AusLeisure

Australian Competition and Consumer Commission (ACCC) Deputy Chair Dr Michael Schaper says that he is concerned that many sectors remain unprepared for changes coming into effect in November when existing unfair contracts provisions for consumers are extended to include small businesses.

The ACCC says that small businesses enter into an average of eight standard contracts a year. With more than two million small businesses in Australia, the ACCC anticipates this change will potentially affect millions of standard form contracts.

Speaking at the Small Enterprise Association of Australia and New Zealand (SEAANZ) National Small Business Conference 2016 in Melbourne, Dr Schaper explained “the ACCC has engaged with many businesses during the transition period.

“I urge all businesses that issue standard form contracts to undertake a review of their terms in the lead up to 12th November to ensure that they are compliant with the new laws.

“Almost two thirds of small businesses have claimed to have experienced unfairness in the contract terms and conditions that they have signed up for and almost half report experiencing some harm as a result.”

Dr Schaper explained that the ACCC has prioritised education and engagement efforts towards a number of sectors including franchising, retail leasing, and independent contracting.

He explained “the prevalence of standard form contracts in these areas means that these businesses should be taking full advantage of the transition period to understand their obligations and review their contracts.

“Our engagement to date suggests that there is still more to do before 12th November.”

The new law, which aims to protect small businesses from unfair terms in business-to-business standard form contracts, will apply from 12th November. Currently, many small businesses entering into contracts with larger businesses have no option but to accept all the terms of the standard form contract that they are given. Under this new law, the courts will be able to strike out any unfair contract terms.

Dr Schraper added “some industries have responded swiftly to understand their new obligations when dealing with small businesses.

“Notably, the ACCC has engaged with the retail leasing industry, including the major shopping centre landlords, to review their standard form contracts. Our review revealed several areas of concern.”

Following contact from the ACCC, many landlords have amended these terms that allowed them a very high level of discretion in seeking costs from their small business retail tenants. The ACCC considered that terms which placed no limits on landlords seeking to recover their own costs from lessees in a variety of circumstances may be considered to be unfair contract terms under the new law.

Some leases also included terms allowing the landlord to unilaterally vary shopping centre rules such as trading hours. In response to the ACCC’s concerns, most landlords have agreed to amend contract terms to limit the types of variations that the landlords can make.

Dr Schraper concluded “the quick steps that have been taken by the retail leasing industry are a guide for other sectors in adequately preparing for the new unfair contract terms law. All businesses should make an effort to understand how they will be affected by the law and whether it covers any deals they are engaged in.”

Contracts covered include those between businesses where one of the businesses employs less than 20 people and the contract is worth up to $300,000 in a single year or $1 million if the contract runs for more than a year.

The ACCC has previously paid particular attention to fitness clubs, warning clubs about using the phrase ‘No Contracts’ in advertising, where they required consumers to sign membership contracts with conditions for termination and payment of the membership.

20th July 2016 - PALACE CINEMAS PAYS ACCC PENALTY OVER ONLINE BOOKING FEES

9th February 2016 - GYMS RISK BREACHING UNFAIR TERMS BAN

6th December 2015 - ACCC URGES BUSINESSES TO CHECK THAT THEIR CONTRACTS ARE FAIR

1st September 2015 - FLEXIBLE GYM CONTRACTS IMPROVE MEMBER RETENTION

7th January 2015 - JETTS FITNESS FOUNDER WARNS CONSUMERS NOT TO SIGN LOCK-IN CONTRACTS IN 2016

4th July 2014 - ACCC WARNS GYMS ABOUT ‘NO CONTRACTS’ MEMBERSHIP ADVERTISING

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