Does your business provide goods or services to consumers? Or do you receive a commission when you refer a consumer to a third party?  

Suppliers and intermediaries need to be aware of disclosure obligations aimed at improving transparency for consumers.

These disclosure provisions came into effect on 1 July 2020 however NSW Fair Trading allowed a 6-month grace period during which businesses were not penalised for non-compliance with these provisions.  Since 1 January 2021 NSW Fair Trading has enforced the new provisions.

What are the disclosure obligations under the NSW Fair Trading Act?

Under section 47A of the Fair Trading Act 1987 (NSW), suppliers must take "reasonable steps" to ensure that consumers are aware of terms or conditions that may substantially prejudice the interests of the consumer.

Examples of such prejudicial terms include (but are not limited to):

• Terms which exclude the liability of a supplier;

• Terms that hold consumers liable for damage to delivered goods;

• Terms that permit suppliers to provide a consumer's data to a third party in a form that may make the consumer identifiable to the third party; and  

• Terms that require the consumer to pay a cancellation or balloon fee.  

In addition, under section 47B of the Fair Trading Act 1987 (NSW), intermediaries (e.g. agents, brokers or referrers) are also required to take "reasonable steps" to ensure consumers are aware of any financial incentives (e.g. commission or referral fees) the intermediary will receive from a third party supplier as a result of the consumer being supplied with goods or services from that third party supplier.

The above disclosure obligations apply in addition to any other existing disclosure obligations under other legislation.

What are "reasonable steps"?

"Reasonable steps" are actions that one would reasonably expect would create awareness in a consumer. Common examples include:

• Including a summary of key terms on the front page of an agreement and requiring a consumer to sign that they have acknowledged and read these key terms. 

• Verbally disclosing to a consumer that the business will receive a referral fee from a third party if the consumer decides to use that third party.

• Pop-up messages advising the consumer that the company has a particular commission arrangement with a recommended third party.

Disclosure should be clear and upfront. To minimise risk, disclosure of these terms and arrangements should be made before you supply goods or services to a consumer, or before a sale is completed. You should also ensure the consumer understands the terms and confirms their awareness of the terms (e.g. by obtaining explicit informed consent orally, by signing a contract, or by clicking an "I agree” check-box on your website).

How can we help?

Failing to comply with Australian consumer and Fair Trading laws can result in serious consequences for businesses.  

If you require assistance with compliance, or have been contacted by a regulator in relation to your business practices, please contact Gena Kawaguchi or one of our other Commercial Partners.

The material in this article was correct at the time of publication and has been prepared for information purposes only. It should not be taken to be specific advice or be used in decision-making. All readers are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law. Brown Wright Stein Lawyers excludes all liability relating to relying on the information and ideas contained in this article.

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