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 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.
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.
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.
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
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.
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
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.
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
The Australian Consumer Law
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.
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.
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
Unfair contract laws in other jurisdictions
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.
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.
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
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.
Conduct of the inquiry
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: https://www.aph.gov.au/Senate/committee/economics_ctte/tpa_consumer_law_09/submissions.htm.
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
This report has ten chapters:
chapter 2 outlines the consultative process leading up to the
introduction of the legislation;
chapter 3 outlines the need for a national consumer law and
submitters' views on the merit of harmonised consumer laws;
chapter 4 looks at the key threshold issue of the bill—what is an
unfair contract term? It details the bill's definition of 'void' and 'unfair'
contract terms and the 'grey-list' of unfair contract terms intended to guide
the courts. The chapter also looks at how the bill's provisions on 'unfair contract
terms' differ from the Trade Practices Act's 'unconscionable conduct'
chapter 5 examines the scope of the bill and in particular, the
debate as to whether it should have included business-to-business unfair
chapter 6 focuses on the bill's requirement that the court must
take into account the extent to which the term caused 'detriment, or
substantial likelihood of detriment' and the extent to which it is
chapter 7 looks at the bill's provisions to prohibit contract
terms and to exclude certain terms from the bill's remit;
chapter 8 considers the arguments for and against the exclusion
of insurance contracts from the bill's provisions;
chapter 9 looks at the bill's new enforcement powers in Schedule
chapter 10 makes some concluding comments on the bill including
the proposed commencement date of the legislation.
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