The recent decision of the Full Federal Court in Australian Competition and Consumer Commission (ACCC) v Quantum Housing Group Pty Ltd (2020) (Quantum Housing Group case) has clarified the law regarding unconscionable conduct. This is a crucial decision for consumers and small businesses as it expands the scope for which unconscionable conduct is prohibited in Australian law.
What is Unconscionable Conduct?
The most common definition for unconscionability is conduct that is so harsh that it goes against good conscience. Under sections 20 and 21 of the Australian Consumer Law, a person must not, in trade or commerce, engage in unconscionable conduct. In determining whether conduct is deemed unconscionable, a court will consider:
- the relative bargaining strength of the parties;
- whether any conditions were imposed on a weaker party that were not reasonably necessary to protect the interests of the stronger party;
- whether the weaker party could understand the documentation used;
- the use of undue influence, pressure or unfair tactics by the stronger party;
- the requirements of applicable industry codes;
- the willingness of the stronger party to negotiate; and
- the extent to which the parties acted in good faith.
Expanding the scope – The Quantum Housing Group Decision
In the Quantum Housing Group case, the Full Federal Court held that it is not necessary to establish that those engaging in unconscionable conduct have exploited a disadvantage or vulnerability of the affected consumer or small business. Rather, it was found that for an effective claim of unconscionability, it only needs to be shown that the conduct is against or offends conscience that is driven by the norms of acceptable consumer behaviour.
Penalties for breach of unconscionable conduct provisions
A party that engages in unconscionable conduct opens itself up to the risk of penalties, including:
- $500,000 for individuals; and
- Up to $10million or up to three times the benefit received from the conduct; or
- 10% of the annual turnover (whichever is greater) of a body corporate.
What does this mean for consumers and small businesses?
The decision in the Quantum Housing Group case expands the scope of unconscionable conduct by providing that an effected party need not have been exploited because of a disadvantage or vulnerability. Therefore, this case sets a precedent for future unconscionable conduct cases.
In light of this decision, businesses should reflect on their current practices and the seven considerations listed above to ensure that they are not knowingly or inadvertently engaging in unconscionable conduct.
Call NECA Legal today on 1300 361 099 for more information on unconscionable conduct.
This summary is a guide only and is not legal advice. For more information on legislative obligations, please call NECA Legal on 02 9021 9699 or email [email protected].