In a previous article we discussed the proposed changes to the Business to Business Unfair Contract Terms regime, aimed at giving greater protections to businesses.
Business customers (big and small) are set to gain further protections under forthcoming changes to clause 3(1)(a) of the definition of “consumer” under the Australian Consumer Law (ACL).1
Under the current definition in section 3 of the ACL, a person is a “consumer” if the person acquires:
- Category 1: goods or services that are priced at $40,000 or less2;
- Category 2: goods or services that are of a kind ordinarily acquired for personal, domestic or household use (regardless of the price of the goods or services);3 or
- Category 3: a vehicle or trailer acquired for use principally in the transport of goods on public roads.4
A person is not a “consumer” however if they acquire goods for the purpose of resupply or to use up or transform in the process of production or manufacture, or in the course of repairing or treating other goods or fixtures on land.5
We have previously discussed the different categories of consumers under section 3 of the ACL in this article.
What’s changing and why?
On 9 July 2020, the Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020 (Regulations) increased the monetary threshold for determining whether a person acquires goods or services as a “consumer” under section 3(1)(a) of the ACL from $40,000 to $100,000.6
The Regulations have also increased the threshold amount in section 12BC(3)(a) of the Australian Securities Investment Commission Act (Cth) 2001 (which contain similar consumer protection provisions for financial products and services) from $40,000 to $100,000.7
These changes take effect from 1 July 2021.
The changes have been anticipated since 2018 following recommendations by the Australian Consumer Law Review. The review found that “the extent of consumer and small business protection provided by the ACL had eroded over time, as the real value of the monetary threshold of $40,000 in the ACL’s definition of ‘consumer’ declined. As a result, the scope of purchases protected by the ACL had diminished, and it was decided that the definition was no longer fit for purpose. The Review proposed that the $40,000 threshold be increased to $100,000 to broadly account for inflation since the threshold was set in 1986.”8
Why is this important?
The ACL gives “consumers” certain statutory rights against suppliers of goods and services. These are commonly known as statutory consumer guarantees. There are 9 consumer guarantees that apply to goods and 3 consumer guarantees that apply to services. These are that goods will be of acceptable quality; fit for purpose; comply with their description; correspond with the sample or demonstration (if given); comply with any express warranties; have clear title; free from securities; and come with undisturbed possession.9 For services, these are that the services are provided with due care and skill; fit for purpose; and are delivered within the stated time or if no time stated, within a reasonable time.10
If a person acquires goods or services as a “consumer” and the supplier breaches a relevant consumer guarantee, the consumer has certain rights under the ACL which may, depending on the circumstances, include repair or replacement of the goods, obtaining a refund, cancelling a service and/or obtaining compensation for damage and loss (including in some circumstances consequential loss).11
Contracts that purport to exclude the operation of the consumer guarantees are void under section 64 of the ACL. However suppliers of goods and services to consumers in Category 1, (i.e. goods or services priced at $40,000 or less, soon to be $100,000 or less) may limit their liability for a breach of consumer guarantee to the repair or replacement of the goods, or supply of equivalent goods or the payment of the cost to repair or replace the goods;12 the re-supply of the services or the payment of the cost of having the services supplied again.13 This limitation is only possible however, where the goods or services are not of a kind ordinarily acquired for personal domestic or household use.
What does this mean for businesses?
It will be important for businesses to make sure that their supply contracts and sales terms and conditions include appropriate limitation of liability provisions under section 64A of the ACL particularly for businesses whose goods and services have traditionally fallen outside the scope of the ACL because of the current monetary threshold.
This article was written by Teresa Torcasio, Partner and Caitlyn White, Senior Associate.
1 Schedule 2 to the Competition and Consumer Act 2010 (Cth)
2 Section 3(1)(a), ACL.
3 Section 3(1)(b), ACL.
4 Section 3(1)(c), ACL.
5 Section 3(2)(a) and (b), ACL
6 Schedule 1, Section 1, Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020
7 Ibid, Schedule 1, Section 2.
9 Chapter 3, Pt 3-2, ACL.
11 Chapter 5, Pt 5-4, ACL.
12 Section 64A(1), ACL.
13 Section 64A(2), ACL.