New unfair contract terms laws and increased penalties passed by Senate

28 October 2022

After just 12 minutes of debate, Federal Parliament yesterday passed legislation making it a contravention of the Australian Consumer Law to include or give effect to unfair terms in standard form consumer or small business contracts.

This legislation also dramatically increases penalties for contravening competition or consumer laws.

Unfair contract terms laws

Now that it has been passed, the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 (Bill) is likely to receive Royal Assent within one to two weeks. Businesses then have one year to review their standard form agreements and remove or amend any unfair contract terms.

After this one year grace period, any instance of including, applying or relying on an unfair contract term in a standard form consumer or small business contract will expose companies to the dramatic new penalties described below.

Increased penalties for competition and consumer law contraventions

As soon as the Bill receives Royal Assent, penalties for contraventions of Australia’s competition and consumer laws, including contraventions of unfair contract terms laws, will increase as follows:

  1. Companies – Potential penalties for most contraventions increase to the greatest of:

(a) $50 million;

(b) if the court can determine the benefit obtained from a contravention – 3x the total value of that benefit; and

(c) if the court cannot determine the value of the benefit obtained – 30% of Australian group turnover during the ‘breach turnover period’ (ie, the greater of 12 months or the period of contravention).

  1. Individuals – Potential penalties for most contraventions increase to $2.5 million per contravention (up from $500,000 for civil contraventions or 2,000 penalty units (currently $444,000) for criminal cartel offences).

What now?

For more about these new laws, please see our more detailed analysis in the previous article written by Teresa Torcasio, Partner, Richard Westmoreland, Partner, and Zoe Vise, Solicitor.

All businesses should review their standard form consumer and small business contracts. HWL Ebsworth has specialist teams that can assist with these reviews. If you would like more information about the services we provide, please contact us.

This article was written by Richard Westmoreland, Partner, Teresa Torcasio, Partner, and Alexander Shepherd, Solicitor.

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