Changes to the Fair Trading Act

Tuesday 3 March, 2020

Late last year, the Government introduced a Bill to amend the Fair Trading Act 1986.  The purpose of this Bill is to protect consumers and small businesses from ‘unfair’ commercial practices.  

There are three key changes proposed:

• prohibiting unconscionable conduct in trade;
• extending protections against unfair contract terms to apply to small trade contracts; and
• adding a right for consumers to require uninvited direct sellers to leave or not enter their property.

Prohibiting unconscionable conduct

The Fair Trading Act already prohibits misleading and deceptive conduct in trade. The proposed changes will extend this to prohibit businesses from engaging in unconscionable conduct in trade.  ‘Unconscionable’ is not defined in the Bill but the Bill does provide guidance on how to determine if conduct has been unconscionable. 

The Court may consider:

• whether the trader used unfair pressure or tactics;
• the relative bargaining power of the parties;
• whether the trader failed to disclose their intended conduct that could adversely impact the affected person;

If there is a contract, the Court can look at the terms of the contract and the circumstances in which the contract was entered into.

Unfair contract terms

The Bill extends the Act's existing ban on unfair contract terms in standard form consumer contracts to small trade contracts.  A ‘small trade contract’ is defined as a contract where the value of the trade relationship is worth no more than $250,000 per year. If the relationship later becomes worth more than $250,000 per year, the contract is still a small trade contract. If one party to a contract alleges that a contract is a small trade contract, the contract is presumed to be a small trade contract unless the other party proves it is not.

Unfair contract terms are terms which:

• cause significant imbalance in the parties’ rights and obligations;
• are not reasonably necessary to protect a party’s legitimate interests;
• would cause detriment (financial or otherwise) to one party if relied on.

The Bill has now been referred to Select Committee and submissions due by 27 March 2020.

If you have questions, want to make a submission, or are concerned about any of the terms in your contracts, our Commercial Team is happy to help.