Addressing the Council of Small Business Organisations Australia (COSBOA) National Small Business Summit 2018, ACCC chair Rod Sims said that current business-to-business unfair contract terms were not sufficient in protecting small businesses.
The Australian Consumer Law currently allows a potentially unfair contract term to be challenged in a court so it can be declared void, but it does not prohibit such a term being included in a contract in the first place.
Mr Sims said that companies can still include potential unfair contract terms in their contracts and can only enforce them to remove those unfair terms if challenged.
“The business-to-business unfair contract term law is an extremely valuable law that works to protect small businesses against terms that just should not be found in contracts. However, it does not go far enough, and its limitations really tie our hands as a regulator,” Mr Sims said.
“The regime has two significant flaws: first, unfair contract terms are not illegal; and second, the ACCC cannot seek penalties when the court has declared an unfair contract term void, nor can we issue infringement notices for contract terms that are likely to be unfair.
“The law simply isn’t strong enough. Unfair contract terms should be illegal. As it stands, no real incentive exists for businesses to ensure their standard contracts do not contain such terms, which really means they have incentive to include them and see if they can get away with it.”
Mr Sim’s comments come after the ACCC’s Small Business in Focus report found that unfair contracts continue to hurt small business clients in 2018.