More Scope, More Power: Enhancing the scope of the Australian Consumer Law and regulator power

Businesses are reminded to review their customer terms and conditions ahead of the impending changes to the Australian Consumer Law (ACL) and unfair contract term regime, and ensure all internal policies are up to date.

Expanded scope of a ‘consumer’

On 1 July 2021, the Treasury Laws Amendment (Acquisition as Consumer—Financial Thresholds) Regulations 2020 (Cth) (Regulations) takes effect with the scope of a ‘consumer’ set to expand to capture more individuals. 

Presently, a person is taken to have acquired particular goods or services as a ‘consumer’ if:

1. the amount paid or payable for the goods or services were priced at A$40,000 or less (or other prescribed amount);
2. the goods or services were of a kind ordinarily acquired for personal, domestic or household use or consumption; or
3. the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads.

The Regulations increase the monetary threshold for determining whether a person acquires goods or services as a ‘consumer’ from A$40,000 to A$100,000.  A corresponding change is also being made to the consumer protection provisions in the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) which similarly apply to financial products and services. 

Companies are reminded to evaluate their procedures in handling consumer enquiries and complaints.  Goods and services that are acquired by a ‘consumer’ come with automatic guarantees that cannot be excluded.

What are the other changes to look out for?

Proposed changes are also being made to the unfair contract terms regime.  These include, amongst others:

1. narrowing the court’s focus in determining whether a contract is a standard form contract from the current indicia test to emphasise a pattern of ‘repeat usage’ and whether consumers or small businesses have ‘effective opportunity to negotiate’;
2. replacing the cumulative definition of a small business being a business that has less than 20 employees and the contract value is less than A$300,000 or A$1,000,000 (where contract duration is 12 months or more) with a business with less than 100 employees or less than A$10,000,000 annual turnover;
3. introducing a rebuttable presumption that a term is unfair where:
   1. the contract-issuing party uses a term;
   2. that term is substantially similar to a term used previously by the contract-issuing party, or a different entity from the same industry as the contract-issuing party; and
   3. the term that was used previously was deemed unfair by a court;
4. replacing current treatment of unfair contract terms as automatically void with judicial discretion to determine an appropriate remedy for the aggrieved party; and
5. giving the court the ability to impose a civil pecuniary penalty on the contract-issuing party.

These amendments follow the recent expansion of the Insurance Contracts Act 1984 (Cth) and ASIC Act to allow consumers and small businesses to rely on the unfair contract term regime for all insurance contracts, provided the upfront price payable for the contract is less than A$300,000 or the total contract value is less than A$1,000,000 if the contract duration is 12 months or longer.  

Significantly, these amendments impose statutory guarantees on business to business contracts that were previously outside of the scope of the ACL.   

Next steps

Increased enforcement powers for Australian regulators have been an agenda for the federal government in recent years.  It would not be surprising if the amendments to the scope of the ACL and unfair contract terms regime result in an increase in prosecutions by the Australian Competition and Consumer Commission (and Australian Securities and Investments Commission) as their remit and powers are enhanced.

We recommend businesses review their customer terms and conditions to ensure compliance with consumer laws and the unfair contract term regime.

Please contact us for more information.

Authored by Mandi Jacobson, Angell Zhang