The Australian Competition and Consumer Commission (ACCC) is showing no signs of slowing down its enforcement and compliance action ahead of major reforms to the unfair contract terms (UCT) regime taking effect from 9 November 2023.
In late August, following an ACCC investigation into unfair contract terms, several suppliers in the fertiliser industry have agreed to amend their standard form supply contracts to address clauses which the ACCC identified may be unfair as between suppliers and their farmer customers.
In this article, we provide an overview of the findings of the ACCC’s investigation, along with some tips and takeaways for businesses to consider ahead of the effective date of the revised UCT regime later this year.
The ACCC has reported that the investigation into the fertiliser industry was prompted by multiple complaints that fertiliser suppliers were using contracts in a manner that could disadvantage farmers.1
After obtaining copies of the relevant standard form fertiliser supply agreements, the ACCC identified terms that were at risk of being unfair. This included:
- terms allowing the supplier to unilaterally vary the quantity of fertiliser to be delivered to the buyer;
- terms allowing the supplier to terminate the agreement if the supplier believed it would not be able to supply the goods; and
- terms that restricted buyers’ rights to raise issues about defects with the goods supplied.
The ACCC reported that all of the fertiliser suppliers engaged during the investigation co-operated with the ACCC and changed their contract terms to address the ACCC’s concerns.
Why does this matter?
In reporting on the investigation, ACCC Deputy Chair Mick Keogh specifically noted that:
“This is an important reminder to all businesses in the agricultural sector of the need to review their standard form small business contracts and remove unfair contract terms now, or they risk significant penalties when the new laws take effect.”2
These comments not only indicate that the ACCC is currently monitoring (and will presumably continue to monitor) the agriculture sector to ensure that small businesses receive the protections of the Australian Consumer Law (ACL), in line with the 2023-24 Compliance and Enforcement Priorities, but also that, once the new laws take effect, the ACCC will, where appropriate, take action in accordance with the expanded suite of rights and remedies available to (or that can be ordered by) the ACCC and the Courts under the new laws.
What is the effect of the new laws?
In summary, the reforms to the UCT regime under the ACL,3 which will take effect from 9 November 2023, mean that:
- A person who proposes, or applies or relies on, an unfair contract term in a standard form consumer or small business contract will have contravened the UCT regime (previously, the effect in most cases was that the term would be deemed void);
- Significant penalties may be imposed for each contravention of the UCT regime ($2.5 million for individuals, and a baseline of $50 million for companies, but more if the benefit obtained from the contravention or the companies group turnover as calculated under the ACL is higher than $50 million); and
- There will be a wider range of orders that the ACCC can seek in response to a person’s contravention of the UCT regime, including orders that a declared unfair contract term is void, orders prohibiting a person from using terms identical or similar to a declared unfair term, or orders issuing public warning notice or disqualifying individuals involved in contraventions from managing a corporation.
These changes are covered in more depth in our UCT Article Series, which sets out the basics of the UCT regime, including some of the preliminary questions around application and some of the ‘usual suspects’ when it comes to UCT risk.
The ACCC does not appear to be tapering its compliance and enforcement activity in the lead up to the new UCT regime, and is unlikely to hold back on enforcing its new powers once the effective date ticks over.
Businesses are, now more than ever, encouraged to consider whether their contracts with customers or suppliers could be caught by the UCT regime as ‘consumer contracts’ or ‘small business contract’, noting that the expanded definition of ‘small business’ from 9 November 2023 will be any business with less than 100 employees or less than $10 million in annual turnover (in other words, not exactly the “mum and dad” operation that is generally associated with the term small business).
A failure to identify and address UCT risk before the new UCT regime comes into effect may expose businesses to million-dollar penalties, reputational damage, and more. Businesses in the ACCC’s areas of interest (such as those in the agricultural sector, referred to in this article) are particularly at risk.
How can we help?
We have a dedicated contracting and consumer law team that can assist you with contract preparation and review and can provide you with advice on your rights and obligations under the ACL, particularly in light of the upcoming UCT reforms. We also routinely present to businesses on the Australian Consumer Law and the unfair contract terms regime. Please contact us if you would like more information about the services we provide.
This article was written by Teresa Torcasio, Partner, Zoe Vise, Associate and Alexandra Youn, Solicitor.
1 ACCC, ‘Fertiliser suppliers amend unfair contract terms after ACCC investigation’ (Media Release 104/2023, 21 August 2023).
2 Ibid, paragraph 8.
3 Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth).