Consumer protection and unfair business practices have been consolidated into ACL (schedule to the Competition and Consumer Act 2010 (CCA)). The CCA is a national law.
ACL is now in operation and all businesses must understand their changed and new obligations to consumers and other businesses.
Unfair business practices
The unfair business practices regime applies to 'consumer contracts' – standard form contracts for the supply of goods, services or 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). Any 'unfair' term will be declared void.
To avoid a term being declared 'unfair' consider the following:
- Is the contract in plain easy to understand language?
- Does the contract contain unilateral rights or terms that reserve discretion in favour of the supplier? If so, are they necessary?
- Does the contract contain a severance clause - so, at worst, the 'unfair term' is severed?
- Is there an opportunity for the consumer to negotiate?
We recommend that businesses not only review their contracts but also their internal policies. At a minimum, file notes in respect to contract formation and negotiations should be kept.
Consumer guarantees (forms part of the consumer protection part of ACL) applies to businesses and affects manufacturers, suppliers and importers. There have been significant reforms to remedies including:
- pecuniary penalties regarding display notices; and
- compensation for consequential loss if a consumer guarantee is not met.
Consumer guarantees replace the previous system under the Trade Practices Act of implied warranties. They are automatic guarantees for consumers and any clause in a contract that restricts, excludes or modifies the application of the exercise of rights under or liability for failing to comply with the consumer guarantee provisions will be void.
Consumer guarantees apply to:
- goods and services costing up to $40,000 (subject to some exclusions);
- goods and services that cost more than $40,000 if ordinarily required for personal, domestic or household uses (subject to exclusions); and
- vehicles and trailers regardless of cost.
However, franchisors should note the exceptions including goods that are on-sold.
Franchisors must update their systems to ensure compliance with ACL. Franchisors should also be aware that the ACCC has been granted increased investigative, audit and enforcement powers and there are substantial penalties for offences and civil penalties. If a franchisee is investigated by the ACCC, it is likely that the ACCC will extend that investigation into all the businesses within that franchise network.