Australia's new unfair trading practices regime: what businesses need to know

Extra prohibitions mean heightened compliance obligations 11 min read

Federal Parliament has passed new laws introducing a general prohibition on unfair trading practices, and specific obligations targeting drip pricing and subscriptions.

The Australian Consumer Law (the ACL) has been amended to introduce new prohibitions on 'unfair' conduct that is likely to cause consumer detriment, with a view to capturing trading practices that may not clearly fall within the existing ACL prohibitions on misleading conduct, unconscionable conduct and/or unfair contract terms. The new regime commences on 1 July 2027.

In this Insight, we explain the new laws and what they mean for businesses.

Key takeaways

• A broad new general prohibition has been introduced for 'unfair trading practices' that manipulate consumers or unreasonably distort consumer decision-making, and are likely to cause consumer detriment (whether financial or otherwise).
• Conduct captured by the general prohibition may extend beyond existing ACL prohibitions and could include practices such as pressuring consumers to take unintended actions (eg 'dark patterns'),, and presenting information to consumers in complex, ambiguous or overwhelming ways.
• New obligations have been introduced to address drip pricing, including prescriptive disclosure obligations for transaction-based charges.
• New obligations apply to consumer and small business subscription contracts, introducing mandatory disclosure, notification and cancellation requirements.
• Penalties are significant, with the maximum penalty being the greater of $100 million, three times the benefit or 30% of turnover for corporations per contravention.
• With the new requirements taking effect on 1 July 2027, businesses should start preparing now by reviewing policies, customer journeys, disclosures, interface design and checkout flows for potential risk areas.

Who in your organisation needs to know about this?

The reforms are significant for businesses, particularly those operating online. The following people in your business should know about the changes:

• internal legal, compliance and risk teams;
• marketing and sales teams responsible for advertising, pricing and consumer interactions;
• product and customer experience teams responsible for design choices or user journeys;
• customer support and frontline staff who engage directly with consumers; and
• boards and senior executives (given the increased regulatory exposure and potential reputational risk).

The new general prohibition on unfair trading practices

A new prohibition on unfair trading practices will be introduced. A contravention will occur where conduct:

• does, or is likely to, either:
  • manipulate the consumer; or
  • unreasonably distort the environment in which the consumer makes (or is likely to make) a decision; and
• causes, or is likely to cause, detriment to the consumer (financial or otherwise).

Both limbs must be satisfied for there to be a contravention.

The Bill contains a non-exhaustive list of examples that may contravene the general prohibition, including:

• impeding the consumer's ability to exercise legal rights, or seek legal remedies;
• failing to disclose material information;
• disclosing material information in a complex, ineffective, unclear, unintelligible, ambiguous, untimely or overwhelming way; and
• creating an environment (including by using design elements in digital interfaces) that places the consumer under unreasonable pressure, or obstructs consumer decision-making.

Who and what does the general prohibition apply to?

The general prohibition applies to the supply of, or offer to supply, goods or services to consumers in both online and offline settings. It will not apply to B2B conduct, although the Government has commenced consultation on extending the prohibition to some B2B dealings, with the aim of potentially introducing further legislation in Parliament on that issue later this year.

The prohibition is intended to capture practices known as 'dark patterns', which may nudge or pressure consumers into unintended actions in digital environments. Tactics that may be considered 'dark patterns' include:

• displaying misleading countdown timers or low stock cues to create false urgency;
• using 'confirm shaming' to make customers feel guilty about declining a service (eg a pop-up asking a customer to sign up to a marketing mailing list in return for a discount code, where the decline option has a label such as 'No thanks, I prefer to pay full price'); or
• omitting material information such as cancellation options, or using confusing menus to make this information difficult to find.

Conduct likely to manipulate consumers or unreasonably distort consumer decision-making

The first limb of the general prohibition refers to conduct that is likely to manipulate consumers or unreasonably distort consumer decision-making.

• Conduct that is likely to manipulate consumers is likely to capture conduct that wrongfully interferes with a consumer's behaviour, decision-making or actions. This could include exploiting common behavioural biases by creating false urgency or using other confusing, frustrating or high-pressure sales tactics. There is no materiality threshold specified in the legislation (eg there is no requirement that the manipulation be 'unreasonable') and also no requirement that the business intended to manipulate consumers or acted dishonestly. However, the Explanatory Memorandum indicates that the prohibition is not intended to capture legitimate, reasonable or generally accepted marketing or sales practices.
• Conduct that is likely to unreasonably distort the environment in which consumers make decisions will include any conduct that influences or pressures consumers to proceed with a transaction when they otherwise would not, or otherwise obstructs consumers from making decisions. This is particularly relevant to online environments, where the design of checkout flows and cancellation pathways can influence consumer behaviour.

Consumer detriment

The second limb of the general prohibition adopts a low threshold for consumer detriment.

Significantly, detriment is not limited to financial detriment. It can include wasted time, inconvenience or other negative impacts on a consumer, which opens the door to a finding of a contravention even where consumers have not experienced financial harm.

Additionally, actual consumer detriment is not required—it is sufficient if conduct is likely to cause detriment.

The new requirement to display transaction-based charges

The Act introduces new disclosure requirements targeting 'drip pricing'. Drip pricing describes the practice of gradually adding fees during the transaction process, obscuring the total amount payable by consumers.

The new obligations apply to the display of a base price where transaction-based charges also apply.

What is a base price?

The base price is the price payable for the goods or services themselves.

It may apply to one or multiple goods or services, depending on the circumstances. Eg the base price may be the price for a cart of goods, displayed as the total price for those goods on a website.

What is a transaction-based charge?

A charge is a transaction-based charge if:

• it is or may be payable for the supply of the goods or services;
• it is not an amount payable for the goods or services themselves; and
• it is or would be payable at the same time as an amount payable for the goods or services themselves.

This includes charges such as delivery and postage fees.

The following are excluded from the drip pricing regime: optional charges; payment surcharges; taxes, duties, fees, levies or charges imposed on the supplier; certain passed-through taxes; and prescribed charges.

What information do businesses need to display?

If a transaction-based charge applies, businesses are required to disclose the following information in close proximity to the base price:

• the amount of the charge (or the method for calculating it if it is not possible to calculate the amount);
• that the charge is a per-transaction charge;
• whether the charge will or may be payable (eg if a fee applies for delivery but not for pickup); and
• whether the base price includes the charge.

This information must be displayed in a legible, prominent and unambiguous way.

When does the new requirement apply?

These obligations apply to offers to supply (including advertising and promotions) of goods or services ordinarily acquired for personal, domestic or household use. The new drip pricing rules will not apply to offers made to businesses.

Offers to supply include advertisements, posters and marketing or electronic forms, such as on a website.

The new obligations for subscription contracts

The Act introduces new disclosure, notification and cancellation requirements for subscription contracts in the ACL. Subscription contracts are contracts for the recurring or continuing supply of goods or services.

What types of subscriptions are captured?

The new obligations target subscription contracts that automatically renew or create an ongoing liability for consumers without the subscriber taking action. This includes:

• subscription contracts with an indefinite period, where the subscriber automatically incurs a liability unless the contract is cancelled (eg a gym membership that charges $100 each month on an ongoing basis, with no expiry date);
• subscription contracts with a fixed period if supply will automatically continue or renew after the fixed period ends (eg a six-month subscription for a food delivery service that automatically renews for another six months when the first six-month period ends, unless cancelled);
• subscription contracts with an initial free period if supply will automatically continue after the initial free period ends (eg a seven-day free trial for a streaming service that automatically renews for $20 each month unless the subscriber ends the contract before the end of the free trial); and
• subscription contracts with an initial discount period if the price will automatically increase at the end of the discount period (eg an initial seven-day trial for a gym membership for $20 a week, where membership thereafter automatically continues at $40 a week unless the subscriber ends the contract before the end of the discount period).

The new requirements are not intended to capture subscription contracts that require subscribers to take positive steps for the subscription to continue beyond the end of a fixed period, such as contracts that provide consumers with an option to renew.

Certain types of contracts are excluded from the definition of subscription contracts, including leases, licences related to real property, hire-purchase arrangements, instalment payment contracts, childcare contracts and school tuition contracts.

Importantly, the requirements apply to both consumers and small businesses subscription contracts, where:

• consumer contracts are for the supply of goods or services wholly or predominantly for personal, domestic or household use or consumption; and
• small business contracts are standard form contracts, and the subscriber employs fewer than 100 persons and/or had turnover of less than $10 million in the last income year at or before the contract was made.

Disclosure requirements

Suppliers will be required to disclose the following information when they offer to supply goods or services under a subscription contract of the type described above:

• the fact that the contract is a subscription contract;
• information about the subscriber's required payments;
• the period of the contract;
• the renewal, extension or other continuation of the contract;
• any notice required to end the contract; and
• how to end the contract.

The information disclosed must be clear to the consumer. This means it must be comprehensible, unambiguous, legible and prominent, and must be disclosed within a reasonable time before a person enters the contract or in close proximity to where a person would enter the contract.

Ongoing notification requirements

Businesses may be required to comply with ongoing notification requirements, to the extent that such obligations are prescribed.

The relevant provision permits regulations to be made requiring businesses to provide certain information to subscribers at various points of the subscription lifecycle. Any such information must be given to subscribers in a legible, prominent and unambiguous way. The regulations may include a specific manner of disclosure.

The Government has not currently indicated what, if any, ongoing notification requirements may be considered for additional regulations.

Cancellation requirements

Businesses will be required to provide an easy-to-find and straightforward way for subscribers to cancel a subscription contract. Exit steps must be limited to those reasonably necessary to end the contract and protect the subscriber's interests.

What will be considered reasonably necessary to end the contract and protect the subscriber's interests depends on the circumstances. The Explanatory Memorandum states this requirement is intended to ensure that the steps required to end a subscription contract are minimal and do not unreasonably delay subscribers in ending the contract. Eg requiring subscribers to provide extensive feedback or cancel a contract in person is unlikely to be considered reasonable.

Importantly, if a subscriber signed up for a subscription online or the supplier provides a way of entering into a subscription contract online, cancellation must also be available online (even if that particular subscriber did not enter the contract online).

Unfair trading practices are an active regulatory priority for the ACCC

The Australian Competition and Consumer Commission (the ACCC) has been at the forefront of advocating for a prohibition on unfair trading practices.

In its Digital Platforms Inquiry Final Report, the regulator raised the need for reform to address conduct it considered was detrimental to consumers but did not 'neatly fit under existing consumer laws'.¹

Examples of conduct the ACCC specifically identified as problematic are:

• changing terms on which products or services are provided without reasonable notice or the ability to consider the new terms;
• adopting business practices to dissuade a consumer from exercising their contractual or other legal rights, including requiring the provision of unnecessary information in order to exercise such rights; and
• inducing consent or agreement through very long and detailed terms, and all or nothing ‘click wrap’ consents.

For businesses, preparing for the reforms will require a review of customer purchase journeys to assess whether there are risks of contravention under the new laws.

Undertaking a review of this kind is particularly important in the context of a string of recent enforcement actions and proceedings that the ACCC has commenced under the existing ACL prohibitions, each of which targets conduct that may also fall within the scope of the new unfair trading practices regime.

Actions you can take now

The new obligations will take effect on 1 July 2027. In the meantime, businesses—particularly those that operate online or use subscription models or other complex pricing structures—should take action now to remedy potential risks. This may include:

• reviewing customer journeys in online and offline channels to assess whether the customer journey contains what the ACCC may consider to be 'dark patterns', and whether there is a risk that consumers may be pressured, manipulated, exploited or obstructed when making decisions;
• displaying pricing information transparently to ensure transaction-based charges are displayed in close proximity to the base price in a legible, prominent and unambiguous manner;
• reviewing subscription disclosures to ensure that they clearly set out contract periods, cancellation steps, renewal policies, notice periods and payment information;
• simplifying subscription cancellation processes to ensure steps in the cancellation processes are 'reasonably necessary'; and
• assessing contracts with small business counterparts, as the exit and notification requirements for subscription contracts extend to small business subscribers as well as consumers.