Chapter 1

Chapter 1


1.1        The Trade Practices Amendment (Australian Consumer Law) Bill 2009 ('the bill') was referred to the Senate Economics Legislation Committee on 25 June 2009 for inquiry and report by 7 September 2009.

The bill

1.2        The bill will ban unfair terms in standard form business-to-consumer contracts. Standard form contracts are contracts that are not individually negotiated: they are often 'take it or leave it' contracts.

1.3        A term will be considered 'unfair' if it causes a significant imbalance in the parties' rights and responsibilities and it is not 'reasonably necessary' to protect the 'legitimate interests' of the supplier.

1.4        A term is likely to be considered unfair if a supplier can vary any term without the consumer's consent or if a supplier can cancel a contract without a corresponding right for the consumer. If a term is found to be unfair, it is void but the rest of the contract remains in effect.

1.5        The bill will cover most standard form contracts, with the notable exception of insurance contracts (see chapter 8). The types of contracts that are most likely to be affected by the legislation are banking and financial services contracts, utility service contracts, internet and telephone contracts and gym memberships.

1.6        The bill has three principal elements:

...the creation of a new national consumer law, to be called the Australian Consumer Law; implementation of national unfair contract terms law and implementation of new penalties for breaches of consumer law; and new enforcement powers for the ACCC and for the Australian Securities and Investment Commission to enforce these laws.[1]

1.7        Schedule 1 Part 1 and Schedule 3 Part 1 of the bill contains provisions to implement the new national unfair contract terms law. Schedule 1 Part 1 creates the Australian Consumer Law (ACL) and its enforcement by the Australian Competition and Consumer Commission (ACCC). Schedule 3 Part 1 'essentially mirrors these provisions but applies them in relation to financial services', with the Australian Securities and Investments Commission (ASIC) as the responsible regulator.[2]

1.8        Schedule 1 Part 2 of the bill inserts a new part XI into the TPA to allow for the application of the ACL as the law of the Commonwealth, facilitate its application as a law of each state and territory and make provision for its administration, enforcement and amendment.[3]

1.9        Schedule 2 of the bill introduces new enforcement powers and remedies under the Trade Practices Act (1974). This includes pecuniary penalties, disqualification orders, substantiation notices, orders to redress loss or damage suffered by non-party consumers, infringement notices and public warning notices.

The Australian Consumer Law

1.10      This bill is the first of two bills which will introduce the Australian Consumer Law (ACL). The ACL will draw on the existing provisions on unconscionable conduct in part IVA of the TPA, the consumer protections in part V, the liability of manufacturers and importers for defective goods in part VA and part VC offences.[4]

1.11      This bill amends the TPA to establish the ACL as a schedule to the TPA and inserts the unfair contract terms provisions. It also inserts corresponding provisions for financial products and services into the Australian Securities and Investments Commission Act 1999.

1.12      The second bill will be introduced in 2010 and will implement the Council of Australian Governments (COAG) reforms including transferring the existing consumer protection and related provisions of the TPA into the ACL (see chapter 2).[5]

Unfair contract laws in other jurisdictions

1.13      In April 1993, the European Union (EU) adopted its Directive on unfair terms in consumer contracts. The following year, the United Kingdom implemented this Directive into its national law. These regulations were replaced in 1999 with the Unfair Terms in Consumer Contracts Regulations.

1.14      In 2001, Victoria initiated a review of its fair trading legislation which recommended (in June 2002) the introduction of unfair contract terms laws. These provisions were enacted in October 2003 through the Fair Trading (Amendment) Act 2003.[6]

1.15      Section 32W of the Victorian Fair Trading Act 1999 defines an 'unfair term' as a term that, 'in all the circumstances', causes 'a significant imbalance in the parties' rights and obligations arising under the contract to the detriment of the consumer'. The Victorian legislation is restricted to business-to-consumer unfair contract terms. This bill contains similar provisions to those currently in Part 2B of the Victorian Fair Trading Act 1999.

1.16      The committee has found useful a report by the Consumer Action Law Centre into the consumer protection provisions of the Trade Practices Act 1974 and how they compare with provisions in the United Kingdom, the United States, Canada and the EU.[7]

Conduct of the inquiry

1.17      The committee advertised the inquiry in the Australian newspaper and on the committee's website, inviting written submissions by Friday 31 July 2009. It received 58 submissions from various organisations. Appendix 1 lists these submissions: they are also available on the committee's website at:

1.18      The committee held two public hearings: in Canberra on 21 August 2009 and in Sydney on 26 August 2009. Appendix 2 lists those who appeared at these hearings. The committee thanks all those who contributed to the inquiry.

Structure of the report

1.19      This report has ten chapters:

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