ACCC to investigate UberEats and unfair contracts

27 April 2018

After a long working week, there is nothing better than jumping on the couch to binge watch a TV series on Netflix and order dinner through UberEats. However, nothing sours a ‘Netflix chill’ quicker than the delivery running late and dinner turning up cold. But who bears the blame for a ruined dinner?

Earlier this week, the ABC reported that restauranteurs have complained that UberEats imposes unfair terms in their contracts with restaurants, by shifting the liability for cold food from Uber and the drivers and on to the restaurants. In response to the complaints, Australian Competition and Consumer Commission (ACCC) chairman Rod Sims announced on ABC Radio National that the ACCC plans to investigate the restauranteurs complaints and consider whether, amongst other things, Uber’s contracts contain unfair contract terms in breach of the Australian Consumer Law (ACL).

What makes a contract term ‘unfair’?

Small businesses can claim that terms under standard form contracts are void on the basis that they are ‘unfair’. Standard form contracts are those that are offered to clients with the same or similar terms for each client. Under the ACL, contract terms will be deemed ‘unfair’ if:

  • it would cause significant imbalance to the parties’ rights and obligations arising under the contract;
  • it is not reasonably necessary to protect the interests of the party advantaged by the term; and
  • it would cause detriment (financial or otherwise) to a party if relied on.

The unfair contracts regime, under the ACL, was extended to include small businesses in January 2017 and applies to business-to-business contracts entered into after 12 November 2016. Prior to this, claims of unfair contract terms were only available to consumers. Terms that allow one party to remove or decrease their liability unreasonably, terminate the contract or increase prices without notice are examples that have been previously claimed under the ACL.

The ACCC announced in 2017, and again in 2018, that it was prioritising prosecuting companies that it considered had unfair contract terms. Some notable examples of companies that ACCC pursued in 2017 include:

  • JJ Richards - the Federal Court found that eight terms in JJ Richards standard form waste management contracts with small businesses were unfair terms and declared void. These terms allowed JJ Richards to unilaterally increase its prices, provided JJ Richards with an unlimited indemnity, and removed any liability on JJ Richards where its performance is “prevented or hindered in any way”.
  • Servcorp Limited - the ACCC claims that terms permitting Servcorp to unilaterally increase the prices without notice for use of its serviced and virtual office spaces and to unilaterally terminate the contract or acquire the customer’s property without notice, are unfair. This action is continuing in the Federal Court.
  • Ashley & Martin - the ACCC claims that Ashley & Martin contracts for “Personal RealGrowth Program” contain unfair terms that give customers only two days after their initial consultation to notify their discontinuation of the service. Failure to do so would result in customers locked into a 12 month contract. This action is continuing in the Federal Court.
  • Advanced Hair Studio (AHS) - AHS agreed to provide an undertaking to the ACCC to reimburse customers who had been required to pay for its entire program after attending a few sessions. AHS also agreed to establish an ACL Compliance Program.

UberEats’ controversial terms

The UberEats service works by Uber drivers acting as delivery drivers for restaurants. As orders are lodged and prepared, Uber drivers are notified that deliveries are ready and they can take the orders and deliver them to customers who have ordered the food through the UberEats app.

ABC has reported that under its agreements with restauranteurs, Uber’s services are not described as a delivery service, but rather as a ‘technology services provider’. As a result, restauranteurs are vested with the responsibility and possession of the delivery. This is despite the fact they do not have any control over the route the driver takes, or the number of orders the driver is attempting to deliver at any one time. Effectively, this means that if food is delivered cold, it is the restaurant - not Uber or the driver - that is liable for any refund sought by the customer.

Restauranteurs claim this is an unfair contract term as it is the driver who is in control of whether the food is picked up and delivered within a reasonable time. If restauranteurs can establish that this clause:

  • causes a significant imbalance between the restauranteurs and Uber’s obligations;
  • the term is not reasonably necessary to protect Uber’s interests; and
  • the terms causes determent to the restauranteurs;

then the term could be declared void on the basis it is unfair pursuant to the ACL.

What you need to do

The ACCC’s investigation into Uber’s terms is a timely reminder for business owners to conduct periodic reviews of their own contract terms and conditions (particularly if they use standard form contracts) to ensure they are fair and reasonable and compliant with current requirements. 

Small businesses should also review the terms of any current contracts under which their business currently operates and seek advice if you feel some of the terms may be unfair under the ACL.

For more information, please contact HopgoodGanim lawyers’ Litigation and Dispute Resolution team.

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