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Competition and Consumer Law update: New disclosure obligations for supplying goods and services to consumers in New South Wales

Nov 17, 2020

Recent amendments to the Fair Trading Act 1987 (NSW) (Act) have significant implications for any Australian business that trades in New South Wales. The amendments impose new disclosure obligations on businesses who supply goods and services to consumers in the State, including both online and in person purchases.

The Act is intended to have extraterritorial application and extends to conduct occurring both in and outside New South Wales, that is in connection with goods or services supplied there, that affects a person in that State, or results in loss or damage there.

What are the changes?

Pursuant to section 47A of the Act, suppliers are required to ensure that before supplying goods or services to a consumer, they must take reasonable steps to ensure the consumer has been made aware of the substance and effect of any term or condition in relation to the supply of the goods or services that may substantially prejudice the interests of a consumer

The New South Wales Department of Fair Trading has provided a list of terms which may meet this standard. The list includes, amongst others, the following terms:

  • excluding or limiting the liability of a supplier;
  • providing that the consumer is liable for damage to goods that have been delivered;
  • allowing the supplier to provide data about the consumer to a third party, or that enables the third party to identify the consumer; and
  • requiring the consumer to pay an exit fee, balloon payment or some other similar payment.

This new requirement relates to terms which ‘may’ be substantially prejudicial. There is no definition for ‘substantially prejudice’ in the legislation. Therefore, suppliers should be conservative when drafting their agreements for the supply of goods and services to consumers generally (and especially now into New South Wales) so as to avoid falling foul of the new prohibitions.

Further, section 47B of the Act imposes obligations on intermediaries, such as a broker or agent, who now must take reasonable steps to ensure that consumers have been made aware of the existence of any commission or referral arrangements in place which results in the intermediary receiving a financial incentive from another supplier. 

This obligation does not require the nature or value of the financial incentive being disclosed, rather the arrangement that provides for the financial incentive should be disclosed.

Definition of ‘consumer’

Section 3 of the Australian Consumer Law (ACL) defines a ‘consumer’ for the purposes of acquiring goods or services. A person is taken to have acquired goods or services as a ‘consumer’ if the following criteria have been met:

  • the amount paid or payable for the goods or services is $40,000 or less; or
  • the goods or services were of a kind ordinarily acquired for personal, domestic or household use
  • or consumption.

For the purpose of the ACL, both businesses and individuals are classed as consumers.

It is important to note that from 1 July 2021, the definition of a ‘consumer’ for the purpose of the ACL will be amended and the monetary threshold will increase from $40,000 to $100,000.

Reasonable steps

Following this new reform, businesses are obliged to take reasonable steps to comply with the new disclosure obligations. To date, there are no binding requirements in place, however the New South Wales Department of Fair Trading have provided some examples including:

  • using a short, plain language summary on the front page of the contract;
  • provide important information at key times to consumers;
  • make information appear on screen in a scrollable text box, when online; and
  • use images or icons to highlight and explain key information.

Consequences of non-compliance

Failure to comply with the new obligations is an offence and businesses that fail to comply face a maximum penalty of $110,000 for corporations and $22,000 for individuals. Penalty notices may also be issued for contraventions.

What should you do?

Businesses need to carefully review the terms and conditions in their consumer contracts to ensure they comply with the new reforms. The New South Wales Department of Fair Trading is giving businesses until 31 December 2020 to comply with the new obligations. This gives businesses ample time to comply with the new provisions. In the meantime, businesses will not be penalised for non-compliance.

More information

For more information, or advice on the new disclosure obligations, please contact:

Jeremy Goldman, Principal Lawyer
Head of Commercial and Corporate
 +61 3 8600 8886
E jgoldman@kcllaw.com.au
Darren Brown, Principal Lawyer
Head of Transport and Logistics
+61 3 8600 8867
Daniel Kovacs, Principal Lawyer
Co-Head of Intellectual Property and IT
T +61 3 8600 8859
E dkovacs@kcllaw.com.au
Roger Rothfield, Special Counsel
T +61 3 8600 8844
E rrothfield@kcllaw.com.au

Note: This update is a guide only and is not intended to constitute legal advice.