The recent government webinar – getting your business ready for the 2016/2017 financial year

Just in case you missed the recent webinar held by representatives from the ATO, ACCC, ASIC and Fair Work Ombudsman, here is the list of important links shown as part of the above webinar:

Question

Fair Work Ombudsman:

Australian Competition & Consumer Commission: B2B UCT (Business To Business Unfair Contract Terms)

Excessive card surcharging

Scams

Australian Securities & Investments Commission:

Australian Taxation Office:

Have you entered into an unfair contract?

Have you ever entered into a business contract which you think is unfair? Was it a standard form contract which offered plenty of protection for one party but not the other? Smaller businesses now have protection from unfair contracts under laws which were introduced on 12 November 2015.

Which contracts will the law apply to?

The laws will apply to standard form contracts (that is, where the terms and conditions are set by one party with no negotiation) entered into or renewed on or after 12 November 2016 where:

  • at least one of the businesses employs less than 20 people,
  • the price of the contract is no more than $300 000, or $1 million if the contract is for more than 12 months, and
  • the contract relates to the supply of goods or services (including financial goods or services), or the sale or grant of an interest in land.

It does not matter whether the smaller business is the customer or the supplier – the laws apply equally.

The ACCC, Australian Securities and Investments Commission, and state and territory offices of fair trading will enforce this law.

Which contracts will the law specifically NOT apply to?

The laws will not apply to the following types of contracts:

  • contract of marine salvage or towing
  • charterparty of a ship
  • contract for the carriage of goods by ship
  • constitution of a company, managed investment scheme or other kind of body
  • small business contract that is covered by Commonwealth, state or territory law that is prescribed by the regulations.

 How do I know if a contract is unfair? 

Ask yourself:

  • does the contract allow one business, but not the other, to change or cancel the contract, or to limit or avoid their obligations
  • does the contract penalise one business, but not the other, for breaching the contract?
  • are there terms within the contract that are not reasonably necessary to protect the stronger business?

If so, then it may be considered an unfair contract.

But we have plenty of standard form contracts which we give to all of our customers and suppliers!

We suggest that you:

  • know your customers/suppliers – so you know whether they fall within the definition of smaller business. Ask questions!
  •  review your contracts with smaller businesses as a matter of priority, so that you can ensure that your contracts are fair, and you avoid investigation by ACCC, ASIC and/or Fair Trading. If your contracts do contain terms that may be considered unfair, then consider how important the terms in that contract are to your business and whether the terms protect your legitimate business interests.
  • consider structuring the value of the contract so that you exceed the monetary threshold
  • consider developing a separate set of contracts for smaller business clients, and another set of contracts for other business clients – if you are in the transport industry, develop a separate set of contracts for shipping contracts (being an excluded contract).

The law will only apply to contracts entered into or renewed from 12 November 2016, so there is approximately 12 months for you to review and amend your standard form contracts if required.

What can we do if we believe that our small business has entered into an unfair contract?

Whilst having an unfair term in a contract is not an offence (meaning that no pecuniary penalties apply), the smaller business has the right to commence court proceedings against the other business to apply for orders that part of the contract is set aside (that is, declared void) or varied (that is, changed so that it is fair).

If the other business attempts to enforce the unfair term(s) against the smaller business, then the smaller business could seek compensation from the Court.

Of course, it is always our recommendation that if you believe that you have rights against another party, obtain legal advice first, then attempt to negotiate a resolution to the issue without rushing off to Court.

Australian Small Business and Family Enterprise Ombudsman Bill 2015

As anticipated by one of our earlier posts, the Minister for Small Business, the Hon. Bruce Billson, has introduced into Parliament the Australian Small Business and Family Enterprise Ombudsman Bill 2015.

The Ombudsman will be able to respond to requests for assistance by small business owners (including family enterprises).  The Ombudsman will also have an advocacy function.

The Ombudsman will not duplicate the functions of existing Commonwealth, State or Territory officials. It will also not undertake a formal role at this time in relation to dispute resolution under the Franchising Code of Conduct, which continues to be regulated by the ACCC.

Consultation process on new Australian Small Business and Family Enterprise Ombudsman

As you may be aware, the Australian Government is transforming the Australian Small Business Commissioner into a Small Business and Family Enterprise Ombudsman, who will be a Commonwealth-wide advocate for small businesses.

The Government has released for public consultation exposure draft legislation establishing the Ombudsman and outlining the role’s functions and powers.

The draft legislation and accompanying explanatory materials are available on the Treasury website.

You are invited to provide your comments on this draft legislation by Tuesday 7 April 2015.

For more information, including how to submit your comments, visit the Treasury website, call (02) 6263 1536 or send an email to small.business@treasury.gov.au.

Stronger ACCC powers to enforce the Franchising Code

The Government has passed legislation that will give the ACCC stronger powers and greater flexibility when enforcing the Franchising Code of Conduct, the mandatory industry code regulating the conduct of both franchisors and franchisees alike.

The Bill, which will commence on 1 January 2015, gives the ACCC the power to either:

1. issue infringement notices with fines of $8,500 (for companies) or $1,700 (for individuals) for an alleged infringement of the Code.  Once issued with an infringement notice, a person has a period of 28 days within which to comply with the relevant provision of the Code, or pay the fine (without an admission of breach); or

2. seek orders for civil pecuniary penalties of up to 300 penalty units (currently equivalent to $51,000) per contravention.

There will also be a general duty on franchisors and franchisees to act in good faith in their dealings with each other.

In his Second Reading Speech, the Small Business Minister confirmed that the Government intends to introduce an amended Franchising Code of Conduct to apply to franchise agreements entered into in or after 1 January 2015.

… we will be introducing a new franchising code, one which simplifies and modernises the way franchising is regulated, one that fulfils our election commitment to refine the franchising code to strengthen its effectiveness, improve its responsiveness to the sector’s unique commercial characteristics and tensions and guard against additional state-based regulation.

Other amendments to the legislation include:
  • prospective franchisees will need to be provided with a short information sheet containing an overview of the risks and rewards of franchising
  • removing the need for master franchisors to provide a separate disclosure document to the master franchisees in addition to the disclosure document provided by the master franchisee.
  • the short form disclosure document provided in Annexure 2 will be removed.
  • information about online trading activities of franchisors must be disclosed
  • greater obligations regarding disclosure of use and management of marketing funds
  • limiting the right of franchisors to impose significant capital expenditure on franchisees

Contact Melissa Lammers, Solicitor Director, on 9526 3444 or mlammers@shirelegal.com.au if you have any questions.

The ACCC’s latest Small Business in Focus report has been released

The ACCC’s bi-annual “Small Business in Focus” report has been released, summarising the ACCC’s work in the small business sector for the period January – June 2014.

ACCC Small Business in Focus report

The main points covered in the latest report are:

  • misleading claims are a continuing issue for the small business sector (over 1500 complaints received in the 13/14 financial year).  The ACCC took action against Coles for claims that its “Cuisine Royal” and “Coles Bakery” bread was “Baked Today, Sold Today” and “Freshly Baked In-Store”.  The ACCC also took action against against Carlton & United Breweries in relation to its representations that Byron Bay Pale Lager was brewed by a small brewer in Byron Bay, when in fact this was not the case.
  • consumer guarantees was also a significant area of focus for the ACCC.  More than 900 complaints were received by the ACCC in the 13/14 financial year (compared to 373 in the previous financial year).
  • the ACCC’s priorities for the 2014 year include emerging online trading issues, complexity and unfairness in consumer or small business contracts, conduct in concentrated markets which impacts on small business consumers or suppliers, credence claims (such as organic and country of origin claims), and consumer guarantees (particularly the sale of extended warranties).
  • the ACCC served a total of 77 audit notices on traders operating within the franchising industry, to check on their compliance with the mandatory industry code, the Franchising Code of Conduct.

Contact Melissa Lammers on 9526 3444 or mlammers@shirelegal.com.au if you require any assistance in relation to trade practices matters.

Read the submissions received for the Retail Leases Act review

The time to make submissions to the NSW Small Business Commissioner regarding the review of the Retail Leases Act has now closed.  A total of 59 submissions were received, the majority of which have been published on the Small Business Commissioner website.

You can read the public submissions by clicking here.