- Introducing civil penalties for organisations that include or who rely upon unfair contract terms in their standard form contracts with consumers and small businesses;
- Expanding the coverage of the unfair contract terms regime to more small business contracts.
The legislation also significantly increases the maximum penalties which apply to contraventions of the CCA more generally.
Maximum CCA penalties increased five-fold
The legislation drastically increases the maximum penalties for certain anti-competitive conduct and contraventions of the Australian Consumer Law (ACL). The increased penalties have widespread application across the CCA – including in relation to unconscionable conduct, false or misleading representations, product safety breaches and more.
| Current maximum penalties | New maximum penalties | |
|---|---|---|
| Companies |
The greater of
|
The greater of
|
| Individuals | $500,000 | $2.5 million |
The new maximum penalties apply from 10 November 2022.
Introduction of penalties and expansion of unfair contract terms regime
The unfair contract terms regime is contained in the ACL (which applies to contracts for goods, services and the sale or grant of an interest in land) and the ASIC Act (which applies to contracts for financial products and services).
Currently, under the ACL and the ASIC Act, where the court determines a term in a standard form contract to be unfair, that term is declared void and cannot be relied upon by a party to the contract, however no penalty applies.
The new legislation amends the ACL and the ASIC Act by introducing penalties for:
- entering into a standard form consumer or small business contract that contains an unfair contract term, and/or
- applying, relying or purporting to apply or rely on, an unfair contract term contained in a standard form consumer or small business contract.
These penalties will apply to:
- each separate unfair term in a standard form contract that is entered into or relied upon, and
- new contracts entered into, existing contracts which are renewed and individual terms of existing contracts which are varied after the new regime comes into effect.
The changes will also expand the class of “small business contracts” to which the regime applies – as detailed in the following table:
| Current law | New law |
|---|---|
|
The unfair contract terms protections apply to small business contracts where one party employs fewer than 20 persons and the upfront price payable under the contract does not exceed one of the two alternative monetary thresholds provided for in the law. |
Under the ACL, the unfair contract terms protections apply to small business contracts, irrespective of the value of the contract, where one party employs fewer than 100 persons or has an annual turnover of less than $10 million. Under the ASIC Act, the unfair contract terms protections apply to small business contracts where the upfront price payable does not exceed $5 million and one party employs fewer than 100 persons or has an annual turnover of less than $10 million. |
The above changes will come into effect on 9 November 2023, allowing businesses a 12 month grace period to review and amend their small business and consumer contracts.
