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Commercial Unconscionability: ACCC Monitors Dealings Between Larger Businesses And Small Business |
Signs are emerging that the Australian Competition and Consumer Commission ("ACCC") is pursuing a number of test cases in the area of commercial unconscionability under s. 51AC of the Trade Practices Act (Cth) 1974. |
Section 51AC of the Trade Practices Act is aimed at dealing with the reprehensible conduct of larger parties against smaller parties. |
In one case, the ACCC has raised questions about whether it is unconscionable for a larger party to act contrary to the terms of an agreement or to discriminate between two or more small businesses with which it has dealings. It is arguing that, an allegation that a larger party behaves in a discriminatory manner involves an analysis of the commercial justification for differences in treatment. |
An action which the ACCC commenced in 1999 alleged that the landlord in a retail tenancy agreement acted unconscionably by:
- Increasing the rent contrary to the terms of the lease;
- Failing to act to protect the rights under the lease; and
- Forcing the tenant to charge a specified (higher) amount for food dishes while allowing the tenant's competitors to charge less for competing products.
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| The ACCC sought injunctions, declarations, findings of fact and damages. |
The ACCC pursued another action, this time under s. 51AA, against a Western Australian landlord, where it was alleged that it was unconscionable for a land lord to require a tenant to pay a substantial sum of money before assigning a 7 year lease where the tenant had not formally notified its intention to exercise an option for a 7 year period. This case raised the question whether the tenant was entitled to notification by the landlord of the consequences of that tenant failing to exercise an option in accordance with the terms of the lease. A related issues arises about the extent to which a smaller party should protect its own interests under a lease or other agreement, the level of business experience of the parties and the particular consequences of failing to exercise an option under the terms of a lease. If the consequences are very unusual or unexpected then it may be unconscionable for the larger party not to disclose those consequences to the smaller party, which would have allowed the smaller party to consider its position. |
