ACCC urges businesses to remove unfair contract terms ahead of law changes

By Suzie Leask and Kurt Wicklund

The ACCC has reminded businesses to review their standard form contracts and remove or amend any unfair contract terms (UCTs) before new penalties take effect later this year.

The changes brought in by the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) are due to commence on 9 November 2023. Businesses have less than two months before they may be liable for penalties for contraventions of the unfair contract terms regime.

The new laws apply to a broader range of consumer and business contracts with the changes including:

• Application to more contracts – an expanded definition of ‘small businesses’ (less than 100 employees or less than $10 million annual turnover), which means more business-to-business contracts will be covered by the UCT protections.
• New prohibitions – it will soon be prohibited to merely propose an UCT in a standard form contract, as well as being prohibited to apply or rely on an UCT.
• New penalties – the introduction of significant maximum penalties (previously UCT terms were simply void), being the greater of $50 million, three times the benefit or 30% of turnover during the ‘breach turnover period’ (which may be longer than 12 months) applying per contravention. Penalties for individuals will also apply up to a maximum of $2.5 million.
• Expanded powers – expanded power of the court to void, vary or refuse to enforce UCTs, and even prevent a person from entering into future contracts which contain a declared UCT or relying on an UCT in any existing contract (whether or not that contract is before the court) where terms are found to be unfair.

Businesses should heed the ACCC’s warnings over the past 12 months ahead of the 9 November 2023 commencement date, and proactively review the contracts in their supply chain to determine a) whether the UCT regime applies, and b) amend contract terms where appropriate to avoid penalties and regulator scrutiny.