WA businesses face tough penalties for unfair consumer contracts

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ConsumerBusiness / company
  • Businesses that mislead or treat consumers unfairly face new and higher penalties
  • Standard form consumer contracts may need to be reviewed and updated to comply
  • New adoption mechanism used for the first time to update WA laws with national changes

Businesses that present Western Australian consumers with unfair terms in their standard form contracts could soon face tough penalties following amendments to the Australian Consumer Law (ACL).

Standard form contracts are typically used in industries where there is a high volume of 'agreements' occurring between the business and consumers. For example, the contracts used by telecommunication companies, gyms, car rental and travel agencies will often be classed as 'standard form contracts'.

Standard form contracts provide a cost-effective way for many businesses to deal with significant volumes of customers. As these contracts are largely imposed on a 'take it or leave it' basis, consumers have little or no chance to negotiate, so standard form contracts are specifically covered by the ACL to protect them from unfair contract terms.

The standard contract terms may be regarded as unfair if one party to the contract has significant advantage over the other and it would cause financial or other harm to the other party if enforced.

The changes brought in by the amendments to the ACL introduce penalties for the inclusion of unfair contract terms in standard form contracts, whereas previously, where a court found a term unfair, it could only be declared void.

The recent amendments also increase the maximum penalties for certain conduct that is in contravention of the ACL, including making misleading representations, acting unconscionably or selling a product that is banned for safety reasons.

The new maximum penalties for businesses will be the greatest of $50 million or three times the benefit obtained from the conduct; or, if that can't be determined, 30 per cent of the relevant turnover during the breach period. This is up from $10 million or 10 per cent of turnover. The maximum penalty for individuals increases from $500,000 to $2.5 million.

The introduction of the tougher penalties and the changes to the unfair contract term protections is also the first time that a new mechanism has been used to synchronise national and State consumer laws.

The mechanism allows federal changes to the ACL to be automatically incorporated into State laws, subject to disallowance by the WA Parliament. This mechanism ensures a consistent national approach to regulation to protect consumers.

While the increase in maximum penalties has already been introduced for contravention of some of the ACL's conduct requirements, businesses have until November this year to review and update their standard form contracts before these penalties will apply to breaches of the unfair contract term protections.

Comments attributed to Commerce Minister Sue Ellery:

"The introduction of penalties for having unfair contract terms in standard consumer contracts should provide added incentive for businesses to ensure their contracts don't contain terms that are unfair.

"The increase in maximum penalties reflect the serious nature of certain contraventions of the ACL and will serve as a strong deterrent to business for non-compliance with their obligations.

"It's pleasing to see that the new adoption mechanism set up by the Cook Government, that sees national changes to consumer laws being more easily and more quickly reflected in State laws, is working as it should.

"The mechanism ensures that WA will no longer fall behind other jurisdictions when the ACL is amended, keeping our laws up-to-date. However, the WA Parliament still retains the ability to disallow any amendments should they not be in the best interests of Western Australians.

"It also reduces unnecessary red tape for businesses by not requiring them to comply with different laws in different states.

"Businesses should also review their current contracts to make sure they are fair and balanced."

Minister's office - 6552 5700

Consumer Protection
Media release
28 Jul 2023

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