SMEs' biggest concerns and how to avoid them

Australian SMEs have had their biggest concerns collated by the Australian Competition and Consumer Commission (ACCC), which has also outlined law amendments designed to address them.

According to the ACCC, the most common concern SMEs have is the misleading and deceptive practices of other businesses.

“We're continuing to see an increasing number of contacts from the Australian SME sector,” said ACCC deputy chairman Dr Michael Schaper.

“These contacts have been particularly concerned about misleading conduct by other firms, consumer guarantees and agricultural issues.”

Examples of misleading conduct provided by the ACCC include firms offering to advertise for businesses, not delivering on the advertising, then threatening legal action; and businesses misleading consumers over products.

Misleading businesses is an issue the ACCC has made public, and which has been covered by My Business before. It includes practices such as creating misleading subscription services and misleading government grant listings.

The ACCC identified credit card surcharges and unfair contracts as two subjects of deception. 

These points should not be misleading SMEs for much longer, as changes to credit card surcharge laws and unfair contract term laws will be coming into effect from 1 September and 12 November respectively.

“Concerns about changes to credit card surcharging laws in September, and new changes to the ACL [Australian Consumer Law] that will extend protections from unfair contract terms in business-to-business dealings in November, are expected to generate significant interest from the small business community,” said Mr Schaper.

Here's a look into these two changing laws, and what SMEs need to be mindful of when they come into effect:

Credit card surcharge concerns

There is a major concern about businesses imposing excessive surcharges onto consumers, which can cause 75 per cent of consumers to actively tell other people to avoid that business. 

From 1 September 2016, large businesses must not exceed debit transactions for Visa or MasterCard cards by 0.5 per cent of the transaction value; and credit transactions for Visa and MasterCard cards by 1 to 1.5 per cent of transaction value, and for American Express cards by 2 to 3 per cent of the transaction value.

According to the ACCC website, a ‘large business’ is defined as a business that meets two out of three of the following criteria:

  • Consolidated gross revenue for financial year ending 30 June 2015 of $25 million or more.
  • Value of consolidated gross assets at 30 June 2015 of $12.5 million or more.
  • 50 or more employees (whether full time, part time, casual or otherwise) at 30 June 2015.

Any business that doesn’t fall into the large business definition will need to adhere to the new credit card surcharge laws by 1 September 2017.

Businesses that don’t stick to the surcharge law may be fined up to $233,100, and more if an individual affected by a breach suffers loss or damages.

Unfair contract terms concerns

Another point of concern raised by SMEs is what to do when faced with an unfair contract.

A new law coming into effect on 12 November 2016 will change that, allowing seemingly unfair contracts to be put to courts and voided.

The law is valid where a contract:

  • Is made or renewed on or after 12 November;
  • Involves a supply of goods and service, or the sale or grant of an interest in land;
  • Where one party is a ‘small business’ (defined by the ACCC as a business that employs less than 20 people); and
  • The up-front price payable is $300,000 or less for a contract less than 12 months, or $1 million for more than 12 months.

‘Unfair’ is then defined where only one party can, as outlined in the contract:

  • Avoid or limit obligations;
  • Terminate the contract;
  • Be penalised; or
  • Vary the contract.

However, there are exclusions to the ability of a court to void a contract, as defined by the ACCC website:

  • Contracts entered into before 12 November 2016 (unless renewed on or after this date).
  • Shipping contracts.
  • Constitutions of companies, managed investment schemes or other bodies.
  • Certain insurance contracts (e.g. car insurance).
  • Contracts in sectors exempted by the minister responsible – no sectors are currently exempt.
  • Terms that define the main subject matter of the contract.
  • Terms that set the up-front price payable.
  • Terms that are required or expressly permitted by a law of the Commonwealth, or a state or territory (e.g. permitted under the Franchising Code or another prescribed industry code).
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