ALP TO INTRODUCE FINES UP TO $10M FOR UNFAIR CONTRACT TERMS

The Australian Labor Party (ALP) has announced that it will introduce fines of up to $10 million for businesses that impose unfair contract terms on other small businesses, according to a media report. The move will likely impact franchisors should the ALP win government at the next federal election, due later this year, and is already supported by the Australian Competition and Consumer Commission (ACCC) which has called for fines to discourage large organisations from using unfair contract terms in their legal agreements. Currently, unfair contract terms can be struck down, or potentially void an entire contract following court action, however the ACCC argues this not enough of a disincentive for unfair contract terms to still appear in agreements.

The commitment is likely to please small-business advocates and the ACCC, which have been calling for stronger unfair-contract-terms legislation (UCT), amid concern the current regulation lacks teeth.

In making unfair contract terms illegal, Labor says it will introduce fines of up to $10 million for offences, which will for the first time introduce civil pecuniary penalties for large businesses.

UCT legislation was introduced in 2016, but it has been criticised since because while big businesses found to have unfair terms in their contracts with SMEs can have those contracts voided by a court, there are no penalties.

In contrast, the coalition has only committed to a review of UCT law, although it did pass reforms to improve ASIC and the ACCC’s investigative powers in October last year.

www.franchiseadvice.com.au