Enhancements to Unfair Contract Term Protections Regulation Impact Statement

Enhancements to Unfair

Contract Term Protections

Regulation Impact Statement for Decision

September 2020

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Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Contents

Abbreviations ....................................................................................................................... 3

Executive Summary ............................................................................................................... 5

What is the identified problem? .......................................................................................... 5

What are the preferred options? ......................................................................................... 6

Types of contracts impacted ............................................................................................... 8

Background .......................................................................................................................... 9

The Australian Consumer Law .................................................................................................. 9

UCT protection provisions ....................................................................................................... 9

Review of UCT protections for small business........................................................................... 10

1. The problem ............................................................................................................. 12

Unfair contract terms still exist in standard form contracts ........................................................ 12

Scale and scope of the problem ......................................................................................... 14

Awareness of the UCT protections ..................................................................................... 19

What are the potential risks and costs of maintaining the status quo?..................................... 20

The need for Government action............................................................................................ 22

Contract-issuing parties continue to exploit power imbalances .............................................. 22

Simply voiding a term does not provide an effective deterrent ............................................... 23

Automatically voiding a term may make a contract unworkable ............................................. 25

There could be improved access to remedies and more certainty around their use ................... 25

The same unfair terms can be used repeatedly .................................................................... 27

The current headcount threshold used to define small businesses is not always appropriate ...... 28

The contract value threshold reduces scope and leads to uncertainty ..................................... 29

It is not always clear whether a contract is a ‘standard form contract’ ..................................... 30

2. Objectives ................................................................................................................ 33

3. Options .................................................................................................................... 34

Legality and penalties ........................................................................................................... 34

Flexible remedies ................................................................................................................. 35

Definition of small business contract....................................................................................... 36

Headcount/turnover threshold .......................................................................................... 36

Related bodies corporate.................................................................................................. 36

Contract value threshold .................................................................................................. 37

Clarity on ‘standard form contract’..................................................................................... 37

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Minimum standards ............................................................................................................. 38

4. Impact analysis ......................................................................................................... 39

Legality and penalties ........................................................................................................... 39

Flexible remedies ................................................................................................................. 54

Definition of small business contract....................................................................................... 58

Headcount/turnover threshold .......................................................................................... 58

Related bodies corporate.................................................................................................. 62

Contract value threshold .................................................................................................. 64

Clarity on ‘standard form contract’..................................................................................... 67

Minimum standards ............................................................................................................. 69

5. Consultation ............................................................................................................. 72

6. Evaluation, conclusion and estimated regulatory burden ............................................... 74

Estimated regulatory burden ................................................................................................. 75

7. Implementation and review ....................................................................................... 78

Implementation ................................................................................................................... 78

Review ............................................................................................................................... 79

Appendix A ......................................................................................................................... 80

Regulator action on UCTs ...................................................................................................... 80

ACCC ............................................................................................................................. 80

ASIC............................................................................................................................... 90

Appendix B ......................................................................................................................... 95

List of stakeholders who provided a submission ................................................................... 95

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Abbreviations

Ai Group The Australian Industry Group

ANZ Australia and New Zealand Banking Group Limited

AADA The Australian Automotive Dealer Association

AAF Australian Association of Franchisees

ABA The Australian Banking Association

ACCC The Australian Competition and Consumer Commission

ACF The Australian Credit Forum

ACL Australian Consumer Law

ACL Committee

Australian Consumer Law Committee of the Legal Practice Section of the Law

Council of Australia

AFCA The Australian Financial Complaints Authority

AFGC The Australian Food and Grocery Council

AFIA Australian Finance Industry Association

AFRA Australian Furniture Removers Association

AICM The Australian Institute of Credit Management

ALNA Australian Lottery & Newsagents Association

ARCA Australian Retail Credit Association

ASBFEO The Australian Small Business and Family Enterprise Ombudsman

ASIC The Australian Securities and Investments Commission

ASIC Act Australian Securities and Investments Commission Act 2001

ATO Australian Tax Office

Banking Code Australian Banking Association Banking Code of Practice

BCA Business Council of Australia

CAANZ Consumer Affairs Australia and New Zealand

CAF Legislative and Governance Forum on Consumer Affairs

CCA Competition and Consumer Act 2010

CCIA NSW

The Caravan, Camping & Touring Industry & Manufactured Housing Industry

Association of NSW Ltd

Competition and

Consumer

Committee

Competition and Consumer Committee of the Business Law Section of the

Law Council of Australia

DSA Direct Selling Australia

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

FAA The Financiers Association of Australia

FCAI The Federal Chamber of Automotive Industries

FSC The Financial Services Council

HIA Housing Industry Association

Insurance Council The Insurance Council of Australia

IPA Institute of Public Accountants

Law Council The Law Council of Australia

MEA Master Electricians Australia

Min-it Min-it Software

MPANZ Master Plumbers Australia and New Zealand Ltd

MTA Queensland The Motor Trades Association Queensland

National Precast National Precast Concrete Association Australia

NatRoad National Road Transport Association

NECA National Electrical and Communications Association

NFF The National Farmers Federation

NFIA National Fire Industry Association

NIRA National Independent Retailers Association

NSW Farmers NSW Farmers' Association

NSWSBC NSW Small Business Commissioner

OSBC The Office of the Small Business Commissioner South Australia

Prospa Prospa Group Limited

QLS Queensland Law Society

RIS Regulation Impact Statement

SBDC Small Business Development Corporation Western Australia

SCCA The Shopping Centre Council of Australia

SME Committee

Small and Medium Enterprise Committee of the Business Law Section of the

Law Council of Australia

TIO Telecommunications Industry Ombudsman

TPA

Trade Practices Act 1974 (superseded by the ACL, which is Schedule 2 to the

CCA)

UCT Unfair contract term

VACC Victorian Automobile Chamber of Commerce

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Executive Summary

A Regulation Impact Statement (RIS) is carried out by governments when considering whether action

is required to address a specified problem. On 13 December 2019, Treasury released a Consultation

RIS on Enhancements to Unfair Contract Term Protections. Submissions closed on 27 March 2020 and

close to 80 submissions were received. Treasury also held consultation roundtables with a broad

range of stakeholders.

The purpose of this Decision RIS is to identify the options that yield the greatest net benefit for the

community (having regard to the results of the regulatory impact assessment and the consultation

process) and to set out how the preferred options will be implemented, monitored and reviewed.

What is the identified problem?

Standard form contracts are a commonly-used and cost-effective option when conducting business,

as they avoid the transaction costs associated with negotiated contracts. However, such contracts

are often offered on a ‘take it or leave it’ basis and can be one-sided. Consumers and small

businesses generally lack the resources and bargaining power to effectively review and negotiate

contract terms or challenge their enforcement. The unfair contract term (UCT) protections were

introduced to deal with terms that cause a significant imbalance in the parties’ rights and obligations,

and which are not reasonably necessary to protect the legitimate interests of the party who would

be advantaged by such a term.

More than ten years after the introduction of the UCT protections for consumers and nearly four

years since their extension to small business, UCTs are still prevalent in standard form contracts.

Stakeholders advise that the current approach (involving voiding UCTs) is ineffective and that

contract-issuing parties are able to capitalise on the typically weaker bargaining position of

consumers and small businesses by including UCTs in their contracts.

Stakeholders also suggest that improvements are needed to improve clarity on the application of,

and accessibility to, the UCT protections. For example, one of the requirements for a contract to be

considered a ‘small business contract’ and covered by the UCT protections, is that at least one party

to the contract employs fewer than 20 persons at the time the contract is entered into. Stakeholders

advise that this headcount is too low to cover all small businesses that need protection and has also

led to uncertainty about the coverage of the UCT regime, including for contract-issuing parties, which

hinders compliance with the law.

In addition, while there is an expectation that a small businesses will continue to undertake their

own due diligence when entering into a contractual agreement, some stakeholders suggest that the

contract value threshold, which is another requirement for a contract to be covered by the UCT

protections, is set is too low to take into account the various types of contracts small business enter

into. Moreover, stakeholders suggest small businesses would benefit from greater certainty as to

whether the contract they intend to sign is a standard form contract likely to fall within the UCT

protections.

Problems have also been identified with the efficient operation of the UCT protections. For example,

even after a court or tribunal declares a term is unfair, the judgement only extends to the specific

term in the contract to the proceedings and the same (or similar) terms could continue to be used in

other similar small business contracts. In addition, the law is not clear whether, or the extent to

which, the definition of ‘non-party consumer’ covers non-party small business. Concerns have also

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

been raised that while industry-specific requirements under state and territory legislation are

exempt from the application of the protections, the headline clauses are not, creating possible

uncertainty as to whether such headline clauses will be challenged as being ‘unfair’.

What are the preferred options?

Having regard to stakeholder feedback during consultation and the results of the regulatory impact

assessment of the options (Chapter 4), the preferred options are:

Legality and penalties

Option 3 – Make UCTs unlawful and give courts the power to impose a civil penalty

Under this option, a term of a standard form small business or consumer contract could still be

challenged in a court (or tribunal) and found to be ‘unfair’ and therefore void, which means it would

not be binding on the parties. However, compared to the status quo, courts could also apply a civil

pecuniary penalty for the contravention. Courts would be able to determine the appropriate penalty

amount, up to the maximum set under the law. In imposing a civil pecuniary penalty, the court would

need to be satisfied that imposing a penalty is necessary and the amount appropriate, depending on

the circumstances of the individual case.

Successful implementation of this option will in part depend on the provision of appropriate

guidance and education (such as that presented in Chapter 4 Impact analysis, legality and penalties –

Option 2). For example, guidance that would assist in distinguishing between terms that may be

‘unfair’ and terms which, because they are reasonably necessary to protect the legitimate interests

of the contract-issuing party, would not be considered ‘unfair’.

Flexible remedies

Option 2 – UCTs not automatically void; court given power to determine the appropriate remedy

This option would amend the law to clarify that when a court or tribunal declares a term in small

business or consumer contract is ‘unfair’, the court or tribunal has the discretion to determine

appropriate remedies (including that the term is void or is to be varied) rather than the term being

automatically void.

Option 3 – Clarify that remedies for ‘non-party consumers’ also apply to ‘non-party small

businesses’

This option would ensure that the remedies available for ‘non-party consumers’ would also apply to

‘non-party small businesses’. As per the justification for extending UCT protections to small business

contracts, small businesses and consumers share similar characteristics, including limited financial

resources and negotiation powers.

Option 4 – Create a rebuttable presumption provision for UCTs used in similar circumstances

This option would amend the law to establish a rebuttable presumption that a contract term is unfair

if, in a separate case, the same or a substantially similar term has been used by the same entity or in

the same industry sector and declared by a court to be unfair. If such a term was challenged in a

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

court or tribunal, it would be presumed to be unfair, unless the contract-issuing party was able to

produce evidence to demonstrate why it was not unfair in the particular circumstances of the case.

Note: the above options are not mutually exclusive.

Definition of small business contract: headcount/turnover threshold

Option 3 – At least one party to meet a less than 100 person headcount threshold OR less than

$10 million annual turnover threshold

This option would replace the less than 20 person headcount threshold with a less than 100 person

headcount threshold and a less than $10 million annual turnover threshold. Accordingly, one of the

requirements for a contract to be considered a ‘small business contract’ and covered by the UCT

protections would be that at least one party to the contract is a business that employs fewer than

100 persons at the time the contract is entered into and/or has an annual turnover of less than

$10 million.

Definition of small business contract: related bodies corporate

Option 1 – Status quo

This option would retain the current law and not state whether employees of ‘related bodies

corporate’ are to be included when calculating employee numbers for the purposes of the UCT

protections for small business contracts.

Definition of small business contract: contract value threshold

Option 3 – Remove the contract value threshold altogether

This option would remove the requirement for the upfront price payable under a contract to be

below a certain threshold in order for the contract to be considered a ‘small business contract’ and

covered by the UCT protections.

Definition of small business contract: clarity on standard form contract

Option 2 – Court must consider ‘repeat usage’ in determining a contract is a ‘standard form

contract’

The current law provides factors a court must take into account in determining whether a contract is

a standard form contract. This option would include ‘repeat usage’ as one of these factors.

Option 3 – Clarify actions which do not constitute an ‘effective opportunity to negotiate’

This option would amend the law to further clarify the types of actions which do not constitute an

‘effective opportunity to negotiate’. This could include:

a. opportunities for a small business to negotiate minor amendments to a contract, which are

amendments that would not alter the intent and essence of the original term;

b. opportunities for a small business to select, from a pre-existing list of possible terms, which

term they would prefer, rather than an opportunity to actually negotiate the substance of the

term; and

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

c. claims by the contract-issuing party that there was an effective opportunity to negotiate across

all standard form contracts with all its customers, when it only gave an opportunity to

negotiate to a small subset of customers.

Note: the above options are not mutually exclusive.

Minimum standards

Option 2 – Provide an exemption for certain terms which meet minimum standards

This option would amend the law to exempt certain clauses that include ‘minimum standards’ or

other industry-specific requirements contained in relevant Commonwealth, state or territory

legislation.

Types of contracts impacted

To ensure consistency in the operation of the UCT protections, where appropriate, the above

proposals will be applied to small business and consumer contracts for goods, services and the sale

or grant of an interest in land regulated under the Australian Consumer Law (ACL), which is

Schedule 2 to the Competition and Consumer Act 2010 (CCA), and consumer and small business

contracts for financial products and services (regulated under mirror provisions in the Australian

Securities and Investments Commission Act 2001 (ASIC Act)).

The ASIC Act provisions will extend to

insurance contracts from 5 April 2021.

A reference to the ACL in this document should be taken to include the mirror provisions in the ASIC Act.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Background

The Australian Consumer Law

The ACL is the law governing consumer protection and fair trading in Australia. It includes UCT

protections covering standard form consumer and small business contracts. The ACL applies

economy-wide and is administered jointly by the Australian Competition and Consumer Commission

(ACCC) and state and territory consumer protection agencies. As a law of each jurisdiction—

Commonwealth, states and territories—the ACL is enforced by courts and tribunals in each

jurisdiction subject to the specific rules that apply to enforcement processes, courts and tribunals in

each jurisdiction.

Some of the consumer protection provisions in the ACL are mirrored in the ASIC Act in relation to

financial products and services. The Australian Securities and Investments Commission (ASIC) is

responsible for administering and enforcing the ASIC Act.

UCT protection provisions

On 1 July 2010, protections for consumers against UCTs in standard form contracts were introduced

into the Trade Practices Act 1974 (TPA – now contained in the ACL, which is Schedule 2 to the CCA)

and the ASIC Act. The ACL provisions address UCTs for goods, services and the sale or grant of an

interest in land, and the ASIC Act provisions address UCTs for financial products and services.

This

formed part of the response to the Productivity Commission’s 2008 Review of Australia’s Consumer

Policy Framework.

Generally, a term of a standard form contract is unfair if it:

• would cause a significant imbalance in the parties’ rights and obligations arising under the

contract;

• is not reasonably necessary to protect the legitimate interests of the party who would be

advantaged by the term; and

• would cause detriment (financial or otherwise) to a party if the term were to be applied or relied

on.

Main provisions for unfair contracts terms are included in Part 2-3 of the ACL (which is in Schedule 2 to the Competition

and Consumer Act 2010) and Subdivision BA, Part 2 of the ASIC Act. On 6 February 2020, Parliament passed a Bill to extend

the UCT regime to insurance contracts, which will ensure consumers and small businesses have access to the same UCT

protections as for other financial products and services.

Available at: https://www.pc.gov.au/inquiries/completed/consumer-policy

Section 25 of the ACL also provides examples of the types of terms of a small business or consumer standard form

contract that may be unfair.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

In November 2016, the Treasury Legislation Amendment (Small Business and Unfair Contract Terms)

Act 2015 (the Act) extended the UCT protections to standard form small business contracts that meet

certain criteria:

• at the time the contract is entered into, at least one party to the contract is a business that

employs fewer than 20 persons; and

• the upfront price payable under the contract does not exceed $300,000, or $1 million if the

contract runs for more than 12 months.

The extension of the UCT protections to small business recognised that small businesses can often

face the same challenges as consumers in a contractual relationship.

Review of UCT protections for small business

During the passage of the Act through Parliament in late 2015, the Government agreed to undertake

a review of the extension of the UCT regime for small business within two years of its

commencement. On 21 November 2018, the Government released the Review of Unfair Contract

Term Protections for Small Business: Discussion Paper (the discussion paper).

The discussion paper

sought views on the impact of the UCT protections, the thresholds at which the protections apply,

the clarity of the term ‘standard form contract’, and the appropriateness of current exemptions. The

paper closed for submissions on 21 December 2018. A broad range of stakeholders made formal

submissions.

Information gathered through the 2018 Review suggested that while the UCT regime had improved

protections for small business in certain industry sectors, it did not provide strong deterrence against

businesses using UCTs in their standard form contracts. A number of submissions to the review

supported this, arguing that UCTs are still prevalent in small business standard form contracts.

Additionally, the review found that some aspects of the current regime appear to have created

ambiguity, uncertainty and practical difficulties for businesses to comply with the law. For example,

some submissions noted the practical difficulties in using the headcount approach for defining a

small business and the uncertainty around whether a contract met the definition of a ‘standard form

contract’. Some submissions to the Review also highlighted the need for regulators to promote

awareness of the UCT protections and assist with compliance with the law by improving the guidance

they provide to businesses.

In light of the findings, the Government announced its intention to strengthen the UCT protections

for small businesses, including through a range of legislative amendments where appropriate.

Treasury subsequently released a Consultation RIS in December 2019 and the consultation process

formally concluded at the end of March 2020, with almost 80 submissions received. A series of

stakeholder roundtables were also held. Stakeholder views provided through submissions and the

roundtables have informed the development of this Decision RIS. As the ACL is jointly administered

Available on Treasury’s Consultation Hub: https://consult.treasury.gov.au/market-and-competition-policy-divis ion-

internal/c2018-t342379/

Non-confidential submissions were published at: https://consult.treasury.gov.au/market-and-competition-policy-divis ion-

internal/c2018-t342379/consultation/published_select_respondent

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

by the Commonwealth and the states and territories under an Intergovernmental Agreement, any

amendments to the ACL are subject to agreement from the states and territories through the

Legislative and Governance Forum on Consumer Affairs (CAF).

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

1. The problem

Unfair contract terms still exist in standard form contracts

New UCT protections for standard form consumer contacts were introduced as part of the

development of the Australian Consumer Law and in response to the Productivity Commission’s 2008

Review of Australia’s Consumer Policy Framework finding that the former TPA lacked provisions to

deal with unreasonable and one-sided contract terms, or so-called ‘unfair’ terms.

These provisions

were extended to small business in 2016 with the intention it would reduce the incentive to include

unfair terms in standard form contracts with small businesses, providing for a more efficient

allocation of risks in these contracts.

In terms of the extension of the UCT protections to small business, before and after these provisions

came into effect, regulators undertook education and compliance programs across different industry

sectors to encourage businesses to review their standard form contracts and remove any potential

UCTs. In the lead-up to the new law taking effect in 2016, the ACCC examined standard form

contracts in the advertising, telecommunications, retail leasing, independent contracting, franchising,

waste management, and agriculture industries. The ACCC identified terms that it considered may be

UCTs in business-to-business agreements once the law came into effect. The ACCC invited a number

of major firms in each sector to voluntarily participate in the review, and ultimately examined 46

contracts. After identifying a range of contract terms that may raise concerns under the new law, the

ACCC engaged with businesses about amending or removing the problematic terms.

On 10 November 2016, two days before the UCT regime for small business came into effect, the

ACCC released its report, Unfair terms in small business contracts: a review of selected industries (the

ACCC UCT Report).

The ACCC UCT Report discussed ways to avoid including unfair terms in standard

form contracts. It also highlighted concerning terms the ACCC observed across the advertising,

agriculture, franchising, telecommunications, retail leasing, and waste management industries.

Among other things, the report noted the ACCC’s concerns with terms used in the waste

management industry allowing unilateral price increases, automatic rollovers, and unlimited

indemnity. In December 2016, the ACCC wrote to JJ Richards & Sons Pty Ltd to draw its attention to

the ACCC UCT Report and inform JJ Richards that the ACCC was investigating whether terms in

standard form contracts being offered by providers of waste management services gave rise to

concerns under the ACL. Despite the ACCC’s attempts to engage with the large waste management

company, JJ Richards did not address the ACCC’s concerns.

In 2017, the ACCC took legal action against JJ Richards. The Federal Court declared eight terms in its

standard form contract unfair and therefore void.

This included terms that the ACCC UCT Report

had earlier flagged as possible UCTs used in the waste management industry.

Review of Australia’s Consumer Policy Framework pp. 33-34. Available at

https://www.pc.gov.au/inquiries/completed/consumer-policy/report/consumer1.pdf

Available at: https://www.accc.gov.au/publications/unfair-terms-in-small-business-contracts

Australian Competition and Consumer Commission v JJ Richards & Sons Pty Ltd [2017] FCA 1224.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

The ACCC reports that, since the 2017 JJ Richards & Sons Pty Ltd decision, it has continued engaging

with businesses in the waste management industry to ensure compliance. In late 2018, as a result of

an ACCC investigation, three more waste management companies agreed to amend potential UCTs in

their standard form contracts, which were similar to terms the Federal Court had determined were

UCTs in the 2017 JJ Richards case. In April 2019, following further ACCC investigation, two more

waste management companies agreed to remove UCTs from their small business contracts.

Following this, the ACCC wrote to waste management industry bodies reminding them of their

obligations and encouraging them to check their contracts for UCTs. The ACCC also released an

information network bulletin to its small business database encouraging them to check their waste

management contracts for UCTs and to seek to remove them.

The 2018 Review also found that the protections were limited in their effectiveness and UCTs appear

to still be prevalent in standard form contracts. Stakeholders repeated these concerns during the

2020 consultation:

….despite the introduction of the unfair contract term protections for small businesses,

unfair terms are still prevalent. The majority of contracts for which small businesses seek

the assistance of the Australian Small Business and Family Enterprise Ombudsman (ASBFEO)

still contain clauses that the Ombudsman considered to be unfair.

It is clear that UCTs are still present in almost all standard form contracts.

Education and industry engagement have been largely ineffective in changing business

behaviour and without strong deterrents, the law will continue to deliver adverse outcomes

for consumers.

A primary reason why the Committee supports a number of the proposed amendments is

due to what appears to the members of the Committee to be a low level of proactive

compliance by large businesses in amending their SFCs

to remove UCTs. …a significant

number of large companies had apparently taken no or limited steps to amend their SFCs,

even three years after the UCT laws for small business were introduced.

These reforms have been insufficient to properly protect farmer businesses from UCT[s].

Farmer businesses are still exposed to UCTs in standard form contracts across many

agricultural industries.

NFIA submission, p.8.

ASBFEO submission, p. 1.

CHOICE submission, p. 1.

(standard form contracts)

Law Council Submission – SME Committee, p. 9.

NSW Farmers submission, p.4.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Scale and scope of the problem

Regulator action on UCTs

The ACCC advises that between 1 July 2010 and 13 August 2020, the ACCC received 5,720 contacts

alleging potential UCT concerns consisting of:

• 1,907 contacts relating to business to business transactions; and

• 3,828 contacts relating to business to consumer transaction.

Noting that the extension of the UCT protections came into effect on 12 November 2016, of the

1,907 contacts relating to business to business transactions mentioned above, 1,749 of these

contacts were received between 1 January 2017 and 13 August 2020.

Since the introduction of the UCT protections to consumer contracts, and extension to small business

contracts, the ACCC has continued to identify several UCTs in standard form contracts. Consequently,

the regulator has engaged with, and taken action against, a number of businesses, including

litigation, and resolved a number of UCT concerns through court enforceable undertakings and public

administrative resolutions. ASIC has also conducted compliance reviews, initiated court proceedings

and issued reports to promote good industry practices and has taken steps to address UCTs in

individual circumstances.

While the ACCC does not resolve individual complaints, it uses the information consumers and small

businesses provide to help understand where to focus its compliance and enforcement efforts. State

and territory consumer protection agencies have also been involved in action to reduce the

prevalence of UCTs by providing information to consumers and small business about their rights and

obligations and possible courses of action they may take. State and territory consumer protection

agencies also play an important role in negotiating with business to resolve complaints. In some

cases, state and territory consumer protection agencies have also undertaken legal proceedings to

resolve UCT complaints.

Below is a summary of action is taken by the ACCC and ASIC in relation to UCTs. A more detailed

summary is at Appendix A to this Decision RIS.

ACCC and ASIC action on UCTs

2010 – 2013 Following the introduction of the UCT provisions for consumer contracts, the ACCC

undertook a project of engaging with businesses and reviewing standard form contracts

in the ai rline, tel ecommunications and vehi cle rental i ndustries and engaged directly with

businesses to address c oncerns. On 15 March 2013, the ACCC rel eased a report on the

outcomes of this wor k.

November 2010 Following consultation leading up to and after the introduction of the UCT protection

provisions for consumer contracts, ASIC released guidance for mortgage l enders that sets

Note: a small number of contacts were coded as both consumer and business.

Available at https://www.accc.gov.au/system/files/Unfair%20Contract%20Terms%20-%20Industry%20Report.pdf

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

ACCC and ASIC action on UCTs

out how provisions in the National Credit Code and UCT protections apply to mortgage

earl y termi nation fees (exit fees ).

January 2011 Fol l owing ASIC concerns, MyBudget Pty Ltd agreed to amend or remove a number of

potentially unfair and/or unconscionable terms in its Terms of Service Agreement.

January 2013 Mr Rental Australia Pty Ltd, entered into an enforceable undertaking with ASIC in which it

agreed provide refunds to approximately 1,560 consumers (anticipated to be in excess of

$300,000) and amended the standard form rental contract used by the 52 franchisees

operating under the ‘Mr Rental’ banner.

July 2013 The Federal Court declared that a number of terms in Internet Service Provider

ByteCard’s standard form consumer contracts were unfair.

February 2014 ASIC accepted a court enforceable undertaking from Home Essentials Australia Pty Ltd, I

Love My Water Pty Ltd, Triple Bay Group Pty Ltd and Triple Bay Pty Ltd in which the

bus i nesses agreed not to enforce thei r rights under the agreements for terms which were

likely to be unfair.

October 2014 Following ASIC concerns the Commonwealth Bank of Aus tralia (CBA) a greed to rel ease

$2.2 million for approximately 45,000 customers who had money left on expired CBA

Travel Money Cards.

December 2014 The ACCC accepted a court enforceable undertaking from LivingSocial following concerns

over a term that permitted LivingSocial to make substantive changes to i ts terms and

conditions without notifying its customers.

April 2015 In April 2015, the Federal Court found that NRM Corporation Pty Ltd and NRM Trading

Pty Ltd had used UCTs in i ts long term a greements for the s upply of medical services and

medications to men suffering from sexual dysfunction.

August 2015 ASIC revi ewed 16 travel money cards by ei ght issuers as part of a n industry-wide review

into travel money cards i ssued in Australia. This resulted in all travel money cards issued

in Australia now allowing customers to reclaim leftover funds, as well as a number of

other i mprovements.

November 2015 The Federa l Court found a term i n Chrisco’s 2014 lay-by agreements, whi ch allowed

Chrisco to continue to take payments by direct debit after the consumer had fully paid for

their lay-by agreement, unfair.

January 2016 Following concerns raised by the ACCC, telecommunications company Exetel agreed to

remove a cl ause from i ts standard form residential broadband agreement that allowed it

to vary any part of the agreement for any reason.

April 2016 The Federal Court found various terms in Europcar’s standard form rental agreements

unfair because, i n part, they held consumers liable for vehicle loss or damage regardless

of whether the consumer was at fault.

November 2016 –

September 2017

In the l ead-up to the extension of the UCT protections to small business, the ACCC

undertook a project to examine potential UCTs i n s tandard for m c ontr acts across a

number of industries.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

ACCC and ASIC action on UCTs

March 2017 ASIC and ASBFEO completed a review of small business standard form contracts and

called on lenders across Australia to take immediate steps to ensure their standard for

loa n agreements comply wi th the l aw.

May 2017 ASIC hosted a roundtable where the big four banks committed to make significant

improvements to thei r small business l oan contracts to ensure they meet the UCT

protecti on l aws.

August 2017 The big four banks agreed to s pecific changes wi th ASIC to el i minate UCTs from their

contracts.

October 2017 The ACCC took JJ Richards to court where eight terms i n its standard form contract were

declared unfair and therefore void.

The ACCC also accepted a court enforceable undertaking from Advance Hair Studio in

connection with potentially unfair termination clauses. The Undertaking i ncluded partial

cash refunds to certain consumers, corrective advertising, and establishing an ACL

compliance program.

November 2017 Aus tralia Post proposed amendments to its Li censed Post Office Agreement to address

potential UCTs after the ACCC raised concerns.

December 2017 Perth based building company 101 Residential provided the ACCC with a court

enforceable undertaking, acknowledging that non-disparagement clauses in its standard

form contracts may be unfair and a greeing not to enforce or rely on thes e clauses in its

current contracts and remove them from i ts future contracts.

March 2018 AWB Harvest Finance Pools amended terms in i ts contracts a fter the ACCC raised

concerns they were unfair.

The ACCC a ccepted a court enforceable undertaking from Cardtronics where i t agreed to

amend its contracts governing Automatic Teller Machines deployed on the premises of

small businesses.

March 2018 ASIC published Report 565 Unfair contract terms and small business loans which details

the changes made by the big four banks to their small business loan contracts in order to

comply wi th the unfair contract terms l aw.

June 2018 The ACCC accepted a court enforceable undertaking from Home builder Wisdom

Properties Group to not enforce non-disparagement clauses in existing agreements or

include them in future agreements

July 2018 Following engagement with the ACCC regarding potential UCTs, Warrnambool Cheese &

Butter amended the terms i n i ts milk supply agreements and associated milk supply

handbook.

The Federal Court declared 12 terms in the standard form contracts used by Servcorp and

two of its s ubsidiaries (Servcorp Parramatta Pty Ltd and Servcorp Melbourne 18 Pty Ltd)

were unfair and therefore void.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

ACCC and ASIC action on UCTs

September 2018 Proceedings, which were in instituted i n March 2018 against credit reporting body

Equifax (formerly Veda Advantage), were resolved following joint submissions by Equifax

and the ACCC. These involved admissions by Equifax relating to various breaches of the

ACL but not UCTs. Such a finding would not have substantially affected the remedies

ordered by a court.

September 2018 Following an ASIC review, Prospa Advance Pty Ltd agreed to make changes to its standard

form small business loan contract to amend clauses which were likely to be unfair.

December 2018 Dairy Processors Brownes Food Operations, Lion Dairy & Drinks, Norco Co-operative

Limited, Parmalat Australia and Fonterra Australia ea ch agreed to amend different terms

in their milk supply agreements.

Following an ACCC investigation into the use of UCTs in the waste management industry,

Vi s y Paper Pty Ltd (trading as Visy Recycling), Cleanaway Pty Ltd and Suez Recycling &

Recovery Pty Ltd reviewed and amended potential UCTs in their standard form contracts.

April 2019 Three contai ner stevedore companies, DP World, Hutchison and VICT a greed to remove

or amend li kely UCTs in their standard form contracts.

June 2019 Red Ri ch Fruits amended a term that a llowed Red Ri ch Fruits to s eek credit from a grower

for produce Red Rich Fruits had on-sold to a third party, but which was then rejected by

the third party.

July 2019 Uber Eats committed to amend terms which made restaurants responsible for the

delivery of mea l orders, i n circumstances where they had no control over that delivery

process once the food left thei r res taurant.

August 2019 The ACCC took Mi tolo Group Pty Ltd to court where several terms i n contracts between

Mitolo and potato growers were declared unfair and therefore void. Mi tolo also prov i ded

the ACCC with a court enforceable undertaking which contains a revised form of contract.

September 2019 The ACCC took hair loss business Ashley & Martin to court where terms i n three standard

form contracts wi th consumers were decl ared unfair and therefore void.

September 2019 ASIC took Bendi go and Adel aide Ba nk to court where s everal terms wi thin six small

business contracts used by the banks were declared unfair and subsequently void.

March 2020 1300 Australia gave a court enforceable undertaking to the ACCC to amend its current

and future contracts with small businesses and, in certain circumstances, refund part of

the termination fees paid by small business customers.

June 2020 Some of Aus tralia’s biggest wi nemakers agreed to change their supply agreements with

grape growers after the ACCC raised concerns that their standard form grape supply

agreements contained terms which were l ikely to be unfair.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

ACCC and ASIC action on UCTs

July 2020 Following proceedings the ACCC had instituted in the Federal Court against TPG i n

December 2018, the Federal Court found that a term requiring forfeiture of a $20

‘prepayment’ made by consumers was not unfair.

The ACCC accepted a court enforceable undertaking from Chrisco following the ACCC’s

concerns Chrisco had had entered into or renewed lay-by agreements which included

another term that allowed Chrisco to continue to take payments from consumers after

they had fully paid for their existing lay-by order, despite the previous Federal Court

ruli ng that s uch a term was unfair.

September 2020 The ACCC accepted a court-enforceable undertaking from Back In Motion Physiotherapy

Pty Ltd i n relation to certain restraint of trade terms in i ts franchise agreements. Among

other things, Back in Motion Physiotherapy agreed to not include these terms in future

contracts, not enforce the terms in existing contracts, and notify its franchisees of the

ACCC undertaking.

ASBFEO and small business commissioners

Separate from regulators, ASBFEO and state and territory small business commissioners, which are

independent statutory offices established under legislation, receive and investigate complaints made

by small businesses. Generally ASBFEO and small business commissioners will aim to resolve disputes

through the use of alternative dispute resolution processes such as mediation to avoid having to go

to court. Below are some observations ASBFEO and two state small business commissioners have

made in relation to their involvement with UCTs in standard form contracts.

ASBFEO advises that, from its work with small businesses, it is clear that UCTs are still present in

almost all standard form contracts. The Ombudsman believes this results from the current structure

of the UCT regime in that it applies only to standard form contracts which fall within the current

scope of the protection, and that UCTs are only voidable and do not attract penalties.

All of these

matters are explored further in this chapter.

The Office of the Small Business Commissioner (OSBC) South Australia advises that it deals with small

businesses experiencing issues relating to UCTs on a regular basis. OSBC advises that these small

businesses do not have the time or resources to go through the court process, and are worried about

damaging their relationship with the contract-issuing party, which they fear will lead to loss of

business.

The Small Business Development Corporation in Western Australia (SBDC) advises that since the UCT

protections were extended to small business contracts, it has continued to see unfair terms being

used. The SBDC's advisory team believe that, while there has been a decrease in the number small

businesses presenting to the SBDC for advice and assistance on UCT related matters, UCTs and poor

contracting behaviour remains an ongoing issue facing small businesses in WA.

The SBDC advises

ASBFEO submission, p. 1.

OSBC submission, p. 1.

SBDC submission, p. 1.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

that it has partnered with the John Curtin Law Clinic (JCLC)

to provide some recent case studies on

the usage of UCTs in small business contracts in WA. Four case studies are presented in the SBDC’s

submission. The SBDC advises that a common theme throughout the case studies is the power

imbalance that is present between the contracting party and the small business operator. The SBDC

asserts that small businesses continue to be disadvantaged and changes need to be made to the

current UCT regime to ensure small businesses are better protected.

Awareness of the UCT protections

In their submissions, several stakeholders have suggested there is a need for greater awareness and

education on the UCT regime, including targeted education campaigns. For example:

We suggest that further guidance could be provided by the UCT regulators to assist business and

their advisors in complying with both consumer and business UCT provisions. It can for example,

be difficult to determine whether the UCT protections apply. There should be clarification of the

application of both regimes (that is, those applying to consumer and business UCT provisions),

having regard to the practical steps that could be taken to confirm whether UCT provisions

apply.

As ASIC has not been as active in terms of providing regulatory guidance and education in relation

to UCT laws, the SME Committee considers it may be of benefit for ASIC to significantly increase

its profile in this area.

In our opinion, there has been no or very little spent in educating businesses to be compliant with

UCTs. For example, there has been no media advertising reminding industry of what a UCT is.

It is the ACF’s experience that [a] number of big and small business are unaware of the legislative

changes that took place in 2016.

There is also a lack of practical guidance about what makes a term ‘unfair’ under the Australian

Consumer Law. Clearer regulatory (as well as judicial) guidance is required to ameliorate this

uncertainty.

These and many other stakeholders’ submissions also provide suggestions around improvements to

current guidance and specific areas where other guidance is needed. Some of these have been

included as part of Chapter 4 – Impact analysis.

Established by Curtin University of Technology, the JCLC is a dedicated law clinic within the Curtin Law School that offers

clinical legal education to law students and affordable legal services to the WA community. Amongst other things, the JCLC

assists small businesses with legal issues involving lease agreements, franchise agreements, contracts, and consumer law

matters.

SBDC submission, p. 5.

QLS submission, p. 4.

Law Council Submission – SME Committee, p.13.

Min-it and FAA joint submission, p, 9.

ACF submission, p. 2.

Law Council Submission – Competition and Consumer Committee, p. 5.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

The NSW Small Business Commissioner (NSWSBC) suggests, awareness aside, small businesses

sometimes can’t or don’t negotiate terms in contracts drafted by counterparties and that contract

drafters, seeking to protect their own interests, may tend to include UCTs – whether or not they are

familiar with the regime.

Another stakeholder suggests that regulatory guidance and education is

valuable for people who essentially want to comply with the law, but is not effective for people who

know they are the stronger party financially.

Likewise, Consumer Action Law Centre, Financial

Rights Legal Centre and WEstjustice assert that nearly a decade of the current UCT regime has not

eradicated UCTs from standard form consumer contracts and that they continue to see UCTs used

and relied on by business across a wide range of industries, despite extensive regulator education

and guidance programs on UCTs for industry over the years.

What are the potential risks and costs of maintaining the status quo?

The extension of the UCT protections to small business in 2016 gave both small businesses and

regulators the power to challenge potential UCTs in court. However, small businesses rarely have the

time or the resources to commence litigation.

Small businesses may also fear potentially damaging

their relationship with the contract-issuing party, leading to loss of future business, especially in

industries where there are relatively few large businesses for small business to contract with.

While regulators have been able to identify UCTs in standard form contracts and have successfully

litigated several cases and resolved a number of UCT concerns through public administrative

resolutions, regulators have finite resources and UCTs still exist in many standard form contracts.

Moreover, the fact that regulators have been required to take regulatory action and commence

court proceedings demonstrates that many contract-issuing parties have not been proactive in

amending the standard form small business and consumer contracts.

When UCTs are enforced or relied upon by the contract-issuing party it can have potentially

devastating impacts on the small business.

Such impacts could include, for example:

• reinforcing the ongoing imbalance of power between principal contractors and sub-contractors in

contract negotiations, given the inherent imbalance due to the power, scale and access to

resources of larger organisations;

• deterring new entrants and the growth and expansion of existing small businesses, which could

have a knock-on impact in industries more broadly;

• costly legal disputes;

• insolvency and bankruptcy for the small business;

NSWSBC submission, p. 2.

Buchan, J submission, p. 1.

Consumer Action Law Centre, Financial Rights Legal Centre and WEstjustice joint submission, p. 1.

E.g. OSBC submission, p. 1.

NECA submission, p. 2; NSW Farmers submission, p. 6.

E.g. NECA submission, pp. 2-3; NFIA submission, p. 7; National Precast submission, p.5.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

• difficulties with obtaining payment for work, uncertainty of income or reduced income, issues

with cash flow;

• reduced innovation;

• issues with securing affordable insurance (relevant to the risks written into the contract); or

• facing claims for liquidated damages.

The National Fire Industry Association (NFIA) advises that in 2017-18, 1642 construction companies

became insolvent, which represented just under a quarter (22 percent) of all insolvencies in

Australia, and a far greater percentage of insolvencies than any other industry.

NFIA attributes this

to sub-contractors being contractually responsible for the cost overruns, design errors and similar

issues despite having far less capacity to manage these issues or bear the associated financial risks

compared to the head contractor.

In addition, the National Farmers Federation (NFF) advises that

it is aware of a number of small farming businesses that have closed because they were unable to

secure fair contract terms or because their contracts were terminated.

The Australian Furniture Removers Association (AFRA), advises that small businesses are not able to

insure against commonly occurring broad indemnity clauses (which provide the small business

accepts liability for the negligence of another party), and that this can easily place the small business

into financial distress should an incident occur.

Maintaining the status quo for consumer contracts could also have a devastating impact on

consumers, who are no less vulnerable nor less likely to experience UCTs in standard form contracts.

Consumer advocacy group CHOICE advises that through ACCC enforcement actions and its own

investigations, it has seen notable instances where consumers have suffered significant financial loss

or have had their ability to comment on goods or services restricted by UCTs.

In its submission,

CHOICE refers to the Ashley & Martin case as an example where consumers faced losing hundreds or

thousands of dollars if they cancelled the contract with the hair loss treatment business after

considering medical advice, or even if they developed side effects to the prescribed medication. In

this case, while over 25,000 consumers were affected by the UCTs across three standard contracts,

the Federal Court ordered hair loss treatment business Ashley & Martin to refund money paid by

consumers

but was unable to penalise the business for the harm caused to the consumers.

NFIA submission, p. 7.

NFIA submission, pp. 7-8.

NFF submission, p. 6.

AFRA submission, p. 3.

CHOICE submission, p. 2.

Australian Competition and Consumer Commission v Ashley & Martin Pty Ltd (No 2) [2019] FCA 1739 (24 October 2019).

Available at: https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2019/1739.html

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

The need for Government action

Contract-issuing parties continue to exploit power imbalances

As small businesses generally lack the resources and bargaining power to effectively review and

negotiate contract terms or challenge their enforcement, some contract-issuing parties have

continued to exploit this power imbalance when issuing standard form contracts. As the SBDC

asserts, as the onus is on the small business to pursue a remedy through the courts if they believe an

unfair term is included in their standard form contract, larger companies are able to capitalise on a

small business's typically weaker bargaining position and often continue to include UCTs in their

contracts.

For example, the Victorian Automotive Chamber of Commerce (VACC) advises that over the past

decade, car insurers have become increasingly powerful within the industry, utilising their strong

bargaining power and potentially contravening the UCT protections. VACC suggests that the standard

form contract, or repair Authority, used by a large general insurance company in transactions with

smash repairers contains certain terms that cause further imbalance in the parties’ rights and

obligations.

Likewise, the National Electrical and Communications Association (NECA) notes that in the

electrotechnology industry, electrical sub-contracting businesses are generally characterised as

SMEs, offering specialised electrical skillsets and capabilities in contrast to principal contractors,

which are mostly characterised as much larger, diverse and well-resourced organisations.

addition to the size and power yielded by these principal contractors, there is a very small pool of

these principal contractors which means there is limited competition, resulting in sub-contractors

regularly and consistently engaging with the same small group of principal contractors.

NECA

suggests that the relationship between principal and sub-contractors is such that sub-contractors

depend on principal contractors and that unscrupulous principal contractors abuse their power and

size to enforce detrimental and unfair contracts on sub-contractors. The sub-contractors often do

not have the capacity to fairly and equitably negotiate contracts with larger principal contractors,

which exposes SMEs in the industry to potential mistreatment or adverse and compromising

contracts.

The NSW Farmers’ Association (NSW Farmers) advises that within the agricultural sector, a lack of

competition means that farm businesses have no choice but to accept the standard form contracts

issued by large processors and supermarkets. NSW Farmers adds that legal advice given to many

farmers indicates these contracts are skewed against their interests but that if there are no other

options available to the farmer and therefore no ability to effectively negotiate, they are forced to

SBDC submission, p. 7.

VACC submission, p. 3-6.

NECA submission, pp. 1-2.

NECA submission, p. 2.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

agree to terms that they would not normally accept under other circumstances. This is particularly

the case for small businesses with an asset base tied to a single industry or supply chain.

The National Precast Concrete Association Australia (National Precast), which represents the precast

concrete manufacturing industry, advises that its members are regularly presented with UCTs in

tenders who often find that, as a sub-contractor with relatively weak bargaining power, they have

minimal ability to negotiate these terms. It advises that, given that unfair terms are so prevalent in

the industry, small businesses are presented with a difficult choice of enter into contracts with unfair

terms, with all the attendant risk, or slowly go out of business through a lack of work.

NFIA advises the construction industry operates on a pyramid structure with increasing bargaining

power imbalances the further one goes down the contractual chain. NFIA advises that often the head

contractor will agree to contractual terms that accept all risks on key issues because it knows that if it

does not, then it is probable that the project will be awarded to one of its competitors who would be

prepared to accept the principal’s terms.

Small businesses often have less capacity than larger businesses to manage certain risks that are

transferred to them by UCTs. NFIA asserts that UCTs are used to transfer risks down the contractual

chain to sub-contractors at the base of the pyramid that have the least capacity to bear the financial

risks associated with the project. NFIA state that this is because they are the least able to negotiate a

set of more reasonable and balanced terms. NFIA further advises that in all instances, the party

higher up the contractual chain will present its contract documentation on a ‘take-it-or-leave-it’

basis.

Master Plumbers Australia and New Zealand Ltd advises that one of the key issues currently being

experienced by its members is contract terms which provide that a builder or contractor is not liable

for any costs which the sub-contractor incurs, even where it is the result of negligence on the part of

the builder or contractor. It says this is arguably an unreasonable transfer of risk that also makes it

difficult for sub-contractors to obtain insurance.

Simply voiding a term does not provide an effective deterrent

The current provisions do not prohibit the use of UCTs, but rather allow a court to declare that a

term is unfair and therefore void. If a term is declared void, there is no penalty that incentivises

businesses to ensure their standard form contracts are free from UCTs. Contract-issuing businesses

can intentionally include and rely on UCTS in their standard form contracts and the risk is limited to

being unable to rely on the term in the event of a court or tribunal declaring the term is unfair. Many

submissions to the 2018 Review argued this approach does not provide adequate incentive for

businesses to ensure their standard form contracts are free from UCTs.

NSW Farmers submission, p. 6.

National Precast submission, p.4.

NFIA submission, p.7.

MPANZ submission, p. 3.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

During the 2020 consultations many stakeholders repeated concerns that the current approach to

UCTs is ineffective. For example, one small business advises that it has not been able to challenge a

UCT through the court process as the cost of doing so would far exceed its ability to complete the

process and there is a risk that taking action could impact the small business through a reduction in

work provided by the contract-issuing party.

The SBDC submits that small businesses generally lack

access to justice due to a combination of factors including the cost of engaging legal representation,

unfamiliarity with legal process and the stress associated with pursuing court action. The SBDC adds

that it believes that often larger businesses take the risk of including an unfair term to reap the

benefits, knowing that it is unlikely that a contracted small business will pursue its removal through

legal action.

Likewise Clubs Australia submits that the current approach offers inadequate levels of protection to

small business as most small businesses do not have the resources to identify then take legal action

to void an unfair term. Clubs Australia argues the UCT regime should recognise the incentive

structure for entities that may wish to include an unfair term.

Clubs Australia, the Australian

Automotive Dealer Association (AADA) and NSW Farmers submit that making UCTs illegal and

attaching penalties is the only way to deal effectively with the prevalence of UCTs.

The ACCC, ASIC and small business commissioners also suggest more significant consequences are

needed to deter contract-issuing parties from including UCTs in their standard form contracts. The

ACCC, ASIC and small business commissioners also submitted that the UCT protections would be far

more effective if there was a penalty and that larger businesses would be more motivated to ensure

that they remove such terms from their standard form contracts.

The SBDC adds that ensuring that

small businesses and consumers, when entering into an insurance contract, have the equivalent level

of protections as they do under other financial products and services by removing terms that are

unfair is the right thing to do. SBDC believes this would increase confidence in the industry, which

will likely lead to small businesses more adequately insuring themselves.

Consumer advocacy group CHOICE, Consumer Action Law Centre, Financial Rights Legal Centre and

WEstjustice also submit making UCTs illegal and introducing financial penalties for breaches would

deter businesses from using UCTs in their standard form consumer contracts. CHOICE submits that

businesses can take advantage of the power imbalance inherent in standard form consumer

contracts knowing full well that consumers are unlikely to proceed with lengthy court processes to

have a term declared ‘void’ in a contract.

Consumer Action Law Centre, Financial Rights Legal

Centre and WEstjustice argue there needs to be a stronger basis to deter the use of UCTs by

The Repair Shed submission, p. 1.

SBDC submission, p. 7.

Clubs Australia submission, p. 6.

AADA submission, p.10; Clubs Australia submission, p. 6; NSW Farmers submission, p.4.

ACCC submission, p. 1; ASIC submission pp.4-5; NSWSBC submission, p. 3; SBDC submission, pp.7-8.

SBDC submission, p. 8.

CHOICE submission, p. 3.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

businesses when dealing with consumers as a decade of non-compliance with the UCT laws shows

that UCTs must be made illegal if the regime is to be effective.

Automatically voiding a term may make a contract unworkable

The law currently provides that if a court or tribunal finds a term is 'unfair', it is void and the rest of

the contract will continue to bind the parties if it can operate without the void term. Submissions

from the ACCC and ASIC note that the automatic voiding of a term may not be an appropriate

remedy in every situation, as it may make a contract unworkable, cause disruption and require a new

contract to be entered into.

NFF submit this is a particular issue in the agricultural industry where

the nature of many markets means small farm businesses have little choice of processors or

purchasers. If a voided term were to make contract unworkable, a primary producer could be

deprived from accessing the only viable purchaser, leaving the small farm business with perishable

product without a buyer.

The Australian Finance Industry Association (AFIA) notes that if credit contracts are rendered

inoperative and unenforceable, this can trigger the withdrawal of funding to small businesses.

The

Insurance Council of Australia (Insurance Council) notes the potential impacts for insurance contracts

where the voiding of a term may prevent the insured from being able to bring a claim under the

policy.

A voided contract can also negatively impact the contract-issuing party. AFIA notes that

unenforceable credit contracts can have material impact on credit providers. Likewise, the Australian

Retail Credit Association notes that, as a credit provider relies on the existence of the credit contract

in order to govern its ongoing ability to charge interest and fees and to enforce non-payment, a

finding that a term of the agreement, or the agreement itself, is void would be disastrous for that

credit provider.

There could be improved access to remedies and more certainty around

their use

Where a court or tribunal declares a term unfair and the contract-issuing party applies or relies (or

purports to apply or rely) on the unfair term, a small business or a regulator can make an application

to the court or tribunal that the small business has suffered, or is likely to suffer, loss or damage as a

result. A court or tribunal may then grant one or more of the following remedies:

• an injunction preventing the contract-issuing party from attempting to enforce the term or terms

that have been declared unfair;

Consumer Action Law Centre, Financial Rights Legal Centre and WEstjustice joint submission, p.10.

ACCC submission, p. 3. ASIC submission, p.7.

NFF submission, p.8.

AFIA submission, p. 8.

Insurance Council submission, p.3

ARCA submission, p.4.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

• an order to compensate one or more persons who have suffered, or are likely to suffer, loss or

damage as a result of another person applying or relying on, or purporting to apply or rely on the

term or terms that have been declared unfair; and

• other orders that the court thinks are appropriate.

Nonetheless, there are currently barriers that impede access to these remedies. For example, the law

requires a small business or regulator seeking an order for a remedy, such as variation to the unfair

term, to quantify its financial loss or damage before the court.

This requirement is reasonable where the small business is seeking financial compensation, but is not

necessarily appropriate if seeking orders for the contract issuing party to vary the contract to remedy

the harm to the small business. This is particularly the case when the regulator or small business will

already have to prove that the contract term is a UCT, which includes proving the potential detriment

of the UCT if it was relied on.

Even with amendments to these provisions, stakeholders submit that access to the provisions is

difficult for small business and consumers. NFIA submits that small construction businesses avoid

court action as much as possible due to an industry culture that court action will damage commercial

relationships beyond repair and cause reputational damage to sub-contractors right across the

industry.

The OSBC submits that it is virtually impossible for a small business to litigate matters through court

due to the time and cost involved.

This view is supported by NSW Farmers which says that while

farming businesses often suspect that their contract terms are unlawful, the risks in undertaking

court proceedings against their contracting partner are too great.

It is also supported by the

Institute of Public Accountants which advises that bringing an action through the court systems make

this avenue unaffordable for all but very few small businesses.

The ACL enables regulators to seek orders that will provide redress, in whole or in part, for loss or

damage to non-party consumers who are disadvantaged by a term in a consumer contract which a

court or tribunal has declared unfair. The result of this is that consumers are not required to institute

their own follow on proceedings.

A recent example of the third part redress provision in action is where the ACCC successfully brought

proceedings against hair loss business Ashley & Martin.

In this case, over 25,000 consumers were

affected by UCTs across three of Ashley & Martin’s standard contracts. The orders for redress

provided relief for those patients who signed Ashley & Martin’s contracts prior to receiving medical

advice or within seven days of receiving medical advice and who during the term of the contract:

• were advised by a medical practitioner that the RealGROWTH Program was not suitable; or

NFIA submission, p. 13.

SBDC submission, p. 2.

NSW Farmers submission, p.7.

IPA submission, p. 4.

Australian Competition and Consumer Commission v Ashley & Martin Pty Ltd [2019] FCA 1436 (4 September 2019).

Available at: https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2019/1436.html

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

• experienced one or more side-effects from the prescription medicines which caused them to stop

using such medicines; or

• expressed a desire to terminate the contract or obtain a refund (within 7 days of signing the

contract or first obtaining medical advice, whichever is later); or

• expressed a desire to terminate the contract or obtain a refund because they did not have an

opportunity to obtain medical advice or had subsequently received and considered medical

advice and no longer wished to proceed with the RealGROWTH Program.

These patients were provided with a full refund of all money paid under the relevant contract, less

any amount already refunded. Ashley & Martin was also ordered to pay the ACCC’s legal costs.

When the UCT protections for small business were introduced, it was intended that the remedies

available for ‘non-party consumers’ would also apply to ‘non-party small businesses’, which would

allow regulators to apply to a court to seek certain orders for the benefit of small businesses that are

not parties to proceedings where:

• the respondent is a party to a small business contract and is advantaged by a term of the contract

that the court has declared to be an unfair term;

• the declared term has caused, or is likely to cause, a class of small business to suffer loss or

damage; and

• the class includes small businesses who have not been a party to enforcement action in relation

to the declared term.

The current law is not clear whether, or the extent to which, the definition of ‘non-party consumer’

covers non-party small business and therefore whether remedies would be available to a small

business that is not a party to proceedings brought by a regulator, but has suffered, or is likely to

suffer, loss or damage caused by the UCT. Self-Employed Australia submits it is essential that a

regulator should be able to commence court proceedings on behalf of a class of small businesses on

the basis that a UCT has caused or is likely to cause the class of small businesses to suffer loss or

damage small businesses do not have the money or organisational capacity to undertake court

proceedings.

The same unfair terms can be used repeatedly

Under the current law, proceedings in relation to UCTs in consumer and small business contracts only

apply to the terms subject to the proceedings. This means if businesses within the same industry use

the same standard form contract template when drawing up contracts, the fact that a similar or even

identical term has been declared void in other proceedings has no legal force. This provides little

incentive for contract-issuing parties to amend similar terms in their standard form contracts, even in

Australian Competition and Consumer Commission v Ashley & Martin Pty Ltd (No 2) [2019] FCA 1739 (24 October 2019).

Available at: https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2019/1739.html

Self-Employed Australia submission, p. 7.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

response to litigation that found that term void in similar circumstances. It also means that

consumers and those small businesses who cannot afford litigation cannot rely on a court ruling.

The current headcount threshold used to define small businesses is not

always appropriate

One of the existing requirements for a contract to be considered a ‘small business contract’ and

therefore covered by the protections, is that at least one party to the contract must employ fewer

than 20 persons at the time the contract is entered into. The ACCC notes there are problems with the

current headcount threshold in that it has led to uncertainty about the coverage of the UCT regime,

which hinders compliance with the law. Specifically, the ACCC advises that it is difficult for a

contract-issuing party to determine the other party’s employee numbers, and it is often not easy for

a small business itself to determine whether its seasonal or casual workers meet the UCT regime’s

test of being ‘employed on a regular and systematic basis’ in accordance with section 23(5) of the

ACL.

Several stakeholders have raised similar concerns about applying a 20 person headcount

threshold to access the protections:

The ACF considers that particularly the hospitality industry is impacted by the current

headcount threshold of 20 employees. During busy periods as a seasonal business, the

number of employees may increase over the prescribed 20 employees for that period. This is

confusing and it is unclear as to whether they are considered a small business.

…a strict limit on definition of a small business for the purpose of UCT protection does not

adequately address the circumstances where the power differences between a franchisor and

its franchisee is so large as to make it impossible for contracts to be negotiated on a level

playing field.

The current headcount threshold of employing fewer than twenty persons at a time does not

adequately protect a multitude of agricultural businesses that are vulnerable to UCTs in

standard form contracts. Agricultural industries, particularly horticulture, hire seasonally to

meet the demand of various activities including planting, pruning and picking. At these times,

many horticultural businesses exceed the total headcount threshold that prevents them from

receiving protections from UCTs.

…the current 20 employee headcount threshold is much too low, as it does not include many

businesses treated for other purposes as small businesses, including those with large seasonal

or casual workforces.

In addition, several stakeholders have advised that the fewer than 20 person headcount threshold is

inconsistent with other commonly used proxies to define small business. For example, ASIC advises

ACCC submission, p.3.

ACF submission, p.3.

AADA submission, p.3.

NSW Farmers submission, p.8.

Law Council Submission – SME Committee, p.10.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

that the current definition is not consistent with the way the Australian Financial Complaints

Authority (AFCA) applies protections to small businesses (being 100 employees).

Similarly, the

Australian Banking Association Banking Code of Practice (Banking Code) defines a business as small

business if the business has fewer than 100 full-time equivalent employees at the time the business

obtains the banking service. However, the Bank Code adds two additional limbs that must also be

met at the time at the time the business obtains the banking service in order for the business to be

considered a small business. These include that the business had an annual turnover of less than

$10 million in the previous financial year and that it has less than $3 million total debt to all credit

providers.

The Australian Small Business and Family Enterprise Ombudsman Act 2015 defines a business as a

small business at a particular time in a financial year if the business has fewer than 100 employees at

that time or its revenue for the previous financial year is $5 million or less (or if the business was not

carried on in the previous financial year, its revenue for the current year is $5 million or less).

Part-time employees are considered an as an appropriate fraction of full‑time equivalent employees

for the purposes of the headcount threshold.

The Australian Tax Office (ATO) uses an aggregated turnover less than $10 million to define a ‘small

business entity’ in an income year to assess eligibility for small business entity for several

concessions.

A further problem with the current headcount threshold is that the ACL is currently silent on whether

employees of ‘related bodies corporate’ are to be included when calculating employee numbers.

While no evidence was presented in relation to the potential impacts this could have on small

business, concerns have been raised as to how this could impact medium to large business.

Specifically, a subsidiary or special purpose entity of large a business could be covered by the

protections if they were to meet the headcount threshold. ASIC suggests this could run counter to

the purpose and intent of the UCT protections and unnecessarily intervene in contract negotiations

between competitive businesses on a relatively equal footing.

Likewise, the Federal Chamber of

Automotive Industries (FCAI) suggests this is particularly relevant in the new motor vehicle retailing

industry where a single dealer group will often represent several franchise brands, but each

individual franchise may be operated by a smaller subsidiary company and where further

consolidation is currently happening.

The contract value threshold reduces scope and leads to uncertainty

When the UCT protections were extended to small business contracts in 2016, a contract value

threshold was included to limit the scope of the UCT protections to low value small business

contracts. This was on the basis that it would be reasonable for a small business to undertake their

own due diligence for contracts above a certain value. Accordingly, one of the requirements for a

ASIC submission, p. 9.

ABA Banking Code of Practice, 1 March 2020 Release, p. 12. Available at: https://www.ausbanking.org.au/wp-

content/uploads/2020/06/2020-Code-A4-Booklet-with-July-1-COVID-19-Special-Note-WEB.pdf

Australian Small Business and Family Enterprise Ombudsman Act 2015, section 5.

ASIC submission, p. 10.

FCAI submission, p. 5.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

contract to be considered a ‘small business contract’ and covered by the UCT protections is that the

upfront price payable under the contract does not exceed $300,000, or if the contract has a duration

of more than 12 months, the upfront price payable under the contract does not exceed $1 million.

While there is an ongoing expectation that a small businesses will continue to undertake their own

due diligence when entering into a contractual agreement, some stakeholders have suggested that

the contract value threshold set is too low to take into account the range of contracts small

businesses enter into. The NFF advises that farming businesses tend to be capital intensive, with high

revenue but low profit margins and that the value of contracts for heavy farming equipment or

supply of produce is normally higher than the current value threshold of $300,000. The NFF also

suggest that many agricultural sectors operate with an oligopoly at the processor level which means

that, while a farmer may enter into a contract worth over $300,000 per annum, it is often the only

supply agreement he or she will enter in to.

This Australian Institute of Credit Management (AICM)

supports the suggestion that the current threshold may be too low for some industries, such as the

agriculture industry, for heavy farming equipment or the supply of produce.

Likewise, NSW Farmers suggests many agricultural businesses exceed the current value threshold yet

are vulnerable to UCTs in their standard form contracts as farmers generally operate with high value

contracts with low margins (e.g. poultry meat growing contracts easily exceed the contract value

threshold). NSW Farmers adds that such contracts include terms that enable for risk to be unfairly

transferred from the contracting business to individual farmers but due to the imbalance in market

power between the contracting parties, farmers have no choice but to accept the terms of these

contracts.

A further problem with the current contract value threshold is that the upfront price of a contract

may not be available at the time of entering the contract. This can create uncertainty as to whether

the contract is covered by the UCT protections, particularly when a contract value may fluctuate

based on market conditions.

For example, ASIC notes that some contract prices may be

determined as a percentage of an unknown amount, such as the commission on the sale of a

property or a franchise royalty calculated as a percentage of future sales.

It is not always clear whether a contract is a ‘standard form contract’

The UCT protections only apply to standard form contracts. ‘Standard form contract’ is defined by

section 27 of the ACL which provides that if a party to a proceeding alleges that a contract is a

standard form contract, it is presumed to be a standard form contract unless another party to the

proceeding proves otherwise. The ACL also provides factors a court must take into account in

determining whether a contract is a standard form contract including:

NFF submission, p. 9.

AICM submission, p.5.

NSW Farmers submission, p. 8.

SBDC submission, p. 6.

ASIC submission, p. 11.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

• whether one of the parties has all or most of the bargaining power relating to the transaction;

• whether the contract was prepared by one party before any discussion relating to the transaction

occurred between the parties;

• whether another party was, in effect, required either to accept or reject the terms of the contract

in the form in which they were presented;

• whether another party was given an effective opportunity to negotiate the terms of the

contract;

• whether the terms of the contract take into account the specific characteristics of another party

or the particular transaction; and

• any other matter prescribed by the regulations.

The court may also take into account any other matters it considers relevant.

The Small and Medium Enterprise Committee of the Business Law Section of the Law Council of

Australia (SME Committee) and NFIA submit that the rebuttable presumption is insufficient and

when entering into a contract, small businesses would benefit from greater certainty as to whether

the contract they intend to sign is a standard form contract and likely to be covered by the UCT

protections.

This position is supported by several other stakeholders, including ASBFEO, which

states that uncertainty and lack of clarity is a consistent problem for small businesses, especially

when they are facing the prospect of complex and costly legal proceedings.

The SME Committee suggests that what constitutes standard form commercially and legally is

generally well understood, in that the terms of the contract are generally not negotiable (i.e. they are

offered on a ‘take it or leave it’ basis) and the contract is used repeatedly.

However, it is not always clear at the time of entering into a contract whether an effective

opportunity to negotiate has been given. This is especially the case where the parties have

negotiated or amended one or two minor contractual terms. National Precast submits that if minor

parts of a contract are negotiated, the contract itself may no longer be considered ‘standard form’,

even if one party to the contract may have had very little commercial power to negotiate the relative

risks of those terms. National Precast submits the effect of the UCT protections are diluted by a strict

interpretation of what constitutes a ‘standard form contract’.

NFIA submits that many contracts in

Other than terms referred to in s26(1) of the ACL (terms that define the main subject matter of the contract, terms that

set the upfront price payable under the contract or terms that are required, or expressly permitted, by a law of the

Commonwealth, a State or Territory.

That were not terms referred to in s26(1) of the ACL (see footnote above).

Other than terms referred to in s26(1) of the ACL (see footnote above).

Law Council – SME Committee, submission on the 2018 Review of Unfair Contract Term Protections for Small Business,

p.3; NFIA submission, p. 16.

ASBFEO submission, p.3.

Law Council SME Committee, submission on the 2018 Review of Unfair Contract Term Protections for Small Business, p.3;

Law Council Submission – Annexure A –Competition and Consumer Committee, p. A29.

National Precast submission, p.6.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

the building industry are based on a standard form but are riddled with amendments depending on

the specific project circumstances (e.g. procurement models, site conditions, etc.) and

sub-contractors at the bottom end of the hierarchy are typically not informed of what amendments

have been made to standard form contracts.

The Shopping Centre Council of Australia (SCCA) also supports providing certainty around whether

another party was given an effective opportunity to negotiate the terms of the contract. Specifically,

it suggests there is a need for a distinction between a small business contract which:

• is a standard form contract which provides a basis for the commencement of negotiations

between the parties (as is the case in regard to retail leases, where there is often a legal

obligation on landlords to provide a ‘proposed’ lease to a prospective lessee when negotiations

are entered into); and

• is a standard form contract offered on a ‘take it or leave it’ basis.

As outlined above, the SME Committee suggests one of the generally well understood factors in

determining whether a contract is a standard form contract is that the contract is used on a repeated

basis. This is supported by ASBFEO which suggests that if the same substantive clauses are repeated

in most of the contracts made by a party proposing a contract, it would seem likely that this is a

‘standard form’ contract.

ASIC suggests that ‘repeat usage’ is a more objective factor that takes

into account occasions where a contract-issuing party has used the same contract or, importantly,

the same core terms and conditions in multiple contracts.

While courts and tribunals may already

consider ‘repeat usage’ as a relevant factor in determining whether a contract is a standard form

contract, it is not listed in section 27 of the ACL and therefore is not a factor a court must consider in

making their decision.

NFIA submission, p. 16.

SCCA submission, p.5.

ASBFEO p.4.

ASIC submission, p. 13.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

2. Objectives

The primary objective of this reform is to enhance the effectiveness of current laws designed to

protect small business and consumers from UCTs. This will help reduce the prevalence of unfair

terms in small business and consumer standard form contracts, promote a more efficient allocation

of risk, and improve small business and consumer confidence when entering in to standard form

contracts.

Secondary objectives include:

• improving clarity on the application of, and accessibility to, the protections;

• ensuring the coverage of the protections is appropriate; and

• ensuing consistency in application of the UCT regime, including in relation to consumer contracts

for goods and services (regulated under the ACL), and consumer and small business contracts for

financial products and services (regulated under mirror provisions in the ASIC Act which will also

extend to insurance contracts from 5 April 2021).

This will provide certainty for contract-issuing parties, small business and consumers on when the

protections apply, which will assist with compliance with the law.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

3. Options

There are 22 options presented for decisions-makers. These options have been divided into four

categories:

• Legality and penalties

• Flexible remedies

• Definition of small business contract

– Headcount/turnover threshold

– Related bodies corporate

– Contract value threshold

– Clarity on standard form contract

• Minimum standards

Legality and penalties

Option 1 – Status quo

Under the status quo, a term of a standard form small business or consumer contract could be

challenged in a court or tribunal, which could determine the term is ‘unfair’ and therefore void,

which means it will not be binding on the parties. The rest of the contract would continue to bind the

parties to the extent it is capable of operating without the unfair term. The contract-issuing party

would not receive a penalty for including the unfair term in the contract or any identical terms in any

of its other contracts, regardless of whether the inclusion of the term caused any detriment to the

other parties.

Option 2 – Strengthened compliance and enforcement activities

Under this option, regulators would strengthen their compliance and enforcement activities. This

would enable them to investigate more reported cases of potential UCTs in small business contracts

and, where appropriate, commence proceedings to challenge these terms. Regulators would also

boost their education and awareness activities. This could, for example, include working with

industry stakeholders, small business groups and state small business commissioners to launch

targeted education campaigns to improve the awareness of UCT protections.

Option 3 – Make UCTs unlawful and give courts the power to impose a civil

penalty

Under this option, a term of a standard form small business or consumer contract could still be

challenged in a court (or tribunal) and found to be ‘unfair’ and therefore void, which means it would

not be binding on the parties. As per the status quo, the rest of the contract would continue to bind

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

the parties to the extent it is capable of operating without the unfair term. However, compared to

the status quo, courts could also apply a civil pecuniary penalty for the contravention. Courts would

be able to determine the appropriate penalty amount, up to the maximum set under the law. In

imposing a civil pecuniary penalty, the court would need to be satisfied that imposing a penalty is

appropriate in the circumstances of each individual case.

Option 4 – Strengthened powers for regulators

Option 4a – Regulators given the power to issue infringement notices

This option is dependent on the adoption of Option 3 as described above and would give certain

regulators the power to issue infringement notices.

Option 4b – Regulators given powers to determine a term is unfair and request it is varied

This option would give regulators the power to determine whether a contractual term is unfair and

request the contract-issuing party to vary the term. If a business wished to challenge a decision made

by a regulator, they could appeal to a court or tribunal for merits or judicial review of the decision.

Flexible remedies

Option 1 – Status quo

Under the status quo, a term of a standard form small business or consumer contract could be

challenged in a court or tribunal, which could determine the term is ‘unfair’ and therefore void,

which means it will not be binding on the parties. The rest of the contract would continue to bind the

parties to the extent it is capable of operating without the unfair term.

Option 2 – UCTs not automatically void; court given power to determine the

appropriate remedy

This option would amend the law to clarify that when a court or tribunal declares a term in small

business or consumer contract is ‘unfair’, the court or tribunal has the discretion to determine

appropriate remedies (including that the term is void or is to be varied) rather than the term being

automatically void.

Option 3 – Clarify that remedies for ‘non-party consumers’ also apply to

‘non-party small businesses’

This option would ensure that the remedies available for ‘non-party consumers’ would also apply to

‘non-party small businesses’. As per the justification for extending UCT protections to small business

contracts, small businesses and consumers share similar characteristics, including limited financial

resources and negotiation powers.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 4 – Create a rebuttable presumption provision for UCTs used in similar

circumstances

This option would amend the law to establish a rebuttable presumption that a contract term is unfair

if, in a separate case, the same or a substantially similar term has been used by the same entity or in

the same industry sector and declared by a court to be unfair. If such a term was challenged in a

court or tribunal, it would be presumed to be unfair, unless the contract-issuing party was able to

produce evidence to demonstrate why it was not unfair in the particular circumstances of the case.

Definition of small business contract

Headcount/turnover threshold

Option 1 – Status quo

Under the status quo, a less than 20 person headcount threshold is used as a proxy to define small

business. Accordingly, one of the requirements for a contract to be considered a ‘small business

contract’ and covered by the UCT protections is that at least one party to the contract employs fewer

than 20 persons at the time the contract is entered into.

Option 2 – Replace 20 person headcount threshold with $10 million annual

turnover threshold

This option would replace the less than 20 person headcount threshold with a less than $10 million

annual turnover threshold as a proxy for defining small business. Accordingly, one of the

requirements for a contract to be considered a ‘small business contract’ and covered by the UCT

protections would be that at least one party to the contract is a business with an annual turnover of

less than $10 million, regardless of the number of persons the business employs.

Option 3 – At least one party to meet a less than 100 person headcount

threshold OR less than $10 million annual turnover threshold

This option would replace the less than 20 person headcount threshold with a less than 100 person

headcount threshold and a less than $10 million annual turnover threshold. Accordingly, one of the

requirements for a contract to be considered a ‘small business contract’ and covered by the UCT

protections would be that at least one party to the contract is a business that employs fewer than

100 persons at the time the contract is entered into and/or has an annual turnover of less than

$10 million.

Related bodies corporate

Option 1 – Status quo

This option would retain the current law and not state whether employees of ‘related bodies

corporate’ are to be included when calculating employee numbers for the purposes of the UCT

protections for small business contracts.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 2 – Related bodies corporate relevant in determining employee

numbers and annual turnover

This option involves amending the current law to specify that employees of ‘related bodies

corporate’ are to be included when calculating employee numbers for the purposes of the UCT

protections for small business contracts.

To clarify, if amendments are made to the current headcount threshold (either through adopting

headcount/turnover threshold Options 2 or Option 3), this option would involve amending the

current law to specify that:

• any related bodies corporate would be considered relevant in determining annual turnover for

the purposes of the UCT protections for small business contracts (if Option 2 is adopted); or

• employees of related bodies corporate are to be included when calculating employee numbers

and any related bodies corporate would be considered relevant in determining annual turnover

for the purposes of the UCT protections for small business contracts (if Option 3 is adopted).

Contract value threshold

Option 1 – Status quo

Under the status quo, one of the requirements for a contract to be considered a ‘small business

contract’ and covered by the UCT protections is that the upfront price payable under the contract

does not exceed $300,000, or if the contract has a duration of more than 12 months, the upfront

price payable under the contract does not exceed $1 million.

Option 2 – Increase contract value threshold to $5m per contract, regardless of

contract duration

Under this option, one of the requirements for a contract to be considered a ‘small business

contract’ and covered by the UCT protections would be that the upfront price payable under the

contract does not exceed $5 million per contract, regardless of the duration of the contract.

Option 3 – Remove the contract value threshold altogether

This option would remove a contract value threshold altogether.

Clarity on ‘standard form contract’

Option 1 – Status quo

There would be no change to the current definition of ‘standard form contract’ under the current

law.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 2 – Court must consider ‘repeat usage’ in determining a ‘standard form

contract’

The current law provides factors a court must take into account in determining whether a contract is

a standard form contract. This option would include ‘repeat usage’ as one of these factors.

Option 3 – Clarify actions which do not constitute an ‘effective opportunity to

negotiate’

The current law already notes that negotiation on terms relating to the main subject matter of the

contract, the upfront price payable under the contract, and terms required or permitted by a law

does not constitute an ‘effective opportunity to negotiate’. This setting would remain.

This option would amend the law to further clarify the types of actions which do not constitute an

‘effective opportunity to negotiate’. This could include:

a. opportunities for a small business to negotiate minor amendments to a contract, which are

amendments that would not alter the intent and essence of the original term;

b. opportunities for a small business to select, from a pre-existing list of possible terms, which

term they would prefer, rather than an opportunity to actually negotiate the substance of the

term; and

c. claims by the contract-issuing party that there was an effective opportunity to negotiate across

all standard form contracts with all its customers, when it only gave an opportunity to negotiate

to a small subset of customers.

Minimum standards

Option 1 – Status quo

The Consultation RIS presented the status quo as “minimum requirements or standards under state

and territory laws could possibly be challenged as being unfair”.

Option 2 – Provide an exemption for certain terms which meet minimum

standards

This option would amend the law to exempt certain clauses that include ‘minimum standards’ or

other industry-specific requirements contained in relevant Commonwealth, state or territory

legislation.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

4. Impact analysis

Legality and penalties

Option 1 – Status quo

Under the status quo, a term of a standard form small business or consumer contract could be

challenged in a court or tribunal, which could determine the term is ‘unfair’ and therefore void,

which means it will not be binding on the parties. The rest of the contract would continue to bind the

parties if it is capable of operating without the unfair term. A regulator could not seek a penalty for

including an unfair term in a contract or any identical terms in any of its other contracts, regardless

of whether the inclusion of the term caused any detriment to the other parties.

As small businesses generally lack the resources and bargaining power to effectively review and

negotiate contract terms or challenge their enforcement, the status quo enables contract-issuing

parties to continue to exploit power imbalance when issuing standard form contracts.

AFRA

suggest that ultimately, small businesses are likely to accept UCTs because they require the contract

to remain on foot.

In addition, NECA suggests that limited competition in some industries can

create a dependency on larger businesses and the potential to be taken advantage of or enter into

what they believe are adverse contracts.

Further, National Precast suggests that in some

industries, UCTs are so prevalent, small businesses are presented with a difficult choice of entering

into contracts with unfair terms, with all the attendant risk, or face slowly go out of business through

a lack of work.

Likewise, consumer advocacy group CHOICE notes that the considerable cost for an individual

consumer to take a business to court is unlikely to be outweighed by the benefit of pursuing legal

action. CHOICE submits that supply-side prevention of UCTs is the only way to restore the power

imbalance.

100

Option 2 – Strengthened compliance and enforcement activities

Compared to the status quo, this option involves regulators allocating additional resources to

strengthen their compliance and enforcement activities, which would enable them to investigate

more reported cases of potential UCTs in small business contracts and, where appropriate, take

enforcement action, including commencing proceedings to challenge these terms. Regulators would

also boost their education and awareness activities.

E.g. SBDC submission, p. 7; NFIA submission, p.7; National Precast submission, p.4.

AFRA submission, p.4.

NECA submission, p. 2.

National Precast submission, p.4.

100

CHOICE submission, p. 3.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Additional resources to strengthen compliance and enforcement activities

Some stakeholders favoured this option over Option 3, while several other stakeholders favoured

this option in addition to Option 3.

As outlined in Appendix A to this Decision RIS, since the UCT protections were introduced for

consumer contracts in 2010 and extended to small business contracts in 2016, regulators have

undertaken significant action to address UCTs in standard form contracts. While such action has led

to positive results, it can be resource intensive and regulators do not have infinite resources to

enforce the law.

Allocating additional resources to strengthen compliance and enforcement activities in relation to

UCTs would come at a cost – either through requiring additional funding, or diverting resources from

other high priority activities and therefore reducing the compliance and enforcement of those areas.

Consequently, the effect on reducing the prevalence of UCTs in small business contracts through this

option alone is likely to be limited and involve a significant cost.

Boosted education and awareness activities

As noted in Chapter 1 – The Problem, several stakeholders raised concerns about the need for

greater awareness and education on the UCT regime, including targeted education campaigns. While

several stakeholders did not necessarily respond to Option 2 directly, many stakeholders suggest

improvements to the status quo, particularly in response to the following question which was posed

in the Consultation RIS:

Do you have any suggestion as to how regulatory guidance and education campaigns could

help reduce the use of UCTs? This includes any suggestions on improvements to current

guidance or areas where further guidance is needed.

Overall, stakeholders suggest there is a need for:

• further education and guidance (presented in plain language) on:

– terms that are unfair,

101

including specific examples of UCTs

102

and terms courts have

declared unfair;

103

– what constitutes a ‘standard form contract’;

104

– the processes that business should follow when they suspect a contract contains unfair

terms;

105

101

MEA submission, p. 3.

102

E.g. NFIA submission, p. 11; DSA submission, p. 2; AFRA submission, p. 4.

103

E.g. AFIA submission, p. 5; QLS submission, p. 5.

104

E.g. ACF submission, p.4; AFGC submission, p.1; AICM submission, p.6; NIRA submission, p.4.

105

E.g. NFIA submission, p. 11; NFF submission, p. 6; QLS submission, p. 5.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

– how contract-issuing parties can meet their obligations,

106

especially when a smaller

business is the one issuing the contract;

107

• industry-specific guidance (e.g. building and construction;

108

and generally

109

There is also a suggestion that regulators should work with the legal profession to ensure that terms

that are now regarded as UCTs are not repeatedly included in future contracts, which would allow

the terms to persist.

110

In addition, a few stakeholders also showed interest in a joint approach to education and awareness

involving industry and regulators working together. For example, the Housing Industry Association

advises that it would be willing and able to assist in any targeted education campaigns or activities

relating to UCTs in the residential building industry.

111

Also, the NFF suggest that agricultural industry

associations are well placed to assist the Government and ACCC increase access to information and

to help tailor relevant Information to make it easier to understand. It also suggested that it would be

pleased work in conjunction with its members to disseminate information on UCTs via its formal

networks as well as its social media networks.

112

Likewise, the Caravan, Camping & Touring Industry

& Manufactured Housing Industry Association of NSW suggests that success of Option 2 lies in

compliance and ongoing education, rather than one-off campaigns and advises that, as an industry

association, it would be happy to collaborate on any industry specific initiatives or forums or both to

raise awareness and encourage best practice.

113

Some stakeholders suggest that responsibility for providing awareness and education on UCTs should

extend beyond that of regulators. For example, one stakeholder suggests that in addition to ASIC,

ASBFEO should provide educational campaigns to small businesses to allow consumers and

businesses to enter into informed conversations with their financiers during the contract negotiation

process.

114

Another stakeholder suggests it would be helpful if primary contractors or large suppliers

were required to provide a simply worded guide on the terms of any standard form contracts, similar

to a PDS or FEG.

115

While many stakeholders assert there is a need for greater education and awareness on the UCT

regime in its current form, several stakeholders do not believe that regulatory guidance and

education campaigns alone would be effective in reducing the prevalence of UCTs in standard form

contracts. Specifically, while guidance may give consumers and small business more clarity on how to

identify UCTs, it would not assist them to effectively deal with those terms. For example, the

National Road Transport Association (NatRoad) believes the use of UCTs in the road transport

106

E.g. CCIA NSW submission, p. 3; QLS submission, p. 4.

107

E.g. DSA submission, p. 2.

108

NFIA submission, p. 11; MEA submission p.3.

109

E.g. DSA submission, p. 2; AFGC submission, p. 1; AFGC submission, p.1 QLS submission, p. 5.

110

Min-it & FAA joint submission, p. 9.

111

HIA submission, p. 10.

112

NFF submission, p. 7.

113

CCIA NSW submission, p. 3.

114

AFIA submission, p. 5.

115

AFRA submission, p. 5.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

industry has become systemic and laws with ‘cut-through’ are needed. NatRoad also considers

guidance should set out factors where a provision is not unfair because it is reasonably necessary to

protect the legitimate interests of the party who would be advantaged by the term.

116

Similarly, the NSWSBC suggests that awareness aside, there are existing barriers that mean small

businesses sometimes cannot or do not negotiate terms in contracts drafted by counterparties.

117

For example, Master Electricians Australia, a trade association representing electrical contractors,

advises that there are often short time periods for responding to tenders and contracts (as five

business days but frequently only two weeks) and significant competition in the industry which puts

pressure on sub-contractors and small businesses to accept tenders’ terms including evaluating and

accepting the draft contract prior to submitting a tender.

118

Another stakeholder advises that a

tendering sub-contractor may submit a list of commercial exceptions to objectionable terms in the

contractor’s contract with its tender but when the tendering sub-contractor is advised it has won the

tender, they are also advised the contractor’s terms are not negotiable.

119

The NSWSBC also suggests that contract drafters, whether or not they are familiar with the regime,

may tend to include UCTs as they tend to seek to protect their own interests.

120

Another stakeholder

suggests that regulatory guidance and education is valuable for people who essentially want to

comply with the law, but is not effective for people who know they are the stronger party

financially.

121

Consumer advocacy group CHOICE submits that education and industry engagement have been

largely ineffective in changing business behaviour and without strong deterrents, the law will

continue to deliver adverse outcomes for consumers.

122

Likewise, Consumer Action Law Centre,

Financial Rights Legal Centre and WEstjustice assert that nearly a decade of the current UCT regime

has not eradicated UCTs from standard form consumer contracts and that they continue to see UCTs

being used and relied on by business across a wide range of industries, despite extensive regulator

education and guidance programs on UCTs for industry over the years.

123

The authors of this joint

submission add that consumer education campaigns are also unlikely to be effective – even where

consumers are well-informed about their rights, they lack access to justice to enforce those rights

and that the use of UCTs in consumer contracts will only be further reduced with a real deterrent.

124

116

NatRoad submission, p. 7.

117

NSWSBC submission, p. 2.

118

MEA submission, p. 3.

119

Palyga, S submission, p. 2.

120

NSWSBC submission, p. 2.

121

Buchan, J submission, p. 1.

122

CHOICE submission, p. 1.

123

Consumer Action Law Centre, Financial Rights Legal Centre and WEstjustice joint submission, p. 1.

124

Consumer Action Law Centre, Financial Rights Legal Centre and WEstjustice joint submission, p. 10.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 3 – Make UCTs unlawful and allow a court to impose a civil penalty

Under this option, a term of a standard form small business or consumer contract could still be

challenged in a court (or tribunal) and found to be ‘unfair’ and therefore void, which means it would

not be binding on the parties. As per the status quo, the rest of the contract would continue to bind

the parties to the extent it is capable of operating without the unfair term. However, compared to

the status quo, where the action is brought by a regulator, the court could also apply a civil pecuniary

penalty for the contravention. The court would be able to determine the appropriate penalty

amount, up to the maximum set under the law. In imposing a civil pecuniary penalty, the court would

need to be satisfied that imposing a penalty is appropriate in the circumstances of each individual

case.

As outlined in Chapter 1 – The Problem, the current law does not prohibit the use of UCTs, but rather

allows a court to declare that a term is unfair and therefore void. This allows contract-issuing

businesses to intentionally include and rely on terms in their standard form contracts that may be

unfair, with the risks limited only to being unable to rely on the term if a court or tribunal declares

the term is unfair and therefore void.

Many submissions to the 2018 Review argued this approach does not provide adequate incentive for

businesses to ensure their standard form contracts are free from UCTs. These concerns were echoed

in submissions to the 2020 consultation.

Many stakeholders suggested that more significant consequences are needed to deter

contract-issuing parties from including UCTs in their standard form contracts and support making

UCTs illegal and attaching penalties.

125

Stakeholders in support of Option 3 further assert that:

• penalties are the only effective deterrent;

126

• businesses can take advantage of the power imbalance inherent in standard form contracts on

the basis that small business and consumers are unlikely to proceed with court processes to have

a term declared ‘void’ in a contract;

127

• contract-issuing parties will be encouraged to take proactive steps to amend their existing

standard form contracts.

128

While a few stakeholders do not support Option 3 because they believe the current provisions are

working effectively,

129

the remaining views against the introduction of penalties are largely based on

uncertainty around what may be considered ‘unfair’ and concerns that this option would impose

125

E.g. SBDC submission, p.7; CHOICE submission, p. 3; Consumer Action Law Centre, Financial Rights Legal Centre and

WEstjustice joint submission, p.10; AAF submission, p.1; Law Council Submission – ACL Committee, p. 19.

126

E.g. AADA submission, p. 10; NSW Farmers submission, p.4 Law; Council Submission – SME Committee, p. 10.

127

E.g. CHOICE submission, p. 3; SBDC submission, p. 7; Clubs Australia submission, p. 6.

128

ASIC submission, p. 6.

129

E.g. FCAI submission, p. 3; Ai Group submission, p. 2; AFIA submission pp. 6-7; ABA; p. 3; HIA submission, p. 10; Law

Council Submission – Competition and Consumer Committee, p. 6; MIGA submission, p.2; E.g. Ai Group submission, p.2; HIA

submission, p. 8; BCA, 2020 Melbourne consultation, Session 2 (note: BCA has requested their feedback at the consultation

session is submitted in lieu of a written submission).

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

compliance costs. Accordingly, primary views against making UCTs illegal and introducing penalties

include:

• the nature of determining whether a term is unfair is subjective;

130

• uncertainty around whether the UCT protections apply in the circumstances (e.g. if a standard

form contract, if thresholds are met);

131

• imposing penalties would impose compliance costs;

132

– costs could be passed onto consumers and small business;

133

– costs associated with reducing the use of standard form contracts to reduce the risk of

penalties;

134

• businesses could be left in a position where they could not legitimately and reasonably protect

their interests; and

135

• some contract-issuing businesses may choose not to deal with certain businesses (e.g. small

businesses).

136

In addition, a few stakeholders raised specific concerns that this option could potentially have

negative impacts on small business. For example, AICM, which represents the interests of

commercial and consumer credit management professionals, believes that strong enforcement and

penalties should be applied when a business unreasonably relies on or enforces an unfair term. It

suggests that if a penalty were to apply merely for the existence of an unfair term in standard form

contract, this could create a greater unintended consequence of restricting small businesses access

to credit.

137

Direct Selling Australia (DSA), suggests the compliance spend of most small businesses is

not as great as larger businesses with ready access to either in-house or external legal counsel and

that this option might attach liability to small businesses contracting with other small businesses.

138

The specific concerns are considered collectively with the broad concerns mentioned above.

Uncertainty around what may be considered ‘unfair’

The law currently provides statutory guidance on the types of terms which may be regarded as being

unfair. However, it does not prohibit the use of those terms, nor does it create a presumption that

those terms are unfair. Some stakeholders have suggested that the law be amended include a list of

130

E.g. DSA submission, p.2; SSCA submission, p. 6; FCAI submission, p. 3; ABA; p. 3; Sise, P submission; FSC submission, p.

3; Law Council Submission – Competition and Consumer Committee, p. 6; SCCA submission, p. 6; HIA submission, p. 8.

131

E.g. Sise, P submission, p. 4.

132

E.g. Ai Group submission pp. 2-3; ARCA submission, pp. 3-4; Communications Alliance submission, p. 5; HIA submission,

p. 8; BCA, 2020 Melbourne consultation.

133

E.g. Ai Group submission pp. 2-3; Sise, P submission, p. 5; ARCA submission, p. 3.

134

E.g. Sise, P submission, p. 5.

135

E.g. Ai Group submission pp. 2-3; Communications Alliance submission, p. 3.

136

E.g. Ai Group submission pp. 2-3; Communications Alliance submission, p. 3.

137

AICM submission, p. 1.

138

DSA submission, p. 2.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

prohibited UCTs which must not be included in standard form contracts (or if they appear in

contracts, are automatically non-binding).

139

While a list of prohibited terms could provide some

additional certainty around whether a term should not be included in a standard form contract, there

is a risk that characterising a particular term as ‘unfair’ could impose inflexibility on contracting

practices and create an incentive for ‘gaming’ by using terms with substantially the same effect but

that are not described exactly as those on the list. In addition, Australian Grape and Wine

Incorporated, which represents the interests of grape growers and winemakers, suggests that the

focus on individual contract terms can impose unnecessary and costly restrictions on flexibility for

both the small business (grape grower) and contract-issuing party (winemaker).

140

There may also be circumstances in which a term may be considered ‘unfair’ in some circumstances

but which may be considered reasonably necessary in order to protect a party’s reasonable business

interests in other circumstances. For example, two standard form contracts may contain the same

term which may be considered unfair in one contract, but not in the other contract because it has an

additional term that provides a counter-balancing right to protect the other contracting party’s

interests also. Further, it may also be impracticable to identify a comprehensive list and it would

likely need to be continually updated, adding to implementation costs.

Alternatively, the Competition and Consumer Committee of the Business Law Section of the Law

Council of Australia advises that it considers that increased judicial consideration of the provisions

will assist to resolve the uncertainty for parties in their assessment of terms within the context of the

UCT regime. The committee adds that regulatory guidance or education campaigns to help reduce

the use of UCTs should include providing further material including:

• examples of situations where a term will and will not be considered unfair, in order to show

(through clear and consistent analysis) how the circumstances, and contracts as a whole, can

impact the assessment of the term;

• entire sample contracts to provide context to the examples and demonstrate how the potentially

unfair clause may interact with the entirety of the contract in order to reach a determination that

a clause is or is not unfair; and

• examples of amendments to unfair terms that would result in the term no longer being unfair but

still achieve the parties’ intended outcome.

141

Approach of regulators

One of the functions of regulators is to provide information and advice to consumers and businesses

to promote compliance with the law. In general, education and awareness is often the first step

towards securing compliance, and goes beyond the publication of guidance materials. For example,

as discussed in Chapter 1 – The Problem, before the UCT protections for small business came into

effect, the ACCC reviewed a number of contracts, and engaged with business across several different

industries highlighting potentially problematic terms. The ACCC then released a report highlighting

139

E.g. Malbon, J submission; ARCA submission, p. 2; AFRA submission, p.3; Ai Group submission, p. 6; NatRoad submission,

p. 6.

140

Australian Grape & Wine submission, pp. 3-4

141

Law Council Submission – Annexure A – Competition and Consumer Committee, pp. A4-A5.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

concerning terms the ACCC observed across those industries. One of those industries was the waste

management industry. Following this, the ACCC continued to make businesses in the waste

management industry aware of their obligations under the UCT Regime, including by engaging with

waste management provider JJ Richards & Sons Pty Ltd. The ACCC’s subsequent decision to take legal

action against JJ Richards was a result of JJ Richards failing to address the ACCC’s concerns.

Regulators have a range of civil, administrative and criminal enforcement tools that they can use to

try to address concerning conduct. Regulators do not have infinite resources and must consider

complaints carefully and exercise discretion, directing resources to matters that can result in industry

wide change or provide the greatest overall benefit for consumers and small business. Litigation is

costly compared to most other compliance and enforcement actions. As such, regulators engage in a

range of other tools and strategies they have available to achieve outcomes in a timely and

proportionate manner. Such tools differ across each regulator, but may include:

• education, guidance and influencing good practice

• encouraging voluntary industry self-regulation codes

• dispute resolution

• formal written warnings

• infringement notices

• enforceable undertakings

• public statements such as media releases and public warnings

A regulator would be more likely to commence legal action in circumstances where alleged breaches

are blatant, within a regulator’s priority areas, are repeated or would cause significant detriment.

In the March 2019 case of ACCC vs Mitolo Group Pty Ltd (Mitolo), the Federal Court found that

Mitolo had contravened the Horticulture Code by failing to specify the method or formula for

calculating the price of goods before or upon delivery and that terms in 19 contracts Mitolo entered

into with small business potato growers were unfair under the ACL. For the Horticulture Code

contravention, the Court imposed a $240,000 pecuniary penalty against Mitolo for entering into

contracts with growers for a fixed volume of produce before harvest season with prices to be

determined at harvest. However, the court did not have any power to issue a pecuniary penalty for

Mitolo’s conduct in relation to the terms the court found to be UCTs. These terms included the

inclusion of unilateral variation clauses in favour of Mitolo, the right to reject grower produce

without a proper review mechanism and preventing growers from selling their produce to alternative

purchases.

Another relevant example is the Federal Court case of ACCC v Chrisco Hampers Australia Ltd

(Chrisco). In March 2016, the Court ordered Chrisco to pay a $200,000 penalty for contravening the

ACL by making a false or misleading representations to consumers between January 2011 and

December 2013 that consumers could not cancel their lay-by agreement after making their final

payment. The Court also found that Chrisco’s 2014 lay-by agreement contained a UCT, which related

to Chrisco’s “HeadStart Plan”, and required a consumer to ‘opt out’ in order to avoid having further

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

payments automatically deducted by Chrisco after their lay-by had been fully paid. The unfair term

was void but no pecuniary penalty could be issued for the use of that term.

As evident in the Chapter 1 – The Problem, UCTs continue to be prevalent in standard form contracts

more than 10 years since the introduction of the protections for consumer contracts and nearly four

years since the extension to small business contracts. This suggests the current approach to

enforcing the UCT protections is not sufficient to ensure future compliance with the law and deter

the inclusion of UCTs in standard form contracts. For example, despite the previous action against

Chrisco, the ACCC more recently had concerns that Chrisco had entered into or renewed lay-by

agreements since 26 October 2018 which contained another Head Start Plan term that allowed

Chrisco to continue to take payments from consumers after they had fully paid for their existing lay-

by order, unless consumers expressly opted out. In July 2020 the ACCC accepted a court enforceable

undertaking from Chrisco acknowledging that the term may be a UCT and undertaking to increase

the transparency of the Head Start Plan term by requiring consumers to opt in to a Head Start Plan

and to confirm their participation from year to year. Given that the consequences of court

proceedings for UCTs is simply that the term is void, in this instance, court proceedings would not

have produced an outcome any more effective in terms of specific or general deterrence than the

court enforceable undertaking resolution.

ASIC advises that its Report 565 Unfair contract terms and small business loans,

142

while relating to

contract terms of the ‘big four’ banks, was intended to put all lenders on notice on its expectations

for the fairness of terms in small business loan contracts. However, despite achieving important

changes to the small business loan contracts of the big four banks, it subsequently observed systemic

non-compliance by some other lenders, which it then took action on. ASIC notes that it is possible

that, had unfair terms in small business standard form contracts attracted a penalty, it may have

provided a strong financial and reputational incentive to encourage lenders to review and change

their contracts without ASIC’s intervention and ASIC would not have needed to use the same level of

resources to obtain changes from other lenders.

143

Regulators will continue to consider complaints carefully and exercise discretion so as to direct their

finite resources to matters that can result in industry wide change or provide the greatest overall

benefit for consumers and small business. Furthermore, the possibility of pecuniary penalties will

provide a strong deterrence for contract-issuing parties to not include UCTs in standard form

contracts from the outset, to be proactive in amending any likely UCTs in existing standard form

contracts, and to cooperate with regulators and address any concerns raised.

Regulators will continue to exercise their powers in a way that is proportionate to the harm from the

conduct and in accordance with general principles of deterrence. This means early engagement on

the law will focus on industry engagement and compliance activities to provide businesses with an

opportunity to take the necessary steps to amend their contracts to comply with the law.

Regulators will continue to take legal action where they consider that litigation is the most

appropriate way to achieve their compliance objectives. This means that litigation is more likely

where the conduct is by a large or national trader or results, or has the potential to result, in

142

Available at https://download.asic.gov.au/media/4676255/rep565-published-15-ma rc h-2018.pdf

143

ASIC submission, p. 5.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

substantial harm. Large or national traders are likely to have the necessary resources to ensure they

are compliant with the law. It is unlikely that including but not relying on a UCT in a contract would

cause substantial harm, so in many circumstances it is likely that regulators would provide parties

with an opportunity to amend their contracts to comply with the law prior to considering legal

action. In instances where there is a difference in opinion between a contract-issuing party and the

regulator as to whether a term is legitimately required to protect the business interests of the

contract issuing party, the court would make the final decision on the term, the appropriateness of

issuing a penalty and the penalty amount.

As with any change of the law, there would be a transition period during which regulators and other

parties would provide appropriate guidance and education to assist contract-issuing parties, small

businesses and consumers. It is acknowledged a number of stakeholders have raised concerns

around the current insufficiency of clear guidance on what constitutes a UCT. It is therefore

recommended the adoption of this option is considered in conjunction with increased education and

awareness activities outlined in Option 2.

While there is a risk that regulator resourcing constraints could limit the amount of guidance

materials produced, this risk can be mitigated by ensuring that education and guidance are targeted.

In particular, consideration should be given to areas which stakeholders submit are areas where

further education and guidance are needed (refer to Option 2). For example, stakeholders suggest

there is a need for guidance that would assist in distinguishing between terms that may be ‘unfair’

and terms which, because they are reasonably necessary to protect the legitimate interests of the

contract-issuing party, would not be considered ‘unfair’.

It is noted that, as well as regulators, all relevant peak bodies also have an important role to play in

educating their members on UCTs, as well as general education on compliance with laws more

broadly. As outlined in Option 2, a few peak bodies have already indicated their interest in working

with regulators to improve awareness and education around UCTs.

In this way, concerns around the possibility that Option 3 could introduce an additional regulatory

burden for business, increase compliance costs, prevent businesses from being able to protect their

legitimate interests, capture businesses who inadvertently include a UCT in a contract, and result in

possible reputational harm, can be mitigated through the provision of appropriate guidance and

further education activities. Existing approaches regulators take towards compliance and

enforcement (including the use of tools and strategies that do not involve litigation to achieve

compliance in the majority of cases) will also help to mitigate these concerns.

Dispute resolution options

Small business commissioners and small business ombudsmen can play an important role in assisting

small businesses that are in dispute with other businesses, including in relation to alleged UCTs. This

includes facilitating discussions between the small business and the other party. If necessary, access

to external alternative dispute resolution services can sometimes be provided.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Penalty amount

While a few stakeholders have commented on what penalty amount they believe courts should be

able to impose,

144

this matter would be resolved when draft legislation is developed, should Option

3 be progressed. As with all other pecuniary penalties under the ACL and ASIC Act, a court would

need to be satisfied that imposing a pecuniary penalty is appropriate in all the circumstances of an

individual case.

Business compliance costs

When the UCT protections were extended to small business contracts in 2016, it was anticipated that

all Australian businesses would incur familiarisation costs, and businesses offering standard form

contracts may need to review and amend contract terms and change certain business processes. At

that time, it was expected that there would be a net annual compliance burden of around $50 million

in the first year, with no ongoing compliance costs. Option 3 does not introduce any new obligations

for business so it is anticipated that the majority of compliance costs already occurred when the UCT

protections were introduced.

Introducing a stronger deterrence effect could encourage some businesses to be proactive in

re-examining contracts that had been previously reviewed. However, any such action is at the

discretion of individual businesses. Other variables (such as how thoroughly a contract was

previously reviewed) makes it challenging to quantify how many businesses may incur additional

compliance costs and the total regulatory costs from Option 3. These costs are expected to be small

(see Chapter 6 – Evaluation, conclusion and estimated regulatory burden, for more information).

Competition effects

Some stakeholders submit that the risk of receiving a penalty might limit the degree to which a

business can assign certain risks to the other party in return for a lower contract price. Some

stakeholders also submit that any compliance cost associated with the intervention could be passed

onto small businesses or consumers through a higher contract price. Suppliers may also respond by

limiting their supply (or acquisition) of particular goods or services to small businesses, or moving to

negotiated contracts for some transactions. For example, the Australian Industry Group argues that

given the difficulty faced by a contract-issuing party in determining whether the other party is a small

business, introducing civil penalties may have a dampening impact on the competitive negotiating

environment broadly.

145

The UCT protections were carefully designed to reduce unintended consequences and minimise

interference with freedom of contract. Terms which are considered reasonably necessary to protect

legitimate business interests cannot be considered unfair. Stakeholders raised similar concerns with

the introduction of the UCT protections for small businesses in 2016. Evidence suggests that those

consequences did not occur, including in financial product and service contracts. Standard form

contracts continue to be widely used and there is no evidence to suggest that there was a significant

impact on the price and supply of related goods and services.

144

E.g. Law Council Submission – SME Committee, p. 10; AAF submission, p.1, 4; MEA submission, p. 2; Law Council

Submission – ACL Committee, p. 20; Sise, P submission pp. 7-9.

145

Ai Group submission, p. 1.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 3 maintains an appropriate balance between protecting those businesses most likely to lack

sufficient resources and bargaining power, while preserving contractual freedom and certainty, and

encouraging businesses to take reasonable steps to protect their interests.

Option 4 – Strengthened powers for regulators

Option 4a – Regulators given the power to issue infringement notices

In addition to prohibiting UCTs in small business standard form contracts, regulators could also be

given the power to issue infringement notices to further strengthen the deterrence effect of the UCT

regime. As some state regulators do not currently have the ability to issue infringement notices for

civil contraventions of the ACL, an infringement notice regime would only apply to relevant

regulators (such as the ACCC and ASIC at the Commonwealth level).

Some regulators have the power to issue an infringement notice where it has reasonable grounds to

believe that a person has contravened certain consumer protection provisions including:

• unconscionable conduct provisions;

• unfair practices provisions (except for certain sections e.g. section 18 of the ACL);

• certain unsolicited consumer agreement and lay-by agreement provisions; and

• certain product safety and product information provisions.

These regulators may also issue an infringement notice to a person for:

• failing to respond to a substantiation notice; or

• providing false or misleading information to the regulator in response to a substantiation notice.

An infringement notice is not a penalty issued by a regulator. If a party receives an infringement

notice and chooses pays it, the effect of doing so is that the regulator cannot take action against the

party for the conduct set out in the infringement notice. If the party chooses not to pay an

infringement notice, the regulator would then need to decide how to address the conduct in another

way, which could include taking the matter to court in order to secure a pecuniary penalty. This

means that infringement notices are reserved for instances where the regulator has a strong

evidentiary and legal basis for believing that a breach of the ACL has occurred. The ACCC will only

consider issuing an infringement notice where it is likely to seek a court-based resolution should the

recipient of the notice choose not to pay.

146

Infringement notices are designed to provide a timely, cost-efficient enforcement outcome in

relation to relatively minor contraventions of the law. For example, where a potential contravention

is isolated and where there is a less severe level of consumer or small business detriment. Additional

benefits of infringement notices is that they can be combined with court-enforceable undertakings

146

Guidelines on the use of infringement notices by the Australian Competition and Consumer Commission, p. 3. Available

at: https://www.accc.gov.au/system/files/Infringement%20notices%20-

%20Guidelines%20on%20the%20use%20of%20infringement%20notices%20-%20July%202020.pdf

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

offered by businesses in order to effect changes to businesses’ practices, in addition to addressing

past conduct

147

and can add flexibility to the regulatory toolkit, allowing regulators to

proportionately and appropriately tailor enforcement responses to the full array of circumstances.

148

Several stakeholders support giving regulators the power to issue infringement notices for including

an unfair term in a small business or consumer standard form contract.

149

However, some

stakeholders raise concerns around the appropriateness of giving regulators the power to issue

infringement notices where there may be some uncertainty as to whether a term is unfair.

150

addition, the Financial Services Council notes that, in its view, the application of an infringement

notices regime for the UCT protections is inconsistent with the Guide to Framing Commonwealth

Offences, Infringement Notices and Enforcement Powers (Infringement Notice Guide) published by

the Attorney-General’s Department.

151

The Infringement Notice Guide states that the efficacy of an infringement notice scheme depends on

the reliability of the assessments made by the enforcement officers as to whether an offence has

occurred. To ensure accuracy, these assessments should be based on straightforward and objective

criteria rather than complex legal distinctions.

152

While the provisions around what may be considered an ‘unfair’ contractual term were drafted in

such a way so as to provide flexibility in the administration of the regime, it is possible this could lead

to circumstances where making a decision as to whether a term is unfair would require a regulator to

exercise significant discretion in determining whether a penalty should be imposed on a recipient by

way of infringement notice. Once penalties are introduced and the law continues to develop with

further case law, the level of discretion that would need to be exercised in determining whether a

term is unfair may reduce. This may mean that the use of infringement notices becomes a more

appropriate enforcement option at a later stage. Consequently, it is recommended that infringement

notices are not introduced at this time, but rather that regulators firstly focus on boosting their

education and awareness activities (as discussed in Options 2 & 3) to provide greater clarity and

certainty around the UCT regime and continue to engage with relevant parties about potentially

unfair contractual terms before pursuing financial penalties.

It is recommended that further consideration of the appropriateness of applying an infringement

notice regime to the UCT protection provisions is done so following the implementation of the

preferred options in this Decision RIS (if adopted) and subsequent review into the effectiveness of

these reforms.

147

ACCC submission, p. 5.

148

ACCC submission, p. 3.

149

E.g. ASBFEO submission, p. 2; OSBC submission, p 1. ; NSWSBC submission, p. 2; TIO submission, p.5; Spier Consulting

submission, p. 3; AADA submission, p. 11; Buchan, J; Self-Employed Australia; Law Council Submission – SME Committee

p. 9; NFIA submission, p. 13.

150

E.g. AFIA submission, p. 7; DSA submission, p. 2; FSC submission, p. 3-4; Communications Alliance submission, p. 3.

151

FSC submission, p. 3.

152

A Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers, p. 58. Available at

https://www.ag.gov.au/sites/default/files/2020-03/A%20Guide%20to%20Framing%20Cth%20Offences.pdf

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 4b – Regulators given powers to determine a term is unfair and request it is varied

This option would give regulators the power to determine whether a contractual term is unfair and

request the contract-issuing party to vary the term. If a business wished to challenge a decision made

by a regulator, they could appeal to a court or tribunal for merits or judicial review of the decision.

While several stakeholders support this option,

153

others suggest that in practice, this option could

be expensive and time consuming

154

and not necessarily achieve a faster resolution compared to

existing dispute resolution mechanisms or litigation.

155

In addition, a few stakeholders raise concerns

around the appropriateness of transferring powers from the courts to regulators where the

determination around whether a term is unfair could, in certain circumstances, be an exercise

demanding considerable interpretation and judgement and could require a regulator to exercise

significant discretion in making a determination.

156

It is noted that a few stakeholders suggest that, rather than regulators, one or more dispute

resolution bodies could be given the power to determine whether a contractual term is unfair. For

example, the Australian Consumer Law Committee of the Legal Practice Section of the Law Council

notes that most consumers will pursue disputes against insurers through AFCA and suggests that

authorising AFCA to assess whether a contract term is unfair would in their view, significantly

improve access to justice for vulnerable consumers.

157

While it is acknowledged there is some merit

to such a suggestion, it is not currently considered an appropriate option. While some external

dispute resolution schemes such as AFCA are already able to consider potential UCTs, such

determinations are centred on assessing a complaint under the scheme, not exercising the power of

a court. In addition, while AFCA is an external dispute resolution scheme for financial products, and

other external dispute resolution schemes exist for energy, water and telecommunications, there is

currently no external dispute resolution scheme which would provide full coverage for the UCT

regime. Establishing a single dispute resolution body for the UCT regime, or even just a body to cover

those matters not covered by AFCA (i.e. consumer and small business standard form contracts for

goods, services and land), is not considered viable in this case given the significant costs involved.

While such costs could be recovered from industry, this would ultimately put a cost burden on

businesses.

As mentioned in Option 3 above, regulators already have a range of enforcement powers and use a

range of administrative remedies to ensure compliance with the law. If a regulator has concerns that

a standard form contract may contain UCTs, the regulator can engage with the relevant

contract-issuing party about these terms. Some regulators can also accept a court enforceable

undertaking with the contract-issuing party to resolve the matter in a timely manner. These

153

E.g. Buchan, J submission, p. 3; Law Council Submission – ACL Committee, p. 19; ANZ submission, p. 4; TIO submission,

p. 5; ASBFEO submission, p. 2; NSWSBC submission, p. 3; OSBC submission, p. 2; NatRoad submission, p. 8; NIFA submission,

p. 13; Gold Coast Family Car Rentals submission.

154

AADA submission, p. 11.

155

ASIC submission, p. 6; Communications Alliance submission, p. 4; CCIA NSW submission p. 3.

156

E.g. AFIA submission, p. 7; DSA submission, p. 2; FCAI submission, p. 3; FSC submission, p. 3-4; AFIA submission, p. 7;

Communications Alliance submission, pp. 3-4.

157

Law Council Submission – ACL Committee, p. 20.

Enhancements to Unfair Contract Term Protections – Decision Regulation Impact Statement

processes require the regulator forming a view about whether a term may be unfair, but a legally

binding decision can only be made by a court or tribunal.

Option 4b would mean that a regulator would be able to make a binding determination about

whether a term is unfair. While the contract-issuing party would be able to appeal a decision made

by a regulator, they would need to appeal to a court or tribunal for merits or judicial review of the

decision.

The scope for regulators to determine (rather than merely suggest) a party has breached a provision

under legislation is generally limited to situations where doing so does not reflect a judgment as to

the person’s guilt or liability, and where regulatory officers are not required to weigh evidence or

draw conclusions as to legal responsibility. A regulator’s determination of whether a term is unfair

could be viewed as an exercise which would require a regulator to exercise significant discretion in

making a determination. It is recommended the final decision on whether a term is unfair continues

to remain with courts and tribunals.

Tabl e 1: Summary of the costs and benefits of legality and penalties options.

Option Costs Benefits

Option 1

Status quo

- Lack of effecti ve deterrence

agai nst the us e of UCTs ,

which would continue to

rema i n prevalent.

- No additional compliance

costs.

Option 2

Strengthened compliance and

enforcement activities

- Not sufficient alone to

provide effective deterrence

agai nst the us e of UCTs , may

requi re additional resources

to strengthen compliance

and enforcement activities.

- Increased education and

awareness of the UCT

protecti ons.

Option 3

Make UCTs unlawful and allow a

court to impose a civil penalty

- Possible compliance costs =

some l arger businesses may

deci de to revi ew thei r

standard form contracts i n

light of penalties being

introduced.

- Stronger deterrence a gainst

the use of UCTs.

- Reduced prevalence of UCTs.

- More efficient allocation of

risk.

- Improved small business and

consumer confidence when

entering in to standard form

contracts.

Option 4a

Infringement notices

- Determi ni ng whether a

contractual term is unfair

may better rest wi th courts

and tribunals at this stage.

- Could provide a ti mely, cost-

effici ent enforcement

outcome in relation to

rel atively mi nor

contraventions of the law.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option Costs Benefits

Option 4b

Regulator determinations

- Degree of s ubjectivity

involved in determining

whether a contractual term is

unfair may better rest wi th

courts and tribunals.

- May provide a more

accessible remedy than

commencing court

proceedings.

For the reasons above, Option 3 will generate the greatest net benefit for the community and is

therefore the preferred option.

Flexible remedies

Option 1 – Status quo

In general, stakeholders were not supportive of maintaining the status quo, and there was general

support for implementing flexible remedies. ASBFEO states in its submission that it is important that

remedies available for UCTs are flexible and proportionate

158

while ASIC considers that the use of

flexible remedies would promote the fairness objectives of the UCT laws.

159

Under the status quo, there is the potential that a UCT, if challenged and declared void, could put the

small business into a worse situation than if the unfair term were to remain. The NFF illustrates this

issue in its submission saying that the nature of primary production markets means small farm

businesses can have few if any choices with regard to the processors or purchasers they must deal

with and voiding a contract can deprive a primary producer from accessing the only viable purchaser

of their product which, in effect, could close the business.

160

AFIA highlights similar issues in credit

contracts say that if credit contracts are rendered inoperative and unenforceable, this can have

material impact on credit providers and can trigger the withdrawal of funding to small businesses.

AFIA submits it is therefore sensible, in such cases, for the court to be able to apply remedies that it

determine are the most flexible to the benefit of both parties – including to vary the terms to allow a

contract to remain on foot.

161

Option 2 – UCTs not automatically void; court given power to determine the

appropriate remedy

Option 2, which would give courts the flexibility to order an appropriate remedy when a small

business contract term is found to be unfair, received strong support from a number of small and

large business representatives, as well as regulators. ASIC notes in its submission to that removing

158

ASBFEO submission, p. 2.

159

ASIC submission, p. 7.

160

NFF submission, p. 8.

161

AFIA submission, p. 8.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

the automatic voiding of UCTs may promote the fairness objective of the UCT protection provisions

by providing flexibility and ensuring that small businesses have access to remedies that are tailored

to the specific circumstances of their case.

162

The ACCC considers that removing the automatic

voiding of a UCT and empowering the court to determine the appropriate remedy, including the

power to vary the term, would allow for a more just, flexible, and mutually beneficial outcome.

163

Some industry stakeholders note that the experience and expertise of courts make them well placed

to decide on an appropriate remedy in a case concerning UCTs. The FCAI notes that courts are used

to crafting remedies that address the loss suffered by a complainant and that the FCAI is confident

that courts would be able to do this in the context of UCTs,

164

while the Insurance Council notes that

courts should have the power to determine the most appropriate remedy.

165

Option 3 – Clarify that remedies for ‘non-party consumers’ also apply to

‘non-party small businesses’

Option 3, clarifying that remedies for ‘non-party consumers’ also apply to ‘non-party small

businesses’ received strong support from stakeholders, as a means to confirming this redress option

is accessible to small businesses. The ACCC states in its submission this option would benefit small

businesses and make enforcement action more effective, increasing the efficacy of the UCT

regime.

166

ASIC also supports this option, stating it would be consistent with the purpose and intent

of extending the UCT protections to small businesses and would clarify what remedies are

available.

167

The Telecommunications Industry Ombudsman notes the benefits that would flow to small business

from this option, specifically that it would promote consistency and ensure small businesses, who

cannot afford the cost of pursuing litigation, are not at a disadvantage.

168

The NFF similarly submits

that this option would dilute the negative impact on commercial relationships that many small

farming businesses will continue to rely on after a case is concluded.

169

While some stakeholders suggest that this option would turn a regulator into a class action lawyer, it

does not increase access to class action nor does it explicitly create additional powers for

regulators.

170

Rather, Option 3 aims to ensure that remedies available for non-party consumers

would also apply to non-party small businesses. The benefits to small business from this option are

predicted to outweigh any costs.

162

ASIC submission, p. 7.

163

ACCC submission, p. 3.

164

FCAI submission, p. 4.

165

Insurance Council submission, p. 3.

166

ACCC submission, p. 4.

167

ASIC submission, p. 7.

168

TIO submission, p. 6.

169

NFF submission, p. 9.

170

Prospa submission, p. 5.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 4 – Create a rebuttable presumption provision for UCTs used in similar

circumstances

This option involves amending the law to create a rebuttable presumption that a contract term is

unfair if, in a separate case, the same or a substantially similar term has been used by the same

entity or in the same industry sector and declared by a court to be unfair. Feedback received through

consultation indicates that stakeholders are, for the most part, supportive of this option, on the

premise that will reduce the prevalence of UCTs.

171

If a court declares a term is unfair and a business uses the same term in another contract in similar

circumstances, the onus should be on that business to demonstrate why it is not unfair in the

circumstances. A rebuttable presumption would create a presumption that a term found to be unfair

in one standard form contract would also be an unfair term in another standard form contract used

by the same contract-issuing party, or in the same industry sector, unless the contract-issuing party

can provide evidence to satisfy a court or tribunal that the term is not unfair in the circumstances of

the case. This option would still rely on a regulator or aggrieved party commencing legal action, but it

shifts the evidential burden onto the contract issuing party.

Contract-issuing parties are often better resourced than their small business or consumer contractors

to provide evidence in a court that a particular term is not unfair in the circumstances. The general

justification for shifting the evidentiary onus in this way is that the relevant matters are particularly

within the knowledge of the respondent.

Proceeding with this option will be subject to further consideration of the legal and practical

implications. The Senate Scrutiny of Bills Committee has previously expressed the view that

presumptions should be kept to a minimum and a strong justification for them must be provided.

The ACCC notes, for example, that this presumption would give greater certainty to consumers and

small businesses and make it easier for them to effectively enforce their rights under the UCT regime.

However, the ACCC also submits further consideration will need to be given to how to appropriately

frame any such rebuttable presumption to ensure the scope is appropriate.

172

171

TIO submission, p. 6; NFF submission, p.8.

172

ACCC submission, p. 4.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Tabl e 2: Summary of the costs and benefits of fl exible remedies options.

Option Costs Benefits

Option 1

Status quo

- If a UCT is challenged and

declared void, the small

business could be in a worse

situation than if the unfair term

were to remai n.

- Small businesses may continue

to be discouraged from

challenging potential unfair

terms, whi ch may increase the

inclination of other businesses

to include such terms in their

contracts.

Option 2

UCTs not automatically void

- Provi des a fl exible way forward

for conti nuing a contract that

may otherwise be unworkable,

benefiting both parties.

Option 3

Remedies for non-party small

businesses

- Remedies available for non-

party consumers would also

apply to non-party small

bus i nesses, allowing courts to

redress loss or damage s uffered

by small businesses who may

have been a ffected by the

unfair term but are not a party

to the proceedings.

Option 4

Rebuttable presumption

- Contract-issuing parties will

need to monitor and update

standard form contract terms if

a term is found to be unfair.

- Contract-issuing parties would

bear an evidential burden i n

legal proceedings to prove that

certa i n terms a lready found to

be unfair in similar

circumstances were not unfair

in the current case.

- Contract-issuing parties will be

more moti va ted to remove any

terms in their standard form

contracts that a court has

already declared unfair, or may

be likely to be unfair.

Options 2, 3, and 4 will generate the greatest net benefit for the community and are the preferred

options.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Definition of small business contract

Headcount/turnover threshold

Option 1 – Status quo

Submissions to the consultation do not support the current headcount threshold of less than 20

employees as a simple proxy for defining ‘small business’ (Option 1). For example:

The ACF considers that particularly the hospitality industry is impacted by the current

headcount threshold of 20 employees. During busy periods as a seasonal business, the

number of employees may increase over the prescribed 20 employees for that period. This is

confusing and it is unclear as to whether they are considered a small business.

173

…a strict limit on definition of a small business for the purpose of UCT protection does not

adequately address the circumstances where the power differences between a franchisor and

its franchisee is so large as to make it impossible for contracts to be negotiated on a level

playing field.

174

The current headcount threshold of employing fewer than twenty persons at a time does not

adequately protect a multitude of agricultural businesses that are vulnerable to UCTs in

standard form contracts. Agricultural industries, particularly horticulture, hire seasonally to

meet the demand of various activities including planting, pruning and picking. At these times,

many horticultural businesses exceed the total headcount threshold that prevents them from

receiving protections from UCTs.

175

…the current 20 employee headcount threshold is much too low, as it does not include many

businesses treated for other purposes as small businesses, including those with large seasonal

or casual workforces.

176

We note that under the current law, one of the requirements for a contract to be considered a

small business contract is that at least one party to the contract employs fewer than 20

persons at the time the contract is entered. While this definition covers around 97 per cent of

Australian businesses, some businesses are unintentionally excluded from the coverage.

177

As accommodation providers operating in a seasonal industry, caravan parks can employ

large numbers of casual employees during peak holiday times. Even though many are small

businesses, with limited financial resources and negotiation powers, this seasonal labour

173

ACF submission, p.3.

174

AADA submission, p.3.

175

NSW Farmers submission, p.8.

176

Law Council submission – SME Committee, p.10.

177

NSWSBC submission, p. 3.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

demand can cause them to become ineligible for the unfair contract terms protections during

their busy periods.

178

There is also a perception that employing 20 or more people means that that business can

afford legal advice, and that the business has sufficient bargaining position to remove any

unfair subcontract terms during contract negotiations. In the highly concentrated building

industry, this is not the case.

179

As accommodation providers operating in a seasonal industry, caravan parks can employ

large numbers of casual employees during peak holiday times. Even though many are small

businesses, with limited financial resources and negotiation powers, this seasonal labour

demand can cause them to become ineligible for the unfair contract terms protections during

their busy periods.

180

In addition, several stakeholders have advised that the fewer than 20 person headcount threshold is

inconsistent with other commonly used proxies to define small business which can create

uncertainty and confusion for small business.

Contract-issuing parties also advise it can be practically difficult for contract-issuing parties to

determine if a contract would meet the definition of a small business contract based on employee

numbers.

181

In addition, as a business’ headcount can fluctuate significantly over time, this creates

challenges for contracting parties to identify which of their standard form contracts are subject to

the UCT protections. This can be particularly difficult when businesses who respond to seasonal

labour demands are involved, due to the fluctuation of their employee numbers.

Option 2 – Replace 20 person headcount threshold with $10 million annual

turnover threshold

Option 2, which involves replacing the headcount threshold with a $10 million annual turnover

threshold, would likely enable more small businesses to be covered by the protections. The

Australian Food and Grocery Council suggests the inclusion of a turnover threshold for the definition

of a small business will aid all parties to contract negotiations as it provides a clearer delineation for

those seeking to deal with small businesses as well as ensuring small businesses with staff numbers

that fluctuate seasonally still benefit from the protections.

182

Further, as the ATO already uses a

$10 million annual turnover threshold as a proxy for defining small business, a small business is more

likely to already know whether it meets this definition.

183

However, while Option 2 would more appropriately align the protections with those businesses who

need the protection, including small businesses that operate in labour-intensive but low-revenue

178

CCIA NSW submission, 4.

179

NIFA submission, p. 14.

180

CCIA NSW submission, p. 4

181

E.g. HIA submission, p. 10; AICM submission, p. 4.

182

AFGC submission, p. 1.

183

ACCC submission, p.5.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

industries,

184

it may not cover small businesses that operate in high turnover but low-profit

industries. ASIC suggests this could have the unintended consequence of essentially replacing one

excluded cohort of small businesses with another.

185

DSA agrees, saying that an analysis of current

DSA membership indicates that 18 companies that meet the current less than 20 employee

headcount would no longer have their contract covered by the UCT protections if the test was

limited to only a $10 million turnover as their annual turnover exceeds this threshold. DSA adds that

many of its members can experience significant growth over the course of several years and it is

quite conceivable that under a turnover only test, these members qualify as a small business one

year but not the next and that employee growth may represent a more stable indicator of business

growth depending on the nature of the business or industry.

186

NFIA also raises concerns with replacing the current headcount threshold with only a turnover

threshold as annual turnover does not equate to net profit and therefore, annual turnover should

never be used exclusively to define a small business because it could exclude legitimate small

businesses which have a low annual income even though their turnover is high.

187

The AADA

supports this saying that new car Dealerships are capital-intensive organisations that exhibit high

turnovers due to the nature of the products and services they provide and but operate on very slim

profit margins.

188

In terms of insurance contracts, the Insurance Council considers a turnover threshold is problematic

because it reflects the gross cost of service rather the size of a company. It suggests, for example,

that $10 million of consultancy work will require a much larger size of company than $10 million for

an importing business wholesaling heavy machinery, where one item might be worth several million

but requires only a small number of employees.

189

Option 3 – At least one party to meet a less than 100 person headcount

threshold OR less than $10 million annual turnover threshold

Option 3 builds on Option 2 by providing a small business would only need to meet one of two

thresholds for defining small business. Specifically, a standard form small business contract would be

covered by the protections if at least one party to the contract has either less than 100 employees or

an annual turnover of less than $10 million.

During consultation, Option 3 was the option most favoured by stakeholders. For example, ASBFEO

believes this provides the most expansive operation of the UCT protections and leverages existing

definitions of ‘small business’.

190

The OSBC agrees this option is the most effective and appropriate

definition of small business for the purpose of the UCT protections.

191

ASIC also agrees that this

184

ACCC submission, p.5.

185

ASIC submission, p.9.

186

DSA submission, pp. 2-3.

187

NFIA submission, p.14.

188

AADA submission, p. 7.

189

Insurance Council submission, p. 3.

190

ASBFEO submission, p. 3.

191

OSBC submission, p. 2.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

option would also cover a greater number of small businesses with less negotiating power and fewer

resources, thereby addressing the problem this option attempts to solve. ASIC also notes that the

option of a combined headcount and annual turnover threshold would make it easier for

contract-issuing parties to identify whether a contract is a small business contract.

192

Option 3 is also

supported by several other stakeholders.

193

Regarding the headcount threshold component of this option, ASIC advises that it would be

consistent with the way AFCA applies protections to small businesses (being 100 employees) and that

aligning these two approaches in the financial services space may simplify the application of the UCT

framework and would ensure that all small businesses that have access to the UCT protections also

have access to external dispute resolution as one means of using those protections.

194

The AADA

advises that it believes an increased headcount threshold of 100 persons would likely capture the

majority of standalone Dealership operations but notes it would need to take into consideration

‘full-time equivalent’ number of staff so as to account for part time workers.

195

In terms of the proposal to set the annual turnover threshold at $10 million, there were no

objections to this amount when used in combination with the proposed headcount threshold of less

than 100 employees. As mentioned above, as the ATO already uses a $10 million annual turnover

threshold as a proxy for defining small business, a small business is more likely to already know

whether it meets this definition. The NSWSBC notes that while numerous definitions are used to

categorise a firm as a small business in Australia for different purposes, it considers that the ATO

turnover threshold would serve as a reasonable benchmark and make it easier for parties to identify

whether a contract would be considered a small business contract for the purposes of UCT

protections.

196

Tabl e 3: Summary of the costs and benefits of defi nition of ‘small business contract’: headcount/turnover

threshold options.

Option Costs Benefits

Option 1

Status quo

- Will not cover all small

businesses that should benefit

from the protecti ons.

- Information on employee

numbers not readily available

and could fluctuate throughout

the year.

- Could create uncertainty as to

whether the protections apply.

192

ASIC submission, p. 9.

193

E.g. NIFA submission, p. 4; National Precast submission, p. 7; NSW Farmers submission, p. 8; SBDC submission, p. 6;

AFRA submission, p. 4; CCIA NSW submission p. 5; MTA Queensland, p. 3; NatRoad submission, p.8.

194

ASIC submission, p. 9.

195

AADA submission, p. 7.

196

NSWSBC submission, p. 4.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option Costs Benefits

Option 2

Replace 20 person headcount

threshold with $10 million

annual turnover threshold

- May not cover small businesses

oper a ti ng i n hi gh turnover but

low-profit industries

(may have

the unintended consequence of

essenti ally replacing one

excluded cohort of small

businesses with another).

- Threshold consistent with ATO

definition of ‘small business

entity’.

- Will likely cover small

businesses operating in labour-

intensive but low-revenue

industries.

- Information on turnover

threshold is readily available

compared to empl oyee

numbers.

Option 3

At least one party to meet a

less than 100 person

headcount threshold OR less

than $10 million annual

turnover threshold

- Will likely cover the greatest

number of small businesses.

- Headcount threshold

consistent with AFCA and

ASBFEO definitions.

- Turnover threshold consistent

with ATO definition of ‘small

business entity’.

- Pr ovi des greater certainty

about whether the protections

apply and assists c ontract-

issuing parties to comply with

the l aw.

Option 3 is the preferred option as it would cover a greater number of small businesses. It would also

provide greater certainty about whether the protections apply and assist contract-issuing parties to

comply with the law by aligning the definition of small business with commonly used definitions of

small business.

Related bodies corporate

Option 1 – Status quo

This option would retain the current law and not state whether employees of ‘related bodies

corporate’ are to be included when calculating employee numbers for the purposes of the UCT

protections for small business contracts.

Some stakeholders suggest that under the status quo, there is a possibility that a subsidiary or special

purpose entity of large a business could be covered by the UCT protections if they were to meet the

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

headcount threshold (or the turnover threshold, if Option 2 or 3 above is adopted).

197

However, no

evidence was provided to suggest this is currently occurring, nor was any evidence provided to

suggest the current approach is intervening in contract negotiations between medium to large

business or having a negative impact on small businesses.

Option 2 – Related bodies corporate relevant in determining employee

numbers and annual turnover

This option involves amending the current law to specify that employees of ‘related bodies

corporate’ are to be included when calculating employee numbers for the purposes of the UCT

protections for small business contracts.

If amendments are made to the current headcount threshold (either through adopting

headcount/turnover threshold in Option 2 or Option 3), this option would involve amending the

current law to specify that:

• any related bodies corporate would be considered relevant in determining annual turnover for

the purposes of the UCT protections for small business contracts (if Option 2 is adopted); or

• employees of related bodies corporate are to be included when calculating employee numbers

and any related bodies corporate would be considered relevant in determining annual turnover

for the purposes of the UCT protections for small business contracts (if Option 3 is adopted).

This option would help to address the concern that a subsidiary or special purpose entity of large a

business should not be covered by the UCT protections where such a subsidiary or entity clearly has

access to the financial means or support required to protect its commercial interests when entering

into standard form contracts, or to avoid standard form contracts altogether by using its bargaining

power to negotiate contracts.

However, no evidence has been provided to suggest that there is a need to prevent such practices.

Instead, some stakeholders raise concerns that this option could create some complexities compared

to the current situation. For example, the Insurance Council believes that it is impractical to

aggregate headcount or annual turnover thresholds for a business and its related bodies corporate to

determine whether the UCT regime thresholds apply where that business is part of a large corporate

group, as it considers such information is fluid and non-transparent.

198

In addition, NFIA suggests

that requiring subsidiary employee numbers to be considered relevant in determining employee

numbers would add another layer of complexity to an already complex situation.

199

197

E.g. SCCA submission, p. 4; Sise, P submission, p. 18.

198

Insurance Council submission, p. 3.

199

NFIA submission, p. 14.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Tabl e 4: Summary of the costs and benefits of defi nition of ‘small business contract’: rel ated bodies corporate

options.

Option Costs Benefits

Option 1

Status quo

- A subsidiary or special

purpose entity of large a

business could be covered by

the UCT protections,

al though there i s no evi dence

of problems occurring.

Option 2

Related bodies corporate

relevant in determining

employee numbers and annual

turnover

- Crea tes additional complexity

in the law.

- May be i mpractical to

aggregate headcount or

annual turnover thresholds

for a business and its related

bodi es corporate, as such

information can be fluid and

less easily determined.

- Addresses the concern that a

s ubs idiary or s pecial pur pose

enti ty of l arge a business

could be covered by the UCT

protecti ons.

Given there is currently no evidence to suggest there is a problem with the present situation, the

greatest net benefit to the community would be to maintain the status quo (Option 1). Maintaining

the status quo will not have any compliance cost on businesses, as businesses are already familiar

with the current law.

Contract value threshold

Submissions to the consultation indicated strong support to change the status quo, with many

stakeholders sharing the view that the existing thresholds are too low. Several stakeholders submit

that, in terms of the UCT protections, the bargaining power of a small business does not depend on

the value of the contract.

200

Regardless of the contract’s value, the fact that it is a standard form

contract means there are very limited (if any) opportunities to negotiate its terms.

As noted in Chapter 1 – The problem, stakeholders note that in certain industry sectors, businesses

which are ordinarily classed as a small businesses may not have their contracts covered by the UCT

protections due to the nature of their business, including in cases where a contract value may

fluctuate based on market condition. It is also noted that the current contract value threshold limits

the protections in cases where a contract-issuing party draws out the term of the contract or

packages multiple contracts as a way to circumvent the threshold, or as part of their normal dealings,

simply includes multiple contracts in one, which inadvertently pushes the overall value of the

contracts above the threshold.

200

E.g. MEA submission, p. 6; NatRoad submission, p. 8; CCIA NSW submission, p. 6.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 1 – Status quo

Stakeholders submit that the current contract value threshold for the UCT protections is too low,

particularly in industries where businesses operate with high value contracts but low profit margins,

including agriculture and motor vehicle retailing. The NFF notes farming businesses tend to be capital

intensive, with high revenue but low profit margins and the value of contracts for heavy farming

equipment or supply of produce is normally higher than the current value threshold. The NFF adds

that while a farmer may enter into a contract that exceeds the current value threshold for the

protections, it is often the only supply agreement the farmer will enter in to.

201

Similarly, the AADA

submits that new car retailing, like farming, is capital intensive and exhibits high turnover and very

low profit levels.

202

Further, ASIC notes the current threshold may not adequately address

circumstances where the upfront price of the contract is uncertain (e.g. a contract price may be

determined as a percentage of an unknown amount, such as the commission on the sale of a

property or a franchise royalty calculated as a percentage of future sales).

203

ASBFEO also indicates it

does not support maintaining the status quo as it believes it is far too low.

204

Under this option, uncertainty over whether a contract is covered by the UCT protections would

persist, especially for those contracts that do not have a clear up front price payable.

Option 2 – Increase contract value threshold to $5m per contract, regardless of

contract duration

This option received some support from stakeholders as an improvement to the status quo. ASBFEO

submits this option is most likely to capture small business contracts without being overly

burdensome.

205

ASIC notes that raising the contract value threshold to $5 million for financial

products and services would align with the definition used by AFCA.

206

CCIA NSW, however, submits

that in the case of the UCT regime, the value of a contract is not necessarily an accurate reflection of

bargaining power.

207

Other stakeholders also raise concerns about the limitations of this option including that, while it

would be an improvement to the status quo, it would still exclude some long term contracts. For

example, NSW Farmers notes a $5 million dollar contract value may exclude long term contracts that

may seem high but which farmers have had limited opportunity to effectively negotiate the terms

for. NSW Farmers adds that an appropriate threshold would ensure that farming businesses, which

would otherwise be in a weaker position to negotiate their contracts, would benefit from the UCT

protections.

208

201

NFF submission, p. 9.

202

AADA submission, p. 6.

203

ASIC submission, p. 11.

204

ASBFEO submission, p. 3.

205

ASBFEO submission, p. 3.

206

ASIC submission, p. 11.

207

CCIA NSW submission, p. 6.

208

NSW Farmers submission, p.8.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 3 – Remove the contract value threshold altogether

Option 3 would remove the requirement for a standard form contract to be under a certain value in

order for the UCT protections to apply. This option received strong support from stakeholders,

including small business representatives and regulators. ASIC notes that removing the value

threshold entirely would benefit small businesses because they are not ordinarily in a position to

negotiate standard form contracts regardless of the contractual value.

209

The ACCC similarly notes

that this option would assist in achieving the intended outcomes of the UCT protections. Specifically,

the ACCC submits that where a small business has no effective opportunity to negotiate a standard

form contract and has no meaningful choice about whether to enter into the standard form contract,

then regardless of the value of the contract, the UCT protections are necessary and appropriate.

210

The NSWSBC notes that this option provides certainty a contract will not be excluded from UCT

protections based on value, which is helpful for larger contracts and where the upfront contract price

is not clear at time of signing and that small businesses require UCT protections irrespective of

contract value.

211

Similarly, the SBDC also supports this option, noting that it will ensure that

regardless of contract value, small business contracts will be covered by the UCT protections.

212

Stakeholders also note that, compared to the status quo and Option 2, this option would overcome

issues relating to uncertainty around whether the UCT protections apply, based on the value of the

contract, particularly when a contract value may fluctuate based on market conditions.

213

addition, some stakeholders note that removing the contract value threshold would not necessarily

capture contracts that are not small business contracts, as the requirement to meet a headcount

threshold (or turnover threshold, if adopted) and for a contract to be a standard form contract would

remain.

214

While at least one stakeholder raises concerns that removing the contract value threshold altogether

may result in small businesses failing to undertake due diligence,

215

the ACCC notes it has seen no

evidence that the UCT regime has disincentivised consumers or small businesses from conducting

appropriate due diligence. The ACCC adds that if there is any disincentive, it expects it comes from

the lack of an effective opportunity to negotiate and the lack of a meaningful choice about whether

or not to enter the contract, rather than from the existence of the UCT protections.

216

Tabl e 5: Summary of the costs and benefits of defi nition of ‘small business contract’: c ontr act va lue thres hold

options.

Option Costs Benefits

209

ASIC submission, p. 12.

210

ACCC submission, p. 5

211

NSWSBC submission, p. 4.

212

SBDC submission, p. 6.

213

E.g. SBDC submission, p. 6; NFF submission, pp. 9-10.

214

E.g. AICM submission, p.5.

215

SCCA submission, p. 5.

216

ACCC submission, p. 5.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 1

Status quo

- Uncerta inty over UCT

protecti ons will persist for

small businesses, particularly

where contracts do not have

a cl ear upfront price payable.

Option 2

Increase contract value threshold

to $5m per contract, regardless

of contract duration

- Some small business

contracts will still fall outside

the scope of UCT protection,

including businesses with

long term or high value but

low profit margin contracts.

- Extends coverage of the UCT

protecti ons to a larger

proportion of small business

contracts.

Option 3

Remove the contract value

threshold altogether

- Small businesses may fail to

undertake due diligence.

- Provides the mos t certainty

that a small business contract

will not be excluded from

UCT protections based on a

value threshold, across

industry sectors that may

otherwi s e be excluded

because of high value, low

profi t margin contracts.

- Pr ovi des certainty for those

contracts where the upfront

va l ue may not be cl ear at the

outset.

- Increases clarity on the

appl ication of the protections

for both contracting parties.

Option 3 would provide the greatest net benefit to the community and is therefore the preferred

option.

Clarity on ‘standard form contract’

Option 1 – Status quo

Submissions to the consultation supported the need for additional clarity to define a standard form

contract. ASBFEO states that retaining the status quo is not appropriate

217

and it is important that

greater clarity is provided on what is considered a standard form contract.

218

ASIC echoes these

217

ASBFEO submission, p. 4.

218

ASBFEO submission, p.3.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

views, stating it considers there is an opportunity to provide additional clarity on what a standard

form contract is for the benefit of regulators, small businesses and contract-issuing parties.

219

Option 2 – Court must consider ‘repeat usage’ in determining a ‘standard form

contract’

Option 2, which would require courts to consider ‘repeat usage’ in determining whether a contract is

a standard form contract, received support from small and large business representatives, as well as

regulators. The ACCC supports including repeat usage as a factor in determining both business-to-

consumer and business-to-business standard form contracts,

220

and ASIC notes that ‘repeat usage’ is

a more objective factor that takes into account occasions where a contract-issuing party has used the

same contract or the same core terms and conditions in multiple contracts.

221

Given this option is

not a major change from the current regulatory position, some stakeholders note the proposal is a

matter of common sense,

222

and that evidence that a substantially similar contract has been used in

a number of similar transactions by the contract issuer would be relevant and useful information to

help the court determine whether the contract is a standard form contract.

223

Feedback received also notes the need to properly define ‘repeat usage’ to ensure contracting

parties are clear on whether using the same contract twice would meet the threshold of ‘repeat’.

224

This is an issue that will be considered during the legislative drafting stage, should Option 2 be

progressed.

Option 3 – Clarify actions which do not constitute an ‘effective opportunity to

negotiate’

A number of stakeholders emphasised that the real issue in defining whether a contract is standard

form contract, is whether there has been an effective opportunity to negotiate.

225

Option 3 received

strong support from stakeholders. One stakeholder notes that embedding examples of actions which

do not constitute an effective opportunity to negotiate in the legislation would assist in reducing the

current confusion on the UCT regime more broadly.

226

NSW Farmers, which supports this option,

comments that clarification around the wording of effective opportunity to negotiate is essential to

ensure that small businesses that deal with a contract-issuing business, where there is an imbalance

of negotiating power, are covered by the UCT protections. NSW Farmers submits that it is not always

clear to small businesses that they are signing up to a standard form contract and that it is also

important to ensure that contract-issuing businesses are not able to make minor changes to its

contracts with small businesses to prevent these contracts from being covered by the protections.

227

219

ASIC submission, p. 13.

220

ACCC submission, p. 5.

221

ASIC submission, p. 13.

222

AFIA submission, p. 10-11.

223

Consumer Action Law Centre, Financial Rights Legal Centre and WEstjustice joint submission, p. 11.

224

Spier Consulting submission, p. 4.

225

E.g. ALNA submission, p. 2; Spier Consulting submission, p. 4.

226

ACF submission, p. 4.

227

NSW Farmers submission, p. 10.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Tabl e 6: Summary of the costs and benefits of clarity on standard form contracts options.

Option Costs Benefits

Option 1

Status quo

- Businesses a nd c onsumer s

may continue to face

uncertainty and lack of clarity

around the operation of UCT

laws.

Option 2

Court must consider ‘repeat

usage’

- Will provide additional clarity

on the definition of a

standard form contract.

Option 3

Clarify actions which do not

constitute an ‘effective

opportunity to negotiate’

- Will provide additional clarity

on the definition of a

standard form contract.

Options 2 and 3 will generate the greatest net benefit for the community and are therefore the

preferred options.

Minimum standards

Option 1 – Status quo

Under the status quo, industry-specific requirements which are required, or expressly permitted, to

be included in contractual agreements by a law of the Commonwealth, a state or a territory, are

exempt from the application of the UCT protections by virtue of s26(1)(c) of the ACL. The exclusion of

terms ‘required, or expressly permitted, by a law of the Commonwealth or a State or Territory’

ensures that a court is not required to determine the fairness of terms that are required to be

included, or expressly permitted to be included, in contracts as a matter of public policy.

Some Commonwealth, state or territory laws require that, if certain clauses are included in a contract

(Clause X), terms setting industry-specific requirements must also be included in the contract (Terms

A, B, C, etc.). For example, state and territory retail lease legislation provides that, should a

demolition clause (Clause X) be included in a retail lease agreement, certain requirements relating to

the demolition (Terms A, B, C, etc.) must also be included in the agreement, or in some cases are

taken to be automatically included in the agreement. Two specific examples of Terms A, B, C, etc. in

this case are:

• a landlord cannot terminate a retail lease agreement on the grounds of demolition unless the

landlord has given the tenant at least six months written notice of the termination date; and

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

• a demolition is to occur within a reasonably practicable time after the lease is to be

terminated.

228

While Terms A, B, C, etc. are required by a law of a state and therefore cannot be declared unfair, the

headline clause (Clause X) is not ‘expressly permitted’ nor ‘required’ in the way envisaged by

s26(1)(c). This means that Clause X could be challenged as unfair, despite a state parliament having

already contemplated the inclusion of Clause X in a contract, by virtue of requiring the minimum

standards (Terms A, B and C etc.) should Clause X be included in the contract.

Concerns have been raised that the ability to challenge a headline clause (Clause X) could create

uncertainty for the parties to the contract. For example, the SCCA raises concerns that under the

status quo, a demolition clause (Clause X) could possibly be challenged as being unfair after a

contract is signed, which could impact proposed redevelopments, cause considerable disruption and

create uncertainty for other affected tenants, and, potentially, make the redevelopment unviable.

Option 2 – Provide an exemption for certain terms which meet minimum

standards

This option would enable certain headline clauses (e.g. Clause X) that are not necessarily ‘required’

or ‘expressly permitted’ by legislation to be exempt from the application of the UCT protections, but

only to the extent that they also include ‘minimum standards’ or other industry-specific

requirements contained in relevant Commonwealth, state or territory legislation (that is, Terms A, B,

C, etc.). An example of the type of clause (Clause X) that might be exempt is a ‘demolition clause’ in a

retail lease agreement, as described above.

When the UCT protections were extended to small business standard form contracts, care was taken

to reduce unintended consequences, and minimise interference with the freedom of parties to

contract. For example, terms which are considered reasonably necessary to protect legitimate

business interests cannot be considered unfair. This option would help minimise interference with

freedom of contract while still ensuring appropriate protections for small businesses from UCTs.

To ensure this option would operate as intended, any new provision to exempt these clauses should

be framed as narrowly as possible to ensure other terms are not inadvertently excluded from the

operation of the UCT protections, and to provide certainty for both contracting parties.

Further consideration and consultation would need to occur to determine the types of headline

clauses that are not necessarily ‘required’ or ‘expressly permitted’ by legislation but which meet

prescribed minimum standards and which should be exempt from the application of the UCT

protections. Determining these clauses would encourage small businesses to exercise appropriate

caution when considering entering into a standard form contract with such a clause, given the clause

would be exempt from the UCT protections.

Tabl e 7: Summary of the costs and benefits of clarity on Minimum Standards options.

Option Costs Benefits

228

See for example section 35, Retail Leases Act 1994 (NSW); section 56, Retail Leases Act 2003 (VIC).

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Option 1

Status quo

- A term could be challenged

as unfair, despite a

parliament having already

contemplated its inclusion i n

a contract. Thi s could cause

disruption and uncertainty

for the parti es.

Option 2

Provide an exemption for certain

terms which meet minimum

standards

- Small businesses would need

to exerci se appropriate

caution when considering

whether to enter i nto a

standard form contract wi th

such as clause, given the

cl ause would be exempt from

the UCT protections .

- Hel ps mi nimise i nterference

with freedom of contract

while still ensuring

appropriate protections for

small businesses from UCTs.

Option 2 is the preferred option as it will help minimise interference with freedom of contract while

maintaining appropriate protections from UCTs for small businesses.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

5. Consultation

Two public consultation exercises have informed this RIS.

In late 2015, the Australian Government agreed to undertake a review of the extension of the UCT

regime to small business within two years of its commencement. On 21 November 2018, the

Treasury released the Review of Unfair Contract Term Protections for Small Business: Discussion

Paper. The objective of this consultation exercise was to seek the views of small businesses and other

stakeholders on the impact of the UCT protections, the thresholds at which the protections apply,

the clarity of the term ‘standard form contract’, and the appropriateness of current exemptions. The

paper closed for submissions on 21 December 2018. A broad range of stakeholders made formal

submissions. In light of the findings, the Government announced its intention to strengthen the UCT

protections for small businesses, including through a range of legislative amendments where

appropriate.

As the proposed legislative amendments will have an impact on businesses and require amendments

to the ACL, a COAG Consultation RIS to seek stakeholders’ views on a range of options was

developed. The Consultation RIS was informed by the stakeholder submissions to the 2018

consultation process, as well as further work with the states and territories, the ACCC and ASIC on

potential options to test through the Consultation RIS. The Consultation RIS was released on 13

December 2019. The objective of this consultation exercise was to seek further evidence from

stakeholders on the extent of the problems identified through the 2018 consultation process, and to

seek views on the benefits and costs of a range of reform options to enhance the UCT protections.

The closing date for submissions on the Consultation RIS was extended until 27 March 2020, as some

stakeholders were affected by the impacts of the COVID-19 pandemic. Almost 80 were submissions

received. Treasury will publish non-confidential submissions on its website. Treasury also held

consultation roundtables in March 2020 with a broad range of stakeholders in Sydney, Melbourne,

and via videoconference.

Evidence provided in submissions and given at consultation sessions indicated that UCTs continue to

be included in standard form small business contracts, and there is a need for the Government to

strengthen the protections to ensure they operate as originally intended. Small business

representatives were largely supportive of making UCTs unlawful and introducing civil penalties.

However, some larger business groups argued that the existing regime is working effectively and

raised concerns about introducing penalties when there is subjectivity and uncertainty around

whether a term is unfair.

These views were taken into consideration alongside other factors, such as regulators’ approach to

compliance and enforcement. Specifically, this Decision RIS notes that regulators already pursue

compliance and/or enforcement tools and remedies best suited to the circumstances, with legal

action predominately reserved for cases where breaches are blatant, repeated or cause significant

detriment. For less significant breaches, it is anticipated that regulators will continue to pursue tools

and remedies other than litigation. Regulators would engage with relevant parties about concerns,

which would provide the vast majority of contract-issuing parties the opportunity amend their

contracts to remove any UCTs without the need for court action. Where a case is taken to court, the

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

legislation already provides a fairly high threshold for a term to be declared unfair, and it provides

examples of unfair terms for courts to consider. A court would also need to be satisfied that imposing

a penalty is appropriate in all the individual circumstances.

Detailed stakeholder feedback is reflected in Section 4 – Impact Analysis, of this RIS. As well as

incorporating the views of stakeholders into this RIS, Treasury also consulted the states and

territories, ACCC and ASIC, and sought further evidence and data from other sources where

appropriate. References to stakeholder submissions in this Decision RIS refer to submissions made on

the Consultation RIS, unless specified otherwise.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

6. Evaluation, conclusion and estimated

regulatory burden

As outlined in Chapter 4 – Impact Analysis, having regard to stakeholder feedback during

consultation and the results of the regulatory impact assessment of the options, the preferred

options are:

Legality and penalties

Option 3 – Make UCTs unlawful and give courts the power to impose a civil penalty

Flexible remedies

Option 2 – UCTs not automatically void; court given power to determine the appropriate remedy

Option 3 – Clarify that remedies for ‘non-party consumers’ also apply to ‘non-party small businesses’

Option 4 – Create a rebuttable presumption provision for UCTs used in similar circumstances

Definition of small business contract: headcount/turnover threshold

Option 3 – At least one party to meet a less than 100 person headcount threshold OR less than

$10 million annual turnover threshold

Definition of small business contract: related bodies corporate

Option 1 – Status quo

Definition of small business contract: contract value threshold

Option 3 – Remove the contract value threshold altogether

Definition of small business contract: clarity on standard form contract

Option 2 – Court must consider ‘repeat usage’ in determining a contract is a ‘standard form contract’

Option 3 – Clarify actions which do not constitute an ‘effective opportunity to negotiate’

Minimum standards

Option 2 - Provide an exemption for certain terms which meet minimum standards

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Estimated regulatory burden

Businesses should already be familiar with the UCT protections, which have been part of the

consumer law since 2010 for consumer contracts, and 2016 for small business contracts.

The 2016 extension of the protections to small business contracts estimated a net annual compliance

burden of around $52 million in the first year with no compliance costs after that. It was expected

that those businesses that decided to review and amend their standard form contracts would likely

do so within the first 12 months of implementation and there will be limited ongoing costs

thereafter.

The preferred options in this reform process enhance the existing protections, rather than create a

new or substantially different framework. Regulators will be expected to undertake activities to

inform businesses of the changes to the law and provide updated guidance material. This will make it

easier for businesses to familiarise themselves with the changes, although as the proposed reforms

do not introduce any significant new concepts, the need for educative and compliance work by

regulators will be less than when the protections were first introduced.

Introducing penalties will strengthen the deterrence against including UCTs in standard form

contracts and does not introduce any new obligations for business. As such, it is assumed that the

majority of compliance costs were captured when the UCT protections were first introduced.

Introducing a stronger deterrence effect could result in some businesses re-examining standard form

contracts that had already been previously reviewed. However, as such action is up to the discretion

of individual businesses and other variables (such as how thoroughly a contract was previously

reviewed), it is difficult to quantify how many businesses may incur additional compliance costs.

However, the total regulatory costs are expected to be small.

Preferred option Compliance activity

Make UCTs unlawful and give a court the power to

impose a civil penalty

A small number of businesses that offer s tandard

form contracts may decide to further review and, if

necessary, amend any terms in those standard form

contracts.

Provi de more fl exi ble remedi es to a court when it

decl ares a contract term unfair

These are changes to improve the opera tion of the

exi s ting protections and a re not l i kely to require any

compliance activities.

Change the definition of a ‘small business contract’ Based on previous feedback from stakeholders, most

bus i nesses do not di fferentiate between standard

form contracts for businesses with less than 20

empl oyees (current threshold) and those wi th more

than 20 empl oyees, so there are unl ikely to be any

compliance activities required as a result of this

option.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Remove the contract value threshold Based on previous feedback from stakeholders, most

businesses do not normally differentiate between

standard form contracts based on their value over or

under $300,000, so there are unlikely to be any

compl iance acti vities required as a result of this

option.

Clarify the definition of a standard form contract These a re changes to i mprove the operati on the

exi s ting protections and a re not l i kely to require any

compliance activities.

Clarify that the UCT protections do not apply to terms

which meet the minimum standards of a law of a

state or terri tory

This is a cha nge to i mprove the operati on of the

exi sting protections a nd i s not likely to require any

compliance activities.

While quantification is difficult, for the purposes of estimating a regulatory costing, it is assumed that

a quarter of large businesses (which are more likely to offer a number of standard form contracts or

more complex standard form contracts) may consider undertaking a further review of their contracts

as a result of penalties being introduced.

These larger businesses are expected to apply one of three approaches:

- Category A: review (and amend) themselves;

- Category B: seek legal advice to review (and amend); or

- Category C: take no action based on a risk assessment that it is not cost effective to review.

It is anticipated that small-medium businesses will not incur significant compliance costs. Most do

not offer standard form contracts and those that do generally standard form contracts offer only one

or two contracts with simple terms and conditions.

There are no regulatory costs for individuals or community organisations, which rarely offer standard

form contracts of the kind that would be captured by the UCT protections.

Based on the costs that can be quantified, the preferred options are estimated to have a compliance

burden on businesses of around $7.5 million in the first year, with no ongoing compliance costs.

Tabl e 8: Average annual regulatory costs (from business as usual)

Change in costs

($million)

Business Community

Organisations

Individuals Total change in

cost

Total, by sector $0.75 - - $0.75

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Compliance costs have been calculated using the following parameters:

- There are 4,271 larger businesses in Australia (200+ employees).

229

- It is assumed that 25 percent of those businesses will decide to review their standard form

contracts, with:

o 60 per cent reviewing and amending those contracts themselves (Category A),

o 20 percent seeking legal advice and amending (Category B), and

o 20 per cent subsequently taking no action based on a risk assessment that it is not

cost effective to review (Category C).

- The length of time reviewing and amending a standard form contract will depend on the

length and complexity of the contract and whether a business has access to in-house legal

expertise.

- Previous consultation heard that larger businesses are likely to offer several different types

of standard form contracts.

- For Category A, it is assumed each business would review on average five standard form

contracts using in-house legal resources, with this amounting to a business-as-usual cost

given these businesses are assumed to already regularly review their standard form

contracts.

- For Category B, it is assumed an average of five standard form contracts would be reviewed

per business, with legal costs averaging $7,000 per contract.

o In general, simple contracts could cost between $3,000-10,000 to review and amend,

while more complex contracts could cost slightly more.

229

Australian Bureau of Statistics Counts of Australian Business 8165.0, Table 13, 20 February 2020.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

7. Implementation and review

Implementation

All of the preferred options will be implemented via legislation to amend the ACL, contained in

Schedule 2 to the CCA, and relevant state and territory Acts which apply the ACL. The preferred

options will also be implemented via legislation to amend the mirror provisions in the ASIC Act.

The ACCC and state and territory fair trading agencies will continue to enforce the UCT protections

for goods, services and the sale or grant of an interest in land. ASIC will continue to enforce the

mirror provisions in the ASIC Act for financial products and services. Regulators will also work with

businesses and consumers to make them aware of the changes, including through enhancing

education and awareness activities, within existing resources.

The changes are not expected to have significant resourcing implications for ACL regulators or the

courts. As noted earlier, the changes do not introduce a new regime or significant new concepts.

Rather, they enhance the existing protections, which have been in place for more than ten years for

consumer contracts and almost four years for small business contracts. In the short term, the

combination of introducing penalties, further education and guidance about the UCT protections,

and increasing the number of small businesses covered by the protections, could lead to an increase

in complaints to regulators. It could also raise public expectations that regulators will be more active

in pursuing alleged breaches. In the longer term, the introduction of penalties is expected to have a

deterrent effect which will reduce the prevalence of UCTs in standard form contracts, which would

likely result in fewer complaints to regulators.

ACL regulators cannot pursue all complaints regarding UCTs. Rather, they consider complaints

carefully and exercise discretion, directing resources to matters that can result in industry-wide

change or provide the greatest overall benefit. When they do pursue a complaint, regulators have a

range of tools and strategies available to achieve outcomes in a timely and proportionate manner.

Regulators are more likely to commence legal action in circumstances where alleged breaches are

blatant, are within a regulator’s priority areas, are repeated or cause significant detriment.

As these matters may vary between jurisdictions, priorities for enforcement action on UCTs will

continue to differ. Consistent with current practice, ACL regulators will continue to work together to

employ the most effective means of addressing consumer and small business harm from UCTs,

through cooperative and complementary enforcement action, and avoiding unnecessary duplication

of effort. ACL regulators will continue to coordinate their activity through Consumer Affairs Australia

and New Zealand (CAANZ).

It is recommended consideration be given to putting in place transitional arrangements to give

businesses time to review and modify their contracts if required, and regulators time to develop

further guidance and conduct additional education and awareness activities. The length of such

transitional arrangements should, however, take into account that the UCT protections have already

been in place for more than ten years for consumer standard form contracts and nearly four years

for small business standard form contracts.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Review

It is noted that there could be more meaningful quantitative data captured on the prevalence of

UCTs in standard form contracts. Part of this limitation is due to underreporting. Regulators, ASBFEO

and state and territory small business commissions may wish to consider putting arrangements in

place to collect consistent and meaningful data on enquiries relating to UCTs and the outcomes of

such enquires to assist in determining the effectiveness of the new measures.

It is recommended that CAANZ review the effectiveness of the enhanced protections no earlier than

three years after they have come into effect.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Appendix A

Regulator action on UCTs

ACCC

2010 – 2013

Following the introduction of the UCT protection provisions for consumer contracts, the ACCC

undertook a project of engaging with businesses and reviewing their standard form contracts in the

airline, telecommunications and vehicle rental industries. The ACCC identified contract terms which

posed problems under both the general consumer protections provisions and the UCT protection

provisions under the ACL, and engaged directly with businesses to address these concerns. The ACCC

released its report on this work on 15 March 2013. This review and engagement lead to substantial

changes by businesses to their standard form contracts. Some changes included:

• TPG: amended a term in its standard form consumer contracts which allowed it to change

subscription fees in its contracts without notice to, or consent from, the consumer. TPG also

agreed to remove a term that gave it a broad right to suspend or disconnect customers’ access to

any aspect of their service at any time and without notice to the customer.

• Telstra: amended its standard form consumer contracts to limit the circumstances in which it

could suspend or terminate the consumers’ service.

• Dodo: removed a term in its standard form consumer contracts which prevented the consumer

from relying on representations made by it or its agents.

• Jetset Travelworld Group: amended its standard form consumer contracts to deal with the

ACCC’s concerns about clauses that required consumers to waive their credit and debit card

charge back rights.

• Universal Music: amended the terms in its standard form consumer contracts to expressly

acknowledge that its liability to the consumer in relation to the supply of services was subject to

the ACL. Its contract previously limited all liability purporting to place the entire onus of risk on

the consumer and none on the business.

July 2013

Following the ACCC commencing proceedings against ByteCard in April 2013, in July 2013, the

Federal Court declared that a number of terms in ByteCard’s standard form consumer contracts

unfair including terms which:

• enabled ByteCard to unilaterally vary the price under an existing contract without providing the

customer with a right to terminate the contract;

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

• required the consumer to indemnify ByteCard in any circumstance, even where the contract had

not been breached, and where the liability, loss or damage may have been caused by ByteCard’s

breach of the contract; and

• enabled ByteCard to unilaterally terminate the contract at any time without cause or reason.

December 2014

The ACCC accepted a court enforceable undertaking from LivingSocial, after raising concerns

regarding a term that permitted LivingSocial to make substantive changes to its terms and conditions

without notifying its customers. LivingSocial acknowledged that the term was likely to have been a

UCT and undertook, amongst other things, to send emails to all LivingSocial subscribers when

substantive updates were made to its terms and conditions.

April 2015

In April 2015, the Federal Court found that NRM Corporation Pty Ltd and NRM Trading Pty Ltd

(together, NRM), had used UCTs in its long term agreements for the supply of medical services and

medications to men suffering from sexual dysfunction. These terms included that NRM patients were

required to provide 30 days’ written notice to terminate the contract and pay a number of fees,

including a fixed administrative fee of 15 per cent of the original contract price. The ACCC’s court

proceedings commenced in 2011 and were the first court proceedings the ACCC took in relation to

the UCT protections. The ACCC also alleged that NRM and Advanced Medical Institute engaged in

unconscionable conduct in the way the companies promoted and supplied their services to men

suffering from sexual dysfunction, and the Court found the companies had engaged in

unconscionable conduct.

November 2015

In November 2015, the Federal Court found that Chrisco had a UCT in its 2014 lay-by agreements

relating to its “HeadStart Plan”, which allowed Chrisco to continue to take payments by direct debit

after the consumer had fully paid for their lay-by agreement. Consumers were required to opt out in

order to avoid having further payments deducted. In concluding that the term was a UCT, the Federal

Court considered that the term caused a significant imbalance in the rights and obligations between

Chrisco and its customers. (The ACCC commenced its court proceedings against Chrisco in 2014.)

January 2016

In mid-2015, Exetel wrote to more than 2,000 residential broadband customers on 12-month fixed

term plans, informing them that they were required to either change their broadband plan or

terminate their Exetel service without penalty. In January 2016, following concerns raised by the

ACCC, Exetel agreed to remove a clause from its standard form residential broadband agreement

which allowed it to vary any part of the agreement for any reason. The ACCC also considered that

Exetel’s advertising of its fixed term plans was likely to be misleading. Exetel also agreed to:

• refund any additional monthly subscription costs incurred for the remainder of the fixed term by

a customer who changed to a new plan; and

• refund any activation charge previously paid by a customer who terminated their service rather

than change to a new plan.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

April 2016

In April 2016, the Federal Court found various terms in Europcar’s standard form rental agreements

unfair because they held consumers liable for vehicle loss or damage:

• regardless of whether the consumer was at fault, and

• when they breached the rental agreement, no matter how trivial the breach or whether it had

any connection to the loss or damage caused.

Europcar consented to orders for corrective advertising and costs.

The ACCC commenced its court proceedings against Europcar in 2014. In 2015 (while the proceedings

were on foot), Europcar amended its standard form rental agreement to remove the unfair terms.

November 2016 – September 2017

In the lead-up to the business to business UCT provision coming into effect, the ACCC commenced a

project examining potential business to business UCTs in standard form contracts across a number of

industries. The project involved engaging with a number of businesses who agreed to amend their

standard form contracts. Some examples included:

• Uber: amended its standard Driver Agreement to limit the circumstances in which it could

terminate the agreement. The original term allowed it to terminate the agreement without

cause.

• Fairfax Media: amended a term in its Advertising Contract to limit the circumstances in which it

could refuse or withdraw a customer’s advertisement. The original term allowed it to refuse or

withdraw a customer’s advertisement for any reason at any time.

• Lendlease Property Management (Australia): amended various terms in its standard lease that

allowed it unlimited rights to recover costs from its tenants.

• Sensis: amended automatic renewal terms in its Standard Product Contract Terms to make them

more transparent and include an obligation requiring it to remind customers of the pending

renewal of their contracts.

• Jetts Fitness: amended a wide-ranging restraint of trade clause in its Franchise Agreement to

reduce both the period and geographical scope of the restraint.

These changes affected thousands of small business contracts across Australia.

In June 2017, the Federal Court found, among other things, that Get Qualified

Australia Pty Ltd entered into consumer agreements containing a UCT with respect to the payment

of refunds.

October 2017

Since the UCT protections were extended to small businesses, JJ Richards entered into or renewed at

least 26,000 contracts for it to provide waste management services, which included contracts that

were covered by the UCT protections.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Following the ACCC commencing court proceedings against JJ Richards, in October 2017 the Federal

Court declared eight terms in JJ Richards’ standard form contract were unfair and therefore void.

These terms involved:

• binding customers to subsequent contracts unless they cancelled the contract within 30 days

before the end of the contract period;

• allowing JJ Richards to unilaterally increase its prices;

• removing any liability for JJ Richards where its performance was prevented or hindered ‘in any

way’;

• allowing JJ Richards to charge customers for services not rendered even when the cause was

something beyond the customer’s control;

• giving JJ Richards exclusive rights to remove waste from a customer’s premises;

• allowing JJ Richards to suspend its service but continue to charge the customer if payment was

not made after seven days;

• creating an unlimited indemnity in favour of JJ Richards; and

• preventing customers from terminating their contracts if they had payments outstanding and

entitling JJ Richards to continue charging customers equipment rental after the termination of

the contract.

In resolving the proceedings, JJ Richards consented to orders restraining it from relying on the unfair

terms in existing small business contracts and from using the terms in future contracts with small

businesses.

The ACCC also accepted a court enforceable undertaking from Advance Hair Studio, a provider of

hair loss treatments and procedures including its Advanced Laser Therapy Program. The undertaking

related to laser program contracts with consumers that:

• between April 2015 and February 2017, included a termination clause that required consumers

to pay 100% of the contract price to terminate after commencing laser therapy sessions; and

• between February 2017 and June 2017, included a termination clause that required consumers to

pay 20% of the contract plus $150 per laser session unattended after commencing laser therapy

sessions.

The undertaking included partial cash refunds to certain consumers, corrective advertising, and

establishing an ACL compliance program.

November 2017

Australia Post agreed to amend some of the terms of its standard Licensed Post Office Agreement to

address UCT concerns raised by the ACCC, including to terms allowing it to unilaterally amend the

agreement and alter commissions payable by licensees, and its termination ‘without cause’ clause.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

December 2017

Between October 2014 and August 2017, Perth based building company 101 Residential issued

standard form building contracts which contained non-disparagement clauses that prohibited

customers from publishing or disseminating any unapproved information about the company,

including online reviews. Following ACCC concerns that the non-disparagement clauses were likely to

be unfair, in December 2017 101 Residential provided the ACCC with a court enforceable

undertaking, acknowledging that the non-disparagement clauses may be unfair and agreeing to not

enforce or rely on the non-disparagement clauses in current contracts and removing them from its

future contracts.

March 2018

After the ACCC raised concerns with AWB Harvest Finance Pools in relation to its contracts, it

amended terms providing AWB with the ability to:

• unilaterally increase fees to growers, such as administration fees or management fees, after the

contract had been accepted by a grower;

• introduce new fees to growers from time to time after the contract had been signed; and

• reject grain at its absolute discretion.

Following concerns raised by the ACCC, Cardtronics Australasia Pty Ltd amended its contracts

governing Automatic Teller Machines (ATMs) deployed on the premises of small businesses which

involved terms providing Cardtronics’ subsidiary DC Payments with:

• a unilateral right to increase certain fees;

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and

• the first right of refusal should businesses seek to change provider at the conclusion of the

contract.

The contracts also contained automatic renewal clauses which meant contracts were automatically

renewed for up to six years unless the merchant provided six months’ notice to cancel.

The ACCC accepted a court enforceable undertaking from Cardtronics which included allowing

existing customers to cancel contracts without penalty in response to increases in certain fees and

requiring Cardtronics to provide written notice to customers five months before the end of the

contract, reduce the minimum notice to cancel the contract from six months to three months and

not exercise its first right of refusal.

June 2018

Home builder Wisdom Properties Group had entered into over 3,000 standard form contracts with

consumers containing non-disparagement clauses which:

• allowed Wisdom to control any public statements made by customers about Wisdom’s

agreement or services;

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This included several terms that allowed Cardtronics to unilaterally increase various fees, including the surcharge fee.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

• gave Wisdom broad indemnities for any losses arising from statements published by customers

(including those approved by Wisdom); and

• allowed Wisdom to suspend building works if customers breached the non-disparagement

clauses.

The ACCC accepted a court enforceable undertaking from Wisdom to not enforce the terms in

existing agreements or include them in future agreements.

July 2018

Following engagement with the ACCC regarding potential UCTs, Warrnambool Cheese &

Butter

(WCB) amended the terms in its milk supply agreements and associated milk supply handbook

which included:

• a unilateral right to vary the price paid to suppliers and other terms of supply, with the supplier

unable to terminate the milk supply agreement early without incurring a financial penalty;

• placing restrictions on farmers selling their farm; and

• requiring farmers to indemnify WCB for loss which could be avoided or mitigated by WCB.

Following legal proceedings instituted by the ACCC in the Federal Court against office services

provider Servcorp Ltd and two of its subsidiaries (Servcorp Parramatta Pty Ltd and Servcorp

Melbourne 18 Pty Ltd) (together Servcorp), in July 2018 the Federal Court declared certain terms

used by Servcorp unfair. The proceedings related to 12 terms of three different standard form service

contracts. These terms had the effect of:

• automatically renewing a customer’s contract, unless the customer had opted out;

• allowing Servcorp to then unilaterally increase the contract price;

• permitting Servcorp to unilaterally terminate contracts;

• unreasonably limiting Servcorp’s liability or imposing unreasonable liability on the consumer; and

• permitting Servcorp to keep a customer’s security deposit if a customer failed to request its

return.

September 2018

The ACCC had instituted proceedings in March 2018 against credit reporting body Equifax (formerly

Veda Advantage) alleging that a term, which automatically renewed customers’ subscriptions to the

services unless the customers opted out in advance, was, among other things, unfair.

In September 2018 the proceedings were resolved following joint submissions by Equifax and the

ACCC. These involved admissions by Equifax that it engaged in misleading or deceptive conduct,

made certain false or misleading representations and engaged in unconscionable conduct. They did

not involve findings in relation to the ACCC’s allegations that the automatic renewal term was unfair.

However, such a finding would not have substantially affected the remedies ordered by a court in

this matter, given that it would have had no direct impact on the penalties ordered against Equifax.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

December 2018

Following ACCC engagement, Dairy Processors Brownes Food Operations, Lion Dairy & Drinks,

Norco Co-operative Limited, Parmalat Australia and Fonterra Australia each agreed to amend

different terms in their milk supply agreements. The terms included:

• unilateral variation of milk prices (terms that allowed processors to decrease the milk price

during the term of a milk supply agreement, where the supplier was unable to terminate the

agreement without penalty);

• unilateral variation of milk supply terms (terms that allowed processors to vary milk supply terms

contained in milk supply handbooks/manuals such as quality requirements, payment terms and

incentive terms, where the supplier was unable to terminate the agreement, without penalty, if a

change to the milk supply terms had a material adverse impact on the supplier); and

• extended termination periods (terms that required suppliers to give notice to terminate the

agreement at a point in time when they may not have had access to sufficient information

regarding possible arrangements with alternate suppliers).

Following an ACCC investigation into the use of UCTs in the waste management industry, Visy

Paper Pty Ltd (trading as Visy Recycling), Cleanaway Pty Ltd and Suez Recycling & Recovery Pty Ltd

reviewed and amended potential UCTs in their standard form contracts which included price

variation and liquidated damages clauses that previously allowed them to:

• unilaterally increase their prices in specified circumstances; and

• impose penalties on customers who wanted to exit their contracts before the end of the contract

term.

April 2019

The three container stevedore companies, DP World, Hutchison and VICT cooperated with the

ACCC’s investigation and agreed to remove or amend likely UCTs in their standard form contracts. DP

World and Hutchison had contract terms that:

• allowed the stevedore to unilaterally vary terms in the agreements without notice, including the

fees to be paid by the land transport operators; and

• limited their liability for loss or damage suffered by the transport businesses, while not offering

the transport businesses the same protections.

VICT’s contract had a term requiring transport businesses to indemnify VICT for loss or damage, with

no reciprocal obligation on VICT. DP World’s standard agreement also required the transport

businesses to pay the stevedore’s legal costs and expenses, in circumstances where such payments

would normally be determined by court order.

Hutchison made commitments to the ACCC in a court enforceable undertaking to:

• amend its terms (which applied or may have applied to 300 small business truck carriers);

• publish corrective advertising; and

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

• implement a compliance program designed to minimise Hutchison’s risk of future breaches of the

ACL.

June 2019

After the ACCC raised concerns with Red Rich Fruits about its contracts with growers, Red Rich Fruits

amended a term that allowed it to seek credit from a grower for produce Red Rich Fruits had on-sold

to a third party, but which was then rejected by the third party. Specifically the term meant the

grower was required to provide credit for the amount the third party had contracted to pay Red Rich

Fruits for the rejected produce, which was likely to include the trader’s profit margin.

July 2019

From at least 2016, Uber Eats’ contract terms made restaurants responsible for the delivery of meal

orders, in circumstances where they had no control over that delivery process once the food left

their restaurant. Following an investigation by the ACCC, Uber Eats committed to amend these terms

to clarify that restaurants will only be responsible for matters within their control such as incorrect

food items or incorrect and missing orders.

August 2019

Following complaints from industry associations and farmers in engagement work conducted by the

ACCC’s Agriculture Unit and the ACCC’s wider review of standard form contracts in the agriculture

sector, the ACCC took Mitolo Group Pty Ltd to court alleging that the terms of contracts between

Mitolo and 25 potato growers entered into between December 2016 and February 2018 were unfair.

Following admissions made by Mitolo, the Federal Court declared that several terms used by Mitolo

were unfair, including terms that allowed Mitolo to:

• unilaterally determine or vary the price Mitolo paid farmers for potatoes;

• unilaterally vary other contractual terms;

• declare potatoes as “wastage” without a mechanism for proper review; and

• prevent farmers from selling potatoes to alternative purchasers.

The Court also declared that terms in Mitolo’s contracts preventing farmers from selling their own

property unless the prospective purchaser entered into an exclusive potato farming agreement with

Mitolo were UCTs.

In addition to the orders made by the Court, Mitolo provided the ACCC with a court enforceable

undertaking which contains a revised form of contract. Mitolo undertook to contract with growers on

terms no less favourable than the revised contract terms, which are annexed to the undertaking.

October 2019

The Federal Court found hair loss business Ashley & Martin’s terms in three standard form contracts

with consumers were void because they were unfair.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

From June 2014 until at least June 2017, Ashley & Martin signed up more than 25,000 customers to

its ‘Personal RealGROWTH Program’ using three different standard form contracts which were all

found to contain unfair terms.

Customers were typically signed up to a 12-month Ashley & Martin program by a sales consultant,

and the unfair terms required consumers to pay for all of the medical treatment before they

received, or could properly consider, medical advice.

Under one of the terms found unfair by the Court, consumers who wished to terminate the contracts

more than 2 days after they accepted the program, and consulted with a doctor, were required to

pay 100% of the total price payable. Another term required customers to pay for treatment even if

they developed side effects to the medication that meant they could no longer continue the

program. The court ordered Ashley & Martin to refund customers who terminated their contracts in

these circumstances.

March 2020

ACCC concerns that some of 1300 Australia contract terms were unfair, the ‘phonewords’ company

gave a court enforceable undertaking to the ACCC to amend its current and future contracts with

small businesses and in certain circumstances refund part of the termination fees paid by small

business customers. Terms the ACCC was specifically concerned with where those that permitted

1300 Australia to:

• automatically renew a contract without notifying the customer;

• charge unspecified penalties for late payments; and

• charge significant early termination fees.

June 2020

Some of Australia’s biggest winemakers agreed to change their supply agreements with grape

growers after the ACCC raised concerns that their standard form grape supply agreements contained

terms which were likely to be unfair, including terms that:

• covered contractual disputes with growers;

• related to wine grape quality assessments;

• provided unnecessarily broad rights to enter and inspect growers’ vineyards, and payment

periods;

• prevented growers from seeking legal or financial advice through confidentiality clauses; and

• allowed them to make unilateral changes to supply contracts, including one sided termination

rights.

This followed resource-heavy engagement between the ACCC and winemakers, which began in

September 2019 after the ACCC’s publication of the wine grape market study final report.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

The ACCC remains concerned that some winemakers’ contracts still provide for lengthy payment

periods for growers, and will continue to monitor the issue, including the industry’s review of its

voluntary code of conduct in this regard.

July 2020

The ACCC had instituted proceedings in the Federal Court against TPG in December 2018 in relation

to a standard form contract term requiring forfeiture of a $20 ‘prepayment’ made by consumers. This

prepayment operated as a non-refundable fee, and TPG retained at least $10 of the prepayment

when a customer cancelled their plan. In October 2018, the Federal Court found that the term in

TPG’s contracts was not unfair. The Full Federal Court subsequently dismissed the ACCC’s appeal

against this finding on 30 July 2020.

Despite the ACCC’s previous action against Chrisco in 2014, and the Federal Court judgment obtained

in 2015 that Chrisco’s 2014 lay-by agreements relating to its “HeadStart Plan” contained a UCT

(discussed above), more recently the ACCC had concerns that Chrisco had entered into or renewed

lay-by agreements since 26 October 2018 which contained another Head Start Plan term that

allowed Chrisco to continue to take payments from consumers after they had fully paid for their

existing lay-by order, unless consumers expressly opted out.

In July 2020 the ACCC accepted a court enforceable undertaking from Chrisco acknowledging that the

term may be a UCT and undertaking to increase the transparency of the Head Start Plan term by

requiring consumers to opt in to a Head Start Plan and to confirm their participation from year to

year.

September 2020

The ACCC accepted a court-enforceable undertaking from Back In Motion Physiotherapy Pty Ltd, a

franchisor with a network of over 500 franchises in Australia and New Zealand.

For more than 15 years, Back in Motion Physiotherapy included terms in its franchise agreements it

admitted may be unfair. One term prevented franchisees wanting to leave the group from being

involved in a competing business within a radius of up to 10km of a Back In Motion Physiotherapy

Franchise for 12 months. This restraint of trade clause effectively blocked franchisees from most

metropolitan areas because of the number and location of Back In Motion Physiotherapy outlets.

Another term allowed Back In Motion Physiotherapy to charge franchisees a ‘buy out fee’ equal to

four times their annual royalty fees if they opted to be released from the restraint of trade.

Among other things, Back In Motion Physiotherapy agreed to not include the terms in future

contracts, not enforce the terms in existing contracts, and notify its franchisees of the ACCC

undertaking. The restraint of trade terms in Back In Motion Physiotherapy’s franchise agreements is

now limited to a term restricting former franchisees for nine months from actively soliciting a client

they know has been a client of a Back In Motion Physiotherapy franchise located within 10km of the

former franchisee’s Back In Motion Physiotherapy practice.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

ASIC

November 2010

Following consultation leading up to and after the introduction of the UCT protection provisions for

consumer contracts, ASIC released guidance for mortgage lenders that sets out how provisions in the

National Credit Code and UCT protections apply to mortgage early termination fees (exit fees).

Regulatory Guide 220 Early termination fees for residential loans: unconscionable fees and unfair

contract terms (RG 220)

231

spelled out ASIC’s guidance on points including:

• what costs and types of loss can be included in exit fees;

• types of loss that should not be recovered through exit fees; and

• the limited circumstances in which a lender may vary exit fees during the life of a mortgage.

January 2011

After ASIC raised concerns with MyBudget Pty Ltd about a number of potentially unfair and/or

unconscionable terms in its Terms of Service Agreement, the budgeting and debt management

service agreed to amend or remove these terms which included:

• administration fees payable after termination until full discharge of client’s liability, even when

MyBudget terminates the agreement on notice;

• failure to inform clients that MyBudget’s weekly administration fee has the same priority as

weekly living expenses;

• charging a direct debit penalty fee if the client authorises a creditor to debit its MyBudget

account; and

• retention of interest on MyBudget accounts without clear disclosure to the client.

January 2013

Mr Rental Australia Pty Ltd, entered into an enforceable undertaking with ASIC following an ASIC

investigation into the household goods rental business’ standard form rental agreement which

included a term allowing the business to charge a ‘calculation period adjustment’ (that is, an

additional fee charged to consumers who terminated their rental agreements early). As part of the

undertaking, Mr Rental agreed provide refunds to approximately 1,560 consumers (anticipated to be

in excess of $300,000) advise existing customers that it will not charge a calculation period

adjustment in the event they terminate their agreements early and amended the standard form

rental contract used by the 52 franchisees operating under the Mr Rental banner.

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Available at: https://asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-220-ea rly-termination-

fees-for-residential-loans-unconscionable-fees-and-unfair-contract-terms/

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

February 2014

ASIC investigated four businesses involved in the hire and sale of water coolers and first aid kits using

‘rent to own’ agreements (Home Essentials Australia Pty Ltd, I Love My Water Pty Ltd, Triple Bay

Group Pty Ltd and Triple Bay Pty Ltd) as the regulator was concerned the agreements contained

UCTs that provided an automatic rollover of the rental term unless the consumer took steps to

cancel the contract. ASIC accepted a court enforceable undertaking in which the businesses agreed

not to enforce their rights under the agreements.

October 2014

ASIC concerns led to the Commonwealth Bank of Australia (CBA) agreeing to release $2.2 million for

approximately 45,000 customers who had money left on expired CBA Travel Money Cards. The CBA

also made changes to all its Travel Money Cards so consumers would not forfeit any funds left on

expired cards, but rather the money would be held by the CBA for three years and, if unclaimed by

consumers, would be treated as unclaimed money.

August 2015

ASIC reviewed 16 travel money cards by eight issuers as part of an industry-wide review into travel

money cards issued in Australia. Following the industry-wide review, all travel money cards then

issued in Australia would now allow customers to reclaim leftover funds, rather than – in some

instances – risking forfeiture of funds once cards expire.

232

ASIC’s review resulted in a number of

other improvements being made by the eight issuers reviewed including:

• improved disclosure in product disclosure statements about how customers can reclaim funds

after expiry;

• removal or reduction of fees, including inactivity fees; and

• improved communications to customers at, or close to card expiry to remind customers of their

available balance and explain how funds can be accessed.

This outcome followed similar action by ASIC in relation to the Commonwealth Bank Travel Money

card in 2014.

233

March 2017

ASIC and ASBFEO completed a review of small business standard form contracts and called on

lenders across Australia to take immediate steps to ensure their standard for loan agreements

comply with the law.

234

232

See: https://asic.gov.au/about-as ic/news-centre/find-a-media-release/2015-releases/15-229mr-consumers-can-reclaim-

funds-on-expired-travel-money-cards-following-asic-ac ti on/

233

See: https://asic.gov.au/about-as ic/news-centre/find-a-media-release/2014-releases/14-262mr-asic-concerns-see-cba-

release-22-million-for-45-000-travel-card-customers/

234

See: https://asic.gov.au/about-as ic/news-centre/find-a-media-release/2017-releases/17-056mr-asic-and-asbfeo-join-

forces-to-ensure-bank-lenders-meet-unfair-contract-laws /

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

May 2017

ASIC and ASBFEO hosted a roundtable where the big four banks committed to make significant

improvements to their small business loan contracts to ensure they meet the UCT protection

provisions.

235

August 2017

Following a commitment to further review their small business loan contracts, the big four banks

agreed to specific changes with ASIC to eliminate UCTs from their contracts. The changes meant that:

• The loan documents would not contain 'entire agreement clauses' that absolve the bank from

responsibility for conduct, statements or representations they make to borrowers outside the

written contract.

• The operation of the banks' indemnification clauses would be significantly limited. For example,

the banks would now not be able to require their small business customers to cover losses, costs

and expenses incurred due to the fraud, negligence or willful misconduct of the bank, its

employees or a receiver appointed by the bank.

• Clauses that gave banks the power to call in a default for an unspecified negative change in the

circumstances of the small business customer (known as 'material adverse change event' clauses)

were removed – so that banks would now not have the power to terminate the loan for an

unspecified negative change in the circumstances of the customer.

• Banks restricted their ability to vary contracts to specific circumstances, and where such a

variation would cause a customer to want to exit the contract, the banks would provide a period

of between 30 and 90 days for the consumer to do so.

The banks agreed that all customers who entered or renewed contracts from 12 November 2016 –

when the protections for small businesses began – would have the benefit of the changes agreed

with ASIC.

March 2018

ASIC published Report 565 Unfair contract terms and small business loans

236

which details the

changes made by the big four banks to their small business loan contracts in order to comply with

the UCT protection provisions. The report is also relevant for other lenders who provide loans to

small business and assists them in meeting their obligations.

September 2018

Following an ASIC review, Prospa Advance Pty Ltd agreed to make the following changes to its

standard form small business loan contract:

235

See: https://asic.gov.au/about-as ic/news-centre/find-a-media-release/2017-releases/17-139mr-asic-and-as bfeo-hold-

banks-to-account-on-unfair-contra ct-terms/ and https://asic.gov.au/about-asic/news-centre/find-a-media-release/2017-

releases/17-278mr-big-four-banks-change-loan-contracts-to-eliminate-unfair-terms/

236

Available at: https://asic.gov.au/regulatory-resources/find-a-document/reports/rep-565-unfair-contract-terms -and-

small-business-loans/

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

• amend the early repayment clause so that borrowers can prepay their loan early without

requiring Prospa’s consent, and removed Prospa’s absolute discretion whether to provide a

discount for prepayment;

• amend the ‘unilateral variation’ clause to significantly limit Prospa’s ability to unilaterally vary

contracts to specific instances. Prospa has also extended the notice period to 60 days where

Prospa intends to vary fees;

• amend clauses defining events of default to add remediation periods and materiality thresholds

and to permit changes to control of the Borrower with the lender’s consent (not to be

unreasonably withheld);

• remove a broad ‘cross-default’ clause which allowed Prospa to call a default under the loan

contract due to any default under another finance document related to the loan (for example,

guarantee or security document);

• restrict the borrower’s indemnity to ensure that:

– the borrower is required to indemnify only Prospa, its employees and agents (and not

third parties that are not parties to the contract such as receivers or contractors); and

– the borrower is not required to indemnify Prospa for losses or costs incurred due to the

fraud, negligence or wilful misconduct of Prospa, its employees, officers, agents,

contractors or receivers appointed by Prospa;

• remove an ‘entire agreement’ clause which absolved Prospa from contractual responsibility for

conduct, statements or representations made to borrowers about the loan contract;

• limit the class of people who can provide guarantees under the loan contract to:

– people who are actively involved in the management of a borrower’s business;

– if the borrower is a company, people who are directors or shareholders of the borrower;

and

– if a shareholder of the borrower company is a company, directors or shareholders of that

company;

• insert a 5-business-days’ notice provision to guarantors about:

– borrowers who are 30 calendar days behind their agreed repayment schedule; and

– the commencement of legal proceedings against a borrower or the appointment of a

receiver;

• limit the guarantor’s liability so that the guarantor is not liable for any increase in the amount of

the loan principal and interest agreed at the start of the loan(but the guarantor is liable for fees

and reasonable enforcement costs);

• insert a provision to obtain consent of the guarantor:

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

– where there is a discharge or release of any security held by Prospa given by the

borrower or a guarantor; and

– where there are multiple guarantors, before releasing a guarantor;

• limit the actions of lender-appointed attorneys where there is an event of default under the loan

contract so that an appointed attorney cannot act in a way that prefers the interests of the

attorney over the interests of the borrower or guarantor.

September 2019

The Federal Court of Australia declared several terms within six small business contracts used by

Bendigo and Adelaide Bank to be unfair and therefore void. The Court also ordered that the

contracts be varied by replacing the unfair clauses with new fair clauses by the parties following

successful negotiations between ASIC and Bendigo and Adelaide Bank. Relevant terms included those

which:

• which specified where the borrower was to indemnify the Bank for certain liability, loss or costs

incurred by the Bank;

• set out events or circumstances that would constitute a default by the borrower, which in turn

would entitle the Bank to take certain action following the default, including applying default

interest rates or enforcing security;

• entitled the Bank to unilaterally vary terms of the contract or terminate the contract, without the

borrower's consent; and

• provided that a certificate from the Bank stating the amount owed on a facility would be

conclusive evidence of the amount owing, unless the customer could demonstrate a manifest

error.

ASIC was also successful in having the Federal Court declare the same terms appearing in other

standard form small business contracts, entered into by the Bank with its customers in the same time

period, to be unfair.

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

Appendix B

List of stakeholders who provided a submission

Below is a list of stakeholders who provided a written submission to the Enhancements to Unfair

Contract Term Protections Consultation RIS. This list does not include stakeholders who marked their

submission as ‘confidential’.

The Australian Industry Group (Ai Group)

Australia and New Zealand Banking Group Limited (ANZ)

Australian Association of Franchisees (AAF)

The Australian Automotive Dealer Association (AADA)

The Australian Banking Association (ABA)

The Australian Competition and Consumer Commission (ACCC)

The Australian Credit Forum (ACF)

Australian Finance Industry Association (AFIA)

The Australian Food and Grocery Council (AFGC)

Australian Furniture Removers Association (AFRA)

Australian Grape and Wine Incorporated (Australian Grape & Wine)

The Australian Institute of Credit Management (AICM)

Australian Lottery & Newsagents Association (ALNA)

Australian Retail Credit Association (ARCA)

The Australian Securities and Investments Commission (ASIC)

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO)

Bourke, Andrew JP

Bristow Legal

Buchan, Jenny

Business Enterprise Centres (BEC) Australia Ltd

The Caravan, Camping & Touring Industry & Manufactured Housing Industry Association of NSW Ltd

(CCIA NSW)

CHOICE

Clubs Australia

Communications Alliance

Consult Australia

Consumer Action Law Centre, WEstjustice and Financial Rights Legal Centre (joint submission)

Direct Selling Australia (DSA)

Disability Justice Australia Inc. (DJA)

The Federal Chamber of Automotive Industries (FCAI)

Field, Archer

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

The Financial Services Council (FSC)

Gold Coast Family Car Rentals

Hogg, Bridget

Housing for the Aged Action Group (HAAG)

Housing Industry Association (HIA)

Institute of Public Accountants (IPA)

The Insurance Council of Australia (Insurance Council)

The Law Council of Australia (Law Council)

Malbon, Justin

Master Electricians Australia (MEA)

Master Plumbers Australia and New Zealand Ltd (MPANZ)

MIGA

Min-it Software (Min-it) and the Financiers Association of Australia (FAA) (joint submission)

The Motor Trades Association Queensland (MTA Queensland)

National Electrical and Communications Association (NECA)

The National Farmers Federation (NFF)

National Fire Industry Association (NFIA)

National Independent Retailers Association (NIRA)

National Precast Concrete Association Australia (National Precast)

National Road Transport Association (NatRoad)

NSW Farmers' Association (NSW Farmers)

NSW Small Business Commissioner (NSWSBC)

The Office of the Small Business Commissioner South Australia (OSBC)

Palyga, Stephen M

Post Office Agents Association Limited (POAAL)

Priestley, Claire

Pritchard, Andrew

Prospa Group Limited (Prospa)

Queensland Law Society (QLS)

Queensland Small Business Champion

Residents of Retirement Villages Victoria (RRVV)

Screen Producers Australia (SPA)

Self-Employed Australia

The Shopping Centre Council of Australia (SCCA)

Sise, Peter

Small Business Development Corporation (SBDC) Western Australia

Spier Consulting

Swimming Pool and Spa Association (SPASA)

Enhancements to Unfair Contract Term Protections – Deci sion Regulation Impact Statement

The Tasmanian Farmers & Graziers Association (TFGA)

Tasmanian Small Business Council (TSBC)

Telecommunications Industry Ombudsman (TIO)

The Repair Shed

Victorian Automobile Chamber of Commerce (VACC)

Victorian Government

Well Built Constructions – On The Coast Commercial & Residential

Wiseman, Leanne