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2022
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
TREASURY LAWS AMENDMENT (MORE COMPETITION, BETTER PRICES)
BILL 2022
EXPLANATORY MEMORANDUM
(Circulated by authority of the Assistant Minister for Competition, Charities and
Treasury, the Hon Dr Andrew Leigh MP)
Table of Contents
Glossary................................................................................................. iii
General outline and financial impact ...................................................... 1
Chapter 1: More competition, better prices.................................... 3
Chapter 2: Unfair contract terms ................................................. 25
Chapter 3: Statement of Compatibility with Human Rights .......... 51
Attachment 1: Regulation impact statement executive summary -
unfair contract terms .................................................. 61
Glossary
This Explanatory Memorandum uses the following abbreviations and acronyms.
Abbreviation Definition
ACCC Australian Competition and Consumer
Commission
ACL Australian Consumer Law as set out in
Schedule 2 to the Competition and
Consumer Act 2010
ASIC Australian Securities and Investments
Commission
ASIC Act Australian Securities and Investments
Commission Act 2001
Bill Treasury Laws Amendment (More
Competition, Better Prices) Bill 2022
CCA Competition and Consumer Act 2010
CHESS Clearing House Electronic Sub-register
System
ICCPR International Covenant on Civil and Political
Rights
OECD Organisation for Economic Co-operation and
Development
RBA Reserve Bank of Australia
RITS Reserve Bank Information and Transfer
System
Scheduled version of Part IV Scheduled version of Part IV as set out in
Schedule 1 to the Competition and
Consumer Act 2010
TPD Total Permanent Disability
Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
General outline and financial impact
Schedule 1 - More competition, better prices
Outline
Schedule 1 to the Bill will amend the CCA, including the ACL, to increase the
maximum penalty applicable to certain breaches of competition and consumer law to
ensure that the price of misconduct is high enough to deter anti-competitive behaviour
and unfair activity, and to ensure consumers retain a robust level of protection.
Date of effect
Schedule 1 to the Bill will commence the day after Royal Assent. The amended penalty
regime will apply to offences committed, or contraventions, acts or omissions that
occur, on or after Schedule 1 to the Bill commences.
Proposal announced
Schedule 1 to the Bill will partially implement the Government's 2022 Better
Competition Election Commitment.
Financial impact
Schedule 1 to the Bill is estimated to have the following impact on the underlying cash
balance over the forward estimates period ($m):
2022 - 23 2023 - 24 2024 - 25 2025 - 26
- - 7.2 55.4
Schedule 1 to the Bill is also estimated to have a positive impact on the underlying
cash balance of $117.5 million in 2026-27, and an ongoing positive impact.
Human rights implications
Schedule 1 to the Bill raises human rights issues. See Statement of Compatibility with
Human Rights -- Chapter 3.
Compliance cost impact
Schedule 1 to the Bill will have a negligible compliance cost.
1
General outline and financial impact
Schedule 2 - Unfair contract terms
Outline
Schedule 2 to the Bill amends the CCA, ACL and the ASIC Act to strengthen and
clarify the existing unfair contract terms provisions, and reduce the prevalence of
unfair contract terms in consumer and small business standard form contracts. The
amendments introduce a civil penalty regime prohibiting the use of and reliance on
unfair contract terms in standard form contracts. The amendments also expand the
class of contracts that are covered by the unfair contract terms provisions.
Date of effect
The amendments in Schedule 2 to the Bill commence on the day after the period of
12 months after the Bill receives Royal Assent. This is to enable industry to make any
necessary changes prior to commencement.
Proposal announced
Schedule 2 to the Bill implements the Government's 2022 Greater Protections from
Unfair Contract Terms Election Commitment.
Financial impact
Nil.
Regulation impact statement
The regulation impact statement covering the amendments in Schedule 2 to the Bill is
available on the Department of Treasury's website.1 The executive summary is
provided at Attachment 1 to this Explanatory Memorandum.
Human rights implications
Schedule 2 to the Bill raises human rights issues. See Statement of Compatibility with
Human Rights -- Chapter 3.
Compliance cost impact
Schedule 2 to the Bill may result in some businesses re-examining their standard form
contracts, although the total regulatory costs are expected to be small.
1
https://treasury.gov.au/publication/p2020-125938
2
Chapter 1: More competition, better
prices
Table of Contents:
Outline of chapter .................................................................................. 3
Context of amendments ......................................................................... 4
Summary of new law.............................................................................. 4
Comparison of key features of new law and current law ........................ 6
Detailed explanation of new law ............................................................ 7
Parts IV, IVBA, X AND XICA ........................................................... 8
Part XIB ......................................................................................... 13
Australian Consumer Law ............................................................. 14
Calculating the maximum penalty for a body corporate................. 19
Consequential amendments ................................................................ 23
Commencement, application, and transitional provisions .................... 23
Outline of chapter
1.1 Schedule 1 to the Bill will amend the CCA to:
• increase the maximum penalty for anti-competitive behaviour in
breach of certain offence and civil penalty provisions in Parts IV,
IVBA, X, XIB and XICA to ensure the price of misconduct is high
enough to deter unfair activity; and
• increase the maximum penalty for breach of certain offence and civil
penalty provisions in the ACL to maintain consistency with maximum
penalties under the competition provisions of the CCA, and ensure
consumers retain a robust level of protection.
1.2 All references in this Chapter are to the CCA unless otherwise stated. A
reference to the ACL is a reference to Schedule 2 of the CCA.
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More competition, better prices
Context of amendments
1.3 Schedule 1 to the Bill will implement one part of the Government's Better
Competition election commitment to strengthen Australia's competition laws
by increasing penalties for anti-competitive behaviour.
1.4 Nearly 30 years ago, the maximum penalty for breach of the competition
provisions in Part IV was increased to $10 million for a body corporate and
$500,000 for a person that is not a body corporate. While the maximum
penalty for a body corporate has since been updated to allow the court to
impose penalties based on the benefit obtained or a percentage of corporate
turnover, the base penalty has remained the same. As a result, there is a risk
under the existing provisions that some large businesses could see a breach of
competition law as an acceptable cost of doing business.
1.5 In 2018, the OECD report Pecuniary Penalties for Competition Law
Infringements in Australia also found that the average and maximum
competition penalties in Australia are, in practice, substantially lower than
those in comparable international jurisdictions.
1.6 The amendments will increase the severity of Australia's penalty regime and
facilitate the imposition of penalties for anti-competitive behaviour that are
more comparable with international jurisdictions. This will ensure the price of
misconduct is high enough to deter unfair activity and improve competition in
Australia for the benefit of consumers and small businesses.
1.7 Maximum penalties available in consumer cases must also be high enough to
achieve deterrence and ensure that consumers retain a robust level of
protection against egregious conduct.
1.8 Penalties under the ACL were last increased in 2018 to align with competition
penalties. The amendments will maintain this consistency by increasing
maximum penalties in line with those proposed for the competition provisions
of the CCA. This will sufficiently deter breaches of consumer law, particularly
in circumstances where there is significant financial benefit to be had.
1.9 Consultation on an exposure draft of Schedule 1 to the Bill occurred from
18 August 2022 to 25 August 2022. Around 20 submissions were received
from stakeholders, including prominent consumer groups, business and legal
organisations and telecommunications industry associations and companies.
Summary of new law
1.10 Schedule 1 to the Bill will strengthen the penalty regime under the CCA,
including the ACL, to deter non-compliant conduct and reduce the financial
benefits and incentives for businesses to engage in conduct in breach of
competition and consumer law.
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
1.11 The maximum penalty for breach of certain offences and civil penalty
provisions in Parts IV, IVBA, X, XIB and XICA and the ACL by a body
corporate, or a person that is not a body corporate, will increase.
1.12 The new maximum penalty for breach of a relevant offence or civil penalty
provision under Parts IV, IVBA, X and XICA and the ACL by a body
corporate will be the greatest of:
• $50 million;
• if the court can determine the value of the benefit obtained--three
times the value of that benefit; or
• if the court cannot determine the value of the benefit obtained--30%
of the body corporate's adjusted turnover during the breach turnover
period for the offence, act or omission.
1.13 The third limb of the maximum penalty for a body corporate will include the
new terms 'adjusted turnover' and 'breach turnover period'. The adjusted
turnover is the sum of the value of all the supplies that the body corporate (and
any related body corporate) has made or is likely to have made during the
breach turnover period, with some exceptions. The breach turnover period
generally represents the duration of the breach, but 12 months is the minimum
period over which the penalty is calculated.
1.14 The maximum penalty for breach of a corresponding civil penalty provision in
Parts IV, IVBA, X and XICA of the CCA, and an offence or civil penalty
provision in the ACL by a person that is not a body corporate will increase
from $500,000 to $2.5 million.
1.15 The new maximum penalty for contravention of the competition rule under
Part XIB by a body corporate will be the greatest of:
• if the contravention continued for 21 days or fewer--the sum of
$50 million and $1 million for each day that the contravention
continued;
• if the contravention continued for more than 21 days--the sum of
$71 million and $3 million for each day in excess of 21 that the
contravention continued;
• if the court can determine the value of the benefit obtained--three
times the value of that benefit; or
• if the court cannot determine the value of the benefit obtained--30%
of the body corporate's adjusted turnover during the breach turnover
period for the contravention.
1.16 The fourth limb of the maximum penalty for contravention of the competition
rule by a body corporate will include the new terms 'adjusted turnover' and
'breach turnover period' in line with the third limb of the maximum penalty for
a body corporate under Parts IV, IVBA, X and XICA and the ACL.
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More competition, better prices
1.17 The maximum penalty for contravention of the competition rule in Part XIB by
a person that is not a body corporate will increase from $500,000 to
$2.5 million.
1.18 The amendments primarily increase penalties for anti-competitive conduct and
breach of consumer law, so the maximum penalties for contraventions which
relate to, for example, the Consumer Data Right or industry codes will not
change. Similarly, penalties for secondary boycott provisions will remain at
their current maximum level, except for secondary boycotts that cause
substantial lessening of competition.
1.19 The new maximum penalties are intended to apply in the most egregious
instances of non-compliance. Courts have the discretion to determine the
appropriate penalty amount, up to the maximum set under the law.
1.20 The amended penalty regime will apply in relation to offences committed, or
contraventions, acts or omissions that occur on or after the commencement of
Schedule 1 to the Bill.
Comparison of key features of new law and
current law
New Law Current Law
The maximum pecuniary penalty for breach The maximum pecuniary penalty for breach
of a relevant civil penalty provision in Part of a relevant civil penalty provision in Part
IV, IVBA, X or XICA or the ACL, and IV, IVBA, X or XICA or the ACL, and the
maximum fine for an offence against section maximum fine for an offence against section
45AF or 45AG of Part IV or the ACL by a 45AF or 45AG of Part IV or the ACL by a
body corporate is the greater of: body corporate is the greater of:
• $50 million; • $10 million;
• if the court can determine the value of • if the court can determine the value of
the benefit obtained - three times the the benefit obtained - three times the
value of the benefit; or value of the benefit; or
• if the court cannot determine the value • if the court cannot determine the value
of the benefit - 30% of the adjusted of the benefit - 10% of the annual
turnover during the breach turnover turnover of the body corporate.
period for the offence, act or omission.
The maximum penalty for breach of a The maximum penalty for breach of a
relevant civil penalty provision under relevant civil penalty provision under
Parts IV, IVBA, X and XICA of the CCA, Parts IV, IVBA, X and XICA of the CCA,
and offence or civil penalty provision in the and offence or civil penalty provision in the
ACL by a person that is not a body ACL by a person that is not a body
corporate is $2.5 million. corporate is $500,000.
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
New Law Current Law
The maximum pecuniary penalty for The maximum pecuniary penalty for
contravention of the competition rule in contravention of the completion rule in
Part XIB by a body corporate is the greater Part XIB by a body corporate is not to
of: exceed:
• if the contravention continued for • if the contravention continued for more
21 days or fewer-- the sum of than 21 days--the sum of $31 million
$50 million and $1 million for each day and $3 million for each day in excess of
that the contravention continued; 21 that the contravention continued; or
• if the contravention continued for more • otherwise--the sum of $10 million and
than 21 days--the sum of $71 million $1 million for each day that the
and $3 million for each day in excess of contravention continued.
21 that the contravention continued;
• if the court can determine the value of
the benefit--three times the value of
that benefit; or
• if the court cannot determine the value
of the benefit obtained--30% of the
body corporate's adjusted turnover
during the breach turnover period for the
contravention.
The maximum pecuniary penalty for The maximum pecuniary penalty for
contravention of the competition rule in contravention of the competition rule in
Part XIB by a person that is not a body Part XIB by a person that is not a body
corporate is not to exceed $2.5 million for corporate is not to exceed $500,000 for each
each contravention. contravention.
Detailed explanation of new law
1.21 Schedule 1 to the Bill increases the maximum fine or pecuniary penalty for the
breach of certain offences and civil penalty provisions in Parts IV, IVBA, X,
XIB and XICA and the ACL by a body corporate, and a person that is not a
body corporate.
1.22 The new penalty regime will deter non-compliant conduct and reduce the
financial benefits and incentives for businesses to engage in conduct in breach
of competition and consumer law.
1.23 The new penalties are in dollar amounts rather than penalty units, consistent
with current approach in the CCA. This is intended to achieve a uniform
maximum across jurisdictions implementing relevant parts of the CCA as
nationally uniform legislation, which may have differences in the value of a
penalty unit.
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More competition, better prices
Parts IV, IVBA, X AND XICA
Chapter 2 Civil penalties in Parts IV, IVBA, X and XICA
1.24 Civil penalties apply for a range of anti-competitive behaviour in breach of
Parts IV, IVBA, X and XICA by a body corporate and a person that is not a
body corporate.
1.25 The amendments will impose new maximum pecuniary penalties for breach of
certain civil penalty provisions in Part IV, IVBA, X and XICA by a body
corporate and a person other than a body corporate. Civil penalty provisions
where the maximum penalty will increase are listed in Table 1.2. If the civil
penalty does not appear in Table 1.2, the penalty will not change.
1.26 The civil penalties in Table 1.2 dealing with the enforcement of undertakings
and orders in relation to international liner cargo shipping under Part X, will
increase in line with the penalties in Part IV. This is due to the operation of
subsections 10.49A(2), 10.60(2) and 10.65(2), which respectively provide that
Part VI (including section 76) applies in relation to subsections 10.49A(1),
10.60(1) and 10.60(1) as if they were provisions of Part IV.
1.27 The amendments will reformat the penalty amounts in existing
subsections 76(1A) and (1B) into a table, including penalty amounts that are
not increasing. Table 1.3 sets out the new location of all penalties for ease of
reference.
[Schedule 1, item 25, subsections 76(1A) and (1B) of the CCA]
Body corporate
1.28 The new maximum pecuniary penalty for a body corporate that breaches a civil
penalty provision in Part IV, IVBA, X and XICA listed in Table 1.2 will
broadly be the greatest of the following three limbs:
• $50 million;
• if the Court can determine the value of the benefit that the body
corporate, and any body corporate related to the body corporate, have
obtained directly or indirectly and that is reasonably attributable to the
act or omission--three times the value of that benefit; and
• if the court cannot determine the value of the benefit obtained--30%
of the body corporate's adjusted turnover during the breach turnover
period for the act or omission.
1.29 In comparison to the existing law, the first limb of the maximum penalty will
increase five-fold from $10 million to $50 million. The second limb will
remain unchanged. The third limb will increase from 10% of annual turnover
in the 12 months prior to the breach, to 30% of the adjusted turnover for the
period of the breach.
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
1.30 Additional details on how to calculate the new maximum penalty for a body
corporate, the meaning of 'adjusted turnover' and 'breach turnover period' and
justification for the penalty are set out below.
[Schedule 1, item 25, subsections 76(1A) and (1B) of the CCA]
Person not a body corporate
1.31 The new maximum penalty for breach of a civil penalty provision in Parts IV,
IVBA, X and XICA (see Table 1.2) by a person that is not a body corporate
will increase from $500,000 to $2.5 million. As the base penalty for a body
corporate is increasing five-fold, the penalty for a person that is not a body
corporate will also increase five-fold, from $500,000 to $2.5 million.
1.32 Under the existing law, a number of civil penalty provisions listed in Table 1.2
primarily apply to body corporates. However, a person that is not a body
corporate may be subject to a pecuniary penalty for breach of a provision of
Table 1.2 that would otherwise be limited to a body corporate, through the
extended liability regime in subsection 76(1). This includes circumstances
where a person has aided or abetted a body corporate to contravene a relevant
provision.
1.33 There are some exceptions to the application of the extended liability regime
that are highlighted in the new table format for section 76. This reflects the
existing law. The new table clarifies that:
• pecuniary penalties may not be ordered under the extended liability
regime against certain individuals in relation to contraventions of
sections 153E, 153F, 153G or 153H in certain circumstances, and
• the only pecuniary penalty that may be ordered for a contravention of
section 45D, 45DA, 45DB, 45E or 45EA is the penalty that applies to a
body corporate, due to the operation of subsection 76(2), which
provides that nothing in subsection 76(1) (providing for the extended
liability regime) authorises the making of an order against an
individual because the individual has contravened or attempted to
contravene, or been involved in a contravention of these sections.
[Schedule 1, item 25, subsections 76(1A) and (1B) of the CCA]
Table 1.1 Civil penalty provisions in Parts IV, IVBA, X and XICA
Provision Conduct
of CCA
Part IV (and Scheduled version of Part IV)
45AJ Making a contract etc. containing a cartel provision
45AK Giving effect to a cartel provision
45 Contracts, arrangements or understandings that restrict dealings or affect
competition
9
More competition, better prices
Provision Conduct
of CCA
Part IV (and Scheduled version of Part IV)
45DA Secondary boycotts for the purpose of causing substantial lessening of
competition
46 Misuse of market power
46A Misuse of market power--corporation with substantial degree of power in
trans-Tasman market
47 Exclusive dealing
48 Resale price maintenance
49 Dual listed company arrangements that affect competition
50 Prohibition of acquisitions that would result in a substantial lessening of
competition
50A Acquisitions that occur outside Australia
Part IVBA
52ZC Digital service to be supplied without differentiating in relation to registered
news businesses
52ZH Obligation to negotiate in good faith
52ZS Obligation to participate in arbitration in good faith
52ZZE Bargaining parties must comply with the determination
Part X
10.49A Enforcement of undertakings
10.60 Enforcement of orders and undertakings
10.65 Enforcement of orders and undertakings
Part XICA
153E Prohibited conduct - retail pricing
153F Prohibited conduct--electricity financial contract liquidity
153G Prohibited conduct--electricity spot market (basic case)
153H Prohibited conduct--electricity spot market (aggravated case)
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
Table 1.2 New location of civil pecuniary penalties in section 76
Provision of CCA Current Current New
provision: provision: provision
body not a body (table in
corporate corporate item 25, new
section 76(1A))
Relating to section 45AJ or 45AK 76(1A)(aa) 76(1B)(b) Item 1
Relating to section 45D, 45DB, 45E 76(1A)(a) N/A - see Item 2
or 45EA section 76(2)
Relating to any provision of Part IV 76(1A)(b) 76(1B)(b) Item 3
not covered by section 45AJ, 45AK,
45D, 45DB, 45E or 45EA
Relating to a civil penalty provision 76(1A)(ca) 76(1B)(aaa) Item 4
of an industry code
Relating to a provision of Division 4 76(1A)(baa) 76(1B)(b) Item 5
of Part IVBA
Relating to section 52ZC, 52ZH, 76(1A)(b) 76(1B)(b) Item 6
52ZS or 52ZZE
Relating to any provision of Part 76(1A)(bab) 76(1B)(b) Item 7
IVBA not covered by section 52ZC,
52ZH, 52Z, 52ZZE or Division 4 of
Part IVBA.
Relating to section 55B, 60C or 60K 76(1B)(aa) 76(1B)(aa) Item 8
Relating to subsection 56BO(1) or 76(1A)(b) 76(1B)(ab) Item 9
56BU(1), section 56CD or a civil
penalty provision of the consumer
data rules
Relating to a civil penalty provision 76(1A)(cb) 76(1B)(aab) Item 10
of the consumer data rules that sets
out at its foot a pecuniary penalty
indicated by the words "Civil
penalty"
Relating to a civil penalty provision 76(1A)(cc) 76(1B)(aac) Item 11
of Part IVE described by section
57GA
Relating to section 92 76(1B)(a) 76(1B)(a) Item 12
Relating to a provision of Division 2 76(1A)(aa) 76(1B)(b) Item 13
of Part XICA
Relating to any other provision to 76(1A)(d) 76(1B)(b) Item 14
which section 76 applies
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More competition, better prices
Offences in Part IV
1.34 The application of criminal cartel offences to corporations applies by way of
two offences in Part IV (sections 45AF and 45AG) that prohibit a corporation
from making, or giving effect to, a provision of a contract, arrangement or
understanding with a competitor that fixes prices, restricts outputs, allocates
markets between competitors, or rigs a bidding process.
1.35 The new maximum fine payable by a body corporate on conviction of a
criminal offence against section 45AF or 45AG will be the greatest of the
following three limbs:
• $50 million;
• if the court can determine the total value of the benefits that have been
obtained by one or more persons and are reasonably attributable to the
commission of the offence--three times the value of that benefit; or
• if the court cannot determine the value of the benefit obtained--30%
of the body corporate's adjusted turnover during the breach turnover
period for the offence.
1.36 In comparison to the existing law, the first limb of the maximum penalty will
increase five-fold. The second limb will remain unchanged. The third limb will
increase from 10% of annual turnover in the 12 months prior to the breach, to
30% of the adjusted turnover for the period of the breach.
1.37 Additional details on how to calculate the new maximum penalty for a body
corporate, the meaning of 'adjusted turnover' and 'breach turnover period' and
justification for the penalty are set out below.
1.38 The new maximum penalty reflects the seriousness of the conduct covered by
the offences, while more adequately reflecting the nature and potential
consequences of cartel conduct. Consistent with the principles set out in the
Guide to Framing Commonwealth Offences, Infringement Notices and
Enforcement Powers, the increased maximum penalty will be adequate to deter
and punish the worst case offence.
[Schedule 1, items 4, 5, 6 and 7, paragraphs 45AF(3)(a) and (c), 45AG(3)(a)
and (c) of the CCA]
1.39 Section 4AB of the Crimes Act 1914 will not apply to the penalty amount for
an offence against section 45AF or 45AG. This will ensure the penalty remains
in a dollar figure rather than automatically converting to penalty units. This is
necessary to achieve nationally uniform legislation, as different jurisdictions
may have differences in the value of a penalty unit.
[Schedule 1, item 8, section 45AI of the CCA]
1.40 Parallel amendments will be made to the Scheduled version of Part IV which
States and Territories apply via their own legislation, to mirror the amendments
to Part IV.
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
[Schedule 1, items 11, 12, 13, 14 and 15 paragraphs 45AF(3)(a) and (c),
45AG(3)(a) and (c) and 45AI of Schedule 1 of the CCA]
Part XIB
Civil penalties in Part XIB
1.41 Part XIB contains specific prohibitions against anti-competitive conduct in the
telecommunications industry. The telecommunications market has a number of
unique characteristics that increase the risk of anti-competitive conduct
compared to other industries.
1.42 Section 151AK sets out a rule for the purposes of Part XIB, known as 'the
competition rule'. This rule is that a carrier or carriage service provider must
not engage in anti-competitive conduct. Contravention of the competition rule
is subject to a civil penalty in accordance with subsection 151BX(1).
1.43 The existing penalties for contravention of the competition rule may not
provide an effective deterrent because it is open to larger providers in the
telecommunications industry to weigh the potential benefit in the market of
breaching the competition rule against the possible size of the financial
penalty, and to knowingly take action in breach of the competition rule.
1.44 The amendments impose larger maximum penalties for breach of the
competition rule to provide a stronger deterrent against anti-competitive
conduct.
Body corporate
1.45 The new maximum pecuniary penalty for contravention of the competition rule
by a body corporate under subsection 151BX(3) will be the greatest of:
• if the contravention continued for 21 days or fewer--the sum of
$50 million and $1 million for each day that the contravention
continued;
• if the contravention continued for more than 21 days--the sum of
$71 million and $3 million for each day in excess of 21 that the
contravention continued;
• if the court can determine the value of the benefit that the body
corporate, and any body corporate related to the body corporate, have
obtained directly or indirectly and that is reasonably attributable to the
contravention--three times the value of that benefit; and
• if the court cannot determine the value of the benefit obtained--30%
of the body corporate's adjusted turnover during the breach turnover
period for the contravention.
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More competition, better prices
1.46 In comparison to the existing law, the base penalty for a contravention that
continues for 21 days or fewer under the first limb will increase five-fold, from
$10 million to $50 million. The daily penalty of $1 million per day for the first
21 days and $3 million per day for each day in excess of 21 days will be
retained, to continue incentivising the expeditious rectification of conduct that
contravenes the competition rule. The base penalty for a contravention that
continues for more than 21 days under the second limb, will increase from
$31 million to $71 million.
1.47 The amendments introduce a new third and fourth limb to bring the maximum
penalty for breach of the competition rule in line with other maximum
penalties for anti-competitive behaviour in the CCA. This will allow the court
to impose penalties based on the benefit obtained or a percentage of corporate
turnover.
1.48 Additional details on how to calculate the new maximum penalty for a body
corporate, the meaning of 'adjusted turnover' and 'breach turnover period' and
justification for the penalty are set out below.
[Schedule 1, items 28 and 29, paragraph 151BX(3)(a),
subparagraph 151BX(3)(a)(i) and (ii) of the CCA]
Person not a body corporate
1.49 The maximum penalty for contravention of the competition rule by a person
that is not a body corporate under subsection 151BX(4) will increase to
$2.5 million. As the first limb of the base penalty for a body corporate is
increasing five-fold, the penalty for a person that is not a body corporate will
also increase five-fold, from $500,000 to $2.5 million.
[Schedule 1, item 30, paragraph 151BX(4)(b) of the CCA]
Australian Consumer Law
1.50 The ACL provides consumers with rights and protections. Breaches of the
ACL can significantly affect consumer wellbeing, competition in the market
and economic efficiency.
1.51 The new maximum penalties align with those proposed for anti-competitive
behaviour in the CCA discussed above. The increase is necessary to ensure the
price of misconduct is high enough to provide a strong deterrent against
breaches of consumer law.
Civil penalties in the ACL
1.52 Under the ACL, civil penalties may be imposed where a person engages in
certain conduct including unconscionable conduct, making false or misleading
representations, and supplying consumer goods or certain services that do not
comply with safety standards or which are banned.
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
1.53 The amendments will impose new maximum civil pecuniary penalties for
breach of a civil penalty provision in the ACL by a body corporate and a
person other than a body corporate. Civil penalty provisions where the
maximum penalty will increase are listed in Table 1.4. If the civil penalty does
not appear in the table, the penalty will not change.
Body Corporate
1.54 The new maximum pecuniary penalty for breach of a civil penalty provision in
the ACL listed in Table 1.4 by a body corporate, will be the greatest of the
following three limbs:
• $50 million;
• if the Court can determine the value of the benefit that the body
corporate, and any body corporate related to the body corporate, have
obtained directly or indirectly and that is reasonably attributable to the
act or omission--three times the value of that benefit; and
• if the court cannot determine the value of the benefit obtained--30%
of the body corporate's adjusted turnover during the breach turnover
period for the act or omission.
1.55 In comparison to the existing law, the first limb of the maximum penalty will
increase five-fold from $10 million to $50 million. The second limb will
remain unchanged. The third limb will increase from 10% of annual turnover
in the 12 months prior to the breach, to 30% of the adjusted turnover for the
period of the breach.
1.56 Additional details on how to calculate the new maximum penalty for a body
corporate, the meaning of 'adjusted turnover' and 'breach turnover period' and
justification for the penalty are set out below.
[Schedule 1, items 103, 104 and 105, subsection 224(3) and
paragraphs 224(3A)(a) and (c) of the ACL]
Person not a body corporate
1.57 The maximum penalty for breach of a civil penalty provision in the ACL listed
in Table 1.4 by a person that is not a body corporate will increase to
$2.5 million. As the penalty for a body corporate is increasing five-fold, the
penalty for a person that is not a body corporate will also increase five-fold,
from $500,000 to $2.5 million.
[Schedule 1, item 103, subsection 224(3) of the ACL]
Table 1.3 Civil penalty provisions in ACL
Provision Conduct
of ACL
20 Unconscionable conduct
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More competition, better prices
Provision Conduct
of ACL
21 Unconscionable conduct in connection with goods or services
23 Unfair terms of consumer contracts and small business contracts (as
amended by Schedule 2 to the Bill)
29 False or misleading representations about goods or services
30 False or misleading representations about sale of land
31 Misleading conduct relating to employment
32 Offering rebates, gifts, prizes or other free items with intention of not
providing it
33 Misleading conduct as to the nature, manufacturing process, characteristics,
suitability for purpose or quantity of any goods
34 Misleading conduct as to the nature, characteristics, suitability for purpose
or quantity of services
35 Bait advertising
36 Wrongly accepting payment
37 Misleading representations about certain business activities
39 Unsolicited credit or debit cards
40 Assertion of rights to payment for unsolicited goods or services
43 Assertion of rights to payment for unauthorised entries or advertisements
44 Pyramid schemes
48 Single price to be specified in certain circumstances
49 Referral selling
50 Harassment and coercion
106 Supplying consumer goods that do not comply with safety standards
107 Supplying product related services that do not comply with safety standards
118 Supplying consumer goods covered by a ban
119 Supplying product related services covered by a ban
127 Compliance with recall notices
136 Supplying goods that do not comply with information standards
137 Supplying services that do not comply with information standards
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
Offences in the ACL
1.58 Criminal penalties may be imposed for certain offences committed under the
ACL, including where a person has made false representations about goods or
services, sought payment for unsolicited goods and services or supplied
consumer goods covered by a ban.
1.59 The amendments impose new maximum penalties for offences committed
under the ACL by a body corporate and a person that is not a body corporate.
Offences where the maximum penalty will increase are listed in Table 1.5. If
the offence does not appear in the table, the penalty for the offence will not
change.
1.60 The new maximum penalty reflects the seriousness of the conduct covered by
the offences, while more adequately reflecting the potential consequences of a
breach of the ACL, including possible harm to consumers. Consistent with the
principles set out in the Guide to Framing Commonwealth Offences,
Infringement Notices and Enforcement Powers, the increased maximum
penalty will be adequate to deter and punish the worst case offence.
Body corporate
1.61 The new maximum fine payable by a body corporate on conviction of an
offence against a provision of the ACL listed in Table 1.5, will be the greatest
of the following three limbs:
• $50 million;
• if the court can determine the value of the benefit that the body
corporate, and any body corporate related to the body corporate, have
obtained directly or indirectly and that is reasonably attributable to the
commission of the offence--3 times the value of that benefit; and
• if the court cannot determine the value of the benefit obtained--30%
of the body corporate's adjusted turnover during the breach turnover
period for the offence.
1.62 In comparison to the existing law, the first limb will increase five-fold from
$10 million to $50 million. The second limb will remain unchanged. The third
limb will increase from 10% of annual turnover in the 12 months prior to the
breach, to 30% of the adjusted turnover for the period of the breach.
1.63 Additional details on how to calculate the new maximum penalty for a body
corporate, the meaning of 'adjusted turnover' and 'breach turnover period' and
justification for the penalty are set out below.
[Schedule 1, items 34, 35, 37, 38, 40, 41, 43, 44, 46, 47, 49, 50, 52, 53, 55, 56,
58, 59, 61, 62, 64, 65, 67, 68, 70, 71, 73, 74, 76, 77, 79, 80, 82, 83, 85, 86, 88,
89, 91, 92, 94, 95, 97, 98, 100 and 101, paragraphs 151(5)(a) and (c),
152(2A)(a) and (c), 153(3)(a) and (c), 154(5A)(a) and (c), 155(3)(a) and (c)
156(3)(a) and (c), 157(3A)(a) and (c), 158(10A)(a) and (c), 159(4)(a) and (c),
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161(7)(a) and (c), 162(6)(a) and (c), 163(5A)(a) and (c), 164(4)(a) and (c),
166(8)(a) and (c), 167(3)(a) and (c), 168(2A)(a) and (c), 194(8)(a) and (c),
195(4)(a) and (c), 197(8)(a) and (c), 198(4)(a) and (c), 199(4)(a) and (c),
203(9)(a) and (c), 204(4)(a) and (c) of the ACL]
Person not a body corporate
1.64 The maximum fine payable by a person who is not a body corporate on
conviction of an offence against a provision of the ACL set out in Table 1.5,
will increase from $500,000 to $2.5 million.
1.65 This aligns with the increase in maximum penalty for an offence against a
provision of the ACL by a body corporate. As the maximum penalty for a body
corporate will increase five-fold, the penalty for a person that is not a body
corporate will also increase five-fold, from $500,000 to $2.5 million. This is a
proportionate increase for a person that is not a body corporate consistent with
subsection 4B(3) of the Crimes Act 1914.
[Schedule 1, items 36, 39, 42, 45, 48, 51, 54, 57, 60, 63, 66, 69, 72, 75, 78, 81,
84, 87, 90, 93, 96, 99 and 102, subsections 151(6), 152(2B), 153(4), 154(5B),
155(4), 156(4), 157(3B), 158(10B), 159(5), 161(8), 162(7), 163(5B), 164(5),
166(9), 167(4), 168(2B), 194(9), 195(5), 197(9), 198(5), 199(5), 203(10),
204(5) of the ACL]
Table 1.4 Offences in ACL
Provision Conduct
of ACL
151 False or misleading representations about goods or services
152 False or misleading representations about sale of land
153 Misleading conduct relating to employment
154 Offering rebates, gifts, prizes or other free items with intention of not
providing it
155 Misleading conduct as to the nature, manufacturing process, characteristics,
suitability for purpose or quantity of any goods
156 Misleading conduct as to the nature, characteristics, suitability for purpose or
quantity of services
157 Bait advertising
158 Wrongly accepting payment
159 Misleading representations about certain business activities
161 Unsolicited credit or debit cards
162 Assertion of rights to payment for unsolicited goods or services
163 Assertion of rights to payment for unauthorised entries or advertisements
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
Provision Conduct
of ACL
164 Pyramid schemes
166 Single price to be specified in certain circumstances
167 Referral selling
168 Harassment and coercion
194 Supplying consumer goods that do not comply with safety standards
195 Supplying product related services that do not comply with safety standards
197 Supplying consumer goods covered by a ban
198 Supplying product related services covered by a ban
199 Compliance with recall notices
203 Supplying goods that do not comply with information standards
204 Supplying services that do not comply with information standards
Calculating the maximum penalty for a body corporate
1.66 The new maximum fine payable on conviction of a criminal offence under
section 45AF or 45AF of Part IV or the ACL by a body corporate, and
maximum pecuniary penalty for breach of a relevant civil penalty provision
under Part IV, IVBA, X or XICA or the ACL by a body corporate will broadly
be the greatest of:
• $50 million;
• if the court can determine the value of the benefit that the body
corporate, and any body corporate related to the body corporate, have
obtained directly or indirectly--three times the value of that benefit;
and
• if the court cannot determine the value of the benefit obtained--30%
of the body corporate's adjusted turnover during the breach turnover
period for the offence, act or omission.
1.67 The base penalty under the first limb will increase five-fold, from $10 million
to $50 million. This is a readily quantifiable starting point for the calculation of
the new maximum penalty, which is intended to deter non-compliant conduct.
1.68 The second limb will not change as it is currently sufficient to achieve
deterrence, in light of the proposed increase to the base penalty under the first
limb, and turnover based penalty under the third limb. If the court can
determine the value of the benefit obtained due to the offence, act or omission,
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the maximum penalty available will be $50 million under the first limb, or
three times the value of the benefit under the second limb.
1.69 If the court cannot determine the total value of the benefit that was obtained
from the offence, act or omission, the maximum penalty will be $50 million
under the first limb, or 30% of the body corporate's adjusted turnover during
the breach turnover period for the offence, act or omission under the third limb.
1.70 The percentage of turnover which may be used to calculate the maximum
penalty under the third limb (the adjusted turnover) will increase from 10% to
30%. This is necessary as the sum required to achieve the deterrence objective
will generally be larger where the corporation has greater resources. The new
maximum penalty under this limb will ensure that sufficiently large penalties
are available, and a penalty cannot be considered an acceptable cost of doing
business.
1.71 The period of time over which the penalty may be calculated (the breach
turnover period) will also increase to cover the duration of the breach, with
12 months being the minimum. The 12 months minimum will ensure that
maximum penalties are appropriate for breaches that are instantaneous rather
than continuous in a similar way to the use of annual turnover for these
breaches under the existing law.
1.72 The third and fourth limb of the maximum pecuniary penalty for contravention
of the competition rule by a body corporate under Part XIB will align with the
second and third limb of the maximum penalty for a body corporate under
Parts IV, IVBA, X and XICA and the ACL, as described above.
1.73 The amendments to the penalty for a body corporate will increase the severity
Australia's penalty regime. In the competition context, the penalty increase
will facilitate the imposition of penalties that are more comparable with
international jurisdictions and ensure the price of misconduct is high enough to
deter unfair activity and anti-competitive behaviour in breach of Parts IV,
IVBA, X, XIB and XICA. In the consumer context, it will provide a strong
deterrent against breaches of the ACL, and ensure consumers retain a robust
level of protection against egregious conduct.
Adjusted turnover
1.74 The current definition of 'annual turnover' in the CCA and the ACL will be
replaced with the definition of 'adjusted turnover' as the penalty under the
third limb of the formula (and the fourth limb of the formula under Part XIB)
will be calculated using a body corporate's turnover during the period of the
breach, which may not be an annual period.
1.75 Adjusted turnover will mean the sum of the value of all the supplies made by
the body corporate or related bodies corporate in connection with Australia's
indirect tax zone. There are exceptions such as supplies made between related
bodies corporate, supplies that are not made in connection with the body
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
corporate's business, supplies that are input taxed, or supplies that are not for
consideration and are not taxable. The exception for supplies that are not
connected with Australia under the definition of annual turnover has been
updated to cover supplies that are not connected with the indirect tax zone, for
consistency with the A New Tax System (Goods and Services Tax) Act 1999.
1.76 The definition of adjusted turnover will rely on terms and definitions used in
the A New Tax System (Goods and Services Tax) Act 1999, similar to the
definition of annual turnover.
[Schedule 1, items 1 and 31, subsections 4(1) of the CCA and subsection 2(1)
of the ACL]
Breach turnover period
1.77 The concept of a 'breach turnover period' will be defined for the purposes of
the CCA and the ACL.
1.78 The breach turnover period provides the formula for determining the period of
time over which the adjusted turnover may be valued.
1.79 For an offence provision, the breach turnover period will generally begin at the
start of the month in which a body corporate committed, or began committing,
an offence, and end at the end of the month in which the body corporate ceased
committing the offence or was charged with the offence. However, the
minimum breach turnover period will be 12 months, ending at the end of the
month in which the body corporate ceased committing the offence or was
charged with the offence.
1.80 For a civil penalty provision, the breach turnover period will generally begin at
the start of the month in which the contravention, act or omission occurred, or
began occurring, and end at the end of the month in which the body corporate
ceased the contravention, act or omission. However, the minimum breach
turnover period will be 12 months, ending at the end of the month in which the
body corporate ceased the contravention, act or omission.
1.81 The 2018 OECD report on Pecuniary Penalties for Competition Law
Infringements in Australia found that Australia does not generally take into
account the length of a contravention in competition law, as opposed to
penalties in comparable jurisdictions, which often increase with time. The
introduction of the breach turnover period would link the quantum of a penalty
imposed under the third limb (and forth limb in Part XIB) to the economic
impact of the sanctioned body corporate's conduct or to the damage caused by
its conduct over the relevant period of time.
[Schedule 1, items 1 and 33, subsections 4(1) of the CCA and subsection 2(1)
of the ACL]
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Example 1.1 Calculation of new maximum corporate penalty
An ACL regulator takes successful action against AB Co., a
fictitious corporation, for misleading conduct in relation to the
nature of goods over a period of 24 months, which generates a
$75 million benefit. AB Co.'s adjusted turnover is valued at
$1 billion for the 24 month period ending in the month when AB
Co. was charged.
The court determines that three times the value of the direct or
indirect benefit to AB Co. (and any related bodies corporate)
attributable to the act or omission is $225 million.
As the benefit can be determined, the maximum penalty that the
court could impose is the higher of:
• $50 million; or
• three times the value of the direct or indirect benefit to AB
Co. (and any related bodies corporate) attributable to the
act or omission, which in this instance is $225 million.
Therefore, the maximum penalty is $225 million.
However, if the benefit could not be determined, the maximum
penalty that the court could impose would be the higher of:
• $50 million; or
• 30% of adjusted turnover of AB Co. during the 24 month
period ending at the end of the month in which AB Co.
was charged, which in this instance is $1 billion. That is,
$300 million.
Therefore, if the benefit could not be determined, the maximum
penalty would be $300 million.
Example 1.2 Calculating the breach turnover period
If Marwah Pty Ltd, a fictitious corporation, began to commit an
offence for false and misleading representations about services on
1 April 2023, and ceased committing the offence on 1 April 2026,
the breach turnover period would be from 1 April 2023 to
30 April 2026. The maximum penalty would be 30% of
Marwah Pty Ltd's adjusted turnover from 1 April 2023 to
30 April 2026.
If Marwah Pty Ltd instead ceased committing the offence on
1 October 2023, the breach turnover period would be 12 months
ending on 31 October 2023. The maximum penalty would be 30%
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
of Marwah Pty Ltd's adjusted turnover from 1 November 2022 to
31 October 2023.
Example 1.3 Calculating the breach turnover period for an instantaneous
breach
Susa Ltd, a fictitious corporation, made a contract that contained a
cartel provision on 1 April 2023, which constitutes an offence
against subsection 45AF(1). While the offence is instantaneous, the
breach turnover period would be calculated as 12 months ending at
the end of the month in which the offence ceased. That is, 12
months ending on 30 April 2023.
Consequential amendments
1.82 Schedule 1 to the Bill will make a number of technical amendments to the
CCA, including the ACL, to implement the new penalty regime. This includes
amendments to:
• repeal the definition of annual turnover and redundant provisions;
• update references;
• reformat subsections 76(1A) to (1B) into table format, and
• reformat the table to subsection 224(3) of the ACL for consistency
with the new table to subsection 76(1A).
[Schedule 1 items 2, 3, 9, 10, 16, 17 , 18, 19, 20, 21, 22, 23, 24, 25, 26,
27, 32 and 103, sections 45AB, 45AE and 57GA, subsections
51AE(2B), 56BN(4), 56CC(3), 56EV(3), 76(1A), 76(1B), 76(4) and
76(5) to (6), paragraphs 56BN(3)(c), 56CC(2)(c) and 56EV(2)(c) and
subparagraph 51AE(2A)(a)(iii) of the CCA, sections 45AB and 45AE
of Schedule 1 of the CCA and subsections 2(1) and 224(3) of the
ACL]
Commencement, application, and transitional
provisions
1.83 The amendments in Schedule 1 to the Bill will commence the day after Royal
Assent.
1.84 The amendments only apply in relation to offences committed, or
contraventions, acts or omissions that occur, on or after the commencement of
Schedule 1 to the Bill.
[Schedule 1, items 106, 107 and 108, Parts 1 and 3, XIII of the CCA and
Chapter 6 of Schedule 2 of the ACL]
23
Chapter 2: Unfair contract terms
Table of Contents:
Outline of chapter ................................................................................ 25
Context of amendments ....................................................................... 26
Unfair contract terms ..................................................................... 26
Reviews of the unfair contract terms regime ................................. 27
Summary of new law............................................................................ 28
Comparison of key features of new law and current law ...................... 29
Detailed explanation of new law .......................................................... 32
Prohibiting the use, application of or reliance on an unfair contract
term ............................................................................................... 32
Remedies available under the unfair contract terms regime ......... 33
Determining what is a standard form contract ............................... 38
Definition of a small business contract .......................................... 39
Minimum standards provisions ...................................................... 41
Contracts excluded from the unfair contract terms provisions ....... 42
Certain life insurance contracts ..................................................... 44
Provisions referring to non-party consumers ................................. 46
Review of operation of the provisions............................................ 47
Other amendments .............................................................................. 47
Application and transitional provisions ................................................. 48
Outline of chapter
2.1 Schedule 2 to the Bill amends the CCA, ACL and the ASIC Act to strengthen
and clarify the existing unfair contract terms provisions, and to reduce the
prevalence of unfair contract terms in consumer and small business standard
form contracts. The amendments introduce a civil penalty regime prohibiting
25
Unfair contract terms
the use of and reliance on unfair contract terms in standard form contracts. The
amendments also expand the class of contracts that are covered by the unfair
contract terms provisions.
2.2 All references in this Chapter to "regulators" are to the ACCC (in relation to
the ACL) or to ASIC (in relation to the ASIC Act) unless otherwise stated.
Context of amendments
Unfair contract terms
2.3 Standard form contracts are a commonly used and cost-effective option when
conducting business, as they avoid the transaction costs associated with
negotiated contracts.
2.4 However, consumers and small businesses often lack the resources and
bargaining power to effectively review and negotiate terms in standard form
contracts. The existing unfair contract terms protections in the ACL and the
ASIC Act provide that where a court finds a term is unfair, the term is void.
This approach has not provided sufficient deterrence against the use of unfair
terms, which remain prevalent in standard form contracts.
2.5 In July 2010, the Trade Practices Amendment (Australian Consumer Law) Act
(No. 1) 2010 introduced the existing unfair contract terms protections into the
ASIC Act and the ACL, which was established concurrently. Under the
regime, a term in a standard form contract is unfair if it:
• causes a significant imbalance in the parties' rights and obligations;
• is not reasonably necessary to protect the legitimate interests of the
party who would be advantaged by such a term; and
• would cause detriment (financial or otherwise) to a party if the term
were to be applied or relied on.
2.6 In determining whether a contract term falls within this definition, a court can
consider such matters as it thinks relevant but must take into account the
contract as a whole and the extent to which a term is transparent.
2.7 The ACL provisions address unfair contract terms in contracts for goods,
services and the sale or grant of an interest in land. The equivalent ASIC Act
provisions address unfair contract terms in contracts for financial products and
services.
2.8 In November 2016, the Treasury Legislation Amendment (Small Business and
Unfair Contract Terms) Act 2015 extended the unfair contract terms
protections to standard form small business contracts that meet certain criteria.
The extension of the protections to small business recognised that small
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
businesses can often face the same challenges as consumers in a contractual
relationship.
2.9 The regime was further extended by the Financial Sector Reform (Hayne
Royal Commission Response--Protecting Consumers (2019 Measures))
Act 2020, Schedule 2 to which commenced on 5 April 2021. This extended the
unfair contract terms protections under the ASIC Act to insurance contracts.
This addressed Recommendation 4.7 - banning unfair contract terms in
standard insurance contracts - of the Hayne Royal Commission into
Misconduct in the Banking, Superannuation and Financial Services Industry.
Reviews of the unfair contract terms regime
2.10 On 21 November 2018, the then Government released the Review of Unfair
Contract Term Protections for Small Business: Discussion Paper (2018
review). Information gathered through the 2018 review suggested that while
the unfair contract terms regime had improved protections for small business in
certain industry sectors, it did not provide strong deterrence against businesses
using unfair contract terms in their standard form contracts.
2.11 Additionally, the 2018 review found that some aspects of the current regime
appeared to have created ambiguity, uncertainty and practical difficulties for
businesses to comply with the law. Submissions to the 2018 review also
highlighted the need for regulators to promote awareness of the unfair contract
terms protections and assist with compliance with the law by improving the
guidance they provide to businesses.
2.12 Treasury subsequently released a Consultation Regulation Impact Statement in
December 2019, with consultation concluding in March 2020. In the
consultation, almost 80 submissions were received, and a series of stakeholder
roundtables were also held.
2.13 On 6 November 2020, Commonwealth, State and Territory Consumer Affairs
Ministers, through the former Legislative and Governance Forum on Consumer
Affairs, considered a Decision Regulation Impact Statement and agreed that
reforms were necessary to better protect consumers and small businesses from
unfair contract terms.
2.14 An exposure draft of the Bill was subsequently released for public consultation
in August 2021.
2.15 Schedule 2 to the Bill will implement the Government's election commitment
to provide greater protections from unfair contract terms.
27
Unfair contract terms
Summary of new law
2.16 Schedule 2 to the Bill strengthens the remedies and enforcement of the regime
by:
• prohibiting the proposal of, use of, application of, or reliance on, unfair
contract terms in a standard form consumer or small business contract;
• creating new civil penalty provisions for breaches of the prohibitions;
• clarifying the powers of a court to make orders to void, vary or refuse
to enforce part or all of a contract (or collateral arrangement);
• making clear a court's power to make orders that apply to any existing
consumer or small business standard form contract (whether or not that
contract is put before the court) that contains an unfair contract term
that is the same or substantially similar to a term the court has declared
to be an unfair contract term; and
• making clear a court's power to issue injunctions against a respondent
with respect to existing or future consumer or small business standard
form contracts entered into by a respondent, containing a term that is
the same or is substantially the same as a term the court has declared to
be an unfair contract term.
2.17 Schedule 2 to the Bill expands the class of contracts that are covered by the
unfair contract terms provisions by:
• increasing the small business definition thresholds (so that the regime
captures an expanded class of small business standard form contracts);
and
• removing the contract value threshold for contracts under the ACL and
raising the value threshold for contracts regulated by the ASIC Act (so
that the regime captures an expanded class of small business standard
form contracts).
2.18 Schedule 2 to the Bill clarifies and strengthens the unfair contract terms
provisions generally by:
• ensuring that repeat usage of a contract must be taken into account by a
court when determining whether a contract is a standard form contract;
• clarifying that a contract may still be a standard form contract despite
there being an opportunity for:
- a party to negotiate changes that are minor or insubstantial in
effect;
- a party to select a term from a range of options determined by
another party;
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
- a party to another contract or proposed contract to negotiate terms
of the other contract or proposed contract.
• making technical amendments to make clear that remedies for
non-party consumers are also applicable to non-party small businesses;
• exempting certain clauses from the unfair contract terms provisions
where those clauses are included in standard form contracts in
compliance with relevant Commonwealth, state or territory legislation;
• excluding certain categories of contracts from the unfair contract terms
provisions, including:
- the operating rules of licensed financial markets;
- the operating rules of licensed clearing and settlement facilities;
and
- real time gross settlement systems approved as payment and
settlement systems by the RBA; and
• exempting certain life insurance contracts from the scope of the unfair
contract terms provisions.
2.19 Schedule 2 to the Bill also requires that the relevant Commonwealth Minister
cause a review of the amendments to the ACL, CCA and ASIC Act made by
Schedule 2 to the Bill to be completed within six months after the end of two
years from commencement.
2.20 Schedule 2 to the Bill does not alter the existing definition of an unfair term.
Comparison of key features of new law and
current law
Table 2.1 Comparison of new law and current law
New law Current law
Under the ACL, the unfair contract terms The unfair contract terms protections apply
protections will apply to a small business to a small business contract if one party to
contract if one party to the contract is a the contract is a business that employs fewer
business that employs fewer than than 20 persons and the upfront price payable
100 persons or has a turnover for the last under the contract does not exceed one of the
income year of less than $10,000,000. two alternative monetary thresholds provided
Under the ASIC Act, the protections will for in the law.
apply to a small business contract if the
upfront price payable does not exceed
$5,000,000, and one party to the contract
employs fewer than 100 persons or has a
29
Unfair contract terms
New law Current law
turnover for the last income year of less
than $10,000,000.
Under both the ACL and ASIC Act part
time employees are to be counted as an
appropriate fraction of a full-time
equivalent employee.
A pecuniary penalty may be imposed if a No equivalent.
person proposes, applies, relies or purports
to apply or rely on, an unfair contract term.
The court can make orders for a whole Where a court determines a term in a
contract or collateral arrangement, standard form contract to be unfair, it is
including to void, vary or refuse to enforce automatically void.
the contract, if this is appropriate to prevent The court can also make orders for the whole
loss or damage that is likely to be caused. or any part of a contract or collateral
The new provisions do not require a court arrangement between the respondent and
to consider that they will redress actual loss another person, including that the contract is
or damage. void. These orders can made by an affected
The court can also make orders, on the party or by application of the regulator on
application of the regulator, preventing a behalf of either a party or a non-party. Such
term that is the same or substantially orders can only be made when a person or
similar in effect to a term that has been class of persons has suffered, or is likely to
declared as unfair, from being included in suffer, loss or damage.
any future standard form small business or
consumer contracts.
Additionally, the court can make orders, on
the application of the regulator, to prevent
or reduce loss or damage which is likely to
be caused to any person by a term that is
the same or substantially the same in effect
to a term that has been declared unfair.
In addition to the current injunction powers, Among other powers, the court can make an
the court can make an injunction restraining injunction in such terms as it considers
a person from: appropriate restraining a party from applying,
relying on, or purporting to apply or rely on,
• entering into any future contract that a term of a contract that has been declared an
contains a term that is the same or unfair term.
similar in effect to a term that has been
declared an unfair contract term; or
• applying, or relying on, a term in any
existing contract that is the same or
similar in effect to a term that has been
declared unfair, whether or not that
contract is before the court.
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
New law Current law
In addition to the current matters, a court In determining whether a contract is a
must also take into account whether one of standard form contract, a court must take
the parties has used the same or a similar into account a number of matters.
contract before.
A contract may be determined to be a In determining whether a contract is a
standard form contract despite there being standard form contract, a court must take
an opportunity for: into account a number of matters, including
whether one party was required to reject or
• a party to negotiate changes to contract accept the terms of a contract in the form in
terms that are minor or insubstantial in which they were presented and whether
effect; another party was given an effective
• a party to select a term from a range of opportunity to negotiate the terms of the
options determined by another party; contract.
or
• a party to another contract or proposed
contract to negotiate terms of the other
contract or proposed contract.
In addition to the current exemptions to the Contractual provisions that are required or
unfair contract terms provisions, expressly permitted by a law of the
contractual provisions that are taken to be Commonwealth, or of a state or territory, are
included in a contract by operation of a exempt from the unfair contract terms
Commonwealth, state or territory law are regime.
also excluded to the extent that the relevant
law mandates their inclusion.
Additionally, a clause of a contract that
results in other contract terms being
included in a contract because of the
operation of another law of the
Commonwealth or a state or territory, is
exempt from the unfair contract terms
provisions insofar as the provisions would
prevent the other terms from being included
or operating as required by the law.
The law refers to "non-party" to clarify that The law refers to "non-party consumers"
the law applies to both consumers and (despite applying to both consumers and
small businesses. small businesses).
Certain categories of contracts are excluded No equivalent.
from the operation of the unfair contract
terms provisions. These include:
• the operating rules of licensed
financial markets such as ASX
Limited;
31
Unfair contract terms
New law Current law
• the operating rules of licensed clearing
and settlement facilities; and
• real time gross settlement systems
approved as payment and settlement
systems by the RBA.
Certain life insurance contracts are also
excluded from the scope of the provisions
in order to ensure positive consumer
outcomes.
Detailed explanation of new law
Prohibiting the use, application of or reliance on an
unfair contract term
2.21 Schedule 2 to the Bill amends both the ACL and the ASIC Act to prohibit the
inclusion of, or reliance on, an unfair contract term in standard form contracts.
If a court finds that a person has contravened the new prohibitions, it can order
a civil pecuniary penalty.
[Schedule 2, items 1 to 4, subsections 23(2A) to (2C) of the ACL and
subsections 12BF(2A) to (2C), 12BG(1) and 12BH(1) of the ASIC Act]
2.22 A person will be in breach of the law if they propose an unfair term in a
standard form consumer or small business contract which they have entered
into.
[Schedule 2, items 1 to 4, subsections 23(2A) to (2B) of the ACL and
subsections 12BF(2A) to (2C), 12BG(1) and 12BH(1) of the ASIC Act]
2.23 Each individual unfair term contained in a contract proposed by the person is
considered a separate contravention and, as a result, a person can be found to
have multiple contraventions in a single contract. While this could result in a
high theoretical maximum penalty, a court will apply existing principles
regarding the assessment of the pecuniary penalty to be imposed, to ensure that
the total quantum of penalties is appropriate. Accordingly, these provisions are
consistent with the Guide to Framing Commonwealth Offences, Infringement
Notices and Enforcement Powers.
[Schedule 2, items 1 and 2, subsection 23(2B) of the ACL and
subsection 12BF(2B) of the ASIC Act]
2.24 The term 'makes a contract' includes where a person enters into a contract. It is
not intended to apply where a person merely drafts or creates a new standard
form contract template for later use.
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
2.25 A person will also be in breach of the law if they apply or rely on (or purport to
apply or rely on) an unfair term of a standard form consumer or small business
contract.
[Schedule 2, items 1 and 2, subsection 23(2C) of the ACL and
subsection 12BF(2C) of the ASIC Act]
2.26 To apply or rely on (or purport to apply or rely on) means to give effect to, or
seek to enforce, an unfair term of a contract. As such, a person can have
multiple contraventions in relation to the same contract or unfair term of a
contract if they apply or rely on multiple unfair terms or an unfair term or
terms on multiple occasions.
2.27 Schedule 2 to the Bill extends the existing powers of a court to order a
pecuniary penalty in relation to breaches of the prohibitions, in addition to
making a declaration that a term is unfair.
[Schedule 2, items 11 to 13, 27 and 28, subparagraph 224(1)(a)(iia) and
subsections 224(3) and 224(3A) of the ACL and subsection 12BA(1)
(definition of enforcement proceeding) and paragraph 12GBA(6)(aa) of the
ASIC Act]
2.28 The Government's expectation is that regulators will continue to take a
reasonable and proportionate approach to enforcing the unfair contract terms
provisions, including affording businesses an opportunity to respond to
allegations of unfair terms before commencing any legal proceedings.
Remedies available under the unfair contract terms
regime
2.29 Schedule 2 to the Bill clarifies a court's power to determine an appropriate
remedy when it finds a term is unfair, introduces new penalty provisions, and
makes some changes to improve the consistency of remedies available under
the ACL and ASIC Act.
[Schedule 2, items 5 to 40, sections 137D, 137F(2)(b), (c) and (d),
137H(1)(b), 157(1AA)(b), 237(1)(a) and (b), 2(1) (definitions of declared
term and enforcement proceeding), 224(1)(a)(ii), 224(3), 224(3A), 232(3),
237(1)(a) and (b), 237(3), 238(1), 242, 243A, 243B, 244, 245, 247(1)(a),
248(1)(a)(i) of the ACL and sections 12BA(1), 12GBA(6)(a), 12GD(9),
12GF(1), 12GG, 12HB(1)(b), 12GLA(4), 12GLC(1)(a), 12GLD(1)(a),
12GM(10), 12GN(1)(c), 12GN(9), 12GNB(1(a)(i), 12GND, 12GNE, 12GNF
and 12GNG of the ASIC Act]
2.30 Under the existing law, where the court determines a term in a standard form
contract to be unfair, the term is automatically void.
2.31 A court can also make orders in relation to the whole or any part of a contract
or collateral arrangement made between a respondent and another person,
including that the contract or arrangement is void, varied, or is not able to be
enforced. These orders can be made in relation to a person who is a party to a
33
Unfair contract terms
proceeding before a court (or on whose behalf the regulator has brought a
matter before a court) or in relation to non-party persons.
2.32 Importantly, all these orders can only be made where a person (or class of
persons) has suffered, or is likely to suffer, loss or damage because of the
conduct of another person.
2.33 The above remedies are available under the general powers in the ACL and the
ASIC Act (particularly subsections 237(1), 238(1), 239(1) and section 243 of
the ACL and sections 12GN, 12GNB, 12GNC of the ASIC Act).
2.34 Schedule 2 to the Bill augments these powers by making additional remedies
available that specifically relate to unfair contract terms and are not available
for other contraventions of the ACL and the ASIC Act.
[Schedule 2, items 5, 24 and 40, section 137D, sections 243A and 243B of the
ACL and sections 12GNE and 12GNF of the ASIC Act]
2.35 Schedule 2 to the Bill retains the automatic voiding present in the existing law.
The court can also make orders to void, vary or refuse to enforce part or all of a
contract if the court thinks this is appropriate to prevent or reduce loss or
damage that may be caused (or to remedy loss or damage that has occurred).
2.36 This differs to the orders the court can make under sections 237 and 238 of the
ACL and section 12GM of the ASIC Act. Under those provisions, the court
must be satisfied that loss or damage has occurred or is likely to occur. Under
the amendments in Schedule 2 to the Bill, a person will only need to show that
the orders will prevent loss and damage that may be caused. If loss and damage
has already been suffered, then the court will need to be satisfied that the
orders made will remedy this.
2.37 The amendments also allow the court to make orders, on the application of the
regulator, preventing a term that is the same or substantially similar in effect to
a term that has been declared as unfair, from being included in any future
standard form small business or consumer contracts by a person who is the
respondent to the proceeding where the declaration about an unfair contract
term was made.
[Schedule 2, items 24 and 40, paragraph 243B(1)(a) of the ACL and
paragraph 12GNF(1)(a) of the ASIC Act]
2.38 In addition, the amendments allow the court to make orders, on the application
of the regulator, to prevent or reduce loss or damage which may be caused to
any person (whether or not that person is party to proceedings for which the
court is making the order) in relation to a term that is the same or substantially
the same in effect to a term that has been declared unfair. These orders can be
made in relation to any existing contract, whether or not that contract is subject
to the proceedings for which the court is making the order.
[Schedule 2, items 24 and 40, paragraph 243B(1)(b) of the ACL and section
12GNF of the ASIC Act]
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
2.39 Schedule 2 to the Bill makes it clear that orders can be made under the current
subsections 237(1) and 239(1) of the ACL or subsections 12GNE(1) and
12GNF(1) of the ASIC Act, and the new remedy provisions, which extend to
unfair contract terms in standard form contracts that are not specifically before
the court. The court will retain its current ability to make certain orders under
the ACL or ASIC Act regardless of whether an injunction or other order under
the provisions specified, has been made.
[Schedule 2, items 14, 24 and 40, sections 232(3), 243A, 243B and 245 of the
ACL and sections 12GNE, 12GNF and 12GNG of the ASIC Act]
2.40 An application for these orders can be made at any time within six years after
the day on which a declaration that a term is an unfair contract term is made.
[Schedule 2, items 18, 24 and 40, subsections 237(3), 243A(3) and 243B(3) of
the ACL and subsections 12GNE(3) and 12GNF(3) of the ASIC Act]
2.41 Schedule 2 to the Bill augments these powers by making additional remedies
available that specifically relate to unfair contract terms.
[Schedule 2, items 5, 24 and 40, sections 137D, 243A and 243B of the ACL
and sections 12GNE and 12GNF of the ASIC Act]
2.42 Schedule 2 to the Bill will extend the court's power to make adverse publicity
orders and make orders disqualifying a person from managing a corporation.
Adverse publicity orders allow a court to make an order, on the application of a
regulator, requiring a person to publish information specified by the court.
These powers will be extended to breaches of the unfair contract terms
provisions in both the ACL and the ASIC Act, where this was not previously
available. An adverse publicity order is available by application of the
regulator where a pecuniary penalty has been ordered by the court under
section 224 of the ACL or section 12GBB of the ASIC Act. This will create
consistency between the ACL and the ASIC Act to allow regulators to take
steps to further protect the public.
[Schedule 2, items 25, 26, 28, 33 and 35, paragraph 247(1)(a) and
subparagraph 248(1)(a)(i) of the ACL and paragraphs 12GBA(6)(a),
12GLA(4)(aa) and 12GLD(1)(a) of the ASIC Act]
2.43 Schedule 2 to the Bill also extends ASIC's power under the ASIC Act to issue
a public warning notice, warning the public about the conduct of a business,
where ASIC has reasonable grounds to suspect that the business has breached
the unfair contract terms provisions, ASIC is satisfied that a person has or is
likely to suffer detriment because of the breach, and ASIC is also satisfied it is
in the public interest to issue such a notice. This is consistent with the existing
power in section 223 of the ACL which allows the ACCC to issue the same
notice on the same grounds for certain breaches of the ACL. Regulators need
not rely on a court order that a term is an unfair contract term in order to meet
the 'reasonable grounds' requirement in paragraph 12GLC(1)(a) of the ASIC
Act and paragraph 223(1)(a) of the ACL. This will create consistency between
the ACL and the ASIC Act and with other regulated behaviour provisions in
the ASIC Act.
[Schedule 2, item 34, paragraph 12GLC(1)(a) of the ASIC Act]
35
Unfair contract terms
2.44 Where a consumer or small business has suffered additional loss or damage in
excess of that already redressed by the court in a related unfair contract terms
proceeding taken by a regulator, they will retain their legal rights and remedies
in relation to that loss or damage. These rights to legal recourse are only
limited to the extent that the loss or damage has already been redressed or
alleviated by a court order and the consumer or small business has accepted the
redress or alleviation.
2.45 Consumers remain able to seek alternative compensation through existing
mechanisms such as Australian Financial Complaints Authority
determinations. This is consistent with existing court practice. The
amendments will not alter the way the Australian Financial Complaints
Authority makes determinations but may provide additional considerations in
its determinations of fairness.
2.46 Consumers and small businesses will maintain the ability to pursue certain
remedies for breaches of the unfair contract terms protections in their state and
territory's Tribunals where the relevant state or territory legislation permits
this. This is dependent on state and territory court and tribunal powers, which
vary between jurisdictions.
2.47 An application can be made for orders under new subsections 243A(1) and
243B(1) of the ACL or under new subsection 12GNE(1) or 12GNF(1) of the
ASIC Act even if an enforcement proceeding in relation to an unfair contract
term has not commenced. This allows an affected party, or a regulator
(including on behalf of an affected party), to seek orders under new
subsection 243A(1) or 243B(1) of the ACL or new subsection 12GNE(1) or
12GNF(1) of the ASIC Act in other legal proceedings (for example breach of
contract proceedings against the affected party) without the affected party
needing to commence civil penalty proceedings under those Acts.
2.48 The court may also order a person to pay a civil pecuniary penalty for
contravening the new unfair contract terms prohibitions.
[Schedule 2, items 11 to 14, 27 and 28, subparagraph 224(1)(a)(iia),
subsections 224(3), 224(3A) and 232(3) of the ACL and subsection 12BA(1)
(definition of enforcement proceeding), and paragraph 12GBA(6)(aa) of the
ASIC Act]
2.49 Schedule 1 and Schedule 2 to the Bill will amend section 224 of the ACL to
impose the maximum penalties for contravention of the new unfair contract
terms prohibitions. The maximum penalty that can be ordered for an individual
will be $2,500,000. For a body corporate, the maximum penalty will be the
greater of:
• $50,000,000;
• if the court can determine the value of the benefit that the body
corporate, and any body corporate related to the body corporate, have
obtained directly or indirectly and that is reasonably attributable to the
act or omission, 3 times the value of that benefit; or
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
• if the court cannot determine the value of the benefit obtained--30%
of the body corporate's adjusted turnover during the breach turnover
period for the act or omission.
The maximum penalty that can be ordered under the ACL reflects the penalty
increase being implemented by Schedule 1 to the Bill.
[Schedule 2, items 12 and 13, subsections 224(3) and (3A) of the ACL,
Schedule 1, item 103, subsection 224(3) and (3A) of the ACL]
2.50 The maximum penalty that can be ordered for contravention of the new unfair
contract terms prohibitions in the ASIC Act are in section 12GBCA of the
ASIC Act. For an individual the maximum penalty is the greater of:
• 5,000 penalty units; or
• if the court can determine the amount of the benefit derived and
detriment avoided because of the contravention, that amount multiplied
by 3.
2.51 For a body corporate, the maximum penalty is the greatest of:
• 50,000 penalty units;
• the amount of the benefit derived and detriment avoided because of the
contravention multiplied by 3; or
• 10% of the annual turnover of the body corporate for the 12-month
period ending at the end of the month in which the body corporate
contravened, or began to contravene, the civil penalty provision, or if
that amount is greater than an amount equal to 2,500,000 penalty units,
2,500,000 penalty units.
[Schedule 2, items 27 and 28, subsection 12BA(1) (definition of
enforcement proceeding) and subsections 12GBCA(1) and (2) of the
ASIC Act]
2.52 While these civil penalties are large, they are the maximum available and are
appropriate in size. The Guide to Framing Commonwealth Offences,
Infringement Notices and Enforcement Powers outlines that larger penalties are
more appropriate for bigger companies, as they provide an adequate deterrent
to breaches of the unfair contract terms provisions. Further, under the ASIC
Act the courts must consider factors including 'the nature and extent of the
contravention' and 'the circumstances in which the contravention took place'
and impose a penalty that is appropriate in the circumstances, including below
the maximum penalty. The court must consider similar matters under the ACL.
The civil courts are experienced in making civil penalty orders at appropriate
levels having regard to the maximum penalty amount, taking into account a
range of factors including the nature of the contravening conduct and the size
of the organisation involved.
2.53 Therefore, a relevant consideration in setting a civil penalty amount is the
maximum penalty that should apply in the most egregious instances of non-
37
Unfair contract terms
compliance with the new unfair contract terms provisions. The maximum civil
penalty amounts that can be imposed under these new provisions are
intentionally significant and are in line with the penalties for other breaches of
the ACL (as amended by Schedule 1 to the Bill), and the ASIC Act.
Determining what is a standard form contract
2.54 The unfair contract terms protections only apply to standard form contracts.
The law sets out matters that a court must take into account when determining
whether a contract is a standard form contract.
Repeat usage of a standard form contract
2.55 Schedule 2 to the Bill adds an additional matter that the court must take into
account when determining whether a contract is a standard form contract. The
court must take into account whether a party has entered into a contract that is
the same or substantially similar to another contract entered into by that person
and the number of times this has been done. This may include contracts made
prior or subsequent to the contract in question. This is a relevant factor because
standard form contracts are often used repetitively with the same or similar
terms. This does not preclude the first iteration of a contract from being
determined to be a standard form contract.
[Schedule 2, items 41 and 43, paragraph 27(2)(ba) of the ACL and
paragraph 12BK(2)(ba) of the ASIC Act]
Effective opportunity to negotiate
2.56 Standard form contracts are often provided on a 'take it or leave it' basis, with
no opportunity for the other party to negotiate any, or the vast majority, of the
terms of the contract. In some instances, the party issuing the contract may
allow limited changes to be made to the contract that are insubstantial in the
context of the whole contract. These circumstances mean the relevant
consumer or small business may not have been provided an effective
opportunity to negotiate.
2.57 Schedule 2 to the Bill clarifies that a court can determine a contract is a
standard form contract despite a number of factors. These factors include
where a party has negotiated minor or insubstantial changes to the terms of a
contract, or has been permitted to select from a pre-determined range of terms
within a contract.
[Schedule 2, items 42 and 44, paragraphs 27(3)(a) and (b) of the ACL and
paragraphs 12BK(3)(a) and (b) of the ASIC Act]
2.58 Similarly, a court may still determine a contract is a standard form contract
even if a party to another contract has been given an opportunity to negotiate
the terms of that contract. This clarifies that even if a subset of consumers or
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
small businesses are able to negotiate the terms of a contract that is issued to a
broader group of consumers or small businesses, the contract may still be a
standard form contract.
[Schedule 2, items 42 and 44, paragraph 27(3)(c) of the ACL and paragraph
12BK(3)(c) of the ASIC Act]
Definition of a small business contract
Upfront price payable threshold
2.59 Schedule 2 to the Bill removes the upfront contract value thresholds for the
definition of a small business contract in the ACL and raises the threshold to
$5,000,000 in the ASIC Act.
[Schedule 2, items 47 and 49, subsections 23(4),(5), (6) and (7) of the ACL
and subsections 12BF(4), (5), (6), (7) and (8) of the ASIC Act]
2.60 When the unfair contract terms protections were extended to small business
contracts in 2016, a contract value threshold was included to limit the scope of
the protections for small business contracts.
2.61 Accordingly, one of the requirements for a contract to be considered a small
business contract and covered by the existing unfair contract terms protections
is that:
• the upfront price payable under the contract does not exceed $300,000;
or
• if the contract has a duration of more than 12 months, the upfront price
payable under the contract does not exceed $1,000,000.
2.62 These upfront contract value thresholds have been eroded due to inflation in
the cost of goods and services over time and are now too low to take into
account the range of contracts small businesses enter into.
2.63 Additionally, the current upfront contract value threshold amounts do not
accommodate small businesses in industries where high value contracts with
low profit margins are common as a matter of course.
2.64 Further, where a small business has no ability to negotiate terms and has no
effective alternative sources of supply or acquisition, unfair contract terms
cannot be avoided even with due diligence.
2.65 Schedule 2 to the Bill removes the upfront price payable threshold under the
contract as a criterion in determining if the contract is a small business contract
under the ACL.
[Schedule 2, item 47, subsections 23(4) and (5) of the ACL.
2.66 Schedule 2 to the Bill maintains the contract threshold test for contracts for
financial services but raises the cap to $5,000,000. The $5,000,000 threshold is
consistent with the Australian Financial Complaints Authority's exclusion of
39
Unfair contract terms
complaints about small business credit facilities that exceed $5,000,000.
[Schedule 2, item 49, paragraph 12BF(4)(a) of the ASIC Act]
Employee numbers and annual turnover
2.67 In addition to removing the upfront price payable thresholds in the ACL and
raising them in the ASIC Act, Schedule 2 to the Bill amends the definition of
small business contract to expand the class of contracts that will be captured by
the unfair contract terms provisions.
2.68 Under the current headcount threshold (which determines whether a business
may be considered a 'small business' covered by the protections), it can be
difficult for a contract-issuing party to determine the other party's employee
numbers. The lack of clarity in the application of the test has led to uncertainty.
2.69 The amended definition requires that one party to a contract is a business that
either employs fewer than 100 persons or has an annual turnover of less than
$10,000,000 for the previous income year. A party can satisfy one or both of
these conditions to fall within the definition.
[Schedule 2, items 45 to 47 and 49 to 52, paragraphs 139G(2)(aa),
139G(2A)(a) and subsection 23(4)(b), of the ACL and paragraphs
12BF(4)(b), 12BH(2)(aa), 12BL(3)(a) and 12GND(2)(a) of the ASIC Act]
2.70 For the purposes of the employee threshold, all employees of the party to the
contract must be counted. Employee numbers are intended to be calculated at
the time a contract is entered into with a party and later changes in employee
numbers will not affect whether the amended small business definition is met.
2.71 A party includes and is not limited to a person, entity or body corporate.
2.72 The amendments also clarify how employees are to be counted in determining
whether a business falls within the 100-employee threshold. Schedule 2 to the
Bill maintains the existing exclusion for casual employees not employed on a
regular and systematic basis, but also introduces a pro rata assessment for staff
employed on a part time basis. These threshold requirements more accurately
reflect the reality of many small businesses and provide certainty as to which
contracts will be covered by the regime.
[Schedule 2, items 45 to 47 and 49 to 51, paragraphs 139G(2)(aa),
139G(2A)(a)and subsection 23(5), of the ACL and paragraphs 12BF(4)(a),
subsection 12BF(6) and paragraphs 12BH(2)(aa), 12BL(3)(a) and
12GND(2)(a) of the ASIC Act]
2.73 The turnover condition requires the party's turnover for the previous income
year (within the meaning of the Income Tax Assessment Act 1997) to be less
than $10,000,000 at or before the time the contract is entered into.
[Schedule 2, items 47 and 49, subparagraph 23(4)(b)(ii) of the ACL and
subparagraph 12BF(4)(b)(ii) of the ASIC Act]
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
2.74 A party's turnover includes the sum of all supplies made by the party during
the period but does not include supplies that are, within the meaning of the A
New Tax System (Goods and Services Tax) Act 1999 (the GST Act):
• input taxed;
• not for consideration (and are not taxable under section 72-5 of the
GST Act);
• not connected with the party's business; or
• not connected with the indirect tax zone.
[Schedule 2, items 47 and 49, subsections 23(6) and (7) of the ACL
and subsections 12BF(7) and (8) of the ASIC Act]
Minimum standards provisions
2.75 The current unfair contract terms provisions exempt a term of a standard form
consumer or small business contract from being declared an unfair term if it is
a term required, or expressly permitted, by a law of the Commonwealth, a state
or a territory insofar that the term is required, or expressly permitted, by such a
law.
2.76 However, the existing law does not clearly exempt terms that are read into a
contract by the operation of a law of the Commonwealth, a state or a territory.
In some cases, a law only requires or reads terms into a contract on a
contingent basis; that is, it only requires certain contract terms be included in a
contract if other types of terms have already been included in that contract.
Schedule 2 to the Bill clarifies that all of these types of terms are exempt from
the unfair contract terms provisions.
[Schedule 2, items 53 and 56, subsection 26(1) of the ACL and
subsection 12BI(1) of the ASIC Act.]
2.77 For example, some Commonwealth, state and territory laws require that, if a
certain term or terms are included in a contract (term X), terms setting
industry-specific requirements must also be included in the contract (terms A,
B, C, etc.). In these scenarios, where term X of a contract exists, the relevant
law either requires the inclusion of, or deems to include, the terms A, B and C
as a result. While terms A, B and C are required by a law of the
Commonwealth, a state or territory, and therefore cannot currently be declared
unfair, term X is not 'expressly permitted' nor 'required' in the way envisaged
by the current exemptions. Schedule 2 to the Bill exempts all these terms from
the unfair contract terms provisions.
2.78 As a result, these terms cannot be declared unfair by their mere inclusion
alone. However, the unfair contract terms protections can regulate the content
of that term where it does not prevent the term from operating as the relevant
law requires or envisages. If the term is included in such a way that would go
41
Unfair contract terms
beyond the requirement of the law and is unfair then the unfair contract terms
protection can still be applied.
Example 2.1
Ajay's Phone Company (Ajay Co.) is seeking to rent a retail
property from Sharon's Building Management Co (Sharon Co.)
located inside building A. As part of the lease agreement, Sharon
Co. has included a term allowing them to terminate the lease if they
want to demolish or renovate the building the relevant retail
property is located in.
Under the relevant State law, where a term is included in a contract
for a termination of a retail lease on the grounds of the proposed
demolition or renovation of the building in which the retail
property is located, the lease is taken to include other terms setting
out how a person must notify or compensate a tenant as a result of
the termination.
The term allowing Sharon Co. to terminate the lease agreement is
exempt from the unfair contract terms protections because it results
in one or more other terms being included in the contract by
operation of a law of a State. The terms about notice and
compensation are exempt from the unfair contract terms provisions
as they have been included in the contract, or are taken to be so
included, because of a law of a State.
2.79 This will ensure that the unfair contract terms regime does not cover terms that
other laws require parties to include in their contracts while still ensuring
appropriate protections for consumers and small businesses from unfair
contract terms. It will also enable state and territory governments to ensure that
they are able to implement legislation that reflects the specific requirements of
their jurisdiction.
Contracts excluded from the unfair contract terms
provisions
2.80 Schedule 2 to the Bill excludes a limited number of specific contracts from the
operation of the unfair contract terms protections where there are strong public
policy reasons for doing so. This includes specific contracts that are integral to
the operation of licensed markets, clearing and settlement facilities, and
payments systems; and legacy life insurance contracts which, if covered, could
result in some consumers being worse off.
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
Operating Rules of Financial Markets and Clearing and
Settlement Facilities
2.81 Schedule 2 to the Bill excludes the operating rules (including listing rules) of
licensed financial markets and clearing and settlement facilities, such as ASX
Limited, from the scope of the unfair contract terms regime. These rules are
made and have effect as a contract in accordance with Subdivision B of
Division 3 of Part 7.2 and Subdivision B of Division 2 of Part 7.3 of the
Corporations Act 2001, respectively. Contracts that consist of, or relate to
compliance with, listing rules of the licensed financial market between the
operator of the licensed financial market and listed entities, responsible entities
for registered schemes and operators of foreign passports funds are also
included.
[Schedule 2, items 55 and 58, section 28A of the ACL and section 12BLC of
the ASIC Act]
2.82 The exclusion includes contracts made under or in accordance with the
operating rules, and extends to written procedures that are incorporated into or
made or approved in accordance with, the operating rules.
[Schedule 2, items 55 and 58, section 28A of the ACL and section 12BLC of
the ASIC Act]
2.83 Operating rules are contracts that govern the core operational functioning of
licensed markets and clearing and settlement facilities as well as the admission
standards for listed securities. Operating rules are integral to the operation of
Australia's financial markets and, among other matters, provide for the finality
and irrevocability of transactions. Application of the unfair contract terms
provisions to these contracts could potentially interfere with, or create
uncertainty around, particular terms of operating rules that are necessary to the
maintenance of market stability and integrity.
2.84 Operating rules are subject to oversight by ASIC and disallowance by the
relevant Minister. Sections 793D and 822D of the Corporations Act 2001
require licensees to lodge amendments to operating rules with ASIC, and the
Minister may disallow changes under subsections 793E(3) and 822E(3) of the
Corporations Act 2001.
Approved payment or settlement system contracts
2.85 Schedule 2 to the Bill excludes contracts that establish, contain, or incorporate
rules governing the operation of a payment or settlement system approved
under section 9 of the Payment Systems and Netting Act 1998. The exemption
includes contracts made in the course of, or for the purposes of, operating such
a system.
[Schedule 2, items 54 and 57, subsection 28(5) of the ACL and subsection
12BL(4) of the ASIC Act]
43
Unfair contract terms
2.86 The systems that are currently approved are the RITS, the Austraclear System
and the CHESS. These systems are critical to facilitating the orderly settlement
of payment obligations in Australia and operate on a largely contractual basis.
Application of the unfair contract terms provisions to these arrangements could
potentially interfere with, or otherwise create uncertainty around, certain terms
such as those which provide for the finality and irrevocability of the settlement
of transactions.
2.87 Approved payment or settlement systems are typically subject to robust
supervisory oversight. The RITS is owned and operated by the RBA and is
subject to the general oversight, decision-making and audit processes of the
Reserve Bank Board and Payments System Board. The Austraclear System and
CHESS are each licensed clearing and settlement facilities subject to
supervisory oversight from ASIC and the RBA under Part 7.3 of the
Corporations Act 2001, including disallowance powers in relation to operating
rule changes.
2.88 The scope of this exemption includes the terms on which the RBA transacts in
domestic financial markets if, and to the extent that, those terms are set out in
the same contractual documents which contain the rules for the RITS as an
approved payment or settlement system.
Certain life insurance contracts
2.89 The unfair contract terms provisions as amended by Schedule 2 to the Bill do
not apply to two categories of life insurance contract.
Guaranteed renewable life insurance policies
2.90 The unfair contract terms provisions as amended by Schedule 2 to the Bill do
not apply, and are taken never to have applied, to a guaranteed renewable
contract that constitutes a life insurance policy within the meaning of the Life
Insurance Act 1995, which was made before 5 April 2021, or was entered into
before 5 April 2021 and subsequently renewed on or after 5 April 2021.
Guaranteed renewable life insurance contracts are contracts whereby the
insurer agrees to continue to provide cover on the terms of the original contact
so long as the policy holder continues to pay premiums. Many of these
contracts are legacy contracts, contracts that have lasted in excess of ten or
twenty years and have the same terms as when they were originally entered
into.
[Schedule 2, item 58, section 12BLB of the ASIC Act]
2.91 Since 5 April 2021 when the unfair contract terms protections were extended to
insurance contracts in response to the Hayne Royal Commission, it has been
unclear as to whether the existing unfair contract terms provisions have applied
in relation to certain long-standing life insurance contracts. Guaranteed
44
Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
renewable life insurance contracts were not intended to be covered by the
unfair contract terms provisions and the insurance industry has proceeded on
this presumption, however this has not been clarified under the existing law.
The potential for the unfair contract terms provisions to apply to these
guaranteed renewable life insurance contracts creates uncertainty in the life
insurance industry for both consumers and business. This may result in
contracts being voided as a result of terms entered into many years before and
that may have been fair at the time the contract was signed.
2.92 This may result in worse outcomes for the consumer. For example, a consumer
who has been paying life insurance premiums for decades may not be insurable
on the same terms, or at all, if their health and/or occupational circumstances
have deteriorated since they first took out the cover. Therefore, these contracts
have been excluded from Schedule 2 to the Bill to remove this potential
negative impact on consumers.
Life insurance policies
2.93 The unfair contract terms provisions as amended by Schedule 2 to the Bill do
not apply, and are taken never to have applied, to certain life policies within
the meaning of the Life Insurance Act 1995, which have been replaced, linked
or unlinked. Specifically, this means a life insurance contract entered into
before 5 April 2021 which, subsequent to 5 April 2021, has been replaced for
the following reasons:
• the replacement policy reinstates the previous policy and is issued at
the request of the owner of the previous policy after the previous
policy lapses;
• the replacement policy is a reissue of the previous policy to correct an
administrative error in the previous policy;
• the replacement policy is issued, at the request of the owner of the
previous policy, for one or more of the following reasons:
- to change the ownership of the policy;
- to extend or vary the cover provided under the policy in
accordance with a term of the previous policy;
- to change the terms relating to premiums paid under the policy; or
- to link or unlink certain existing policies.
[Schedule 2, item 58, section 12BLA of the ASIC Act]
2.94 The exemption for linking and unlinking existing policies is to cover situations
in which a policy holder changes the structure of their policy by connecting it
with or separating it from another policy. For example, a consumer might
convert a standalone TPD policy and a standalone death cover policy to one
linked cover policy (covering both TPD and death) to reduce premiums.
"Linked" covers are inter-dependent of each other. For example, with linked
45
Unfair contract terms
TPD and death cover, a claim for TPD would reduce the sum insured for a
subsequent death claim. By contrast, "unlinking" separates out cover that was
previously combined so that the policyholder holds two separate policies where
a claim under one policy does not affect the sum insured under the other
policy. Schedule 2 to the Bill relies on the common definition of linking and
unlinking as used in the insurance industry. The terms bundling and
unbundling are used interchangeably with the terms linking and unlinking in
the insurance industry and share a common definition.
2.95 The exemption in Schedule 2 to the Bill for the correction of administrative
errors allows for situations where the material content of the insurance contract
is not changed but rather an administrative mistake has occurred in the creation
of that contract. This includes situations where a name has been misspelled, a
person's gender has been incorrectly recorded or the wrong policy was opened
accidently. The correction of these errors may result in an issuing of a new
policy on the same or substantially the same terms as the previous contract just
without the error and this would apply the new unfair contract terms to these
contracts if not exempted.
[Schedule 2, item 58, subsection 12BLA(2)(b) of the ASIC Act]
2.96 The replacements enumerated in subsections 12BLA(1) and (2) each count as
renewals, novation or assignments under the law and would otherwise bring
the insurance contracts into scope of the new unfair contract terms provisions.
However, many of these contracts are legacy contracts, whose terms were
agreed at the time they were entered into but may be unfair in the current
context. The introduction of penalties creates an incentive for insurers to refuse
to respond to customer-initiated requests relating to life insurance products,
such as where a name has been misspelt on a policy, where a customer takes up
an option to add cover on terms set out in the original policy, or where a credit
card expiry has resulted in a missed payment for the policy and automatic
cancellation to avoid potentially breaching the unfair contract terms provisions.
2.97 To avoid potentially negative outcomes for consumers, Schedule 2 to the Bill
excludes these contracts from the scope of the unfair contract terms regime.
2.98 Where a replacement policy is issued to extend or vary the cover under the
policy, and this involves varying a term of the policy that spells out the
existing cover, then the new unfair contract terms regime will apply to the term
as varied. However, if the extension or variation is achieved by adding new
terms to the contract, only the new terms are affected.
[Schedule 2, item 58, subparagraph 12BLA(2)(c)(ii) of the ASIC Act]
Provisions referring to non-party consumers
2.99 Schedule 2 to the Bill makes technical amendments to make it clearer that
remedies for a breach of the unfair contract terms provisions are available for
46
Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
both non-party consumers and non-party small businesses. These changes do
not affect the way the law currently functions.
2.100 Schedule 2 to the Bill amends the law by replacing the definition of 'non-party
consumer' with the concept of 'non-party'. This change makes it clear that the
remedies for a breach of the unfair contract terms provisions are available to all
non-parties, regardless of whether they are consumers or small businesses.
[Schedule 2, items 59, 60 and 69, subsection 2(1) (definition of non-party
and non-party consumer) in the ACL and subsection 12BA(1) (definition of
non-party) of the ASIC Act]
2.101 Amendments are made to the ACL to ensure all existing references to
non-party consumers are amended to refer to non-parties.
[Schedule 2, items 61 to 68, Division 4 of Part 5-2 (heading), Subdivision B
of Division 4 of Part 5-2 (heading), section 239 (heading), subsection
239(1)(c), subsections 239(3)(a) and (b), section 240 (heading), section 240,
section 241 (heading) and section 241 of the ACL]
2.102 Amendments are made to the ASIC Act to ensure all existing references to
non-party consumers are amended to refer to non-parties.
[Schedule 2, items 70 to 75, section 12GNB (heading), sections 12GNB,
12GNC (heading) and 12GNC of the ASIC Act]
Review of operation of the provisions
2.103 The Commonwealth Minister must cause a review to be undertaken of the
operation of the new unfair contract terms provisions introduced into the CCA
(including the ACL) and the ASIC Act. The review must relate to the operation
of the provisions during the two years post-commencement.
[Schedule 2, item 80]
2.104 This mandated review will allow the Government to carefully examine the
effectiveness of the reforms and any potential changes that should be
considered. The review must be completed and a report on the review provided
to the Minister within 6 months after the end of the period to which it relates,
with a final report required to be tabled in Parliament within 15 days of the
relevant Minister receiving a copy.
[Schedule 2, item 80]
Other amendments
2.105 Schedule 2 to the Bill amends the ACL to ensure that references to new
provisions are incorporated into relevant sections to give effect to the unfair
contract terms regime.
[Schedule 2, items 5 to 10 and 14, subsection 2(1) (definitions of declared
term and enforcement proceeding), section 137D, paragraphs 137F(2)(b)
47
Unfair contract terms
and (c), section 137H, paragraph 155(2)(b)(v) and subsection 232(3) of the
ACL]
2.106 Schedule 2 to the Bill amends the ASIC Act to ensure that references to new
provisions are incorporated into relevant sections to give effect to the unfair
contract terms regime.
[Schedule 2, items 25, 26, 28 to 34, subsection 12BA(1), paragraph
12GBA(6)(a), subsections 12GF(1), 12GLA(4), paragraph 12GLC(1)(a),
paragraph 12GN(1)(c) and subparagraph 12GNB(1)(a)(i) of the ASIC Act]
2.107 Schedule 2 to the Bill also makes minor amendments to the ACL to update the
readability and structure of the Acts that do not affect the way the law currently
functions.
[Schedule 2, items 15, 18 to 20,70 and 77, Subdivision A of Division 4 of Part
5-2 (heading), subsection 237(1) (notes), Subdivision C of Division 4 of Part
5-2 (heading), subsection 239(1) (notes), Subdivision B of Part 5-2 (heading)
and subsection 303(2) of the ACL]
Application and transitional provisions
2.108 The unfair contract terms amendments (other than item 58) will apply to new
standard form contracts that are made at or after the commencement of
Schedule 2 to the Bill. Schedule 2 to the Bill will commence on the day after
the end of the period of 12 months beginning on the day the Bill receives
Royal Assent. The 12-month delay between Royal Assent and commencement
is designed to give businesses time to review and adjust their contracts and
practices if required to prepare for the new unfair contract terms provisions.
[Schedule 2, items 78 and 79, section 305 of the ACL and section 342 of the
ASIC Act]
2.109 The amendments in Schedule 2 to the Bill do not apply to a contract made
before the commencement of the Schedule, except as provided for in the
relevant sections of the ACL and the ASIC Act.
[Schedule 2, items 78 and 79, subsection 305(2) of the ACL and subsection
342(2) of the ASIC Act]
2.110 If the existing contract is renewed at or after the commencement of Schedule 2,
the Schedule applies to the contract as renewed on and from the day on which
the renewal takes effect.
[Schedule 2, items 78 and 79, subsection 305(3) of the ACL and subsection
342(3) of the ASIC Act]
2.111 A term of a contract varied after the commencement of Schedule 2 to the Bill
will also be covered by the unfair contract terms regime. If there has not
already been a renewal of the contract, the amendments will apply only to the
term or terms that have been varied, on and from the day on which the
variation takes effect, and as if the contract as varied had been made on the
48
Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
variation day.
[Schedule 2, items 78 and 79, subsection 305(4) of the ACL and subsection
342(4) of the ASIC Act]
2.112 The amendments of sections 137D and 137F of the CCA made by Schedule 2
to the Bill apply in relation to a contract to the same extent as the amendments
of the ACL made by Schedule 2 to the Bill apply in relation to the contract.
[Schedule 2, item 76]
2.113 Sections 12BLA and 12BLB have effect despite section 325 as inserted by
Schedule 2 to the Financial Sector Reform (Hayne Royal Commission
Response--Protecting Consumers (2019 Measures)) Act 2020. However,
sections 12BLA and 12BLB do not apply to the extent that their operation
would result in an acquisition of property (within the meaning of
paragraph 51(xxxi) of the Constitution) from a person otherwise than on just
terms (within the meaning of that paragraph of the Constitution).
[Schedule 2, item 79, section 343 of the ASIC Act]
2.114 Section 51(xxxi) of the Constitution provides that the Commonwealth
Parliament may only legislate with respect to the acquisition of property by the
Commonwealth on just terms. Where Schedule 2 to the Bill would affect rights
and obligations under a contract to the extent that it would result in the
acquisition of property on unjust terms contrary to section 51(xxxi) of the
Constitution, these contracts are exempted from the application of Schedule 2
to the Bill.
[Schedule 2, item 79, section 342 and subsection 343(2) of the ASIC Act]
49
Chapter 3: Statement of
Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
Table of Contents:
Schedule 1 - More competition, better prices ...................................... 51
Overview ....................................................................................... 51
Human rights implications ............................................................. 53
Conclusion .................................................................................... 56
Schedule 2 - Unfair contract terms ...................................................... 56
Overview ....................................................................................... 56
Human rights implications ............................................................. 57
Conclusion .................................................................................... 59
Schedule 1 - More competition, better prices
Overview
3.1 Schedule 1 to the Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011.
3.2 Schedule 1 to the Bill will implement a new penalty regime which will deter
non-compliant conduct and reduce the financial benefits and incentives for
businesses to engage in conduct that breaches the competition and consumer
law.
3.3 The new penalty regime in Schedule 1 to the Bill increases the maximum
financial penalties for the breach of certain offences and civil penalty
51
Statement of Compatibility with Human Rights
provisions currently held in Parts IV, IVBA, X, XIB, XICA and the ACL by a
body corporate, and a person that is not a body corporate.
3.4 Nearly 30 years ago, the maximum penalty for breach of the competition
provisions in Part IV was increased to $10 million for a body corporate and
$500,000 for an individual. While the maximum penalty for a body corporate
has since been updated to allow the court to impose penalties based on the
benefit obtained or a percentage of corporate turnover, the base penalty has
remained the same. As a result, a breach of competition law can be seen as an
acceptable cost of doing business, particularly for large businesses.
3.5 1n 2018, the OECD report Pecuniary Penalties for Competition Law
Infringements in Australia also found that the average and maximum
competition penalties in Australia are, in practice, substantially lower than
those in comparable international jurisdictions.
3.6 The amendments will increase the severity of Australia's penalty regime for
anti-competitive behaviour and facilitate the imposition of penalties that are
more comparable with international jurisdictions. This will ensure the price of
misconduct is high enough to deter unfair activity and improve competition in
Australia for the benefit of consumers and small businesses.
3.7 Maximum penalties available in consumer cases must be also high enough to
achieve deterrence and ensure that consumers retain a robust level of
protection against egregious conduct.
3.8 Penalties under the ACL were last increased in 2018 to align with competition
penalties. The amendments will maintain this consistency by increasing
maximum penalties in the ACL in line with those proposed for the competition
provisions of the CCA. This will sufficiently deter breaches of consumer law
in circumstances where there is significant financial benefit to be had.
3.9 By strengthening penalties, Australia will be promoting competition and better
corporate behaviour, while ensuring consumers retain a robust level of
protection.
Civil contraventions
3.10 The new maximum civil pecuniary penalties for contraventions of certain
provisions are under the CCA and ACL are:
• for a body corporate, the greater of:
- $50,000,000;
- if the Court can determine the value of the benefit that the
body corporate, and any body corporate related to the body
corporate, have obtained directly or indirectly and that is
reasonably attributable to the act or omission--3 times the
value of that benefit, and
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
- if the Court cannot determine the value of those benefits or that
benefit--30% of the body corporate's adjusted turnover during
the breach turnover period for the act or omission.
• for a person other than a body corporate $2,500,000.
Offences
3.11 The new maximum fine for certain offences under the CCA and ACL are:
• for a body corporate, the greater of:
- $50,000,000;
- if the Court can determine the value of the benefit that the
body corporate, and any body corporate related to the body
corporate, have obtained directly or indirectly and that is
reasonably attributable to the offence--3 times the value of
that benefit, and
- if the Court cannot determine the value of those benefits or that
benefit--30% of the body corporate's adjusted turnover during
the breach turnover period for the offence.
• for a person other than a body corporate $2,500,000.
Human rights implications
Civil penalty provisions
3.12 Schedule 1 to the Bill engages the right to a fair trial, as well as the
presumption of innocence in Articles 14 and 15 of the ICCPR. Article 14(2) of
the ICCPR recognises that all people have the right to be presumed innocent
until proven guilty according to the law. Articles 14 and 15 apply only in
relation to the rights of natural persons, not legal persons, such as companies.
3.13 Schedule 1 to the Bill provides for a civil penalty of up to $2.5 million where a
natural person contravenes certain provisions of the CCA and the ACL.
3.14 Civil penalty provisions may engage criminal process rights under Articles 14
and 15 of the ICCPR. Although there is a domestic law distinction between
criminal and civil penalties, 'criminal' is separately defined in international
human rights law. Therefore, when a provision imposes a civil penalty, it is
necessary to determine whether or not the penalty amounts to a 'criminal'
penalty for the purposes of Articles 14 and 15 of the ICCPR.
3.15 The civil penalty provisions contained in Schedule 1 to the Bill may be viewed
as 'criminal' for the purposes of human rights law. This view may be formed
as these provisions are deterrent in nature and proceedings would be instituted
by a public authority with statutory powers of enforcement. While this may be
53
Statement of Compatibility with Human Rights
the case, the civil penalty provisions do not amend or seek to discourse any
rights of an individual or an applicable legal process.
3.16 The provisions do not apply to the general public, but to a sector or class of
people such as class of people who hold positions of high responsibility in
corporations who should reasonably be aware of their obligations under the
CCA. Therefore, imposing these civil penalties will enable an effective
disciplinary response to non-compliance.
3.17 While these civil penalties are large, they are appropriate in size. The Guide to
Framing Commonwealth Offences, Infringement Notices and Enforcement
Powers outlines that larger penalties are more appropriate for bigger
companies, as they provide an adequate deterrent. Those involved in
contraventions of the CCA and ACL may receive large financial benefits from
their misconduct. The increase in financial penalties is appropriate for
regulatory and disciplinary purposes, and to ensure paying a financial penalty
does not become a cost of doing business.
3.18 Further, the judiciary continues to have discretion to consider the seriousness
of the contravention and impose a penalty that is appropriate in the
circumstances. The civil courts are experienced in making civil penalty orders
at appropriate levels, taking into account a range of factors including the
maximum penalty, the nature of the contravening conduct and the size of the
organisation involved. Therefore, a relevant consideration in setting a civil
penalty amount is the maximum penalty that should apply in the most
egregious instances of non-compliance with the CCA and ACL. The maximum
civil penalty amounts that can be imposed under Schedule 1 to the Bill are
intentionally significant.
3.19 The increases to financial penalties will seek to neutralise any financial
benefits or gains obtained from contraventions of the CCA and ACL. This
approach is consistent with the broader penalty framework for contraventions
by corporations. The new penalty is a maximum that the court can impose. The
judiciary continues to have discretion to consider the seriousness of the
contravention and impose a penalty that is appropriate in the circumstances.
3.20 Article 14(5) of the ICCPR provides that everyone convicted of a crime has the
right to their conviction and sentence being reviewed by a higher tribunal
according to law. The provisions increasing the penalty do not amend any of
the review processes available to individuals. Anyone that has a pecuniary
penalty imposed on them is able to have their case reviewed by a higher court.
3.21 Article 14(7) of the ICCPR provides that no-one is to be liable to be tried or
punished again for an offence of which she or he has already been finally
convicted or acquitted. If the civil penalty provisions are considered to be
'criminal', the related legislative scheme does not permit proceedings to be
brought against the person for substantially the same conduct. For example,
subsection 76(3) of the CCA provides that if conduct constitutes a
contravention of two or more provisions of Part IV of that Act, a proceeding
54
Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
may be instituted any one or more of the provisions, but a person is not liable
to more than one pecuniary penalty in respect of the same conduct. This is
consistent with Article 14(7) of the ICCPR as an individual would not be
punished again for conduct in relation to which they had already been
convicted.
3.22 Finally, the civil penalties do not carry a sanction of imprisonment for non-
payment of the penalty and the amendments do not amend any of the criminal
process or procedural rights that currently exist and are upheld in accordance
with Article 14 of the ICCPR. The increased penalties will apply to offences
that are committed, or begin to be committed, after Schedule 1 to the Bill
commences, and therefore apply prospectively, upholding Article 15 of the
ICCPR.
3.23 Based on the above factors, including the cumulative effect of the nature and
severity of the civil penalties in Schedule 1 to the Bill, these civil penalties do
not breach any of the guarantees provided by article 14 and 15 of the ICCPR.
3.24 To the extent the increases in penalties apply to bodies corporate, they do not
engage any human rights.
3.25 To the extent that Schedule 1 engages the rights under Article 14 and 15 of the
ICCPR, it is compatible with human rights as the limitations are appropriate
and proportionate.
Criminal penalty provisions
3.26 Schedule 1 to the Bill contains criminal penalty provisions which engage the
right to a fair trial in Article 14 of the ICCPR as well as the presumption of
innocence in Articles 14 and 15 of the ICCPR.
3.27 The criminal penalty provisions of the CCA are held under sections 45AF and
45AG and provide that an offence is punishable by on conviction by a fine not
exceeding the greater of the three limbs set out above.
3.28 The criminal penalty provisions of the ACL are held under various sections
and prescribed in the table at subsection 224(3). The criminal penalty
provisions in Schedule 1 to the Bill will not introduce new criminal provisions,
but rather amend the amounts of the penalties currently held under the CCA
and ACL.
3.29 The criminal penalty provisions of the CCA and the ACL do not impede on the
right to be presumed innocent which is held under article 14(2) of the ICCPR,
nor does the criminal penalty provisions impede on the right not to be tried
twice for the same offence, which are held under article 14 (7) of the ICCPR.
3.30 Although it does not form part of the amendment, the provisions being
amended are to be read with section 225 of the ACL. Section 225 relevantly
provides for protections and procedures in relation to criminal proceedings
including:
55
Statement of Compatibility with Human Rights
• that a court must not make an order against a person for conduct that is
substantially the same as conduct constituting the consumer protection
breach (subsection 225(1));
• that proceedings for an order under section 224 against a person are
stayed if criminal proceedings are started (subsection 225(2)(a));
• if the conduct is substantially the same as the conduct alleged to
constitute the consumer protection breach (subsection 225(2)(b)), and
• rules surrounding the admissibility of evidence of information given
and evidence of production of documents previously given by the
individual in proceedings in relation to a consumer protection breach.
3.31 To the extent the increases in penalties apply to bodies corporate, they do not
engage any human rights.
3.32 To the extent that these provisions engage with Article 14 and 15 of the
ICCPR, they are compatible with human rights.
Conclusion
3.33 Schedule 1 to the Bill is compatible with human rights because, to the extent
that it may limit human rights, those limitations are reasonable, necessary and
proportionate.
3.34 To the extent that these amendments limit the rights under Article 14 and 15 of
the ICCPR, they are compatible with human rights as:
• the increased penalty amounts are aimed at deterring non-compliance
with the CCA, and not punitive in nature;
• the maximum penalty amount will only be used in the most egregious
instances; and
• the civil and criminal penalties are applicable to people who should
reasonably be aware of their obligations.
Schedule 2 - Unfair contract terms
Overview
3.35 Schedule 2 to the Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011.
3.36 Schedule 2 to the Bill amends the ACL and the ASIC Act to strengthen and
clarify the existing unfair contract terms provisions and to reduce the
56
Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
prevalence of unfair contract terms in consumer and small business standard
form contracts. The amendments introduce civil penalty provisions prohibiting
the use of unfair contract terms in standard form contracts. The amendments
also expand the class of contracts that are covered by the unfair contract terms
provisions.
3.37 A review of the existing provisions in 2018 found that they did not provide
strong deterrence against businesses using unfair contract terms in their
standard form contracts.
Human rights implications
3.38 Schedule 2 to the Bill engages the following human rights and freedoms:
• the right to a fair trial;
• the right to work; and
• the right to adequate standing of living, including food, water and
housing.
Right to a fair trial
3.39 Schedule 2 to the Bill engages the right to a fair trial in Article 14 of the
ICCPR through the introduction of civil penalty provisions for the use of unfair
contract terms.
3.40 The maximum penalty that can be issued for contravention of the civil penalty
provisions prohibiting the use of unfair contract terms in the ASIC Act will be
consistent with existing penalties in the ASIC Act for similar contraventions.
For an individual the maximum penalty will be the greater of:
• 5,000 penalty units; or
• if the court can determine the amount of the benefit derived and
detriment avoided because of the contravention, that amount multiplied
by 3.
3.41 The maximum penalty that can be issued for contravention of the civil penalty
provisions prohibiting the use of unfair contract terms in the ACL will be
$2,500,000. This aligns with the new maximum penalty for similar provisions
in the ACL being introduced in Schedule 1 to the Bill.
3.42 The civil penalty provisions contained in Schedule 2 to the Bill are not
'criminal' for the purposes of human rights law. While a criminal penalty is
deterrent or punitive, these provisions are regulatory and disciplinary as this is
a more appropriate response to regulation of contractual rights. Further, the
provisions do not apply to the general public, but to a sector or class of people
who should reasonably be aware of their obligations and who exist in a specific
regulatory context under both the CCA and the ASIC Act. The civil penalty
57
Statement of Compatibility with Human Rights
regime is intended to only apply to businesses and individuals acting in
relation to a business who breach the unfair contract terms regime.
3.43 As bodies corporate are not protected by relevant human rights law,
contraventions by bodies corporate do not engage Article 12 of the ICCPR.
3.44 Imposing the civil penalties will encourage increased compliance with the law
and deter the use of unfair terms in standard form contracts. Also, while the
civil penalties do at first appear substantial, they are the maximum penalty
available. Courts are not required to impose penalties at the maximum level.
Courts assess the appropriate and proportionate level of penalty to impose in
each case up to the maximum. There are a range of considerations that courts
consider when determining the appropriate quantum of penalties to be
imposed. Based on the above factors, the cumulative effect and the nature and
severity of the civil penalties in Schedule 2 to the Bill are not 'criminal' for the
purposes of human rights law.
3.45 To the extent Schedule 2 to the Bill engages Article 14 of the ICCPR, it does
so appropriately and is consistent with the Bill's objectives.
3.46 This is because of the need to encourage compliance with the unfair contract
terms protections. Failure to create this disincentive will likely result in unfair
terms continuing to be prevalent in standard form contracts, impacting
consumers and small businesses. Penalties are required to adequately
incentivise compliance.
Right to work
3.47 Schedule 2 to the Bill engages the right to work under Articles 6(1), 7 and
8(1)(a) of the International Covenant on Economic, Social and Cultural Rights.
3.48 The right to work provides that everyone must be able to freely accept or
choose their work, and includes a right not to be unfairly deprived of work.
3.49 Any negative impact on the right to work must be directed towards a legitimate
objective, be rationally connected to (that is, effective to achieve) that
objective, and be proportionate. Schedule 2 to the Bill meets these criteria.
3.50 Schedule 2 to the Bill is relevant to the right to work as both ASIC and the
ACCC can seek disqualification orders from a court to prevent a person from
managing a corporation. These orders can only be sought where the relevant
conditions are satisfied and that person has been involved in breaches of the
unfair contract terms regime. This would engage the right to work as it
prevents the relevant person from working as a director of a company or
engaging in any major management of a body corporate.
3.51 The objective of Schedule 2 to the Bill is to reduce the prevalence of unfair
contract terms in standard form contracts. The objective is necessary to ensure
that consumers and small business are not subject to detriment in situations
where they lack adequate bargaining power and suffer loss or damage as a
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
result. The objective addresses the current lack of disincentive to include unfair
terms in contracts. This issue is pressing and substantial enough to warrant
limiting these rights, because consultation has shown that unfair contract terms
continue to be prevalent in standard form contracts, negatively impacting
consumers and small businesses.
3.52 Schedule 2 to the Bill is connected to the objective of preventing the use of
unfair contract terms, as it is an effective way to achieve that objective.
Disqualification orders provide an effective way to achieve this objective as
they are a disincentive against the use of unfair contract terms by directors and
executive employees of companies who may seek to take advantage of
consumers or small businesses. This creates a strong incentive for these
directors and employees to review their terms to ensure they comply with the
unfair contract terms provisions.
Conclusion
3.53 Schedule 2 to the Bill is compatible with the human rights it engages and does
not unnecessarily, unreasonably or disproportionately limit the right to a fair
trial or the right to work.
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Attachment 1: Regulation impact
statement executive summary - unfair
contract terms
Table of Contents:
What is the identified problem? ............................................................ 62
What are the preferred options? .......................................................... 63
Legality and penalties.................................................................... 63
Flexible remedies .......................................................................... 63
Definition of small business contract: headcount/turnover threshold
...................................................................................................... 64
Definition of small business contract: related bodies corporate ..... 64
Definition of small business contract: contract value threshold ..... 64
Definition of small business contract: clarity on standard form
contract ......................................................................................... 65
Minimum standards ....................................................................... 65
Types of contracts impacted ................................................................ 66
A Regulation Impact Statement (RIS) is carried out by governments when considering
whether action is required to address a specified problem. On 13 December 2019,
Treasury released a Consultation RIS on Enhancements to Unfair Contract Term
Protections. Submissions closed on 27 March 2020 and close to 80 submissions were
received. Treasury also held consultation roundtables with a broad range of
stakeholders.
The purpose of this Decision RIS is to identify the options that yield the greatest net
benefit for the community (having regard to the results of the regulatory impact
assessment and the consultation process) and to set out how the preferred options will
be implemented, monitored and reviewed.
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Regulation impact statement executive summary - unfair contract terms
What is the identified problem?
Standard form contracts are a commonly-used and cost-effective option when
conducting business, as they avoid the transaction costs associated with negotiated
contracts. However, such contracts are often offered on a 'take it or leave it' basis and
can be one-sided. Consumers and small businesses generally lack the resources and
bargaining power to effectively review and negotiate contract terms or challenge their
enforcement. The unfair contract term (UCT) protections were introduced to deal with
terms that cause a significant imbalance in the parties' rights and obligations, and
which are not reasonably necessary to protect the legitimate interests of the party who
would be advantaged by such a term.
More than ten years after the introduction of the UCT protections for consumers and
nearly four years since their extension to small business, UCTs are still prevalent in
standard form contracts. Stakeholders advise that the current approach (involving
voiding UCTs) is ineffective and that contract-issuing parties are able to capitalise on
the typically weaker bargaining position of consumers and small businesses by
including UCTs in their contracts.
Stakeholders also suggest that improvements are needed to improve clarity on the
application of, and accessibility to, the UCT protections. For example, one of the
requirements for a contract to be considered a 'small business contract' and covered by
the UCT protections, is that at least one party to the contract employs fewer than 20
persons at the time the contract is entered into. Stakeholders advise that this headcount
is too low to cover all small businesses that need protection and has also led to
uncertainty about the coverage of the UCT regime, including for contract-issuing
parties, which hinders compliance with the law.
In addition, while there is an expectation that a small businesses will continue to
undertake their own due diligence when entering into a contractual agreement, some
stakeholders suggest that the contract value threshold, which is another requirement for
a contract to be covered by the UCT protections, is set is too low to take into account
the various types of contracts small business enter into. Moreover, stakeholders suggest
small businesses would benefit from greater certainty as to whether the contract they
intend to sign is a standard form contract likely to fall within the UCT protections.
Problems have also been identified with the efficient operation of the UCT protections.
For example, even after a court or tribunal declares a term is unfair, the judgement only
extends to the specific term in the contract to the proceedings and the same (or similar)
terms could continue to be used in other similar small business contracts. In addition,
the law is not clear whether, or the extent to which, the definition of 'non-party
consumer' covers non-party small business. Concerns have also been raised that while
industry-specific requirements under state and territory legislation are exempt from the
application of the protections, the headline clauses are not, creating possible
uncertainty as to whether such headline clauses will be challenged as being 'unfair'.
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
What are the preferred options?
Having regard to stakeholder feedback during consultation and the results of the
regulatory impact assessment of the options (Chapter 4), the preferred options are:
Legality and penalties
Option 3 - Make UCTs unlawful and give courts the power to
impose a civil penalty
Under this option, a term of a standard form small business or consumer contract could
still be challenged in a court (or tribunal) and found to be 'unfair' and therefore void,
which means it would not be binding on the parties. However, compared to the status
quo, courts could also apply a civil pecuniary penalty for the contravention. Courts
would be able to determine the appropriate penalty amount, up to the maximum set
under the law. In imposing a civil pecuniary penalty, the court would need to be
satisfied that imposing a penalty is necessary and the amount appropriate, depending
on the circumstances of the individual case.
Successful implementation of this option will in part depend on the provision of
appropriate guidance and education (such as that presented in Chapter 4 Impact
analysis, legality and penalties - Option 2). For example, guidance that would assist in
distinguishing between terms that may be 'unfair' and terms which, because they are
reasonably necessary to protect the legitimate interests of the contract-issuing party,
would not be considered 'unfair'.
Flexible remedies
Option 2 - UCTs not automatically void; court given power to
determine the appropriate remedy
This option would amend the law to clarify that when a court or tribunal declares a
term in small business or consumer contract is 'unfair', the court or tribunal has the
discretion to determine appropriate remedies (including that the term is void or is to be
varied) rather than the term being automatically void.
Option 3 - Clarify that remedies for 'non-party consumers'
also apply to 'non-party small businesses'
This option would ensure that the remedies available for 'non-party consumers' would
also apply to 'non-party small businesses'. As per the justification for extending UCT
protections to small business contracts, small businesses and consumers share similar
characteristics, including limited financial resources and negotiation powers.
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Regulation impact statement executive summary - unfair contract terms
Option 4 - Create a rebuttable presumption provision for
UCTs used in similar circumstances
This option would amend the law to establish a rebuttable presumption that a contract
term is unfair if, in a separate case, the same or a substantially similar term has been
used by the same entity or in the same industry sector and declared by a court to be
unfair. If such a term was challenged in a court or tribunal, it would be presumed to be
unfair, unless the contract-issuing party was able to produce evidence to demonstrate
why it was not unfair in the particular circumstances of the case.
Note: the above options are not mutually exclusive.
Definition of small business contract:
headcount/turnover threshold
Option 3 - At least one party to meet a less than 100 person
headcount threshold OR less than $10 million annual turnover
threshold
This option would replace the less than 20 person headcount threshold with a less than
100 person headcount threshold and a less than $10 million annual turnover threshold.
Accordingly, one of the requirements for a contract to be considered a 'small business
contract' and covered by the UCT protections would be that at least one party to the
contract is a business that employs fewer than 100 persons at the time the contract is
entered into and/or has an annual turnover of less than $10 million.
Definition of small business contract: related bodies
corporate
Option 1 - Status quo
This option would retain the current law and not state whether employees of 'related
bodies corporate' are to be included when calculating employee numbers for the
purposes of the UCT protections for small business contracts.
Definition of small business contract: contract value
threshold
Option 3 - Remove the contract value threshold altogether
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Treasury Laws Amendment (More Competition, Better Prices) Bill 2022
This option would remove the requirement for the upfront price payable under a
contract to be below a certain threshold in order for the contract to be considered a
'small business contract' and covered by the UCT protections.
Definition of small business contract: clarity on
standard form contract
Option 2 - Court must consider 'repeat usage' in determining
a contract is a 'standard form contract'
The current law provides factors a court must take into account in determining whether
a contract is a standard form contract. This option would include 'repeat usage' as one
of these factors.
Option 3 - Clarify actions which do not constitute an 'effective
opportunity to negotiate'
This option would amend the law to further clarify the types of actions which do not
constitute an 'effective opportunity to negotiate'. This could include:
• opportunities for a small business to negotiate minor amendments to a
contract, which are amendments that would not alter the intent and
essence of the original term;
• opportunities for a small business to select, from a pre-existing list of
possible terms, which term they would prefer, rather than an
opportunity to actually negotiate the substance of the term; and
• claims by the contract-issuing party that there was an effective
opportunity to negotiate across all standard form contracts with all its
customers, when it only gave an opportunity to negotiate to a small
subset of customers.
Note: the above options are not mutually exclusive.
Minimum standards
Option 2 - Provide an exemption for certain terms which meet
minimum standards
This option would amend the law to exempt certain clauses that include 'minimum
standards' or other industry-specific requirements contained in relevant
Commonwealth, state or territory legislation.
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Regulation impact statement executive summary - unfair contract terms
Types of contracts impacted
To ensure consistency in the operation of the UCT protections, where appropriate, the
above proposals will be applied to small business and consumer contracts for goods,
services and the sale or grant of an interest in land regulated under the Australian
Consumer Law (ACL), which is Schedule 2 to the Competition and Consumer
Act 2010 (CCA), and consumer and small business contracts for financial products and
services (regulated under mirror provisions in the Australian Securities and
Investments Commission Act 2001 (ASIC Act)).2 The ASIC Act provisions will extend
to insurance contracts from 5 April 2021.
2
A reference to the ACL in this document should be taken to include the mirror provisions in
the ASIC Act.
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