The Fair Trading Amendment Bill (Bill) was introduced to parliament on 17 December 2019 to amend the Fair Trading Act 1986 (Act). The Bill passed its first reading on 12 February this year and submissions are now being accepted by the Select Committee and will close on 27 March 2020.
The Bill aims to better protect consumers and small businesses from unfair commercial practices. It is a result of the discussions and consultation conducted by MBIE between December 2018 and February 2019. Work undertaken by MBIE during this time found that a significant number of businesses had been offered what they considered to be unfair contract terms or treated unfairly. It recommended legislative intervention to respond to unfair practices prevalent in the market including: imbalances in bargaining power, lack of legal or commercial sophistication of some parties, and the presence of take-it-or-leave-it standard form contracts.
Such unfair practices were said to have negative economic impacts including increasing costs for a party both in terms of negotiating the terms of the contract and/or implementing unfair terms they have signed-up to. This may prevent that party's ability to grow and innovate and could also discourage some parties from entering into a contract in the first place thereby restricting competition.
We submitted on MBIE's discussion paper at that time and opposed its proposals. In our view, there is no need for further government intervention in business-to-business practices. We retain the view that the proposed Bill is not necessary to the extent it further regulates business-to-business practices. Our reasoning is set out in our original submission on MBIE's discussion paper which can be found here.
New protections against unfair practices
The Bill as introduced, includes two new protections against unfair practices:
It prohibits unconscionable conduct in trade; and Extends the current Act's protections against unfair contract terms in standard form consumer contracts to also apply to small trade contracts. The Bill includes factors that a court may have regard to in assessing whether a party's conduct is unconscionable including:
The relative bargaining power of the parties; The extent to which the parties acted in good faith; Whether the party affected was reasonably able to protect its interests (taking into account its particular characteristics and circumstances); Whether the party affected was able to...