Ombudsman lauds Labor stance on unfair contracts

Ombudsman Kate Carnell has welcomed the Labor party’s commitment to three key changes to legislation on unfair contract terms.

Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Ms Carnell described Labor’s announced changes to unfair contract terms as “in line with our submission to the review currently being undertaken by Treasury”.

She went on: “Making unfair contract terms illegal would be a major improvement in protecting small businesses.

“Currently, where a standard-form contract contains an unfair contract term, the only way for a small business to take action is through the court system. And even if the term is proven to be unfair, there is no penalty to the big business.”

Penalties of $10 million

Ms Carnell also argued that making the unfair contract terms illegal would empower the Australian Competition and Consumer Commission (ACCC).

“The ACCC would be able to penalise big businesses up to $10 million and issue infringement notices,” she said.

“We agree the contract size threshold should be increased to $1 million for contacts up to 12 months. And to $5 million for contacts greater than 12 months. This is also in line with our submission.”

Ms Carnell defined small businesses as those with a turnover of up to $10 million. She also praised them as the “engine room” of the Australian economy.

“Increasing the number of small businesses protected by this proposal is something this office has consistently advocated,” she said.

“The ACCC has estimated that small businesses enter into around eight standard contracts per year.”

Access to Justice

Ms Carnell said Phase I of the Access to Justice Inquiry found that small businesses were unlikely to take action when faced with an unfair contract term in their standard form contract.

“They’re reluctant to damage commercial relationships, and lack the resources and time to pursue litigation,” she said.

“Any change to legislation or regulation that levels the playing field between small businesses and the larger players is worth pursuing.”

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