01 Sep Recent Changes to Consumer Law Increase Penalties for Unfair Contract Terms
Recent Changes to Consumer Law Increase Penalties for Unfair Contract Terms
1 September 2022
The government has recently passed the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 which will increase the maximum penalties for breaches under the Competition and Consumer Act (CCA) and for the first time, introduce penalties for unfair contract terms. These changes are designed to deter businesses from engaging in misleading, unconscionable or unfair conduct and will help ensure they comply with their obligations under the Consumer Law.
Increase of Penalties
Under the new bill, penalties for some conduct under the CCA have increased five-fold. Maximum penalties for businesses are the greater of:
- $50 Million
- 3x the value of the “reasonably attributable” benefit obtained from the conduct, if the court can determine this; or
- if a court cannot determine the benefit, 30% of adjusted turnover during the breach period.
Previously the penalties were the greater of $10 million; 3x the benefit or 10% relevant turnover. The maximum financial penalty for individuals will also increase from $500,000 to $2.5 million. These penalties will apply to various types of conduct including unconscionable conduct, false or misleading representations, harassment and coercion, supplying products that do not comply with safety or information standards or that are covered by a safety ban, and more. They will also apply to most civil and criminal offences under the CCA including cartel offences, the news media & digital platforms mandatory bargaining code provisions, the international liner cargo shipping provisions, and the prohibited conduct in the energy market provisions.
New Penalties for Unfair Contract Terms
The bill will also introduce penalties for businesses that include unfair contract terms in their standard form contracts with consumers or small businesses. Standard form contracts are often a cost-effective way to contract with others, however, they are usually imposed on a “take-it or leave-it” basis and can leave consumers and small businesses open to exploitation. Previously, the Courts could declare certain terms unfair and therefore void, but these terms were not prohibited. The Courts couldn’t impose any penalties on businesses that used such terms. However, with the introduction of this new bill, they now can. These changes will also expand to cover small business contracts – a small business is a business that employs fewer than 100 people or has an annual turnover of less than $10 million – and will apply regardless of the value of the contract.
When Do These Changes Come into Effect?
The changes to unfair contract terms will come into effect the day after 12 months have passed after the bill receives Royal Assent. In other words, businesses have 12 months to review and update their contracts before these penalties apply. The higher penalties for other CCA breaches will apply the day after Royal Assent is given. You can read more about these changes Here.
What do I need to do?
Now is a great time to start reviewing your standard form business contracts to ensure that your business will not contravene the Unfair Contract legislation and before the penalties apply. Contact our team if you would like further information.