On 25 February 2013 we issued a Corrs In Brief – “Business beware: The ACCC renews its commitment to enforcement” – to report that the Australian Competition and Consumer Commission (ACCC) had released its Compliance and Enforcement Policy for 2013 (Policy). The Policy sets out the ACCC’s approach to ensuring compliance with the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL) and contains important insights into where the ACCC’s regulatory eye will be focused over the coming year.
Both the Policy, and our recent experience with ACCC enforcement, make it clear that the ACCC’s attention is increasingly directed towards enforcement in the consumer protection arena. An important part of that focus is the unfair contract terms regime, which was enacted in 2010 and which regulates business interaction with consumers by way of standard form consumer contracts.
It is therefore no surprise that the ACCC has used the occasion of its National Consumer Congress (an annual event hosted by the ACCC involving consumer groups, community organisations and government) on 15 March 2013 to announce the results of its industry review of unfair contract terms (Review).
In summary, the ACCC identified a wide variety of problematic terms in standard form consumer contracts in all of the key industries that were subject to the Review. Many of these terms have been amended or deleted as a result of the ACCC’s efforts.
The Review marks a line in the sand for the ACCC. Although in conducting the Review the ACCC took a compliance-led approach, giving the relevant businesses an opportunity to “change their ways”, in future the ACCC is likely to take a more enforcement-led approach. There is now a window of opportunity open to all businesses to ensure that their standard form consumer contracts are in line with the ACL and won’t be subject to ACCC enforcement action.
The national unfair contract term regime came into effect on 1 July 2010 as part of the wider ACL reforms. Under the regime a consumer or the ACCC may seek a declaration from the court that a term of a standard form consumer contract is unfair and therefore void.
The test for whether or not a term is unfair has three elements, all of which must be satisfied:
In determining whether a term is unfair, the court may take into account such matters as it thinks fit. However, to assist the court the ACL includes a non-exhaustive list of terms that may be considered unfair (for example, a term that permits one party to vary the terms of the contract, or a term that penalises one party for a breach or termination of the contract). The court must also take into account the extent to which the term is transparent (i.e. expressed in reasonably plain language, legible, presented clearly and readily available) and it must consider the term within the contract as a whole.
Terms which set the upfront price payable by the consumer and the subject matter of a contract, and terms expressly required or permitted by law, are excluded from the regime and cannot be declared unfair.
The Review had two broad aims:
The ACCC assessed contracts in the airline, telecommunications, fitness and vehicle rental industries and, in conjunction with Consumer Affairs Victoria, contracts used by online traders and travel agents. These sectors appear to have been targeted because they suffer from what is claimed to be relatively high levels of consumer complaints and there is the potential for widespread consumer harm if unfair contract terms within them are allowed to persist.
The Review identified particular concerns in relation to terms which:
Having identified these concerns, the ACCC reports that substantial improvements have been achieved; in most cases, businesses under review chose to amend or delete the problematic terms. In the airline industry, for example, the ACCC reports that 79% of problematic terms identified have now been amended or deleted as a result of the Review. However, the ACCC has foreshadowed further action – including the possibility of court proceedings – against those businesses, particularly in the travel agent and vehicle rental industries, who have chosen not to change their consumer agreements in response to the ACCC’s concerns.
In the context of the Review the ACCC also identified a number of concerns outside the unfair contract terms regime and these serve as a reminder that standard form consumer contracts can raise issues under other aspects of the ACL. For example, terms that seek to exclude liability or limit consumers’ rights – a particular concern for the ACCC during the Review –may fall foul of the unfair contract terms regime, the consumer guarantee regime and, to the extent that they give a false impression about a consumer’s rights, will contravene the prohibition against misleading or deceptive conduct.
Although the businesses directly affected by the Review have been given an opportunity to modify their behaviour ahead of any ACCC enforcement action, there is no guarantee that other businesses will be given that same chance. Indeed, the ACCC has explicitly stated that the release of the Review’s outcomes marks the end of the ACCC’s emphasis on compliance and a transition to a more enforcement-led approach. That approach is sure to include an increased willingness to initiate court proceedings to affect change.
In the aftermath of the Review, all businesses that make use of standard form consumer contracts are presented with an opportunity to review their standard terms for compliance not only with the unfair contract terms regime but the full range of ACL requirements. Businesses that operate in high-profile consumer markets, or that make use of the kinds of terms identified in the Review, need to be particularly mindful of the ACL and the prospect of ACCC action.
 Inclusion on the list does not raise a presumption that a particular type of term is unfair; the examples are still subject to the unfair terms test.
The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.