The Australian Competition and Consumer Commission has launched its first legal action under the country’s expanded unfair contract laws, alleging eight clauses in the standard form contracts of cleaning business JJ Richards and Sons are unfair to small businesses.
JJ Richards provides waste management services to businesses across Australia, including recycling and sanitary collection.
The ACCC will argue in the Federal Court that up until at least April, the business was issuing standard form contracts that breached the new unfair contract protections for small businesses.
In particular, the ACCC will allege that the contracts contained terms that would bind client businesses to subsequent contracts, potentially up to five years, unless those smaller businesses cancelled the contract within 30 days of its term ending.
The ACCC will also allege that the contracts allowed JJ Richards to unilaterally increase its prices; granted the company exclusive rights to remove waste from a customer’s premises; and created unlimited indemnity in favour of JJ Richards.
The regulator is also concerned about contract terms that allegedly removed JJ Richards’ liability where its performance is “prevented or hindered in any way”; allowed customers to be charged for services not rendered for reasons outside of their control; allowed JJ Richards to suspend its services but keep charging customers if their payments weren’t made after seven days; prevented customers with outstanding payments to terminate their contracts; and give JJ Richards the ability to keep charging equipment rental charges after a contract had been terminated.
The ACCC will seek court declarations that the contract terms and unfair and therefore void. It will also ask the court to issue injunctions to prevent JJ Richards from relying on the contract terms and entering into future contracts with small businesses that contain the same terms.
Speaking to SmartCompany, ACCC deputy chair Dr Michael Schaper said in the Commission’s work on standard form contracts so far, clauses that included very short windows for renewal were becoming “a bit of a concern”.
“Rollovers in and of themselves aren’t always problematic, but ones that don’t give people the time and opportunity before renewing can be,” Schaper says.
He says unfair contracts are an area of priority for the Commission, and the next year will see the ACCC working to “establish some precedent” in the area.
He urges SMEs who believe they might be subject to unfair contract terms to present these contracts to the Commission, because this will help with any court action it can ultimately take towards businesses.
“The first port of call is to try and negotiate it out. If not, we are encouraging businesses to come to us,” he says.
This is the first time the ACCC has brought a challenge to a contract based on the unfair contracts protections for small businesses, which protect against contracts that allow one party to unilaterally vary the terms of the agreement.
Last month, Victoria’s Civil and Administrative Tribunal ordered a public speaking promoter to repay a business customer $4000 after its terms for booking a motivational speaker workshop were found to be unfair.
Not enough small business awareness
Small Business and Family Enterprise Ombudsman Kate Carnell tells SmartCompany there’s still not enough awareness in the SME community that these laws are in effect.
She says small businesses are likely to enter more than 10 standard form contracts each year, some of which could include these unfair terms.
“Standard form contracts can be anything from the ones you are aware of, like lending documents, to things like rubbish removal contracts, and there are a whole range of these contracts that small businesses run up against all the time,” Carnell says.
She says when a business owner is presented with a standard document where the terms appear non-negotiable, they should read it carefully to ensure there are no terms that might fall foul of the new protections.
“A contract should be a contract, of two parties,” she says, highlighting SMEs should be wary of any documents that let the other party call all the shots.
However, the fact remains that taking a bigger business to court to have unfair terms voided is an expensive exercise, says Carnell, and she welcomes moves by the consumer watchdog to act on the behalf of SMEs.
She says court action on these issues shows the big end of town is realising, “this is serious”, Carnell says.
Schaper says the ACCC is focused on taking action for small businesses where “there are small businesses and a large number of people are being affected”.
SmartCompany contacts JJ Richards for comment but did not receive a response prior to publication.