Ashley & Martin pinged for hairy contract terms

WRITTEN BY Riley Berry

The Australian Competition and Consumer Commission (ACCC) has successfully brought proceedings against Ashley & Martin for including standard contract terms that were unfair pursuant to provisions under the Australian Consumer Law (ACL). The proceedings against the well-known provider of medical hair regrowth products reflect the ACCC’s ongoing attempts to enforce the unfair contract provisions of the ACL.

Unfair Contract Terms void under the ACL

The ACL provides that a term of a consumer contract or small business contract is void if (a) the term is unfair and (b) the contract is a standard form contract. A term is unfair if three conditions are met:

  1. Meeting the term would create a significant imbalance in the parties’ rights and obligations arising under the contract;
  2. The term is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and,
  3. The term would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.

Furthermore, as per the case of Ferme & Ors v Kimberley Discover Cruises Pty unfairness will be judged at the time the contract was formed. In determining unfairness the court will also have regard to the extent to which the term is transparent, whether it was expressed in plain language, was legible, presented clearly and readily available to a party affected by the term.

Forced growth

From 2014 to 2017, Ashley & Martin signed up over 25,000 customers to its ‘Personal RealGROWTH Program’ using three different standard form contracts, a take-it-or-leave-it style contract where the terms are set by one of the parties with little to no room for negotiation. Customers typically signed up to a 12-month program, which involved administering a variety of shampoos, conditions, supplements and prescription only medication. Of the unfair contract terms, these included requiring customers to pay for all medical treatment before receiving medical advice and making customers incur a cost if they sought to withdraw from the program after receiving adverse medical advice. Absent receipt of medical advice, the ACCC argued that the terms of Ashley & Martin’s contracts denied customers the ability to give informed consent and were thus unfair.

In the case of ACCC v Ashley & Martin the Federal Court found that the relevant provisions across the three different standard form contracts were unfair and thus void. Banks-Smith J found that detriment caused included foregoing hundreds and in some cases thousands of dollars for products that were medically ill-suited. They stated the terms impose “on the patient a disadvantageous burden or risk”. As a consequence the Court ordered Ashley & Martin to refund consumers over the unfair contract terms. Relief was given to patients who signed contracts prior to receiving medical advice, received medical advice that the RealGROWTH Program was not suitable, experienced side-effects, within 7 days of signing the contract expressed a desire to terminate or expressed a desire to terminate the contract because they didn’t have an opportunity to receive or consider medical advice.

The long and short of it

Previously, the inclusion of unfair contract terms was a low risk strategy for businesses and suppliers. If found to be unfair but not at the heart of the agreement, the term would be void and excluded from the rest of the agreement. The Federal Court’s decision demonstrates that there are additional consequences for businesses who included unfair terms. For Ashley & Martin this was a hairy decision and proved to be a costly one too.

If you’re concerned about unfair contract terms in your agreements, please contact our Business & Commercial team to see how we can help.

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