ACCC Crack Down on Unfair Contract Terms
Does your business use standard form contracts when engaging with consumers or small businesses? The kind that’s offered on a take-it-or-leave-it basis? If yes, it’s time to take a good hard look at them.
The Australian Competition and Consumer Commission (ACCC) is cracking down on businesses that use unfair contract terms in their standard form contracts in breach of the Australian Consumer Law (ACL), and the consequences of getting it wrong are serious: significant fines and penalties, court-enforceable undertakings, costly compliance programs and possible reputational damage.
The recent investigation by the ACCC into Mable Technologies Pty Ltd (Mable) serves as a timely warning to businesses of the perils of unfair contract terms.
What happened at Mable?
Mable provides an online platform whereby people looking for personal care (e.g. social support, housekeeping, nursing and allied health services) are connected with independent support workers.
There is no cost to sign up; however, fees charged by the support workers are paid by clients through Mable, with a percentage deduction as Mable’s own fees. At sign up, support workers and clients agree to Mable’s standard form Terms of Use, effected by clicking a box as is typical in most online platforms.
Between 9 November 2023 and 22 August 2024, Mable’s standard form Terms of Use contained terms which provided for:
- Deemed acceptance after 24 hours of service logs for work provided by support workers to clients, leading to the automatic processing of payments with no contractual right to opt-out or dispute the invoice after deemed acceptance;
- Unilateral variation of fees or amendments to the Terms of Use by Mable as notified on the platform, without providing a reasonable period of notice before variations take effect;
- Minimum penalty fee of $5,000 payable by workers or clients who avoid Mable’s fees, such as by providing services outside of the Mable platform within 12 months of first introduction or first provision of service through Mable.
Additionally, the Terms of Use provided for:
- Exclusion of Mable’s liability for any claim or loss incurred by a worker or client related to the worker or client’s use of, access to or transactions involving Mable’s platform (regardless of the basis of claim or loss);
- Limitation of Mable’s liability for any claim or loss incurred by a worker or client related to use of the Mable platform without equivalent limitation for workers or clients;
- Indemnification of Mable against all third-party claims and liabilities incurred by Mable related to use of the Mable platform by the worker or client; and
- Requirement for workers and clients to pay Mable’s costs reasonably incurred in enforcing its rights under the Terms of Use.
Mable cooperated with the investigation and admitted breaches of the ACL. It was required to enter into a court-enforceable undertaking addressing the ACCC’s concerns, including agreeing to not use or enforce the impugned terms as well as, at its own expense, to establish an ACCC-approved multi-year Compliance Program.
So, what counts as an unfair contract term?
Generally speaking, an unfair term is a term that:
- would cause significant imbalance in the parties’ rights and obligations arising under the contract;
- is not reasonably necessary to protect the legitimate interests of the party who would be disadvantaged by the term; and
- would cause detriment to a party if it were to be applied or relied on.
The unfair contract term regime under the ACL applies to standard form consumer or small business contracts.
- A consumer contract includes a contract for the supply of goods or services to an individual who acquires it wholly or predominantly for personal, domestic or household use or consumption; and
- A small business contract is a contract where, at the time of entering into the contract at least one party to the contract employs fewer than 100 full-time equivalent employees or has an annual turnover of less than $10 million.
A contract is “standard form” if it is essentially offered on a “take-it-or-leave-it” basis (i.e., the other party cannot change any, or the majority, of the terms of the contract).
If a term is found to be unfair, it’s void. It cannot be enforced. Worse still, penalties for breaching the regime are significant. Companies in particular can face fines the greater of:
- $50 million,
- three times the benefit obtained by the unlawful conduct; or
- 30% of the company’s adjusted turnover during the breach turnover period.
That’s not a risk most businesses can afford.
What to do
Don’t wait until it’s too late. The ACCC has made it clear: unfair contract terms are in the firing line for 2025-2026. If you haven’t done a thorough review of your standard form contracts, now is the time. Our Corporate & Commercial team at Cornwalls has deep expertise in this space and can help you ensure compliance under the ACL.
Queries
For further information on the above, or if you are interested in understanding your other obligations under the ACL, please get in touch with an author or any member of our Corporate & Commercial team.
Disclaimer
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action