Small businesses angry over unfair contract terms exclusion

Small business is divided over the exclusion of business-to-business contracts from the Government’s new unfair contract terms legislation.

The Council of Small Businesses of Australia and the Australian Newsagents Federation have both spoken out against the changes, but other bodies including the Australian Retailers Association have welcomed the immunity from the scheme.

The Government’s legislation is designed to protect consumers from “unfair contract terms” in standard-form contracts. This includes terms such as unfair exit fees, penalty fees and clauses that permit one party to unilaterally change or cancel a contract.

But late last week Small Business Minister Craig Emerson announced B2B transactions would be excluded from the new legislation, pending the Government’s reviews of the unconscionable conduct provisions of the Trade Practices Act and also the Franchising Code of Conduct.

But Jaye Radisich, chief executive of the Council of Small Businesses of Australia, says she is disappointed by the Government’s decision.

“It appeared to us that there was a strong commitment to having business-to-business relationships included in the bill, so we are very disappointed about these changes.”

“Just yesterday I was made aware of one of the retail groups telling a small supplier they wouldn’t pay that supplier until 90 days after they’ve received the goods. That is completely unacceptable. Small businesses rely on their contracts from big purchasers, but we think they need to be treated fairly. Right now the balance in power between suppliers and purchasers is hideously imbalanced.”

Radisich says it isn’t too late to reverse the changes and that COSBOA hopes to see B2B contracts receive protection in the bill.

“I don’t think it’s too late. There is an option for the Government to work with the Opposition and cross benches to reintroduce the provision when the legislation gets to the Senate. I don’t think that is in conflict with where the Government is going, and I hope they will reconsider.”

ANF chief executive officer Anthony Matis said he was devastated by the news B2B transactions would not be protected.

“The debate over these provisions reflects the divide between the interests of big business on one hand and the interests of small business on the other,” he told the Australian Financial Review.

“The Productivity Commission recommended small businesses be regarded as consumers and for protections for small business to be in there. It’s now up to the Senate to vote the bill down until those protections are reinstated,” he said.

But ARA executive director Richard Evans said he welcomes the move to exclude retailers from the bill as it will save the industry over $700 million in compliance costs.

“The draft Consumer Credit Protection Bill included unintended consequences, which meant retail staff would need to be trained, accredited, registered and licenced to offer credit assistance to the same level as finance brokers.”

“This was an unnecessary burden on retailers which could have cost up to $27,000 in staff training and other obligations for each individual retailer.”

Evans said the exemption means retailers can continue to provide consumers with finance options and retain 24,000 jobs that he contends would have been lost under the Government’s proposals.