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The current Commonwealth Government has been proactive in legislating the commercial landscape with the aim of ensuring fair competition. The amendments to the Competition and Consumer Act 2010 (Cth) in October 2022 to impose a penalty on those who rely on unfair contract terms to the detriment of the consumer are now in force. But it’s unlikely the government will stop there.

A hot topic being discussed at the moment is the introduction of a general prohibition against unfair trading practices. With pressure mounting from the ACCC and members of Parliament, the creation of such a prohibition seems likely.

What are ‘unfair trading practices’?

The ACCC and other regulators are able to impose penalties on a business where it can identify specific breaches of that business’ contractual or legal obligations. On the other hand, it can be difficult to reprimand a business for its actions if its allegedly “unfair” conduct cannot be linked to a specific contravention. For example, many digital streaming services have convoluted and confusing processes for consumers to follow to cancel their subscription. Examples include confusing wording, urges to stay longer, or (counter-intuitively) having to press a RED button for “yes” and a GREEN button for “no”.

And while these examples of unfair trading practices might not result in severe consequences for the consumer, sometimes it may. For example, the ACCC took a VET FEE-HELP diploma provider to court over its sales tactics to knock on the doors of people living in disadvantaged and vulnerable communities to sign up students, often without the students’ knowledge of the significant debt they would incur. The ACCC was not successful in its pursuit of the diploma provider under the current laws of misleading and deceptive conduct.

Why does the ACCC think prohibitions are needed?

The discussion about the implementation of “unfair trading” prohibitions is not new in Australia and it exists in many other jurisdictions around the world. The ACCC and the Government believe there is a gap in the current consumer protections regime. Whilst certain prohibitions against unfair trading practices exist (such as undue harassment), the general prohibition as proposed would cover the entire market.

Consequences for small and medium Australian businesses

As with most consumer protection regimes, large businesses and multinationals are better equipped to deal with the teething issues of the introduction of new laws. It is difficult to predict exactly how this will affect small and medium businesses in Australia, as the finer details have not yet been decided or disclosed. However, one common critique of the desired general prohibition against “unfair trading practices” is the ambiguity of the word “‘unfair”.

It remains to be seen whether community and business standards of unfairness will align with legislative intent and judicial understanding. Concerns from businesses have been raised that, despite their good intentions and general compliance with consumer protection laws, an ambiguous prohibition of ‘unfairness’ could expose them to (ironically) unfair penalties.

Key takeaways

1. The current Commonwealth Government is proactively seeking to implement laws to target businesses that they believe are acting contrary to fair competition.
2. Regulators and the Government argue that there is a gap in Australia’s consumer protection regime that can be adequately filled with the introduction of a general prohibition on “unfair trading practices”.
3. Details as to how the prohibition will affect small and medium businesses is unknown, but general concerns have been raised over how the term ‘unfair’ will be interpreted and regulated.

Macpherson Kelley’s Commercial team is well informed on this issue and remains across developments in the compliance space. If you need straight-talking advice or have concerns as to how the implementation of unfair contract terms or unfair trading practices affects your business, please reach out.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.