
| No current equivalent law |
A pecuniary penalty may be imposed if a person makes a contract with an unfair contract term they proposed, or if they apply, rely or purport to apply or rely on an unfair contract term amounting to:
|
|
The court may make orders:
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Additional to the current law: the court may make orders it considers appropriate to redress (in whole or in part) loss or damage that has been caused; or to prevent or reduce loss or damage that is likely be caused, by the unfair contract term (including to existing contracts that contain the same or similar terms) |
| The court may injunct a party from applying or relying on (or claiming to apply or rely on) a term of a contract that has been declared unfair |
Additional to the current law, the court may injunct a person from:
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‘Small business’ threshold is fewer than 20 employees and either:
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‘Small business’ threshold is fewer than 100 employees; or annual turnover of less than $10 million |
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In determining whether a contract is a ‘standard form contract’, the court must consider a number of matters including:
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Additional to the current law, the court must consider whether a person or company has used the same or a similar contract before, and the number of times this has been done. A contract may be determined to be a standard form contract despite whether a party had an opportunity:
|
| Only refers to non-party consumers |
Refers to both non-party consumers and non-party small businesses[1] |
[1] a non-party or a non – party small business is a person or small business who has not been involved in proceedings relating to the contravening conduct.
When will the proposed changes apply?
If the Bill is passed into Parliament, it will come into force the day it receives Royal Assent. However, the amendments to unfair contract terms will take legal effect the first day after 12 months beginning on the day the Bill receives Royal Assent.
Please get in contact with us if you believe that the unfair contract term regime applies to you, or if you would like to be vigilant and have your contracts reviewed, otherwise please check in for further updates!
Queries
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Disclaimer
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.