Suppliers beware – new disclosure obligations in NSW require you to be more transparent with consumers than ever before!

If your business supplies goods or services to consumers in NSW, then it’s time to take another look at your sales and customer on-boarding processes.

As of 1 January 2021, NSW Fair Trading is enforcing new provisions in the Fair Trading Act 1987 (NSW) that require businesses that supply goods or services in NSW to “consumers” to comply with new mandatory disclosure obligations.

The provisions require businesses to make the following disclosures:

  • the substance and effect of any terms in their contracts which may “substantially prejudice” the interests of consumers;
  • if they have commission or referral arrangements with another supplier when they recommend that a consumer buys goods or services from that third party supplier.

The new law has been introduced by the NSW Government in order to “increase transparency and competition, giving consumers the information they need to make meaningful decisions about their future” in order that “consumers have a fair chance of understanding what they are signing up to1.

“It is not good enough that prejudicial terms are hidden in lengthy contracts or on obscure web pages, or that they are so complex that it is difficult for an ordinary person to understand. Consumers should be able to easily understand what they are signing up to and make meaningful decisions”2.

Unlike the unfair contract term regime in the Australian Consumer Law (ACL), the new law applies not just to standard form contracts. However it will only apply to supplies to a “consumer” as that term is defined by the ACL – that is, a supply of goods or services valued at less than $40,000; valued at more than $40,000 but which are of a kind acquired for personal, domestic or household use or consumption; cars and trailers. (Note: from 1 July 2021, this $40,000 monetary threshold will increase significantly to $100,000 which will catch a far greater number of supplies). There are some key exceptions to the ACL definition of “consumer” which mean that a person will not be taken to be a consumer where they acquire goods for the purpose of re-supply or using them up or transforming them in trade or commerce (e.g. manufacturing inputs).

Unlike the ACL’s unfair contract term regime which currently only allows non-compliant terms to be declared “void” and unenforceable by a Court3, there are penalties available for breaches of the new law in NSW of up to $110,000 for corporations and $22,000 for individuals. Penalty notices are also available for suspected breaches, being $1,100 for corporations and $550 for individuals.

The NSW fair trading law has extra-territorial reach. This means that even if your business is based outside NSW, you will still need to comply with the disclosure requirements if you supply consumers in NSW.

Read on to learn what this means for you and your business.

Disclosure of prejudicial supply terms

The new law requires that suppliers must, before supplying a consumer with goods or services, take reasonable steps to ensure that the consumer is aware of the substance and effect of any term or condition relating to the supply of goods or services that may substantially prejudice the consumer’s interests.

When will a supply term “substantially prejudice” a consumer?

The new law contains a non-exhaustive list of examples of terms that may substantially prejudice consumers, including:

  • liability – clauses which exclude a supplier’s liability or provide that the consumer is liable for damage to delivered goods;
  • data disclosure – clauses which allow a supplier to sell or share data about, or provided by, the consumer to a third party in a form that allows the consumer to be identified; and
  • additional fees – clauses which require the consumer to pay an exit fee or balloon payment etc.

Whilst the “substantially prejudice” test involves questions of degree, the Government intends it “to set a high bar which gives businesses the scope to take a conservative approach to compliance”4. No regulations have been made by NSW Parliament to provide further clarity regarding what “substantial prejudice” is likely to entail at this stage.

Disclosure of commissions, referral fees by intermediaries

The new law also addresses the area of third party referrals and information or recommendations on goods and services. It requires intermediaries to take reasonable steps to ensure that a consumer that is to be supplied with goods or services is aware of a “financial incentive” (i.e. commissions, referral fees etc.) that will be received by the intermediary5. This will catch businesses that act as a go-between between customers and third party suppliers like online comparator sites, but only where a financial incentive is paid to the intermediary. Importantly, intermediaries are not required to disclose the specifics of the financial incentive other than that an incentive will be paid.

The NSW Government has lauded this provision as “a consumer protection first across the general marketplace in Australia” which will protect the legitimate interest of consumers in knowing if the recommendations they are receiving may be biased – for example, that a website may in fact be a subscription site, only recommending goods or services that are subscribed to the website and not providing the consumer with all the available options.

The Government acknowledges that some businesses are already likely to be complying with this upfront disclosure requirement and won’t be required to make any changes (e.g. search engines like Google and other news websites which identify content for which they receive payment by labelling that content as “sponsored” or as an “ad”).

It is also intended that regulations will be made that exclude businesses that already have legal disclosure requirements under other laws so it will be interesting to see what transpires in this regard.

When will a supplier have taken “reasonable steps” to make the required disclosures?

Suppliers must make the required disclosures to consumers before supplying the goods or services. In practice, this should be done before the consumer signs the contract, makes a payment, or otherwise commits to the supply arrangement.

As for what “reasonable steps” mean, there is currently no statutory guidance around when a supplier will be taken to have complied with this obligation. What is reasonable will depend on the circumstances – i.e. supply terms which are concise, plainly drafted with clear formatting (e.g. without clutter and with lots of “white paper”) are less likely to be problematic. Clearly however, more needs to be done than simply disclosing the existence of a prejudicial term and businesses must take reasonable steps to be upfront about the substance and practical effect of these terms. This does not require businesses to absolutely guarantee that consumers understand relevant terms and consumers still need to take ultimate responsibility to understand what they are signing up to.

NSW Fair Trading advises that the best way to meet this disclosure requirement is for disclosures to be “clear, upfront and automatic”, taking into account the nature of the business, the likely impact of the terms, and the supplier’s resources. This means that the disclosure should be easy to understand, readily available so the consumer is not required to seek out the information themselves, and included automatically as a standard part of each transaction6.

Examples of what this might look like include for prejudicial terms:

  • Using short, plain English summaries on the front page of a contract which need to be expressly acknowledged by consumers;
  • Providing information in short chunks at key points during the transaction process for the consumer, e.g. on the upfront information or payment page;
  • Providing pop-up boxes on a website which explain key terms and how they could affect consumers; or
  • Using illustrations, icons or formatting to highlight and explain key information7.

How does the new law in NSW interact with the ACL?

The disclosure requirements in the new law are in addition to, and supplement, those in the ACL where:

  • the ACL’s unfair contract term regime is aimed at improving fairness in contractual relations, by preventing suppliers across Australia from including or enforcing unfair terms in their standard form contracts with consumers and small businesses. This regime only applies to consumer and small business contracts which are standard form contracts.
  • the disclosure requirements in the new law are aimed at making suppliers more transparent about supply terms with NSW customers. Whilst the new law only applies to customers located in NSW, in another sense it applies more broadly than the ACL regime as it applies to all consumer supply contracts and not just standard form contracts.

So, supply terms that fall within both the ACL regime and the new law need to comply with both regulatory regimes. Where contracts already comply with the ACL’s unfair contract term regime though, the disclosure requirements of the new law may already have been met (given that transparency is one of the factors listed in the ACL which goes to fairness of a contract term). However, this will not always be the case given that the concept of fairness in the ACL is broader and more nuanced than the “substantial prejudice” underpinning the disclosure requirements in the new law.

By comparison, supply terms with NSW customers that fall outside the ACL’s unfair contract term regime only need to comply with the disclosure requirements in the new law.

The bottom line is that even if supply terms have been reviewed previously for ACL compliance, they will need fresh case-by-case consideration to ensure full compliance with all regulatory requirements including those in the new law in NSW.

Next steps

There is essentially now a double gateway for prejudicial terms in consumer contracts in NSW. First, you need to consider whether the term can be lawfully included and enforced in a standard form contract having regard to the ACL’s unfair contract term regime. Second, you need to consider how to communicate the substance and practical effect of that term to consumers, having regard to your disclosure obligations in the new law.

We recommend the following practical steps:

  • Identify any terms in your contracts with NSW consumers which are likely to be significantly prejudicial to consumers (having particular regard to liability provisions, termination fees and similar payments, and any rights which you may have to share personal customer information with third parties) and whether you have an arrangement where you receive a financial incentive for referring customers to another supplier of goods or services.
  • Ensure that these terms are compliant with the unfair contract term regime in the ACL so that they can be lawfully enforced against consumers, to the extent this regime applies to your contract. Remember, there are serious penalties available under the ACL for making false and misleading representations in trade or commerce, including by misleading consumers as to their rights and obligations under the ACL.
  • Implement changes in your customer on-boarding and contractual documentation processes to ensure that any terms which are significantly prejudicial to consumers, even if they are fair, are clearly explained to customers upfront as well as any financial incentive arrangements which mean you will receive a benefit from a referral. For instance, if you operate a website, you should consider upgrading your interface to include pop-up boxes which refer to key provisions in your trading terms. You should also ensure that all sales staff and customer service representatives are trained to provide the relevant disclosures to consumers in a manner which complies with the new law in NSW.

Got questions? Our Competition & Antitrust team is here to help.


1. Second Reading Speech of the Fair Trading Legislation Amendment (Reform) Bill 2018 (NSW), by Scot MacDonald on behalf of the Honorable Sarah Mitchell, 17 October 2018.
2. Ibid.
3. For proposed reforms to the unfair contract term regime under the Australian Consumer Law, see our earlier article here.
4. Second Reading Speech.
5. Secret commissions are already a criminal offence under the Crimes Act 1900 (NSW)
6. https://www.fairtrading.nsw.gov.au/resource-library/publications/new-disclosure-obligations-for-nsw-businesses.
7. Ibid.


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