The Federal Court today declared that 38 contract terms used in contracts entered into by Fujifilm Business Innovation Australia or Fujifilm Leasing Australia (together, Fuji) with many thousands of small businesses are unfair, following court action by the ACCC.
The Court declared the unfair contract terms void and unenforceable. Fuji was also ordered to stop enforcing these terms in current small business contracts and to cease using these terms in 11 types of standard form contracts with small businesses for the next five years.
The orders apply to 11 types of standard form contracts Fuji entered with small businesses for printers and related software. The unfair contract terms included terms providing for automatic renewal, excessive exit fees and unilateral price increases.
“We took this court action because Fuji’s unfair contract terms allowed this large company to leverage the significant power imbalance between it and small business customers to impose unnecessary and unjustifiable terms on these businesses,” ACCC Deputy Chair Mick Keogh said.
“Fuji’s unfair contract terms were imposed on many small businesses who had signed contracts containing these terms, and Fuji took action, including litigation, to enforce these terms.”
“We continue to strongly advocate for law reform to prohibit unfair contract terms and enable the Court to impose penalties in cases where such terms are imposed and enforced against small businesses, as here, or consumers,” Mr Keogh said.
The orders apply only to contracts entered into with small businesses, which are businesses employing fewer than 20 staff.
Since November 2016, Fuji has entered into or renewed approximately 34,000 contracts, the vast majority of which were made using the standard form contracts at issue in this case. Many of those contracts are still in force. It is not known how many of these contracts were with small businesses, although it is likely this is a substantial number of these contracts.
Under the Court orders, Fuji is obliged to contact current customers with relevant contracts and ascertain if they are small businesses and make them aware of the orders. Fuji must also publish information about these orders on its website.
Fuji was also ordered to implement a compliance program and pay part of the ACCC’s costs.
Fuji admitted that these terms were unfair, and consented to the declarations and other orders made by the Court.
More information about the types of small business contracts for printers or software which are covered by this order is available at the Federal Court website.
In October 2020, the ACCC instituted proceedings against Fuji Xerox Australia (now Fujifilm Business Innovation Australia) and Fuji Xerox Finance (now Fujifilm Leasing Australia) alleging that a number of Fuji’s standard form contracts contained unfair contract terms.
Fuji supplies a range of business products on a lease basis, including photocopiers, scanners and multifunction printers. Fuji also services these products, and supplies software and print management services. Its parent company is Fujifilm Holdings Corporation, based in Japan.
In some cases, Fuji enters into contracts with small businesses as “principal and/or agent” on behalf of Fujifilm Leasing Australia, a related body corporate.
Fuji’s contract terms came to the ACCC’s attention via complaints from small businesses, including a complaint from the Australian Small Business and Family Enterprise Ombudsman, concerning standard form contracts used across the printing industry more generally.
Further general information on unfair contract terms is available on the ACCC website.
Both the ACCC and ASIC are responsible for enforcing the unfair contract terms law in relation to small businesses. ASIC’s role is in relation to financial services. The two agencies work closely, and in this case ASIC delegated its powers to the ACCC to pursue this action insofar as it concerns the unfair contract terms regime in the Australian Securities and Investments Commission Act 2001 (ASIC Act).
Under the Australian Consumer Law and ASIC Act, businesses are not prohibited from including or relying on an unfair contract term against consumers or small businesses. Although courts can declare unfair terms to be void and consequently unenforceable, they cannot impose penalties on companies using these unfair terms.
The ACCC continues to advocate for a change to the Australian Consumer Law to make it illegal for businesses to include or rely on an unfair contract term against consumers or small businesses, and for the Courts to have the power to impose penalties where businesses use and benefit from unfair contract terms.
The declared unfair contract terms
The types of terms which have been declared unfair and void include the following:
- Automatic renewal terms: permit Fujifilm to renew the contract for a further period unless customers cancel the contract a certain number of days before the end of the contract term.
- Disproportionate termination terms: allows Fujifilm to terminate the contract in a significantly wider range of circumstances than those which allow the customer to terminate the contract, if any.
- Liability limitation terms: limit Fujifilm’s liability or require the customer to indemnify Fujifilm without corresponding rights for the customer.
- Termination payment terms: require customers to pay extensive exit fees to Fujifilm in the event the contract is terminated, including certain charges which Fujifilm can set unilaterally.
- Unfair payment terms: require customers to pay Fujifilm for software licensed pursuant to the agreement irrespective of whether Fujifilm has delivered the software and, when goods are purchased, to pay the purchase price prior to delivery.
- Unilateral variation terms: permit Fujifilm to unilaterally vary some terms of the contract including the charges and terms contained in documents other than the signed contract.