ACCC deputy chair Mick Keogh has asked small businesses who believe their business contracts may be unfair to reach out, reiterating the competition watchdog’s focus on levelling the playing field.
Delivering its biannual small business update on Thursday, the ACCC said enforcing unfair contract terms (UCT) laws are a top-order consideration moving forward, encouraging firms to review their own deals.
Over the last six months, the ACCC has pursued several businesses over alleged UCT law violations, including two container stevedore companies, DP World Australia and Victoria International Container Terminal.
It also raised concerns about alleged UCT violations in the horticulture sector, with Melbourne fruit wholesaler M.V. Napoleone & Co in its sights.
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“Unfair contract terms are a big focus for the ACCC, and we want to make sure small businesses are not at a disadvantage because of one-sided ‘take it or leave it’ contracts,” Keogh said in a statement circulated Thursday.
While the ACCC is unable to secure penalties for UCT violations, primarily because they are not actually illegal, it is able to have courts void offending contracts.
“We encourage small businesses to review their standard form contracts and if a contract term looks unfair, call it out and seek to have it changed,” Keogh said.
There have been concerns in the past many business owners don’t realise contracts they have with suppliers, financial firms or other partners contain unfair terms.
Earlier this year, UberEats, which has been in the market for some time, amended allegedly unfair terms in its own contracts after it emerged restaurants were being left holding the bag for refunds they were not responsible for.
Is your contract unfair?
Worried a contact might be unfair? Under UCT laws passed in 2016, small business contracts that are ‘standard form’ and have an upfront payable price less than $300,000 (or $1 million if longer than 12 months) can be voided by courts if unfair.
Standard form contracts are those prepared by one party, without negotiation — in other words, offered on a ‘take it or leave it’ basis. Small businesses are defined as those with fewer than 20 workers.
Courts consider the balance of power between parties, whether businesses are given an opportunity to negotiate and whether terms are specific to small businesses or a particular transaction when deciding whether a contract is unfair.
Unfair means contracts which would cause “significant imbalance” in a businesses’ rights and obligations under the terms of an agreement, or where a team is not reasonably necessary to protect the interests of the benefitting party.
Businesses with suspicions are advised to contact the ACCC or the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) regardless of whether they’re 100% sure.
Fewer complaints over the last six months
ACCC engagement with small businesses has fallen in the last six months as a fewer number of firms contact the competition watchdog with complaints.
About 3,248 small businesses reached out to the ACCC between January and June 2019 with reports and enquiries, down 12% from the 3,729 reports in the last six months of 2018.
Fewer businesses had complaints about misleading conduct and other Australian Consumer Law issues, while there was also a dip in consumer guarantee reports.
It comes as the regulator continues its focus on unfair contract terms (UCT), amid an ongoing wait for the federal government to hold consultations over whether UCT laws should be strengthened.
The ACCC secured four administrative resolutions which affect small businesses in the last six months, as well as two court outcomes and 15 compliance checks in the franchising and horticultural sectors.