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Investigatory Powers Granted to the ACCC and ASIC Over Unfair Contract Terms

The Treasury Laws Amendment (Australian Consumer Law Review) Act 2018 (Cth) (the Act) received royal assent on 25 October 2018, and therefore commenced on 26 October 2018. The Act introduces numerous amendments, including changes that enable the Australian Competition and Consumer Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) to investigate  unfair terms in certain standard form contracts. Up until 26 October 2018, the ACCC and ASIC were only able to exercise their investigative powers in relation to ‘contraventions’ or ‘possible contraventions’ of the law. The effect of this was that their investigative powers did not allow for investigations of possible unfair contract terms as the inclusion of unfair contract terms is not prohibited by law, albeit that the terms may be void. Examples of contract terms that may be unfair, include:

  • terms that enable one party to a contract (but not the other) to avoid or limit their obligations under the contract;
  • terms that enable one party to a contract (but not the other) to terminate the contract; or
  • terms that penalise one party to a contract (but not the other) for breaching the contract or for terminating the contract.

As result of the changes, the ACCC and ASIC will be able to use their compulsory notice powers to investigate terms of a consumer contract or a small business contract so as to determine whether to seek a declaration that a term of the contract is unfair.  Importantly, the ACCC will now be able to use its powers under section 155 of the Competition and Consumer Act 2010 (Cth) to investigate unfair contract terms and determine whether to bring court proceedings in relation to the terms. What does this mean for business? The changes highlight that it is now of greater importance for businesses to undertake a review of their standard form contracts so as to amend or remove potentially unfair contract terms.  Whilst some businesses may have to this point sought to maintain unfair contract terms in their standard contracts given the reasonably low likelihood of regulatory intervention or challenge from the other party to the contract, such an approach now seems to carry greater risk. Should you wish to discuss this topic further, please contact Eric Louca on (02) 9 279 4888 or elouca@lswlawyers.com.au. Important Disclaimer: The content of this publication is general in nature and for reference purposes only. It is current at the date of publication. It does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.



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