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Abbott Government to Protect Small and Medium Businesses Against ‘Unfair’ Contracts

Abbott Government to Protect Small and Medium Businesses Against ‘Unfair’ Contracts

Supermarket chains, franchisors, finance companies, telcos and shopping centre landlords may have to rewrite their standard contracts with small businesses once the budget extends legal protection for SMEs. While Tuesday’s budget is not expected to contain any big-ticket sweeteners for small business, the Abbott government will honour its election commitments to increase protection for the sector. The budget will extend unfair contract provisions – currently available only to consumers – to small businesses that enter into arrangements with other businesses.

The scrutiny of big-business practices comes as supermarket chain Coles fights potentially hundreds of millions of dollars in penalties if it is proven in court that it used stand over tactics to extract $16 million in rebates from 200 small suppliers. The budget measure, which is expected to cost up to $1 million over four years, would allow small businesses to protest to the Australian Competition and Consumer Commission against “take it or leave it” contracts from big businesses. Legal experts warned the introduction of unfair contract laws to small businesses would have far-reaching affects across the economy, as small businesses were given a new weapon to rebalance their negotiations with ­bigger firms. Labor attempted to introduce the same small business protection as consumers in 2008 but withdrew the changes without warning after lobbying by Telstra, the Business Council of Australia and the Law Council of Australia.

Small Business Minister Bruce Billson has advocated the reform ever since. Any contract between businesses found to be “unfair” to one of the parties would be void and enforceable. HWL Ebsworth Lawyers partner Richard Westmoreland said the proposed changes would be controversial because the impact would depend on the definition of a “small business”, which could rely on the turnover of a particular business or the value of the contract.

“If the Coalition’s plan to extend unfair contract terms protection is implemented, Australia will become the only major jurisdiction where protections against unfair terms are extended to business customers,” Westmoreland says.

The Abbott government will commit up to $3 million to force federal government departments to all small businesses to compete against big firms for government work with the promise the government will pay its bills on time. There will be $6 million to establish a small business and family enterprises ombudsman who will serve as “concierge” for dispute resolution; an adviser on developing small business-friendly laws; and a single point for small businesses to apply for federal government ­payments and grants.


**Original Article by Fluer Anderson-