By arguing an unfair contract is also false or
misleading conduct, ACCC hopes to get a pecuniary penalty - which
can be as high as $1.1m per breach.
Businesses with standard form clauses in their contracts should
take note that the ACCC is likely to pursue unfair contracts cases
under the false or misleading conduct provisions of the Australian
Consumer Law (ACL).
Why does this matter? The ACL does not permit the ACCC to seek
pecuniary penalties under the unfair contracts provisions. The
false and deceptive conduct provisions of the ACL, on the other
hand, allow pecuniary penalties of up to $1.1 million per breach to
be sought from the Court.
The ACCC has had two recent successes: first in the Chrisco
Hampers case1, and now in the recent Exetel case.
Although the Exetel case was resolved without litigation, the ACCC
again considered that a standard unilateral variation clause in a
standard fixed term residential broadband agreement was not only an
unfair contract term in line with established principles, but was
likely to contravene or misleading conduct provisions of the
Background to the Exetel case
In mid-2015, Exetel, Australia's largest independent
internet service provider wrote to over 2,000 residential broadband
customers on 12-month fixed contract to inform them that they were
required to either terminate their Exetel service without a
penalty, or to change their broadband plan. In doing so, it relied
on a clause in its standard residential broadband agreement which
provided that Exetel could vary any part of that
agreement for any reason.
The ACCC alleged that this clause was an unfair contract term,
and that Exetel's advertising of fixed term plans was
misleading in breach of the ACL, because it falsely represented
that customers would receive the service for 12 months on terms
which were fixed.
Exetel co-operated throughout the ACCC's investigation and
remove the offending unfair clause;
refund any additional monthly subscription costs for the
remainder of the fixed term for customers who changed to a new
refund any activation charge previously paid by customers who
terminated their Exetel service rather than change to a new
What should business be doing now?
Exetel's actions to remedy the offending conduct show that
there are potentially very serious financial consequences for
companies who include or retain clauses which are unfair. In
addition, regulator interest in these clauses can also have
The Exetel case, and other recent ACCC activity in the unfair
contracts space such as the Chrisco Hampers case last year, show
that ACCC is actively monitoring and enforcing compliance in this
area, and will use the full scope of its powers, including pursuing
businesses simultaneously for false or misleading conduct. This
means a business which does not do its housework on unfair contract
terms is running the risk of large penalties.
Sectors which commonly use standard form contracts with
consumers and small business, such as telecommunications, retail,
logistics, travel, health and leisure, and insurance, should be
reviewing their standard contracts now. While there is immunity for
contracts entered before the business to small business unfair
contracts regime takes effect, contracts entered into, renewed or
varied after November 2016 will be subject to the new laws. We can
help you with this process.
1ACCC v Chrisco Hampers Australia Limited
 FCA 1204, in which unfair contracts terms in certain lay-by
agreements resulted in liability for a pecuniary penalty under the
unfair contracts, and false or misleading conduct provisions of the
ACL. The hearing on penalty is fixed for 1 March 2016.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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The Competition and Consumer Act strictly prohibits business conduct that is likely to, or will mislead or deceive consumers.
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