Enhancements to Unfair 
        Contract Term Protections 
        Regulation Impact Statement for Decision 
        September 2020
                                 i 
                                                     
       © Commonwealth of Australia 2020 
       This publication is available for your use under a Creative Commons Attribution 3.0 Australia licence, 
       with the exception of the Commonwealth Coat of Arms, the Treasury logo, photographs, images, 
       signatures and where otherwise stated. The full licence terms are available from 
       http://creativecommons.org/licenses/by/3.0/au/legalcode.  
               
       Use of Treasury material under a Creative Commons  Attribution 3.0 Australia licence requires you to 
       attribute the work (but not in any way that suggests that the Treasury endorses you or your use of 
       the work). 
           Treasury material used ‘as supplied’. 
       Provided you have not modified or transformed Treasury material in any way including, for example, 
       by changing the Treasury text; calculating percentage changes; graphing or charting data; or deriving 
       new statistics from published Treasury statistics — then Treasury prefers the following attribution:  
           Source: The Australian Government the Treasury. 
       Derivative material 
       If you have modified or transformed Treasury material, or derived new material from those of the 
       Treasury in any way, then Treasury prefers the following attribution:  
           Based on The Australian Government the Treasury data. 
       Use of the Coat of Arms 
       The terms under which the Coat of Arms can be used are set out on the Department of the 
       Prime Minister and Cabinet website (see www.pmc.gov.au/government/commonwealth-coat-arms). 
       Other uses 
       Enquiries regarding this licence and any other use of this document are welcome at: 
           Manager 
           Media and Speeches Unit 
           The Treasury 
           Langton Crescent  
           Parkes  ACT  2600 
           Email: media@treasury.gov.au  
                              Enhancements to Unfair Contract Term Protections – Decision Regulation Impact Statement 
                   Contents 
                   Abbreviations ....................................................................................................................... 3 
                   Executive Summary ............................................................................................................... 5 
                       What is the identified problem? .......................................................................................... 5 
                       What are the preferred options? ......................................................................................... 6 
                       Types of contracts impacted ............................................................................................... 8 
                   Background .......................................................................................................................... 9 
                   The Australian Consumer Law .................................................................................................. 9 
                   UCT protection provisions ....................................................................................................... 9 
                   Review of UCT protections for small business........................................................................... 10 
                   1.       The problem ............................................................................................................. 12 
                   Unfair contract terms still exist in standard form contracts ........................................................ 12 
                       Scale and scope of the problem ......................................................................................... 14 
                       Awareness of the UCT protections ..................................................................................... 19 
                       What are the potential risks and costs of maintaining the status quo?..................................... 20 
                   The need for Government action............................................................................................ 22 
                       Contract-issuing parties continue to exploit power imbalances .............................................. 22 
                       Simply voiding a term does not provide an effective deterrent ............................................... 23 
                       Automatically voiding a term may make a contract unworkable ............................................. 25 
                       There could be improved access to remedies and more certainty around their use ................... 25 
                       The same unfair terms can be used repeatedly .................................................................... 27 
                       The current headcount threshold used to define small businesses is not always appropriate ...... 28 
                       The contract value threshold reduces scope and leads to uncertainty ..................................... 29 
                       It is not always clear whether a contract is a ‘standard form contract’ ..................................... 30 
                   2.       Objectives ................................................................................................................ 33 
                   3.       Options .................................................................................................................... 34 
                   Legality and penalties ........................................................................................................... 34 
                   Flexible remedies ................................................................................................................. 35 
                   Definition of small business contract....................................................................................... 36 
                       Headcount/turnover threshold .......................................................................................... 36 
                       Related bodies corporate.................................................................................................. 36 
                       Contract value threshold .................................................................................................. 37 
                       Clarity on ‘standard form contract’..................................................................................... 37 
                                                                               1 
                              Enhancements to Unfair Contract Term Protections – Decision Regulation Impact Statement 
                   Minimum standards ............................................................................................................. 38 
                   4.       Impact analysis ......................................................................................................... 39 
                   Legality and penalties ........................................................................................................... 39 
                   Flexible remedies ................................................................................................................. 54 
                   Definition of small business contract....................................................................................... 58 
                       Headcount/turnover threshold .......................................................................................... 58 
                       Related bodies corporate.................................................................................................. 62 
                       Contract value threshold .................................................................................................. 64 
                       Clarity on ‘standard form contract’..................................................................................... 67 
                   Minimum standards ............................................................................................................. 69 
                   5.       Consultation ............................................................................................................. 72 
                   6.       Evaluation, conclusion and estimated regulatory burden ............................................... 74 
                   Estimated regulatory burden ................................................................................................. 75 
                   7.       Implementation and review ....................................................................................... 78 
                   Implementation ................................................................................................................... 78 
                   Review ............................................................................................................................... 79 
                   Appendix A ......................................................................................................................... 80 
                   Regulator action on UCTs ...................................................................................................... 80 
                       ACCC ............................................................................................................................. 80 
                       ASIC............................................................................................................................... 90 
                   Appendix B ......................................................................................................................... 95 
                       List of stakeholders who provided a submission ................................................................... 95 
                    
                                                           
                                                                               2