Businesses face new compliance hurdles under proposed unfair trading laws

The Australian Government has released an exposure draft of proposed unfair trading laws for public consultation.

The exposure draft proposes to add the following prohibitions to the Australian Consumer Law (ACL):

• a general prohibition on unfair trading practices;
  
• specific protections against unfair subscription practices; and
  
• specific additional protections against 'drip-pricing' conduct.

If passed by Parliament, the new laws will come into force on 1 July 2027.

What the proposed laws mean for businesses and compliance risk

The general prohibition would introduce new concepts into the ACL for which there is no existing case law or guidance, making it difficult to achieve any meaningful level of certainty around compliance.

In a positive departure from previously stated positions, the general prohibition would not apply to business-to-business (B2B) conduct involving small businesses. However, the specific protection on unfair subscription practices would. The Government has also stated that it will consult further about how best to protect small businesses against general unfair trading practices (and businesses should pay close attention to those developments).

The reforms also introduce top-tier civil penalties. For corporations, these are the greater of A$50 million, three times the value of the benefit resulting from the contravention, and 30% of the body corporate's adjusted turnover. For individuals, maximum penalties of A$2.5 million would apply.

The Australian Competition and Consumer Commission's (ACCC) compliance and enforcement priorities for 2026-27 include a warning that it will 'step up' its enforcement initiatives once the proposed laws are in force. Given its latest priorities include a continued focus on 'manipulative and false practices' in digital and online markets, we expect that the practices of suppliers in those markets will be a particular focus for the ACCC. In particular, the proposed laws clearly target alleged harms caused by so-called 'dark patterns' and associated choice architecture used by digital platforms and online retailers. If passed into law, the regulator is likely to wield its new powers by commencing investigations and enforcement action against digital and online businesses that it considers to be in contravention of the new laws.

The nature and scope of the proposed laws means that digital and online businesses may need to consider a review and modification of their business practices. The proposed 1 July 2027 commencement date means that affected businesses have a limited window within which to update their activities and practices.

Understanding the new concepts driving the general unfair trading prohibition

The proposed general prohibition against unfair trading practices would prohibit conduct in trade or commerce in connection with the supply of, or an offer to supply, goods or services to a consumer that:

• does, or is likely to:
  • unreasonably manipulate the consumer; or
    
  • unreasonably distort the environment in which the consumer makes a decision, or is likely to make a decision; and
    
• causes, or is likely to cause, detriment (whether financial or not) to the consumer.

Unreasonable consumer manipulation and unreasonable distortion of a consumer's decision-making environment are new concepts under the ACL. According to the draft explanatory materials:

• Unreasonable consumer manipulation would cover conduct that exploits cognitive or behavioural biases to produce a decision not in the consumer's best interest. Examples include '[creating] false urgency; the use of obstructions; or the use of confusing, frustrating, or high-pressure tactics' to induce a sale.
  
• Unreasonable distortion of a consumer's decision-making environment would cover conduct that encourages a consumer to make economic decisions when they otherwise would have been unlikely to do so. Examples include creating overwhelming or complex environments or providing excessive and confusing information to induce the consumer to take the desired 'easier' option or the only option presented or not take any action.

The interpretation of these concepts is a matter on which minds are likely to differ, which is problematic for compliance efforts. Explanatory materials state that the prohibition 'is not intended to capture legitimate, generally accepted marketing practices', however that qualification is not reflected specifically in the proposed legislative amendments. It is also somewhat unhelpful given digital and online markets in particular are characterised by highly dynamic and evolving marketing practices and technical functionality. It will take time for a body of case law to evolve to a point where businesses have more certainty regarding what these terms mean and what constitutes legitimate and generally accepted marketing practices. Until there is further clarity a cautious approach would be prudent, particularly given that top-tier penalties would apply.

The general prohibition only applies to goods or services that are of a kind ordinarily acquired for personal, domestic or household use or consumption. Importantly, supplies to a consumer that is a body corporate, or to a consumer that is carrying on a business, are excluded from the general prohibition. This is a departure from previous announcements that the laws could very well apply to B2B dealings involving small businesses.

Conduct caught by the general prohibition must also result in actual or potential detriment to the consumer in order to fall within the prohibition, which can be financial or non-financial (such as wasted time and effort).

The general prohibition would also include a 'grey list' of conduct that may contravene the general prohibition. The current list includes:

• interference with a consumer's ability to exercise their legal rights or seek legal remedies (such as not providing accessible customer service support for customers to exercise their consumer guarantee rights);
  
• failing to disclose material information, or disclosing it in a complex or ineffective way (such as unclear, unintelligible, ambiguous, or untimely disclosure of key information, including changes to the goods, services or terms); and
  
• placing undue pressure on, or obstructing, a consumer from making or fulfilling their decision (such as online design elements that fail to provide guidance on how to cancel supply, which may place a positive obligation on a business to offer support or guidance).

New disclosure and cancellation requirements for subscription contracts

The Government has proposed three obligations that would impact the lifecycle of subscription contracts:

1. Disclosure of key information regarding the nature of the subscription contract at the time of offer.
   
2. Periodic notices to subscribing consumers.
   
3. Ensuring methods to end subscription contracts are accessible and straightforward.

The protections would apply to standard form contracts for the supply of goods or services to individuals that are consumers (i.e. where a subscriber acquires the goods or services wholly or predominantly for their personal, domestic or household use or consumption) and small businesses (i.e. where a subscriber employs fewer than 100 persons or made less than A$10 million in revenue at the time the contract was made). This is the only set of protections in the exposure draft that applies to B2B dealings with small businesses.

Certain specified subscription contracts are excluded from the proposed prohibition, including bespoke subscription agreements, contracts for public utilities, leases, real property licences and hire-purchase agreements, and contracts for the supply of prescription healthcare products.

Under this specific protection, a supplier that offers a standard form subscription contract must disclose certain information in a prescribed manner. Slightly different requirements apply depending on the nature of the contract. These requirements apply at the time of the offer (both in relation to individual customers and advertisements to the public at large) and at regular notification intervals after the contract has formed.

The disclosures must be given to the subscriber in a legible, prominent and unambiguous way, and information should not be hidden in fine print or otherwise obscured (such as by requiring counterparts to visit another website). When offering a contract, a supplier would be required to provide a statement with the following content:

• the contract is for a subscription;
  
• the contract is for an indefinite or fixed term; and
  
• (if relevant) the contract includes a free trial or promotional period.

In addition, suppliers would be required to disclose a range of prescribed information at the time of the offer and at the regular notification intervals, as specified in the table below:

Suppliers of subscription goods or services would also be required to ensure that methods for ending the subscription contracts:

• are easy to find;
  
• are straightforward; and
  
• require the subscriber to only take steps that are reasonably necessary to give effect to a cancellation (which will depend on the circumstances) and protect the subscriber's interests.

For contracts entered into online, suppliers must also provide an online method to end the contract (irrespective of whether other methods for ending the contract are available).

Specific additional protections against drip pricing conduct

Drip pricing occurs where a business gradually adds fees during a transaction process. The proposed protections mandate disclosures to remedy perceived harms that can arise from this type of conduct, and are in addition to existing price representation laws under the ACL that are applicable to drip pricing conduct.

As with the general prohibition, the proposed drip pricing protections would only apply to the supply of goods or services that are of a kind ordinarily acquired for personal, domestic or household use or consumption. The requirements would not apply to offers made exclusively to bodies corporate.

Under this specific prohibition, when disclosing the 'base' price of the goods or services being offered, the supplier would also be required to disclose any transaction-based charges (i.e. any fees or other charges paid on a per-transaction basis).

Where transaction-based charge cannot yet be calculated (e.g. where a charge is dependent on a consumer's location), the method for calculating the transaction-based charge would need to be disclosed upfront.

Key takeaways and next steps

As drafted, the proposed unfair trading laws could have significant implications for the practices of a broad range of businesses, particularly those operating in digital or online retailing markets. The broad potential application of the prohibition and the range of new and unfamiliar concepts increase the risks for businesses seeking to effectively comply.

Businesses operating in Australia should monitor further developments to the draft laws, evaluate their subscription and pricing practices, and seek legal advice as to how to comply well before the new laws come into force in 2027.