Business to business transactions and competition

HIA’s Position statement

1. The current competition and independent contractor laws are adequate
   • HIA supports effective competition laws.
   • Effective competition laws should be focused on:
     • improving productivity
     • increasing market efficiency; and
     • delivering better prices for consumers.
   • The Competition and Consumer Legislation comprehensively regulates business dealings and provides protection for businesses with prohibitions on misleading conduct, anti-competitive conduct and unconscionable conduct.
   • The Independent Contractors Act 2006 appropriately regulates unfair contract terms for subcontractors in the building and construction industry.
2. Freedom of contract and limited government intervention
• Parties should be free to contract and agree upon their own terms and conditions, including the terms and conditions of payment. This will ensure the efficient operation of the market for all businesses operating in the residential construction industry.
• Businesses are established as part of the market economy, and with the expectation of their dealings being subject to the principles of ‘buyer beware’. Businesses recognise there are risks involved with all commercial activities and that it is up to them to assess these risks before proceeding.
• Only where there is an overwhelming case for regulation, such as clear evidence of market failure, should governments interfere in commercial arrangements between contracting parties.
• Introducing laws that ‘protects’ one business at the expense of another is at odds with a competitive market, is counterproductive and will aggravate the difficulties faced by business.
3. It is inappropriate to regulate businesses via a consumer orientated law
• Business owners are not ‘consumers’.
• Businesses are more aware of their legal rights, understand the consequences of entering into contracts and are generally more sophisticated than consumers.
• Businesses have the capacity to make an informed decision based an assessment of risks, including trading risk against return.
4. HIA does not support laws or regulations that impose unnecessary and inappropriate costs in business to business transactions
• This would result in direct costs of doing business naturally increasing.

Background

• Unfair contract laws are part of the consumer protection framework and attempt to remedy an imbalance between parties, based on the perceived strength of the bargaining power of businesses versus the public. Under the Australian Consumer Law (ACL), an unfair term is defined as one that causes an imbalance in the parties’ rights and obligations that go beyond what is reasonably necessary to protect the legitimate interests of the party relying on the clause.
• The ACL applies to standard form contracts, including contracts for gym memberships, telecommunication agreements and home building contracts. It is proposed businesses be treated as consumers too.
• There are a number of arguments against extending consumer protection rights to business dealings.
• Intruding in commercial contracting undermines the principle that businesses should be free to contract with whom they choose and be bound by the terms they agree to.
• It increases the unnecessary compliance burden (red tape) on businesses.
• All states and territories have already introduced security of payments laws to protect the cash flow of ‘down the chain’ contracting parties.
• Unconscionable conduct laws already provide protection for exploitation of the ‘special’ disadvantage of parties in commercial relationships.