Businesses will get protection from unfair contracts, Emerson says

Changes to the franchising code of conduct and more regulation of existing laws will work to shield SMEs from business contracts with unfair terms, small business minister Craig Emerson said yesterday.

In a speech to the Committee for Economic Development of Australia, Emerson also said the Government’s investigation of unconscionable conduct provisions in the Trade Practices Act and the Franchising Code of Conduct will help quash unfairness in the industry.

“Information imbalances in business-to-business transactions may therefore best be dealt with through reforms and more effective enforcement of the false and misleading and unconscionable conduct provisions of the Trade Practices Act and the Franchising Code of Conduct. And the Australian Consumer Law Bill will give the ACCC greater powers to take effective action against such behaviour.”

“In the context of business-to-business contracts, a general notion of unfairness, subject to interpretation by the courts, may have the effect of increasing risk, raising business costs and potentially jeopardising small business financing. Small business financiers will be more reluctant to lend if they believe that key contract terms could be overturned.”

The Government has attracted criticism from SMEs for excluding business-to-business contracts from the unfair contracts legislation, which will prohibit contracts giving an unfair advantage to one party over the other.

Emerson also used the speech, titled ‘Labor is the party of competition’, to position the Government as a proponent of market competition, and said criticisms against an open market would “not be listened to with great sympathy”.

“Today’s productivity growth is tomorrow’s prosperity. Business managers will have strong incentives to innovate – boosting productivity growth and future prosperity – when they are under competitive pressure from rivals who adopt and adapt the latest technologies and who develop and apply their own best ideas.”

Emerson also used his speaking opportunity to attack calls for the regulation of e-commerce, saying they are merely the “old tariff rebate revisited”.

“If any business organisation can deliver goods and services to the consumer at low prices and the consumers want to choose those, why should Government step in and say ‘Hey, you have no right to low cost items ordered from the internet?'”

“In the 1970s and 1980s, people used to say ‘If you reduce tariffs, no, no the price of kids’ underpants and socks won’t fall, because the big, greedy capitalists will take it all in profits’…I have heard people actually say [these] are no cheaper now than they were in the 1970s. Rubbish. They are a lot cheaper and disadvantaged people benefit from them.”

He said governments should not regulate goods and services over the internet (with the exception of pornography) and that new competition policies should be made to respond to new technologies.