ACCC Deputy Chair, Mick Keogh, said they initiated the investigation into unfair contract terms after receiving complaints that suppliers were using contracts in a way that could disadvantage farmers.

After obtaining copies of the standard form supply agreements, the ACCC identified several unfair terms including those which gave the supplier the right to unilaterally vary the quantity of fertiliser to be delivered to the buyer or to terminate the agreement if they believed they would be unable to supply the goods. Some terms also restricted buyers' rights to raise issues about defects with the goods.

Under the law a term in a standard form contract may be unfair if it creates a significant imbalance in the parties' rights and obligations under the contract, is not reasonably necessary to protect a party's legitimate business interests or is likely to cause financial or other harm to the other party if enforced.

While all the fertiliser suppliers the ACCC engaged with during its investigation co-operated and changed the contract terms to address its concerns, Keogh said it serves as an important reminder to all businesses in the agricultural sector to review their standard form small business contracts and remove unfair contract terms.

From November 10, the ACCC will be able to take court action to seek pecuniary penalties for breaches of new unfair contract term laws.  

Under the new laws businesses face a maximum penalty of $50 million or three times the value of the benefit derived. If that value cannot be determined, the penalty is up to 30 per cent of the company's turnover during the period it engaged in the conduct.

The new unfair contract terms provisions will also expand the definition of a ‘small business' to include businesses with up to 100 employees or up to $10 million in annual turnover. 

"We will continue to monitor traders in the fertiliser industry and, more broadly, across the agricultural sector, and we will investigate if we have concerns with contract terms," Keogh said.

"If a small business thinks an unfair contract term is being included or enforced in their agreement, we recommend they obtain independent legal advice to understand the options available to them."

Anyone who has competition or fair-trading concerns is encouraged to report an issue affecting their business through the ACCC website.