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Recent amendments to the Commonwealth Trade Practices Act, 1974 are designed to protect small businesses from harsh or oppressive ("unconscionable") conduct in business dealings. They give small businesses the same protection under the Act that is available to consumers, but only in respect of transactions of less than $1 million.
Unconscionable conduct occurs where a weaker party is in a position of special disability which the stronger party knows about (or should know about) and the stronger party takes unfair advantage of that position. The amendments allow a court to take into account some new factors in determining whether a business has been subjected to unconscionable conduct:
- the relative commercial strengths of the parties;
- whether undue influence was exerted by the stronger party;
- whether the parties adhere to a code of conduct for their type of business;
- whether the contract exceeded what was reasonably necessary for the legitimate interest of the stronger party;
- whether there was evidence of disclosure, good faith and willingness to negotiate.
If you are a franchisee, a petrol reseller or a petrol distributor, the amendments provide additional protection by requiring adherence to codes of conduct and by providing relatively quick and inexpensive means of resolving disputes. Further, the Australian Competition and Consumer Commission (ACCC) is empowered to take representative legal action on behalf of small businesses and it proposes to initiate some test cases to explore the boundaries of the new amendments in the courts.
These provisions are of very great significance to small business and all proprietors should be aware of them.