The recent enactment of the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) signifies a notable expansion in the unfair contract terms (UCT) regime. In this respect, the amendment significantly expands the scope of the UCT regime under the:

1. Australian Consumer Law (ACL) in the Competition and Consumer Act 2010 (Cth) which covers standard form ‘consumer contracts’ and ‘small business contracts’; and
2. Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) which covers standard form consumer contracts and small business contracts relating to financial products or the supply (or possible supply) of financial services.

In this article, we summarise the key amendments made to the ACL and ASIC Act, being the expansion of the definition of ‘small business contracts’ and increased penalties for contravening the UCT provisions.

Small Business Contracts

The definition of a ‘small business contract’ under the ACL and ASIC Act has been significantly expanded.

Pursuant to the ACL, a small business contract is a contract for the supply of goods or services, where at the time of entering into the contract, at least one party:

1. employs less than 100 full-time equivalent employees (up from 20 employees); or
2. has an annual turnover of less than $10 million.

Notably, the requirement for the relevant contract’s upfront or ongoing price to fall below certain thresholds has been removed.

Pursuant to the ASIC Act, a small business contract is a contract, where at the time of entering into the contract:

1. the upfront price payable under the contract is less than $5 million; and
2. at least one party to the contract:
1. employs less than 100 full-time equivalent employees; or
2. has an annual turnover of less than $10 million.

Increased Penalties

The ACL and ASIC Act have both been amended to provide for substantial penalties for each contravention of the UCT provisions.

Pursuant to the ACL, the maximum penalty for a contravention of the UCT provisions by:

1. a company is the greater of:
1. $50 million (up from $10 million);
2. three times the value of the benefit obtained from the conduct (if capable of being ascertained); or
3. 30% of the company’s adjusted turnover during the breach turnover period (minimum 12 months).
2. an individual is $2.5 million.

Pursuant to the ASIC Act, the maximum penalties are:

1. for a company, the greater of:
1. 50,000 penalty units (currently $13,750,000);
2. three times the value of the benefit obtained from the conduct (if capable of being ascertained); or
3. 10% of annual turnover, capped at 2.5 million penalty units (currently $555 million).
2. for an individual:
1. 5,000 penalty units (currently $1,375,000); or
2. three times the value of the benefit obtained from the conduct.

What to Do Next

These amendments came into effect on 9 November 2023 and companies need to be proactive in ensuring that they are compliant with the expanded UCT regime. Those seeking to comply with their obligations should have their standard form contracts reviewed as soon as possible to ensure that they do not contain any unfair terms to avoid the significant penalties that now attach to a contravention of the UCT provisions.