The ACCC has indicated that its educative and engagement approach to the national unfair contract terms regime is over and has warned that it is now looking at enforcement.

On 15 March 2013 the ACCC released its Unfair Contract Terms – Industry review outcomes report. The report comes after the ACCC conducted an investigation of standard form consumer contracts in a number of industries – airline, telecommunications, fitness and vehicle rental – as well as some standard form contracts used by travel agents and online traders. The potential for widespread consumer detriment and the high number of complaints received by the ACCC, were the reason that these industries were put under the ACCC’s spotlight.

In launching the report on, fittingly, World Consumer Rights Day, ACCC Chairman Rod Sims stated that it marks “the end of the compliance emphasis … and the transition to a more enforcement focussed approach”.  According to the report, while the majority of businesses have ‘voluntarily’ changed their contracts by deleting terms or amending them, a number of businesses have chosen not to comply with ACCC requests to make amendments to which the regulator has warned it is now considering whether court action is warranted.  This shift in strategy is not surprising given the ACCC’s commitment to ‘strong enforcement’ and to bringing test cases on the new provisions of the Australian Consumer Law – the national unfair terms regime is yet to be considered by any court. 

The ACCC report identified eight types of terms used in standard form consumer contracts which it considers to be of particular concern from an unfair terms perspective:

  1. Contract terms that allow the business to change the contract without consent from the consumer.
  2. Terms that cause confusion about the agency arrangements that apply and that seek to unfairly absolve the agent from liability.
  3. Terms that unfairly restrict the consumer’s right to terminate the contract.
  4. Terms that suspend or terminate the services being provided to the consumer under the contract.
  5. Terms that make the consumer liable for things that would ordinarily be outside of their control.
  6. Terms that prevent the consumer from relying on representations made by the business or its agents.
  7. Terms seeking to limit consumer guarantee rights.
  8. Terms that remove a consumer’s credit card chargeback rights when buying the service through an agent.

Throughout the report the ACCC names a number of businesses who have taken proactive steps to either delete or amend terms identified as unfair, and provides examples of terms before and after they were rewritten to address the ACCC’s concerns.  Examples of changes made include:

  • revising contracts so that actual business practices of allowing customers to alter contracts were incorporated into the standard form contract themselves;
  • the removal of overly onerous requirements in relation to contract termination, such as needing to attend a fitness centre and first meet face-to-face with staff before the consumer is entitled to terminate their contract; and
  • setting out the circumstances in which suspension or termination of services, particularly in the telecommunications industry, may occur.

The ACCC identifies specific industries where businesses have not addressed concerns.  In particular the hire car industry is highlighted in the report as not complying with requests to amend standard form contracts.  Further the report identifies the industry as having broader ACL concerns.  We expect an increased focus on this industry by the ACCC.

Of particular interest are the ACCC’s comments about transparency.  Amongst other things, a court assessing whether a term is unfair must take into account the extent to which a term is transparent.  The ACCC observed that a number of consumer contracts are lengthy and complex and do not use plain English, which the regulator considered made them hard to understand.  The ACCC praised businesses that have taken steps to provide easy to use summaries for consumers and encouraged other businesses to follow suit and to reduce the length and complexity of their standard form consumer contracts.

Looking ahead, the Coalition has stated that, if elected, it intends to extend the unfair contract provisions in the Australian Consumer Law to protect small businesses as well as consumers.  Bruce Billson, Shadow Minister for Small Business, has stated that small businesses often have to negotiate standard form contracts with big businesses on a ‘take it or leave it’ basis without the protections that the unfair terms regime offers.  Such a change could have significant ramifications for contracting in Australia. 

With the ACCC’s focus squarely on unfair contract terms and court proceedings, businesses who have not already done so would be well minded to consider the terms of any of their standard form consumer contracts.