The Trade Practices (Australian Consumer Law) Bill 2009 was introduced into Parliament last week and contains the new unfair terms laws which, if passed, will enter into force on 1 January 2009. They are, however, considerably watered down from the original proposed unfair terms laws.
The original draft prohibited all unfair terms in standard form contracts – whether goods or services were to be supplied to individuals or businesses. Then Chris Bowen announced some modifications as a result of ‘consultation’ – suddenly there was to be a ‘threshold’ of $2m, above which the laws would not apply. The bill, however, curtails the law significantly – according to the new law, the unfair terms provisions apply only to consumer contracts, defined as contracts for ‘(a) a supply of goods or services; or (b) a sale or grant of an interest in land; to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.’
Wow. What a change. The law is now NARROWER than the existing unfair terms law in Victoria; Victoria restricts the unfair terms prohibitions to consumer contracts, defined in a similar manner to that described above BUT it applies to ALL consumer contracts, not just standard form contracts.
There was no clear announcement of this monumental back-down on the breadth of the federal unfair terms law. At least not until last week’s second reading speech by Dr Craig Emerson, where he stated (my emphasis):
“We have consulted, and we have listened. And this is reflected in the provisions set out in this bill, which differ in key respects from those that the government exposed in May, particularly in respect of the exclusion of business-to-business transactions.
In relation to the question of whether business-to-business contracts—and particularly those involving small businesses—should be included under the unfair contract terms provisions, the government is currently reviewing both the unconscionable conduct provisions of the Trade Practices Act and also the Franchising Code of Conduct.
Both of these reviews cover issues relating to the protections afforded to businesses in circumstances where they are dealing with other businesses with greater bargaining power and market power. In responding to these reviews, the government is seeking the views of businesses—large and small—about the effectiveness of our current laws. The government will further consider this issue when these reviews are completed.
The government has also indicated its intention that this bill should be referred to a senate committee, and this issue will—no doubt—be further considered as part of that process.”
So,the breadth may possibly expand again … we await yet another senate review (let’s hope it’s better than the last one dealing with cartels … maybe they will demonstrate some understanding of this law … then again, that might be being a tad optimistic).
I don’t really have much difficulty with the law being limited to consumers; it is consumers who are most likely to purchase in bulk using standard forms without reading their contracts or, even if they did, without having any bargaining power to make changes to blatantly unfair terms. But this is quite a monumental change from the original draft provisions which captured ALL standard form contracts and a more adequate explanation from the government about the reasons for this change is needed.
See also the Government’s Australian Consumer Law Home Page.