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Uber Eats chewed out for unfair terms

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Uber Eats is the latest big business to come under fire for unfair terms in its standard form contracts, as the Australian Competition and Consumer Commission (ACCC) continues its campaign to eradicate unfair trading terms affecting Australian small businesses.

Despite Uber Eats agreeing to update its terms, the ACCC wants new laws and greater penalties for businesses caught doing the wrong thing.


Uber Eats updates unfair terms

Investigations by the ACCC revealed a term in Uber Eats’ standard form contracts that held local restaurants responsible for the delivery of food, despite having no control once orders left their premises. For example, Uber Eats could refund customers over the complaint of cold food and deduct this amount from the restaurant, despite the delivery driver being at fault.

The ACCC also held issue with a clause asserting that Uber Eats did not provide logistics services, which it deemed misleading.

Uber Eats took a cooperative stance and agreed to remedy these clauses, with changes to contracts expected to be completed by the end of 2019. The company will not enforce the terms considered unfair while the changes are being rolled out.

The crackdown continues

Ensuring small businesses aren’t subject to unfair contract terms by larger businesses is currently a top priority for the ACCC. This is evident by recent enforcement actions, including high-profile investigations into powerhouse companies such as JJ Richards, Visy Paper, Lion Dairy & Drinks and Parmalat Australia.

Each business was prompted to remove or update clauses in their standard form contracts which imposed unfair conditions on smaller companies in their supply chains.

Although the ACCC is keenly watching and calling out injustices inflicted by these major organisations, their power to take action is currently limited. The watchdog is calling for unfair contract terms to be made illegal and accompanied by penalties.

The law at work

The regulations regarding unfair contract terms apply to standard form contracts. These are contracts that one party offers to another with no ability to negotiate the terms. Essentially, the other party is offered to “take it or leave it”. For a contract to be standard form at least one of the parties must be a small business (with fewer than 20 employees) or a consumer.

It was only in 2016 that a law was introduced prohibiting unfair contract terms and allowing a court or tribunal to declare these terms as void or unenforceable. But the ACCC is frustrated with the limited repercussions.

ACCC deputy chair Mick Keogh has expressed the need for stronger laws that hold businesses more accountable: “Because there are no penalties there is no discouragement of these clauses, there is no incentive for businesses to clean them up… The worst that can happen is a court might declare the clause in that contract void.” He has called for big businesses to review their contracts to avoid the “name and shame issue”, despite the lack of penalties involved.

In March 2019 the Government committed to consulting on options to broaden and strengthen the existing laws, with then-Assistant Treasurer Stuart Robert proposing changes to expand the number of small businesses qualifying under the protections. We’re yet to see how this promise will be progressed.

What does this mean for you?

Whether or not harsher penalties are introduced, small businesses and consumers have rights to protect themselves from unfair terms in standard form contracts with large businesses.

If you are presented with a standard form contract with terms that you consider to be legitimately unfair and have the potential to negatively impact your business, in the first instance you can ask the other party to remove or amend the term. If this request is denied, you can contact one of the following channels for assistance:

  • Australian Small Business and Family Enterprise Ombudsman, or Small Business Commissioner
  • Local, state or territory consumer protection agency
  • ACCC
  • Your lawyer

For assistance reviewing or updating your contracts, please get in touch with our team.

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