The ACCC has instituted proceedings against Servcorp Ltd and two of its subsidiaries (Servcorp) alleging that a number of terms in Servcorp’s standard form contracts with small businesses are unfair and should be declared void.
Servcorp supplies serviced office space and virtual office services such as office suites, secretarial services, IT, communications and personal assistants to its clients, many of whom are Australian small businesses.
“This is the second court action the ACCC has taken to enforce the new law dealing with unfair contract terms in small business contracts,” ACCC Deputy Chair Dr Michael Schaper said.
“This is a case against a large publicly listed company and two of its subsidiaries who we will allege incorporated a number of unfair contract terms in its contracts with small business customers.”
The contract terms which the ACCC alleges are unfair include terms that:
- automatically renew a customer’s contract and allow Servcorp to unilaterally increase the contract price after the renewal and without prior notice to the customer
- permit Servcorp to unilaterally terminate the contract and to impose penalty-type consequences on the customer
- unreasonably limit Servcorp’s liability or which impose unreasonable liability on the customer
- permit Servcorp to unilaterally determine whether the contract has been breached
- permit Servcorp to unilaterally acquire the customer’s property without any notice.
The ACCC alleges that these terms in Servcorp’s standard Service Agreement are contrary to the unfair contract term provisions of the Australian Consumer Law. It also considers that these terms are not reasonably necessary to protect Servcorp’s legitimate interests.
“We received complaints from a number of small businesses that Servcorp had automatically renewed their contracts and then substantially increased their office rents after they were locked in to a further term,” Dr Schaper said.
“The ACCC is particularly concerned about terms that allowed Servcorp to unilaterally terminate a contract and apply unreasonable termination fees and charges to the small business.”
“The ACCC is committed to ensuring small businesses receive the protection of the new business-to-business unfair contract terms law,” Dr Schaper said.
“Businesses should ensure that potentially problematic terms are only as broad as reasonably necessary to protect their legitimate interests. All large businesses that issue standard form contracts should be taking steps to ensure that they are compliant with the new laws.”
The ACCC is seeking declarations that these clauses are unfair and void, injunctions, publication orders, compliance program orders and costs.
For more information, see Unfair terms in small business contracts.
Background
The new business to business unfair contract laws apply to standard form small business contracts entered into or renewed on or after 12 November 2016.
Contracts covered include those between businesses where one of the businesses employs less than 20 people and the up-front price payable is up to $300,000 or, if the contract runs for more than a year, up to $1 million.
This is the second court business-to-business unfair contract terms proceedings the ACCC has commenced. On 6 September 2017, the ACCC instituted proceedings against JJ Richards & Sons Pty Ltd.