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If you are a business, beware! Under Sch.2 (ACL) of the Competition and Consumer Act (CCA),[1] there are statutory provisions that combat unconscionable conduct and abuses of bargaining power between parties. The law provides that unconscionable conduct is unfair dealings between parties within trade or commerce. This means that businesses may be caught under the ACL even though the ACL is mainly targeted towards protecting consumers’ interests.

Basically, ss.20-22 of ACL prohibits unconscionable conduct. These provisions are applicable to business-to-business dealings within a vertical chain. Although a weaker bargaining position does not solely result in unconscionable conduct, ss.21-22 applies when there is evidence of premeditated unfairness that connotes obloquy.

Factors to consider

Let’s take a closer look. For s21 to apply, you must prove that you are a ‘Person in trade or commerce’ – this means that the parties must have been contracting for the purposes of operating their businesses. For example, a supplier and retailer in sporting goods.

S22 lists factors that will be considered as to whether the conduct in question is unconscionable. This includes:

  • The strength of bargaining positions;
  • whether customer is required to comply with unreasonable conditions
  • The customer’s understanding of the documents
  • undue influence/pressure/unfair tactics
  • whether the customer could have gotten identical goods/services
  • the supplier’s conduct and whether it was consistent to all parties involved
  • any applicable industry code
  • any other industry code
  • Whether the supplier failed to disclose:
    • intended conduct
    • any risks to the customer
  • supplier and customer contract:
    • whether the supplier was willing to negotiate
    • terms and conditions
    • conduct of supplier after the transactions were made
  • whether the supplier has contractual right to vary unilaterally term/condition
  • good faith

Case Example

This all may sound complicated, but let’s look at a case that recently occurred between the ACCC and Coles Supermarket:

ACCC v Coles

The ACCC has (for the first time) commenced legal action against Coles under the s21-22 on unconscionable conduct in the ACL.[2] The ACCC alleged that Coles deployed unfair tactics and misrepresented information to ensure that suppliers complied with its Active Retail Collaboration (ARC) program. Coles effectively abused its dominant bargaining position by demanding suppliers to pay additional rebates outside the negotiated terms of the agreement. Accordingly, Coles’ unconscionable conduct inflicted “significant detriment to small suppliers”[3] which systemically hindered the suppliers’ business, and subsequently damaged consumer welfare and economic growth.[4] Ultimately, the parties reached a $10 million settlement on the condition that Coles “…apologises and accepts full responsibility for its actions…”.[5] It reaffirms that statutory unconscionable conduct under consumer law can prevent prejudicial bargaining positions held in a business context.

Conclusion

This sounds as a warning that your contractual dealings may be caught under the ACL and be held void even if you were not dealing with consumers. Provisions in the ACL provides for unconscionable conduct between businesses – so it is best to revise your contractual terms to ensure you are not infringing any rights.

If you would like to discuss your situation with one of our specialist Contracts lawyers, please complete the form or give us a call. We will then assess your needs free of charge and provide a fixed-fee quote if relevant. Just give us a call on 1300 544 755.

[1] Competition and Consumer Act 2010 (Cth).

[2] ACCC v Coles Group Limited [2014] FCA 363.

[3] Australian Competition and Consumer Commission, ‘ACCC takes action against Coles for alleged unconscionable conduct towards it suppliers’ (Media release, 5 May 2014, VIC253/2014).

[4] Ibid.

[5] Eli Greenblat, ‘Coles admits unconscionable conduct, settles with ACCC’, The Australian (online), 15 December 2014 < http://www.theaustralian.com.au/business/news/coles-admits-unconscionable-conduct-settles-with-accc/story-e6frg906-1227156306220>.

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