Mall owners are wrapped in red tape

On two occasions, Robert Gottliebsen has unfavourably contrasted the Shopping Centre Council's position on the proposed extension of the unfair contracts law to business-to-business contracts with that of Coles and Woolworths (A Coalition sticky spot for shopping centres, November 19 and Abbott must fix small business in 2014, December 31).

Gottliebsen has suggested that Coles and Woolworths are “ahead of the game” as a result of the negotiation late last year of the Food and Grocery Prescribed Industry Code of Conduct, and that the reason for negotiating this code was “so that they could influence the outcome [of the proposed new unfair contracts law extension]”. By contrast, the Shopping Centre Council, which is seeking to have retail leases (contracts) exempted from the proposed legislation, is being painted as recalcitrant.

It is not clear how Coles and Woolworths are ahead of the game or in a better position than shopping centre owners. Coles and Woolworths currently operate in an unregulated environment: their contracts with their suppliers are not regulated by governments, other than the application of existing provisions of the Competition and Consumer Act.

Nor will the provisions of the new code be exempted from the the unfair contracts law, just as the Franchising Code of Conduct will not be exempt. Coles and Woolworths, along with shopping centre owners and franchisors, will soon be subject to ‘double regulation’ of their contracts. This hardly puts them ahead of the game or in a better position.

Whether a contract between Coles or Woolworths with a food and grocery supplier is ‘fair’ or ‘unfair’ will soon be a matter for a judge to decide. This will become a judicial lottery. The concept of ‘unfairness’ is very subjective, particularly in business negotiations where both parties have an obligation to protect their own interests. Justice Gottliebsen may have one view of what is ‘fair’ in business; Justice Cockburn may have a different view of what is ‘fair’. There is no body of law to guide them in this case.

Retail leases are already heavily regulated by all state and territory governments in their respective retail tenancy legislation. Almost every aspect of the shopping centre relationship is regulated, beginning even before the lease is entered into.

If a lease term does not conform to the protections of the relevant Retail Leases Act, then the lease term is void. The whole justification of this regulation is to ensure that retail lease contracts are fair for retail tenants. No other country provides such detailed legislative protection for retail tenants.

Once the unfair contracts regime is added to this mix in Australia, then shopping centre owners will be facing ‘double regulation’. In fact, we are facing ‘triple regulation’ since the existing provisions of the Competition and Consumer Act, such as those relating to unconscionable conduct and  misleading and deceptive conduct, already apply over and above the provisions of retail tenancy legislation.

Given that other comparable countries such as New Zealand and the United States do not have any of this business regulation (that is, no retail tenancy legislation; no unfair contracts regulation; no unconscionable conduct regulation), this triple regulation path is an absurd one for Australia to be going down.

Hence our push to have retail leases that are already regulated by state and territory governments exempted from the proposed new law. In a climate where the federal government has declared war on unnecessary business regulation – in an effort to reduce the cost of doing business in Australia – that is surely being responsible, not being recalcitrant.

Nor is this an unusual or unprecedented request. The existing unfair contracts law for business-to-consumer contracts exempts “a term required, or expressly permitted, by a Commonwealth, State or Territory law”. If this exemption is permitted for consumer contracts, it is surely also justified for business contracts.

Milton Cockburn is the executive director of the Shopping Centre Council of Australia.