Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Hansard source

I would like to speak on the Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Bill 2015. The opposition will be supporting this bill and I must say, while the Senate report has only just in the last few minutes been tabled, it is unusual in that we do not have sufficient time to study the detail of that report. I note that a number of stakeholders have raised with the Senate committee report—and I think that in the few minutes I have had to look at this it is quite apparent that there have been issues of concern raised with the economics committee and the senators directly. It is important to acknowledge those issues, and I note that the opposition has a number of additional comments in this report which reflect the concern that has been expressed in the course of the Senate inquiry.

This bill amends the Australian Securities and Investments Commission Act 2001—the ASIC Act—and the Australian Consumer Law, which is set out in the Competition and Consumer Act 2010. It extends the unfair contract term protections currently available to consumers, so that they also cover businesses with fewer than 20 employees, where these businesses agree to standard form contracts for transactions valued at less than a prescribed threshold. Under this bill, the applicable threshold for contracts is $100,000, or $250,000 if its duration is more than 12 months. Contracts above these thresholds would continue to be treated in the current way. The up-front price for contracts is defined in the ASIC Act. It must be disclosed at or before the time the contract is entered into.

Part 2 of the ASIC Act contains provisions that protect consumers from unfair contract terms. This bill extends these provisions to also cover small business contracts. The existing concepts of 'unfair' and 'standard form contract' can be found in sections 12GB and 12BK of the ASIC Act. The Act and the Australian Consumer Law currently contain minor consumer unfair contract term protections. The ASIC Act applies to financial services and products, while the Australian Consumer Law applies to the supply of goods and services other than financial services or products and the sale or grant of an interest in land.

The government has indicated the Australian Competition and Consumer Commission was provided with $1.4 million in the 2014-15 budget to support the implementation of this bill. However, what concerns many stakeholders is the government's own estimate of the additional compliance costs for business. The government's explanatory memorandum point out that:

Persons who offer contracts to small businesses may incur a once-off transitional cost (including seeking legal expertise) to implement any system changes and ensure contract terms comply with the unfair contract terms law. This cost is estimated to be $50 million in the first year …

Many businesses have informed senators and informed the Senate inquiry that they feel that this estimate is on the conservative side and they claim this will add many millions of dollars in red tape compliance costs for business. The explanatory memorandum also notes:

Businesses that offer low-value standard form contracts to small businesses may need to review and amend their contracts to ensure they are compliant with the new protections.

Labor senators have received many representations from the business community who have noted their strong concerns about these costs, along with other substantive issues. These issues are contained in the additional comments made by Labor senators in the report that has just been tabled. They include the narrow definition of what is a small business; the lack of a comprehensive disclosure regime to encourage small businesses to seek professional and legal advice before entering into a contract with another business; the lack of a reasonable time limit within which a small business can advise if they consider part or all of the contract is 'unfair' to ensure contract certainty; the definition of 'up-front price'; the short time period for businesses to change their contracts before the legislation takes effect; the $100,000 up-front price threshold for a small business contract; the inclusion of retail leases in the bill; and the inclusion of franchised businesses operating under the Franchise Code of Conduct. These are matters that we believe the government has an obligation to take on board.

The Senate Economics Legislation Committee—which I know is extraordinarily overworked—has managed to examine these matters, and there is no doubt that there will be those that will welcome the measures in this bill; however, there needs to be attention paid to the concerns that are being expressed about the detail regarding the implementation of this legislation.

Labor understands that small businesses, like consumers, are offered contracts on a 'take it or leave it' basis and often lack the resources to understand or negotiate contract terms. This can result in some risk for small businesses, which are often less able to access legal and other advice to help them manage risk. In addition, the costs of obtaining legal advice are sometimes disproportionate to the benefits that any legal advice of this type will provide. Peak representative groups have expressed their concerns about this matter in many different ways and in a wide range of fora.

Labor appreciates that this issue is a very real one for people directly affected. Equally, and as importantly, when a change of this nature, a change of this significance, is being considered, there will undoubtedly be those who have opposing views, and the consequences of such a change will have a negative impact on their business. I think their concerns need to be directly addressed.

We are conscious that many in the business community have concerns about what they see as the far-reaching impacts of applying unfair contract protections on business-to-business interactions. They have expressed the view that, while these measures outlined in the bill would have some protections for small business, extending them would also expose other small businesses to claims from other small businesses themselves regarding unfair terms.

It is important to note here, in response to the regulation impact statement that the government has issued for the consultation, that the Office of Best Practice Regulation observed that the regulation impact statement acknowledges, firstly, there is limited empirical evidence about the scope of the problem being experienced by small business and, secondly, the benefits and the costs of options are difficult to measure. It is clear from this that the coalition's commitment prior to the election—and, again, once in government, in its option paper that it was intent on bringing in this legislation—needs to be assessed against their own statements in the Office of Best Practice Regulation.

The Labor Party was not the only one that, at the time that the option paper was released, noted it appeared to be doing little more than seeking evidence to support an extension of an unfair contract term protection to small business through legislation. The result of this approach is that some stakeholders see this bill as having the potential to seriously damage business confidence and business certainty. That is why we are highlighting the concerns today. It is often said that, without proper and rigorous analysis, we can end up with laws that are not, in fact, fit for purpose. On this side of the chamber, we are seeking to prevent that, where possible.

Labor is also aware that there remain serious concerns in some quarters about the inclusion of retail leases in the bill. There have been concerns expressed to the opposition by those from the financing and banking sectors, the automotive industry and even the franchise sector itself. The opposition would like the minister to take seriously the concerns that are being expressed. It is not Labor's position, one way or another, to support or oppose the views of the stakeholders. We are not saying necessarily that the evidence is there to sustain that claim, but there is no doubt the claims are genuinely felt. But it is important for us to acknowledge that these are concerns that call on the government to continue a dialogue with those who are making those criticisms.

As I said at the outset, Labor will support the bill but, at the same time, we want to ensure the legislation does not end up creating a situation where both parties to an agreement lose out because of the way in which the implementation of a well-intentioned but ill-conceived proposition occurs.

It is important to recognise that it was under a Labor government that we introduced a national law to regulate unfair terms in contracts between individual consumers and businesses in 2010—I think it was a process commissioned by Mr Bowen, when he was the minister responsible for small business in 2009. We saw that as an important part of Australian Consumer Law reform. It is also worth noting the unfair contract provisions for consumers have only been in place since 2010, so any view on their effectiveness in such a short time would need to be viewed with some caution. Indeed, the minister only announced the review of the Australian Consumer Law last month. Nevertheless, we will observe any findings of that review and we will study them very closely.

In terms of the current laws, the status quo means that a small business has no legal protections if a term in the standard form contract is unfair, unless there is some other factor such as an unconscionable conduct, or misleading or deceptive conduct, occurring in the context of the contract. For most people, that means a small business does not have recourse to the protections set out in Australian Consumer Law which render unfair terms in standard form contracts void when they are entered into by an individual consumer. The key small business stakeholders and various interest groups strongly back the changes that address this issue, and that is why we are supporting the bill.

However, given the concerns that I have outlined, Labor is of the view that the government should commit to a two-year post-implementation review of the legislation to actually judge its effectiveness for those directly concerned.

This is consistent with good practice and with the government's recently announced review of the Australian Consumer Law. A two-year post-implementation review acknowledges the concerns raised by some stakeholders regarding the high costs of compliance and the red-tape burden imposed by the bill, while providing support for the majority of small business stakeholders who are in favour of the bill. It is well known that the coalition went to the last election committing to extend unfair contract protections to small business. But it is equally important for the coalition, now they are in government, to hear and act on the concerns of all stakeholders when serious issues are raised in relation to small business.

Labor will support the bill. I understand there are some amendments being proposed, and we will give serious consideration to those when they are moved.