Warning bells should be ringing for all businesses which rely on standard form customer contracts in the supply of goods and services.  To the extent that such contracts are one-sided and unfair, the ACCC may have you in its sights.

The ACCC has just commenced its first ever proceedings against an internet service provider alleging breaches of the unfair contract provisions in the Australian Consumer Law (ACL).

Despite the fact that the national laws prohibiting the use of “unfair” terms in consumer contracts came into effect on 1 July 2010, the ACCC has spent the last few years educating businesses about the new laws rather than taking any action against companies in breach of those laws.

In a move which signals a change of direction, the ACCC commenced proceedings against ByteCard Pty Limited (known as Netspeed Internet Communications) (Bytecard) in the Federal Court.  It alleges that Bytecard forced customers to accept standard form consumer contracts with terms that:

  • enabled ByteCard to unilaterally vary the price under an existing contract without providing the customer with a right to terminate the contract;
  • required the consumer to indemnify ByteCard in any circumstance; and
  • enabled ByteCard to unilaterally terminate the contract at any time with or without cause or reason.

The ACCC alleges that such terms breach the unfair contract provisions of the ACL and should be declared void.  The ACL prohibits “standard form” consumer contracts which:

  • cause significant imbalance in the parties’ rights and obligations arising under the contract; and
  • include terms that are not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and
  • would cause detriment (whether financial or otherwise) to a party if they were to be applied or relied on.

The action commenced against Bytecard is the first time the ACCC has relied upon these new laws in any litigation.

In light of the ACCC’s actions, we recommend that businesses review their standard form consumer contracts.  Seek advice if you have any concerns regarding your standard form contracts.