Agriculture welcomes changes to the Australian Consumer Law prohibiting unfair contract terms

Industry are welcoming changes to the Australian Consumer Law (ACL) which will prohibit the use of unfair contract terms in standard consumer and small business contracts and may help support a fairer playing field for farmers.

From 9 November 2023, the ACL will prohibit businesses from proposing, using, or relying on unfair contract terms in standard form contracts with consumers and small businesses, with significant penalties potentially applying to standard form contracts containing unfair contract terms.

A contract term is considered unfair if it causes a significant imbalance in the rights and obligations of the parties under the contract; if it is not reasonably necessary to protect the legitimate interests of the party advantaged by the term; and if it would cause financial or other harm to the other party to the contract if relied upon. Restraint of trade clauses, unfair payment terms, excessive penalties and unrestrained ability to terminate are all areas of contracts where unfair terms may develop and lead to circumstances where one party (usually the party with less power) is unfairly disadvantaged. Whether a particular term is unfair will however ultimately depend on the contract as a whole.

From 9 November 2023, the maximum penalty for businesses found to be in breach of these laws is the greater of $50 million, or three times the value of the ‘reasonably attributed’ benefit obtained from the conduct. If the court can determine this, or if the court cannot determine the ‘reasonably attributed’ benefit, 30% of adjusted turnover during the breach period will be payable. Individuals may also be liable for financial penalties of up to $2.5 million.

The Australian Competition and Consumer Commission (ACCC) will be closely monitoring businesses’ compliance with the updated unfair contract term laws. The ACCC is also strongly encouraging businesses to review their standard form contracts and ensure they comply with the ACL.

The ACCC has published guidance and tips on their website to assist organisations to understand their obligations but are strongly recommending that organisations seek independent legal advice on their contracts where appropriate.

QFF corporate partner, Sparke Helmore Lawyers , have also written an article on what farmers need to know about the upcoming changes to unfair contract terms, which you can read at the QFF website.

Industry associations and peak bodies are also reminded for the need to review and update any standard form industry templates or other supporting documents they provide their members to ensure the amended laws are reflected.

With food insecurity and inflationary pressures on the rise, and public awareness of market power imbalances, the ongoing need for competition reform is at an all-time high. Long standing concerns about significant market concentration in Australia’s retail sector, especially in supermarkets, continue to be raised by agricultural producers and peak bodies.

Changes to the ACL are a step in the right direction, but there is more work to be done if we are to create a true level playing field for our farmers, protect consumers and provide greater certainty for all players within the supply chain.

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