The ACCC has accepted a court enforceable undertaking from Sensis Pty Ltd (Sensis) following an investigation into its automatic contract renewal and cancellation processes. The ACCC investigation followed a large number of complaints from small business customers of Sensis.
From at least January 2015 to August 2016, Sensis represented on its website that its Yellow Pages and White Pages bundled print directory and online packages had a monthly fee with a 12-month minimum contract period, but failed to adequately disclose that:
- these bundled packages automatically renewed for a further 12 months unless cancelled by the customer; and
- the customer may be charged a cancellation fee equal to the remaining cost of the contract if they cancelled an automatically renewed contract after a certain date.
The ACCC was also concerned that Sensis may not have adequately disclosed these automatic renewal and cancellation terms in certain communications to customers before and after contracts were entered into.
“Automatic renewal terms must be prominently disclosed, along with all the steps customers can take to cancel a contract and any cancellation fees that may apply. This is particularly important for small business customers,” ACCC Deputy Chair Dr Michael Schaper said.
“Traders who fail to adequately disclose key terms in their contracts risk misleading their customers and breaching the Australian Consumer Law.”
Sensis acknowledged that its conduct may have contravened the ACL prohibitions on misleading or deceptive conduct and false or misleading representations with respect to the price of services, and has undertaken to:
- refund affected customers who have not already been refunded by Sensis;
- maintain improvements to its processes to ensure its automatic renewal and cancellation processes are clearly disclosed to customers; and
- publish a corrective notice on its website.
During its investigation, the ACCC also raised concerns that certain clauses in Sensis’ standard Product Contract Terms may be ‘unfair’ under the new business-to-business unfair contracts terms provisions in the Australian Consumer Law.
These included Sensis’ automatic renewal terms and clauses giving Sensis broad discretion to cancel a customer’s contract, including the ability to terminate a contract “without cause”.
To address the ACCC’s concerns, Sensis agreed to amend its Product Contract Terms to:
- make its automatic renewal terms more transparent and to include an obligation on Sensis to remind customers of the pending automatic renewal of their contracts; and
- qualify Sensis’ right to terminate a customer’s contract to circumstances where Sensis is “acting reasonably” and in order to protect its legitimate interests.
“Ensuring that small businesses receive the protection of the new unfair contract terms laws is an enforcement priority for the ACCC.” Dr Schaper said.
“The ACCC has serious concerns about the use of wide-ranging termination clauses that allow a business to unilaterally terminate a contract without reasonable cause.”
“Businesses which continue to use such terms in their standard form contracts with small businesses risk ACCC enforcement action, which may include court proceedings to have those terms declared unfair,” Dr Schaper said.
Effective from 12 November 2016, the unfair contract terms provisions of the ACL were extended to cover standard form contracts involving small businesses.
In November 2016, the ACCC published a report about unfair terms in small business contracts following a review of small business contracts in range of industries including the advertising industry.