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25 January 2019

Tough stance on unfair contract terms welcomed

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell today welcomed the Labor party’s commitment to three key changes to unfair contract terms legislation.

“The changes to unfair contract terms announced by Labor is in line with our submission to the review currently being undertaken by Treasury,” Ms Carnell said.

“Making unfair contract terms illegal would be a major improvement in protecting small businesses.

“Currently where a standard form contract contains an unfair contract term, the only way for a small business to take action is through the court system. And even if the term is proven to be unfair, there is no penalty to the big business.

“By making unfair contract terms illegal, the Australian Competition and Consumer Commission (ACCC) would be able to penalise big businesses up to $10 million and issue infringement notices.

“We agree the contract size threshold should be increased to $1 million for contracts up to 12 months and $5 million for contracts greater than 12 months, also in line with our submission.

“Increasing the number of contracts and small businesses protected by this proposal – those with a turnover of up to $10 million - is something this office has consistently advocated.

“The ACCC has estimated that small businesses enter into around eight standard contracts per year.

“Phase I of our Access to Justice Inquiry found small businesses are unlikely to take action when faced with an unfair contract term in their standard form contract.

“They are reluctant to damage commercial relationships, and lack the resources and time to pursue litigation.

“Any change to legislation or regulation that levels the playing field between small business, the engine room of our economy, and the larger players is worth pursuing.”