This bill will deliver on the government’s election commitment to help ease the cost of living by increasing penalties for breaches of competition and consumer laws and to provide greater protections for small businesses from unfair contract terms.
Schedule 1 to the bill will increase the maximum penalty for anti‑competitive behaviour under the Competition and Consumer Act 2010 (CCA) as well as breaches of the Australian Consumer Law (ACL) to ensure the price of misconduct is high enough to deter unfair activity and to ensure consumers retain a robust level of protection.
In 2018, the Organisation for Economic Co‑operation and Development found that the average and maximum competition penalties in Australia are substantially lower than those in comparable international jurisdictions. As a result, there is a risk that a breach of the existing competition law could be seen as an acceptable cost of doing business by some large firms.
The amendments will increase the severity of Australia’s penalty regime to be more comparable with international jurisdictions. As a result of this bill, we expect that, in some cases, courts will impose higher penalties for wrongdoing. We want courts to be able to ask themselves, ‘Will this penalty deter lawbreaking by this company and others like it?’
By strengthening penalties, Australia will be promoting competition and better corporate behaviour. Greater competition means better prices and more choice for Australian households. No business that complies with the law will face any additional compliance burden as a result of this increase in penalties.
Schedule 2 to the bill strengthens the existing protections against unfair contract terms in the Australian Consumer Law (ACL) and the Australian Securities and Investments Commission Act 2001(ASIC Act). The reforms will better protect consumers and small businesses from unfair terms, by reducing their prevalence in standard form contracts. This will help to improve consumer and small business confidence when entering into standard form contracts.
Consumers and small businesses often lack the resources and bargaining power to effectively review and negotiate terms in standard form contracts they are offered by a larger party.
The existing unfair contract terms protections in the ACL and the ASIC Act provide that where a court finds a term is unfair, that term is void.
This approach has not provided sufficient deterrence against the use of unfair terms, which remain prevalent in standard form contracts.
The amendments introduce civil penalty provisions prohibiting the use of, and reliance on, unfair terms in standard form contracts. This will enable a regulator to seek a civil penalty from a court. The existing definition of an unfair term remains unchanged.
The government’s expectation is that regulators will continue to take a reasonable and proportionate approach to enforcing the unfair contract terms protections, including affording businesses an opportunity to respond to allegations of unfair terms before commencing any legal proceedings.
The bill includes a requirement to review the reforms two years after commencement, and the government will also welcome feedback from stakeholders ahead of this review.
Finally, the Legislative and Governance Forum on Corporations was previously notified in relation to the unfair contract terms amendments as required under the Corporations Agreement 2002.
Full details of the measures are contained in the explanatory memorandum.