David Blackhall

DEALERS should be protected from unfair contract terms under a review underway by the federal government’s treasury department, according to the Australian Automotive Dealers Association (AADA).

The review will highlight the need to protect high-value businesses, such as automotive retailers, which currently fall outside the financial threshold of the small-business definition.

As such, they have not been protected under unfair- contracts law because the high prices of cars greatly exaggerate the actual business turnover of car dealerships.

The AADA said that current UCT protections apply to all small-business contracts that meet the following criteria:

• The contract is a standard- form contract
• At the time the contract is entered, at least one party to the contract is a business that employs fewer than 20 persons
• The upfront price payable under the contract does not exceed $300,000 or $1 million if the contract runs for more than 12 months

AADA CEO David Blackhall said very few franchised new-car dealers meet this definition – particularly the 20 employees – and the government’s move should include car dealers in the small-business legislation regarding unfair contract terms (UTCs).

“The government is 100 per cent right in reviewing UTCs. We congratulate assistant treasurer Stuart Robert for prioritising this important piece of work,” he said.

“The AADA will be seeking changes to the criteria which small business needs to meet, as we believe these protections should be extended to franchised new-car dealers as a matter of urgency.”

Mr Blackhall said the head of the Australian Competition and Consumer Commission, Rod Sims, had stated in a recent speech that these thresholds can exclude businesses that may require protection from UCTs.

“He cited new-car dealers as falling outside the existing thresholds due to the high value of the products sold and number of employees,” he said.

“New-car dealers are locked into agreements with vehicle manufacturers which have UCTs, such as unilateral variation clauses.

“However, due to the current small-business thresholds, most of our members do not enjoy protections against these terms.”

Mr Blackhall said the AADA looked forward to working with the treasury in its review over the next few months.

“The AADA advocates for the establishment of an Automotive Industry Code of Conduct to regulate behaviour between new-car dealers and offshore vehicle manufacturers,” he said.

“Such a code should include protections against unfair contract terms as well as other industry-specific behaviours.”

The ACCC and the Australian Securities and Investments Commission (ASIC) last week were given investigative powers to assess whether a term in a standard- form contract may be unfair.

The measure was passed in the parliament by the coalition government last Thursday and means ACCC and ASIC have “stronger powers to ensure consumers and small and family businesses are given a fair go and protected from the repeated or widespread use of unfair contract terms,” the treasury department said in a statement.

The Treasury Laws Amendment (Australian Consumer Law Review) Bill 2018 makes amendments to clarify and strengthen consumer protections relating to consumer guarantees, unsolicited consumer agreements, product safety, false billing, unconscionable conduct, pricing as well as unfair contract terms.

By Neil Dowling