13 May 2021

Small business to benefit from expanded protections under the Australian Consumer Law

By Michael Corrigan, Adrian Kuti, Damiano Fritz, and Caroline De Paoli

Suppliers should review their terms and conditions of supply to ensure that they are complying with the ACL for supplies between $40,000-$100,000 – especially as it relates to business-to-business transactions which might previously have been above the limit.

Small business will be the main beneficiaries of changes to the law from 1 July 2021 which will expand the reach of the protections under the Australian Consumer Law (ACL) to apply to the purchase of any goods or services for up to $100,000 (save for business stock or goods used up or transformed in manufacturing or repair).

Consumer rights already apply to goods or services acquired for "personal household or domestic purposes". Certain consumer protections under the ACL also apply for the purchase of many goods or services for commercial or other purposes, provided that the purchase price is less than $40,000. From 1 July 2021, this value will increase to $100,000, to cater for the effects of inflation since the value cap was last adjusted in 1986.

Suppliers should therefore review their terms and conditions of supply to ensure that they are complying with the ACL for supplies having a value above $40,000 and below $100,000 – especially as it relates to business-to-business transactions which might previously have been above the limit.

Equivalent changes apply to the consumer protection provisions in the ASIC Act for financial services.

Meaning of "consumer" in the ACL

The ACL provides general and specific consumer protections which can apply generally to conduct in trade or commerce, or to transactions with "consumers", in Australia.

For the purpose of the ACL, a "consumer" is a person who acquires goods or services:

  • ordinarily acquired for personal, domestic or household use or consumption; or
  • where the amount payable for the goods or services does not exceed a specified limit (currently $40,000) save for business stock or goods used up or transformed in manufacturing or repair; or
  • where the good is a vehicle or trailer acquired principally for the transport of goods on public roads.

In proceedings commenced under the ACL, there is a rebuttable presumption that the consumer threshold is satisfied, unless the contrary is established.

The Explanatory Statement for the amendment describes the increase to the threshold as necessary to ensure that the ACL remains fit for purpose:

''The decline in the real value of the threshold means that certain business purchases once covered under the ACL are no longer covered. The higher monetary threshold in the ‘consumer’ definition will assist in efficient economic transactions by restoring the level of coverage for business purchases in real terms, assuring minimum standards of protection for the goods and services purchased by business consumers.''

Implications – commercial vehicles, agricultural equipment, office systems and more

The increased monetary threshold will extend the scope of key provisions of the ACL to small business purchases which are not ordinarily for personal, domestic or household use.

The extended scope of the ACL will be particularly relevant to business-to-business transactions. For example, the review by the Consumer Affairs Australia and New Zealand (CAANZ) leading up to the reform nominated client record systems, agricultural equipment, industrial air-conditioning units, water tanks and commercial vehicle purchases as examples of business purchases that, should come under the new "consumer" threshold.

The expanded definition of consumers will attract key provisions of the ACL including:

  • consumer guarantees, which mandate that suppliers provide consumers with certain guarantees, including that goods are of an acceptable quality (that is, fit for purpose, acceptable in appearance, free from defects, safe and durable); correspond with their advertised description; that access to repairs and spare parts for the goods supplied are available; and that the manufacturer and supplier will comply with any express warranty;
  • unsolicited consumer agreements, which restrict agreements arising from negotiations which occur over the phone, or at a location which is not the seller's place of business; are uninvited by the customer; and relate to a sale over the value of $100;
  • lay-by, which require that agreements for the sale of goods which are not to be delivered until the total purchase has been paid, in three or more instalments, must be in writing and be able to be terminated by the consumer at any time prior to the delivery of the goods; and
  • linked credit contracts, which regulate contracts entered into by consumer for the provision of credit in relation to the supply, lease, or hire of goods by the supplier to the linked credit provider or to the consumer.

It is important to remember that the definition of "consumer" is already wide enough to cover goods or services of any value that are predominately acquired for business use, but nonetheless are "commonly" or "regularly" acquired for personal, domestic or household use. Examples in the case law include goods supplied at a commercial scale, but which are commonly acquired for domestic use (such as building or construction materials sold on both an industrial and household scale).

The increase to the monetary threshold will apply only to goods or services acquired after 1 July 2021.

Key takeaways

The upcoming increase to the monetary threshold for "consumer" transactions is the latest in a series of recent reforms to Australia's consumer protection laws, including that:

It is important that businesses are aware of their obligations to consumers and in their dealings generally in trade or commerce under the ACL, especially in view of the continually evolving regulatory landscape and the ACCC's enforcement priorities for 2021.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.