ACCC cracks down in first unfair contract terms case

A telecommunications business is the first to come under fire from the Australian Competition and Consumer Commission, as the watchdog cracks down on the use of unfair contract terms.

Canberra-based company ByteCard, also known as Netspeed Internet Communications, allegedly had three terms in its contract which the ACCC considers unfair. The ACCC is now seeking for those contracts to be voided.

The ACCC alleges unfair contract terms allowed ByteCard to unilaterally vary prices in existing contracts without providing the customer with the right to terminate the contract, required consumers to indemnify ByteCard in every circumstance and unilaterally terminate the contract at any time without cause or reason.

ACCC chairman Rod Sims said in a statement it’s the first time the ACCC has taken a business to court over unfair contract terms.

Hall and Wilcox partner Ben Hamilton told SmartCompany it’s likely to be the first of many such cases.

“The ACCC has said it before, it’s now gone through a stage of engagement and it’s into the second phase of enforcement against unfair contract terms,” he says.

Hamilton says lawyers, judges and businesses will all be following the case to see the outcome, which will determine how the contracts ruling is treated in practice.

“Commonly, we see terms which allow for unilateral variation, either in terms of a right to unilaterally amend the terms of a contract or the price. It will be interesting to see how the courts treat unilateral variation,” he says.

“Unfair contract terms is a new ACCC regime and will be looked at closely.”

This court action follows the ACCC’s March release of its Unfair Contract Terms Industry Review Outcomes, which identified a number of problematic terms and industries.

The watchdog determined changes needed to be made to standard form contracts used in the airline, telecommunications, fitness and vehicle rental industries, as well as some used by online traders and travel agents.

The ACCC determines a contract term is unfair based on three conditions:

• It would cause a significant imbalance in the parties’ rights and obligations under the contract.
• It is not reasonably necessary to protect the legitimate interest of a party to the contract (the party who is advantaged by the term would have to prove that this is necessary).
• It would cause detriment to a party to the contract if it were applied or relied upon.

The ACCC has fast-tracked proceedings in the Federal Court against ByteCard and the case is listed for a scheduling conference in Melbourne on June 13, 2013.

SmartCompany contacted ByteCard through Netspeed, but a spokesperson said the company had no comment.

This isn’t the first time the telecommunications company has been in court. In February this year it was found by the Federal Court to have breached the Telecommunications Industry Ombudsman scheme.

Bytecard was fined $75,000 after it failed to comply with TIO determinations and following directions from the Australian Communications and Media Authority. Its director Brian Morris was also fined $37,000.