Delay in outlawing unfair contracts is harming small businesses, says Rod Sims

Small businesses across the country are still being subjected to unfair contract terms and there is “no doubt” a delay in the government’s plans to make such terms illegal is costing those businesses greatly, says competition boss Rod Sims. 

Speaking to SmartCompany about the Australian Competition and Consumer Commission’s calls for greater protections for small businesses against ‘unfair practices’, Sims said unfair contracts remain a “huge issue” for the small business sector, despite protections being extended to small businesses back in 2016. 

“It is causing a lot of harm and we’ve got to change it,” he says. 

“Small businesses are still getting unfair contract terms, and while they are not illegal and there are no penalties, they’ll keep getting unfair contract terms.”

According to the ACCC’s most recent Small Business in Focus report, the commission received 322 reports relating to unfair contract terms from small businesses and franchises in 2020. 

In November, federal and state governments reached an agreement to take the 2016 reforms to the next step by legislating to make unfair contract terms illegal. 

The agreement, which came after a lengthy consultation process, will mean courts will be given the power to impose civil penalties for unfair terms. 

The planned reforms will also expand the definition of small business and remove the requirement for a contract to be below a certain value. They will also clarify what is a ‘standard form contract’ and when the protections will apply.

At the time, Assistant Treasurer Michael Sukkar said the government would develop draft legislation for the changes, which would then be subject to a consultation process. 

A Treasury spokesperson told SmartCompany this draft legislation is expected to be released later this year for consultation, and “will provide a further opportunity for stakeholders to comment on the detail of the reforms”.

Speaking to SmartCompany, Small Business Ombudsman Bruce Billson says unfair contract terms continue to make up a “very significant part” of his office’s dispute load, as well as disputes with the big tech platforms.

Under Kate Carnell’s leadership, the Ombudsman’s office was one of the leading advocates for the stronger protections against unfair contract terms.

When she finished her five-year term in March, Carnell nominated the reforms as one of the top priorities for the office.

“We’re very much looking forward to the government’s response and we commend Sims and the ACCC for their advocacy,” says Billson.