Labor introduces legislation to ban unfair contracts for SMEs, heap $50 million penalties on anti-competitive businesses

Penalties of $50 million for companies found to have engaged in anti-competitive behaviour could soon be a reality, as the federal government tables legislation which could drastically increase the risks of breaching competition and consumer laws.

At the same time, the government is also pushing to eliminate the use of unfair contract terms that give one business unfair leverage over another.

The Albanese government presented its Treasury Laws Amendment (More Competition, Better Prices) Bill in the House of Representatives on Wednesday, in the hopes of upgrading the maximum financial penalties for market-bending actions.

Under the government’s plan, the penalty for corporations could grow five-fold from its current cap of $10 million, which has remained the same for some 30 years.

Turnover-based penalties are also set to rise. Instead of paying 10% of annual turnover for each breach, companies which fall foul of the competition and consumer laws will need to pay 30% of turnover accrued while the breach took place.

Individual penalties will grow dramatically, from a maximum of $500,000 to a new cap of $2.5 million.

But the new maximum penalties are intended to apply only to the “most egregious” breaches of competition law, the bill states, leaving it up to the courts to decide which corporations face the harshest setbacks.

The changes would improve the nation’s budget position by $117.5 million in 2026-2027, the bill estimates.

The bill’s tabling comes after months of advocacy from the Albanese government, which says increasing the financial burden facing companies and individuals that behave anti-competitively will help protect other businesses and consumers alike.

Assistant Treasurer Stephen Jones said in a statement that cracking down on anti-competitive behaviour could help consumers already feeling the pressure of inflation.

“At times like these, we need to use every tool in the shed to protect working families from unfair practises,” he said.

“Increasing penalties puts everyone on notice that anti‑competitive behaviour will not be tolerated.”

Assistant Minister for Competition, Charities and Treasury Andrew Leigh said it was vital to boost those penalties, as today’s punishment may be too lenient for big business to care about.

“Fines should not be so modest that companies can treat them as a mere cost of doing business,” he said.

To put those changes into action, the government plans to amend Australian Consumer Law under the Competition and Consumer Act 2010, along with tweaks to the Australian Securities and Investments Commission Act 2001.

The government also intends to consult on similar changes to the maximum penalties under the consumer protection provisions of the financial services law, “to ensure the law continues to provide robust and effective protection of consumer interests across all sectors of the economy”.

Unfair contracts to be outlawed

In addition, Minister for Small Business Julie Collins on Wednesday said the legislation also aims to outlaw contract terms that allow one party to unilaterally tear up an agreement without showing cause.

If passed into law, the long-heralded legislative amendments will create civil penalties for businesses found to rely on such terms in standard contracts, empowering regulators to chase offending companies through court.

The number of small businesses afforded those protections could also grow, with Labor hoping to expand the eligibility threshold from businesses with fewer than 20 employees to businesses with headcounts of 100 or less.

An additional test, covering companies with annual turnover of less than $10 million, will also apply to small businesses seeking protection.

Competition watchdogs, including the ACCC, have long warned that unfair contract terms harm small businesses, with a lack of civil penalties meaning major players were likely to continue their problematic tactics.

In a statement, Collins said the new bill will go some way to meeting those concerns.

“This is a vital step in addressing the power imbalance that exists for small businesses, and help support them following significant challenges in recent years,” she said.