Bytecard Pty. Limited (better known as Netspeed Internet Communications) (Bytecard), an internet service provider, is the first company to be taken to court by the ACCC under the new unfair contract terms provisions of the Australian Consumer Law (ACL).  Under the new regime, which came into effect on 1 July 2010, a term of a consumer contract is void if that term is found to be unfair and the contract is a standard form contract.

In order to determine fairness, the court must consider if the term:

  • would cause a significant imbalance in the parties’ rights and obligations under the contract;
  • is reasonably necessary to protect the legitimate interest of a party to the contract; and
  • would cause detriment to a party to the contract if it were to be applied or relied upon.

The ACCC alleges that a number of the terms in Bytecard’s standard form contracts which its customers are required to sign, are unfair, in contravention of section 23 of the ACL.  The terms that are being challenged by the ACCC as being unfair are terms that:

  • enable Bytecard to unilaterally vary the price of the existing contract without the right of the customer to terminate;
  • require the customer to indemnify Bytecard in any circumstance; and
  • allow Bytecard to terminate the contract at any time.

The ACCC is seeking declarations that these clauses are unfair and therefore void pursuant to section 23 of the ACL. The matter has been filed in the Federal Court’s Fast Track List and is listed for a scheduling conference in Melbourne on 13 June 2013.

Interestingly, this is not the first time ByteCard has received the attention of regulators. In February this year, the Australian Communications and Media Authority successfully challenged ByteCard and its director, Brian Morris, alleging ByteCard had failed to comply with determinations issued against it by the industry ombudsman, requiring it to repay money to its customers. The Federal Court ordered ByteCard to pay $75,000 and ordered Mr Morris to pay $37,500.

While this is the first time the ACCC has instituted proceedings under the unfair contract terms regime, the ACCC released a report in March after conducting a review of standard form consumer contracts in a number of industries. As discussed in our recent post, during the review phase, the ACCC identified problematic clauses, with many businesses voluntarily complying with the ACCC’s request to alter or amend clauses. In publishing the report, the ACCC said that it marks, “the end of the compliance emphasis … and the transition to a more enforcement focused approach”.

The latest proceedings demonstrate the ACCC’s continued focus on strong enforcement and following through on what they said they would do.