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AUSTRALIAN businesses are preparing for sweeping changes to the Australian Consumer Law (ACL) designed to address perceived shortfalls in the existing codes of conduct and to bring this country in line with other markets including the EU and the US.

The change has been instigated by the Australian Competition and Consumer Commission (ACCC) which has stated that a new law would create a standard of behaviour that would evolve with changing business practices.

A report by legal firm Clayton Utz said that the ACCC has called for the ACL to be amended to include a general provision against unfair trading practices. The main reasons for this are:

  • A perceived gap in the law and cases in which the regulator failed to convince the courts that a particular business has acted unconscionably towards consumers, although its conduct was considered unfair
  • Drawing on the existing requirements in financial services and credit licensing that licensees must act “honestly efficiently and fairly”
  • To align Australia to other jurisdictions, which have laws prohibiting unfair trading practices
  • Concerns that various codes of conduct, designed to protect small business suppliers in dealings with the major grocery chains, continue to fail to address conduct of concern
  • To give regulators more tools to address the practices of major digital platforms in their use of consumer data.

Clayton Utz said that:

  • A new law would establish a generalised norm of behaviour that would be better able to apply across different sets of circumstances, and for all participants in markets. This would allow it to focus its prohibition on behaviour that was causing significant harm, instead of prohibiting particular practices that may or may not cause harm, depending on the circumstances.
  • This norm of behaviour would be able to keep up with evolving commercial practices in a way that more rigid regulation, like an industry code, would not.
  • Large penalties should be available for unfair practices.

Clayton Utz partners in Sydney, Michael Corrigan and Elizabeth Richmond, stated in the report that for business this meant that a generic law prohibiting unfair practices that follows the ACCC’s mandate of evolving over time, “will be uncertain in scope.”

“Therefore, businesses will face a challenge to comply – to either ‘take the risk’ or adopt a cautious approach, which in some situations may be too cautious – adding to their costs,” the lawyers said.

“Secondly, the risks of litigation over such an uncertain law will favour those with deep pockets whilst others will face pressure to settle cases because of the costs and uncertainty of predicting the outcome.”

In response to the proposed changes to the ACL, the Victorian Automotive Chamber of Commerce (VACC) said it welcomed the opportunity to comment.

The VACC said in its submission that it commended the government’s initiative to amend the ACL and the ASIC Act (covering financial issues) to implement the agreed reforms as per the exposure draft legislation. 

“These reforms have a direct bearing on the 72,521 automotive businesses that represent Australia’s automotive industry, of which over 95 per cent are small and family-owned automotive retail, service, and repair businesses,” the VACC said. 

“However, while the VACC supports the Unfair Contract Term (UCT) reforms and the draft legislation in principle, VACC believes that some aspects of the exposure draft legislation require further clarity and amendment, particularly as they apply to small businesses within the automotive industry.

“VACC’s submission reviewed both the exposure draft legislation and explanatory materials and suggests eight recommendations in key areas for further development within each. The proposed changes, incorporating any tweaks that might arise from the public consultation process, should be legislated in the first half of 2022.”

The proposal for Victorian automotive businesses will mean a review of standard-form contracts for businesses with less than 100 employees or less than $10 million annual turnover.

“If they have previously been reviewed, it would be prudent to check if any changes or amendments have been made since that review,” the VACC said.

“Non-compliance with the proposed amendments is not an option given the legal risks of ‘getting it wrong’.

“The exposure draft legislation makes it clear that businesses will soon face very serious consequences if they are found to have contravened the UCT laws – particularly given the risk of multiple contraventions. 

“The draft legislation strengthens the remedies and enforcement of the regime via the court process if a small business or consumer wants to challenge a term of their contract, which could be to apply for a court to declare the term unfair either under the ACL or ASIC Act. 

“Ultimately, only a court or tribunal (not the ACCC) can decide that a term is unfair.”

The VACC said that if businesses think a term in their contract is unfair, they should:

  • Ask the other party to remove the term or amend it so it is no longer unfair. 
  • Contact the Australian Small Business and Family Enterprise Ombudsman, or the Small Business Commissioner in your state
  • Contact your local state or territory consumer protection agency
  • Contact the ACCC (or the Australian Securities and Investments Commission – ASIC – if the contract relates to financial products and services). The Australian Financial Complaints Authority (AFCA) can also receive complaints if the contract relates to financial products and services. 

The VACC said that the AFCA has not released any guidance on UCT and that the VACC is speaking to AFCA on this matter.

By Neil Dowling

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