Business owners: watch your step!

Recent changes to the Schedule 2 of the Competition and Consumer Act 2010 (Cth), more commonly known as the Australian Consumer Law and Australian Securities and Investments Commission Act 2001 (Cth), have been enacted by virtue of the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 (Cth). The Bill introduced in February 2022 received Royal Assent November 2022, which strengthens consumer protections, promotes fair competition between businesses and ensures improved corporate behaviour. Out of all of the recent changes, two amendments stand heads and shoulders above:

1. the penalties for anti-competitive behaviour are being increased (i.e false and misleading representations, harassment and coercion, non-compliant products);
2. a review and tightening of the unfair contract terms provisions.[1]

The Australian Competition and Consumer Commission (“ACCC”) states in media release 153/22, “These maximum penalty changes will allow the Courts to ensure that the penalties imposed for competition and consumer law breaches are not seen as a cost of doing business, but rather as a significant impost and something likely to raise the serious attention of owners or shareholders.”[2] For businesses this means you must reconsider your current conduct (including business & marketing strategies) to ensure they are not in contravention of any anti-competitive behaviour. In addition, conducting a comprehensive review of any standard form contracts in use to ensure they comply with the new legislation in force from November 2023.

Penalties increased five-fold

For corporations, the penalties are the greater of:

• $50 million (currently, $10 million);
• 3 times the value of reasonably attributable benefit obtained from the conduct (same as the current penalty); or
• If value cannot be determined then 30% of the body corporates turnover during the period it engaged in the conduct (currently, 10%);

For individuals, the penalties are up to $2.5 million (currently, $500,000). The purpose of the increased penalties is not only to ensure a “robust level of protection” for consumers, but also to deter “anti-competitive behaviour and unfair activity”.[3]

What to do now?

The ACCC states there will be a 12 month grace period for businesses to update their standard form contracts to ensure they are compliant. However, those harsher penalties are currently in force and will apply to any conduct post-amendments to the Act. We recommend obtaining legal advice to review any standard form contracts with consumers and small businesses to ensure there are no unfair contract terms that could be declared void, in turn removing your possibility of enforcing the contract.

Case Studies

Australian Competition and Consumer Commission v Fujifilm Business Innovation Australia Pty Ltd [2022] FCA 928.

In the Federal Court of Australia in August 2022, Justice Stewart declared 38 terms used in Fujifilm’s software and printing small business contracts were void and unenforceable. These terms included:

• providing for automatic renewal;
• excessive exit fees;
• disproportionate termination terms;
• liability limitation terms;
• unilateral price increases and other variation terms.

His Honour declared the terms were unfair because they:

• Caused significant imbalance in the rights and obligations between Fujifilm and its small businesses it contracts with;
• Are not reasonable necessary to protect Fujifilm’s legitimate interests;
• Would cause detriment to the customers if Fujifilm relied upon them.

However, His Honour made the following orders:

1. The terms identified in the small business contracts are declared unfair contract terms;
2. Fujifilm to publish a communication by email/post/electronically to its small business contracted with stating those contract terms determined unfair are void and enforceable, including a declaration the upfront price does not exceed $300,000;
   • Fujifilm to contact all other contracted parties to confirm whether they are a small business, as the unfair terms will not be enforceable upon them;
3. Fujifilm to publish a corrective notice to its customers as well as display on its website stating “On [date], the Federal Court of Australia made orders by consent that some Fujifilm contracts contain unfair terms, and declared that these terms are void and cannot be enforced. See here for further details including if you are affected.”
4. Fujifilm is to not rely upon those contract terms determined unfair within the next 5 years;
5. Fujifilm is to implement a compliance program for the specific purposes of implement standard form contracts that do not contain unfair terms;
6. Fujifilm was to pay $250,000 to cover some of the ACCC’s costs of the proceeding.

If this conduct was post-amendments to the Act, Fujifilm may have faced almost $2 billion in penalties.

Australian Competition and Consumer Commission v Uber B.V. [2022] FCA 1466

In December 2022, the Federal Court ordered Uber to pay $21 million in penalties after admitting it engaged in both misleading or deceptive conduct AND made false or misleading representations to consumers via its website and app. The relevant conduct was in relation to two key points:

1. Cancellation fees which may be charged to users, even during Uber’s “free cancellation period”.
2. Estimation of Uber Taxi rides.

Uber conceded that more than two million users saw the cancellation message. ACCC commented on the outcome: “We note Justice O’Bryan’s statement that the ordered penalty should not be understood as any reduction in the Court’s resolve to impose penalties appropriate to achieve the statutory objective of deterring contraventions of the Australian Consumer Law.”[7] Uber agreed some Uber group employees were aware of issues with its Uber Taxi fare estimates and cancellation messaging. Uber has acknowledged it did not monitor the functionality of the algorithm to ensure the accuracy of the Uber Taxi fare estimates it produced in Australia. It’s clear the new legislation is designed to increase consumer protection, while balancing the needs and obligations imposed on business owners.

Contact the team at Greenhalgh Pickard for advice and strategic planning to ensure both you and your business are protected.

Greenhalgh Pickard’s Litigation Team