Last year, NSW introduced changes to the Fair Trading Act 1987 (NSW) (Act) which were aimed at improving transparency for consumers. The changes require NSW suppliers to communicate and disclose certain information to consumer customers before providing goods or services to them, including any "prejudicial" contract terms or referral arrangements. These changes took effect on 1 July 2020, and as of 1 January 2021, are now being actively enforced.
What are the changes?
There are two key changes:
- businesses: Before supplying goods or services, a business must take reasonable steps to make consumers aware of the substance and effect of any terms which may substantially prejudice their interests. This may include terms which:
- limit or exclude the supplier's liability
- make the consumer liable for damage to delivered goods
- allow the supplier to share data about (or provided by) the consumer with third parties in a form which may enable the third party to identify the consumer
- require the consumer to pay an exit fee, balloon payment or similar payment.
- intermediaries: If there are commission or referral arrangements in place where a referrer or other "middle-man" receives a financial incentive from a supplier, intermediaries must first take reasonable steps to ensure the relevant consumer is aware of this arrangement (but they don't have to disclose the nature or value of that incentive).
These obligations apply in respect of any supply to consumers, being a person who purchases goods or services which are valued below $40,000, or are valued over $40,000 but are of a type ordinarily acquired for personal, domestic or household use. These values will increase to $100,000 as of 1 July 2021.
Who do the changes apply to?
The changes will apply to conduct in or outside NSW, that is in connection with goods or services supplied in NSW, affects a person in NSW or results in loss or damage in NSW. Practically speaking:
- any supplier, who in the course of doing business, supplies goods or services in or to a consumer in NSW may have terms or conditions that they will need to disclose
- any intermediary under a commission or referral arrangement. You are an intermediary if you arrange contracts for the supply of goods or services as an agent, or if you refer a consumer to a supplier, under an arrangement that delivers you a financial incentive for doing so. For example, real estate or travel agents and brokers.
Do these changes sound familiar?
Some of these changes are similar to existing disclosure obligations which may already apply to and be complied with by your business (e.g. Australian Consumer Law, the Privacy Act or laws applying to agents and secret commissions). However, these new reforms will apply in addition to any existing disclosure obligations.
What do businesses need to do?
For most businesses supplying goods or services in or to NSW, compliance will mean a review of standard contract terms to check:
- if any of the terms could be considered "substantially prejudicial"
- if customer data can be shared with third parties (noting "data" could include information other than the personal information traditionally dealt with by privacy laws).
If these apply, you'll need to update your processes to draw these terms to the attention of customers before you supply them with any goods or services. While what constitutes "reasonable steps" will vary depending on the circumstances, NSW Fair Trading encourages "clear, upfront and automatic disclosure". Common strategies will involve:
- easy to read ("plain English") summaries of contract terms
- annotations to highlight prejudicial terms
- asking customers to "acknowledge" such terms
- for online delivery, pop-up notifications and tick-boxes.
Strategic alliances, referral agreements or other handshake arrangements that could constitute an intermediary arrangement should also be reviewed.
When do the changes start?
To give businesses time to adapt to the changes, enforcement of the reforms was deferred for six months after their introduction in July 2020, in favour of an educational approach to awareness and compliance. However, as of 1 January 2021, the changes are now being enforced.
What are the penalties?
Non-compliance may incur fines of $22,000 (individuals) or $110,000 (corporations). NSW Fair Trading can also issue penalty notices of $550 (individuals) or $1,100 (corporations).
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.