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Unfair Contracts Regime Expanded and Increases to Penalties for Competition and Consumer Law Breaches

On 9 November 2022, the The Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 (Cth) (Bill) received Royal Assent, triggering a wide range of changes to the Competition & Consumer Act 2010 (Cth) (CCA) and the Australian Consumer Law (ACL).

The amendments are in two parts, as follows:

  • the introduction of penalties and other changes relating to unfair contract terms; and
  • significant increases to maximum penalties that apply to certain breaches of the CCA and ACL. 

What are the main changes to unfair contract terms?

The changes extend the reach of the current unfair contract regime by lowering thresholds, meaning more contracts will be covered by the legislation. 

The unfair contract protections will apply to contracts with small business which employ less than 100 persons or have an annual turnover of less than $10 million.  The protections will apply regardless of the value of the contract.

The changes also more clearly define ‘standard form contracts’ by clarifying the circumstances in which a standard form contract may exist.  It is clarified that standard form contracts may still exist despite their being an opportunity for a party to negotiate minor or insubstantial changes to a contract, select a term from a range of options offered by another party, or where a party to a similar contract or proposed contract has had the opportunity to negotiate terms.     

Under the previous regime, parties affected by unfair contract terms were able to only recover compensation for loss or damage and seek declarations that the relevant terms were void. Now, as a result of the changes, pecuniary penalties will apply (from November 2023) for businesses that include unfair contract terms in their standard form contracts with consumers and small businesses.

The new penalties

A range of business conduct is captured by the changes the Bill implements, including breaches of civil penalty provisions in those parts of the legislation that govern restrictive trade practices and consumer law. Accordingly, the new penalties will apply to instances of unconscionable conduct, false or misleading representations, unfair contract terms (from November 2023), referral selling, breaches relating to safety standards, anti-competitive agreements, exclusive dealings, and more.

Maximum applicable pecuniary penalties will increase as follows, representing a fivefold increase to the penalties’ regime in play before the changes:

  • For body corporates, the new maximum penalty will be the greater of:
  1. $50 million;
  2. 3 times the value of the benefit;
  3. 30% of the adjusted turnover during the breaches turnover period.
  • For individuals – $2.5 million. 

The new penalties apply from 10 November 2022

Penalties for unfair contact terms will come into effect from November 2023

The changes highlight that it is now of greater importance for businesses to undertake a review of their general practices and standard form contracts so as to amend or remove potentially unfair contract terms. 

Should you wish to discuss this topic further, please contact Eric Louca (elouca@lswlawyers.com.au) or Genevieve Hehir (ghehir@lswlawyers.com.au) or call either of them on (02) 9 279 4888.

Important Disclaimer: The content of this article is general in nature and for reference purposes only.  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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