Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth)
- Principals and contractors will face significantly increased penalties and tighter restrictions on unfair contract terms under new amendments to Australia’s competition and consumer laws.
- The Federal Parliament has passed the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) (New Act), which makes changes to the Competition and Consumer Act 2010 (Cth) including the Australian Consumer Law (ACL).
- The New Act, which aims to improve small business and consumer confidence, strengthens the unfair contract terms (UCT) provisions and increases maximum penalties for contraventions of the ACL.
- This has implications for a broad range of contracts, including construction contracts and standard form contracts.
The New Act introduces two sets of changes: significantly increased maximum penalties for breaches of provisions of the ACL and the introduction of penalties for UCTs in standard form contracts. The increase in penalties for breaches of the ACL came into effect on 10 November 2022 while the introduction of penalties for UCTs will come into effect on 9 November 2023.
The New Act increases the maximum penalties for contraventions of the ACL, in some cases exposing companies to fines up to five times the amount previously payable. The maximum penalty for companies has increased to the greater of:
- $50 million (previously $10 million);
- three times the value derived from the relevant breach; or
- 30 per cent (previously 10 per cent) of the company’s turnover during the period it engaged in the relevant conduct.
The maximum penalty for individuals has increased to $2,500,000.
These changes follow a trend of increased fines for contraventions of the ACL aimed at deterring lawbreaking behaviour, and are likely to result in courts increasing penalties imposed for wrongdoing.
Under the current regime, businesses are not strictly prohibited from including UCTs in standard form contracts – while contract terms which breach the UCT provisions of the ACL may be declared void by a court, they do not attract penalties. The New Act introduces penalties for businesses that include UCTs in standard form contracts with consumers and small businesses. This strengthened UCT regime will come into effect on 9 November 2023, a year from the date of royal assent of the new legislation. The New Act aims to protect consumers and small businesses who may lack bargaining power to negotiate terms in standard form contracts.
The New Act also expands the definition of small business to include contracts where one party employs fewer than 100 persons (increased from 20) or has a turnover of less than $10,000,000. There is no longer a minimum contract value threshold in the ACL, meaning that the unfair contract terms regime will capture a broader range of contracts.
The changes also provide a clearer and broader definition of a ‘standard form contract’, clarifying that a ‘standard form contract’ may still exist even in circumstances where there has been an opportunity for a party to negotiate changes to the some of the terms of the contract. This strengthened law will apply to contracts made on or after 9 November 2023 as well as existing contracts that are renewed or varied on or after 9 November 2023.
The changes to the ACL brought in by the New Act could expose businesses to significant financial consequences in the event of non-compliance with the ACL.
To avoid being subject to penalties, it is recommended that construction industry participants identify any contracts which may fall within the clarified definition of standard form contract and ensure there are no unfair contract terms prior to the new regime coming into effect on 9 November 2023.