John Durie: A win for small business as government prepares to finally outlaw unfair contracts

Penalties will be imposed for the first time under new unfair contract laws expected to soon be unveiled by the federal government.

The changes are part of the reform package promoted by outgoing Australian Competition and Consumer Commission chief Rod Sims.

Other measures include unfair trading laws and changes to merger laws to put the onus on the company wanting the merger to show it isn’t anti-competitive . 

The new unfair contract laws will be a boon to small business and something the sector has urged the government to adopt for several years. 

Sims will be replaced on March 20 by Gilbert & Tobin partner Gina Cass Gottlieb, with new enforcement boss Liza Carver starting work on Tuesday.

Sims will take on a new pro bono competition policy role with the UK-based Centre for Economic Policy and is also considering a post with the Australian National University, which will ensure he continues to play an active role in economic debate on his departure.

The new unfair contract laws will be a considerable improvement to the provisions introduced by the government back in 2016 by the now Small Business Ombudsman Bruce Billson.

In November 2020, the government reached an agreement with state leaders to expand these 2016 reforms by legislating to make unfair contract terms illegal, however, Sims said last year that a delay in introducing the reforms was “no doubt” causing harm to small businesses.

The new laws will cover contracts up to $2 million, up from the present $200,000 limit, but the key change will be allowing courts to impose civil penalties against big companies that impose harsh contract terms.

The present law simply voids the term of the contract in question, allowing the other terms of the potentially heinous contract to continue.

The reform will hit big companies that try to impose harsh terms on small business suppliers, including by changing terms in the middle of the contract without discussion.