New unfair contract term law - backing farmers behind the scenes

22 Nov, 2017 12:59 PM
ACCC Commissioner Mick Keogh.
ACCC Commissioner Mick Keogh.

THE work of the Australian Competition and Consumer Commission’s (ACCC) Agricultural Enforcement and Engagement Unit isn’t just about pursuing legal complaints or conflicts between Australian farmers and suppliers or processors.

Take the competition watch-dog’s current role in overseeing the new unfair contract terms law that was passed by the federal Coalition government in November last year.

The legal changes aim to resolve power imbalances in agricultural supply chains, and other areas of Australian business, which can leave farmers aggrieved over contractual supply arrangements, against bigger downstream players.

ACCC Commissioner Mick Keogh heads up the Agricultural Unit and says the new law is an example of different parties working with his organisation, behind the scenes, to devise solutions “reasonably quickly”, by removing unfair contract provisions in a manner that didn’t necessarily attract much public attention.

Mr Keogh said many agricultural-related contacts like those for selling grains had recently been changed, because of the new unfair contract terms law.

“A lot of background work is going on because of those changes and they don’t talk much about it but a lot of it does involve the agriculture sector as well,” he said.

Mr Keogh gave a detailed description of how the new contract law was operating during a recent talk at an Agribusiness Australia gathering in Canberra, saying the changes carried “considerable implications” for the farming sector.

“If I can summarise it in my layman’s terms - and I know that if there was an ACCC lawyer here they’d be cringing - it basically says that in a standard form contract between a large provider and a small user of those services, or a small organisation that deals with that business, the terms of that contract can’t be manifestly unfair,” he said.

“The simplest example is a telco contract for your mobile phone that says the telco reserves the right to vary the price at any stage - but if you want to get out of the contract you have to pay the full value of the contract etc, etc.

“Those manifestly unbalanced obligations and responsibilities is what the new law aims to address and it applies to consumer contracts, but also to small business contracts under an annual value of $300,000 or $1 million in multi-year contracts.”

Mr Keogh said quite a few contracts in agriculture had on face-value, looked “considerably lop sided” in relation to the new laws.

He said in some supply agreements, for any breach by the small scale supplier, “quite strong penalties” came into play - but quite a few powers were reserved by the major player in that relationship.

Mr Keogh said the ACCC’s unfair contract terms team had been going through a range of contracts brought to its attention with “quite a cooperative process” occurring to make alterations, to avoid conflicts.

“A lot of the companies that have contracts that potentially breach the unfair contract law have been very cooperative in adjusting the terms, modifying the terms and taking out the terms,” he said.

“Sometimes you wonder whether in fact some of these contracts don’t gradually evolve over time as a result of the insistence of lawyers about covering off on every possible risk.

“When you look at them over time, you sort of realise that there is a belts and braces exercise that probably goes way too far, compared to what’s needed, for the types of transactions involved.

“But there are a number of cases that are underway that will sort out a number of the issues associated with it like contracts for grains, forward contracts for lambs and contracts in a whole range of agricultural commodity areas that are typically what they call standard form contracts, where you sign up on a take it or leave it basis and you don’t negotiate clause by clause.

“There has been quite a lot of activity in those areas and I think that will be quite a useful exercise which will help, in some respects, to sorting out how those relationships should work, rather than having a manifestly unfair arrangements in place.”

Small Business Minister Michael McCormack said small businesses no longer had to ‘take it or leave it’ when negotiating contracts with big business thanks to the Coalition’s new law changing the way contract negotiations operated.

“By extending unfair contract term provisions of the Competition and Consumer Act 2010 to small business, the government has made often complex contract negotiations fair,” he said.

He said the law applied to new or varied standard form small business contracts entered into or renewed on or after November 12, 2016.

“If a small business thinks a contract term is unfair, it should ask the other party to the contract to amend or remove the unfair term,” he said.

“If the term is not removed or altered, I strongly encourage the small business to report it to the ACCC or seek assistance from their state Small Business Commissioner or the Australian Small Business and Family Enterprise Ombudsman.

“Contracts covered include those between businesses where one of the businesses employs less than 20 people and the contract is worth up to $300,000 in a single year or $1 million if the contract runs for more than a year.”

Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media


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