Competition regulator uses JJ Richards case to highlight contract reform effect
The Australian Competition and Consumer Commission’s (ACCC) is seeking to use its case against major fleet owner JJ Richards to build momentum on small business unfair contracts reform implementation.
The laws were extended to small business contracts in November 12 last year and the competition watchdog namechecked the JJ Richards case that saw successful court action against unfair terms including an automatic five-year rollover clause, a unilateral price variation term and a broad indemnity provision.
It has also begun proceedings against serviced office space provider Servcorp alleging that 19 terms in its service agreement used with small business clients are unfair. The matter is currently before the court.
“These cases show the ACCC is serious about enforcing the new laws, and we will continue to take action where appropriate to ensure that small businesses are protected,” ACCC deputy chair Dr Michael Schaper says.
“ACCC engagement has seen tens of thousands of new or existing contracts improved, but this is the tip of the iceberg as Australia’s two million small businesses sign an average of eight standard form contracts a year.”
He notes that, earlier this year, a number of major traders such as Uber, Fairfax Media, Jetts Fitness, Lendlease Property Management and Sensis amended their standard small business contracts in response to unfair contract terms concerns raised by the ACCC. These changes have an effect upon thousands of small business contracts across Australia.
More recently, Australia Post proposed some amendments to its Licensed Post Office Agreement to address certain unfair contract terms concerns raised by the ACCC, and now plans to consult with its licensees on the proposed changes.
“We’re pleased with the level of engagement and cooperation we have seen from some traders over the past year, but we are also continuing to receive a steady flow of complaints from small businesses indicating there’s still a good deal of work left to do,” Schaper says.
“Where small businesses think they are being asked to sign a contract that puts them in a greatly disadvantaged position to the company offering the contract, they should ask that the contract be changed. If the company won’t change the contract terms, they should make a report to the ACCC.”
It says small businesses should look out for common types of terms which may be unfair:
automatic renewal terms binding customers to subsequent contracts unless they cancel the contract within a certain timeframe
terms allowing a trader to unilaterally increase its prices or alter the terms and conditions of the contract
terms that broadly limit a trader’s liability towards a small business, or which require a small business to indemnify a trader in an unreasonably broad range of circumstances
terms that allow traders to cancel or terminate an agreement without cause
If small business thinks a contract term is unfair, it should ask the provider to amend or remove the unfair term. If this is unsuccessful, a small business can:
contact the ACCC [or otherwise Australian Securities & Investments Commission (ASIC) if it relates to a financial service or product)
seek the assistance of the State’s Small Business Commissioner or Australian Small Business and Family Enterprise Ombudsman (ASBFEO)
The ACCC has produced guidance material for businesses about the new laws, including a fact sheet which explains what an unfair term is, and what a small businesses can do if they think they have an unfair term in their contract.
It says it will continue to update its small business subscribers of ACCC actions and guidance important to small business, including on unfair contract terms. Interested businesses can subscribe to: Small Business Information Network
The ACCC has published a guide to help small business: Unfair terms in small business contracts