Australia Puts First Small Biz Contract Terms Laws To Test

The Australian Competition and Consumer Commission (ACCC) scored a victory in the nation’s first test of new small business (SMB) contract laws.

According to news from Lexology, this week the Federal Court sided with the ACCC and declared eight terms in J.J. Richards & Son’s standard contracts with small businesses were unfair. The ruling voided those terms, reports said, delivering a victory for the ACCC which, for the first time, put their new laws to the test regarding small business contracts.

The Australian Consumer Law’s protections against unfair contract terms only extended to consumers until last year, when provisions were expanded to include small businesses. Under the law, the SMB party must have fewer than 20 people employed, and the upfront payment under the contract is no more than AUS $300,000 (or under AUS $1 million if the contract is for no more than a year).

J.J. Richards is one of Australia’s largest private waste management companies, reports said. The company provides recycling and other waste collection and management services. Standard contracts the company used with small businesses included eight unfair clauses, the Federal Court ruled.

One of those clauses allowed J.J. Richards to increase its prices, while another bound small business customers to commit to additional contracts unless the first was canceled within 30 days before the contract ended. The Federal Court decided that these clauses “created a significant imbalance between J.J. Richards and its customers,” including small business customers, Lexology said in its report.

Reports added that J.J. Richards is not facing fines for the unfair clauses.

Earlier this year, a report from the Australian Securities and Investment Commission, as well as the Australian Small Business and Family Enterprise Ombudsman, highlighted the issue of unfair contract terms with small businesses in the financial services industry as another issue threatening the nation’s SMBs. A review of banks’ lending practices found that the financial institutions have “substantial work to do” to comply with legislation aimed at increasing protections for SMBs and consumers against unfair contract terms.