Work underway to strengthen the Fair Trading Act

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The Government, in an attempt to address perceived gaps in protections against unfair business practices, is amending the Fair Trading Act (FTA). The Fair Trading Amendment Bill will introduce new protections for businesses and consumers, primarily aimed at preventing unconscionable conduct in trade and unfair contract terms.

What is unconscionable conduct?

 Unconscionable conduct is conduct that is contrary to the norms of society. In Australia (where they operate under very similar legislation already), these norms include acting honestly, fairly and without deception or unfair pressure.

The practical effect of prohibiting unconscionable conduct is that the behaviour of the trader or business operator, or their employees, will be viewed against all the surrounding circumstances. There is no requirement for a contract or sale to be entered into or made and the consumer does not have to suffer any loss or disadvantage. If the behaviour or actions are deemed to be contrary to the norms of society then the trader can be fined or required to provide another remedy such as a refund or compensation.

Unfair contract terms in standard form consumer contracts

 Unfair contract terms are already dealt with in the current FTA but the new legislation will strengthen these provisions further to provide protection from terms in standard form consumer contracts. These are contracts between a consumer/customer and business, under $250,000 in value, where:

  • the consumer/customer has not been able to negotiate the terms of the contract
  • the terms of the contract create a significant imbalance in the parties’ rights and obligations, for example, the contract disproportionately favours the seller
  • the term is not reasonably necessary to protect a party’s interest in the contract, and
  • the term would cause detriment e.g. financial loss to a party if it was enforced or relied on.

Such terms are considered unfair but it is uncertain as to how these will be policed. Once passed into law, the legislation will likely include a process to exclude or remove such terms from contracts, however there are currently no effective means of doing this.

Stricter rules about uninvited direct sales

Under the new Act, a person looking to make uninvited direct sales, for example, door to door sellers, must leave a consumer’s property as soon as possible if the consumer tells them to leave. It also allows consumers to put up a sign prohibiting direct sellers from entering their property and this must be respected. This right will only apply to uninvited direct sellers, and not visits by charities or political parties.

The Fair Trading Amendment Bill is currently before Parliament. Submissions to the Select Committee closed in April 2020.

If you would like to know more about the changes to the FTA and if they will affect you or your business, our experienced Business Law team will be happy to have a chat.