- Prohibits the proposal, use of and reliance on unfair contract terms (UCTs) in standard form consumer and small business contracts and introduces civil penalties for breaches of the UCT provisions for the first time
- Increases the maximum penalties that may be awarded against corporations for breaches of the civil penalty provisions in Parts IV, IVBA, X and XICA of the Competition and Consumer Act 2010 (CCA) and under the Australian Consumer Law (ACL) to the greater of:
- AUD 50 million;
- If the court can determine the value of the benefit obtained — three times the value of that benefit
- If the court cannot determine the value of the benefit obtained — 30% of the body corporate's adjusted turnover during the breach turnover period for the offence, act or omission;
- Increases the maximum penalties for individuals to AUD 2.5 million
- Increases the maximum civil penalty for breaches by telecommunications providers of the Competition Rule, to up to AUD 71 million plus AUD 3 million for every day that a contravention continues in the most serious cases.
The increased penalty regime applies immediately, to conduct engaged in from 10 November 2022. There is a 12-month grace period for the commencement of the UCT provisions, which will come into force on 10 November 2023.
Maximum penalties for contraventions of the CCA and ACL have significantly increased, effective immediately, exposing business to very substantial risk. The need for robust policies, systems and training to ensure compliance with the legislation has never been more important.
The application of the penalty provisions to UCTs in 12 month’s time fundamentally changes the risk to businesses such that it will no longer be possible to include “borderline” unfair terms in standard form contracts. Businesses should use the coming year to prepare by identifying all commercial partners who may fall within the expanded definition of "small business", thoroughly examining all standard form small business and consumer contracts for potential unfair terms, and making necessary changes to avoid contraventions of the new regime.
We expect that following the commencement of the new UCT regime, both the ACCC and ASIC will closely scrutinise standard form contracts and will not hesitate to bring enforcement proceedings in appropriate cases.
For advice and assistance in navigating the proposed changes, including steps that can be taken to reduce your exposure to the significantly increased penalties, please contact our team of experts.