Australia bans unfair trading practices, strengthens laws against drip pricing and subscription traps

What you need to know

• From 1 July 2027, unfair trading practices will be prohibited in Australia. This broad prohibition will ban conduct that manipulates consumers, or unreasonably distorts the environment in which the consumer makes a decision. It is intended to capture conduct such as the use of "dark patterns", creating false urgency, and overly complex terms and conditions.
• While the new prohibition is not intended to capture legitimate, reasonable and generally accepted sales and marketing practices, there is no defence available, nor is there any bright line for businesses to follow. This uncertainty will require careful consideration in some cases.
• The reforms also include targeted obligations to prevent 'drip pricing', by requiring businesses to prominently disclose transaction-based charges alongside base prices, and to prevent 'subscription traps', by imposing new requirements for companies offering subscription contracts.
• Significant penalties will apply, consistent with the other penalties in the Competition and Consumer Act 2010.

What you need to do

• With 12 months before commencement, businesses operating in Australia should be considering their website and app design, user interfaces, end-to-end customer journeys, sales and marketing practices, pricing structures and subscription frameworks to ensure compliance with the new laws. This includes any company located overseas selling to Australian consumers and small businesses.

Introduction

On 2 July 2026, Parliament passed amendments to the Competition and Consumer Act 2010 (CCA) to prohibit unfair trading practices towards consumers, and to introduce new requirements designed to reduce the harm caused by drip pricing practices and subscription traps. The new laws will commence on 1 July 2027.

Corporations that contravene the new laws will be subject to the CCA's current maximum penalties, which were increased earlier this year (see our article here) to the greater of $100 million, three times the benefit obtained, or 30% of the body corporate's adjusted turnover during the breach period. Businesses operating in Australia (including those located overseas but selling to Australian customers) should be taking steps over the next 12 months to ensure that their practices do not contravene the provisions. This should include reviewing all online selling practices and any systems and processes for offering and renewing subscriptions.

New general prohibition on unfair trading practices

The amendments introduce a new prohibition on engaging in unfair trading practices in trade or commerce. This prohibition is intentionally broad, and is designed to capture conduct that may fall short of misleading or deceptive conduct or unconscionable conduct under the Australian Consumer Law (ACL), but which is nonetheless harmful to consumers.

A person engages in unfair trading practices if in connection with the supply of, or an offer to supply, goods or services to a consumer, the person engages in conduct that:

(i) does or is likely to do either or both of the following:

(a) manipulates the consumer, or

(b) unreasonably distorts the environment in which the consumer makes a decision; and

(iii) causes or is likely to cause detriment (whether financial or otherwise).

The reference to a "consumer", in this context, means that the new prohibition will only apply to goods or services that are of a kind ordinarily acquired for personal, domestic or household use or consumption.

Conduct 'in connection with supply' will extend to post-sale conduct, such as behaviour that impacts a consumer's ability to access or use a good or service after its supply.

What type of conduct will the general prohibition capture?

The first limb of the prohibition requires that conduct either manipulates the consumer or unreasonably distorts the consumer's decision-making environment, or is likely to do so. Both concepts are intentionally broad.

"Manipulation" of a consumer is intended to capture wrongful interference with a consumer that results in a change in the consumer's behaviour, decision-making or action that is against the consumer's interests and may involve conduct exploiting cognitive or behavioural biases. It does not require dishonesty. An example of manipulation is conduct that creates a false sense of urgency or scarcity, or the use of confusing, frustrating or high-pressure sales tactics.

The Explanatory Memorandum states that "manipulation" is not intended to capture legitimate, reasonable and generally accepted sales and marketing practices, but the amendments do not include a statutory defence or safe harbour picking up this wording. The absence of a positive defence has been highlighted (including by the Australian Industry Group and the Law Council of Australia) as creating compliance uncertainty, particularly for businesses operating at what will now be a nebulous boundary between legitimate marketing and potentially manipulative conduct.

"Unreasonable distortion" of the environment in which the consumer makes a decision targets conduct which encourages a consumer to proceed with a transaction when they otherwise would have been unlikely to do so, and conduct that obstructs a consumer from implementing an economic decision they would otherwise have made, such as seeking a refund. Examples of "unreasonable distortion" include making the decision-making environment overwhelmingly complex or obscuring key information (for example, by providing excessive or confusing information).

Conduct may constitute both manipulation and unreasonable distortion – the two are not mutually exclusive.

The second limb of the new prohibition requires that the conduct causes detriment to the consumer (whether financial or otherwise), or is likely to do so. The threshold for this limb is low. The Explanatory Memorandum notes that "detriment" in this context can include financial loss, wasted time or any other negative impacts.

Both limbs must be satisfied for conduct to contravene the prohibition. The amendments provide a non-exhaustive list of examples of conduct that may contravene the prohibition, including:

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

Importantly, there is no requirement in the new law that a business must have intended to manipulate or unreasonably distort a consumer's decision-making environment. As a result, it will be possible for businesses to inadvertently contravene the law, without deliberately engaging in any type of sharp practices.

While the general prohibition will apply to online and offline conduct towards consumers, it will particularly target the use of "dark patterns" – practices in digital interfaces that are designed to pressure or nudge consumers into unintended actions without their full awareness. The Government points to the following examples of dark patterns:

• obstacles and complexity which frustrate and exhaust consumers, such as confusing or complex menus with pre-selections or defaults, which make it easy for consumers to select the choices favoured by the business, while other options are obscured or difficult to access;
• countdown timers, low stock notifications or other indicators of elevated demand or supply constraints, where used to create a heightened or artificial sense of urgency and scarcity; and
• confirm-shaming, where the consumer is made to feel regret about their choice.

Exceptions to the general prohibition

The prohibition on unfair trading practices does not apply where the consumer is a body corporate or where the consumer acquires the goods or services in the course of carrying on a business. However, Treasury is currently consulting on whether the general prohibition should be extended to apply to dealings with small businesses and franchisees. The proposed extension could cover situations where small businesses buy goods or services as a consumer, or business-to-business dealings (e.g. where the small business sells products or services to another business, or buys goods or services from another business to sell to the public). The consultation closes on 10 July 2026.

Increased disclosure obligations to combat "drip pricing"

"Drip pricing" occurs when a business advertises an attractively low headline price, but slowly reveals or "drips" unavoidable fees and charges as the consumer moves through the checkout process. The amendments strengthen protections against drip pricing, to ensure that information about transaction-based charges is displayed throughout the purchase process.

The new drip pricing requirements will apply only where the goods or services offered are of a kind ordinarily acquired for personal, domestic or household use or consumption, which is intended to limit the extent to which they will apply in a business-to-business context.

The new laws require businesses offering goods or services at a base price to also display specified information for any "transaction based charge". The base price is an amount payable by the purchaser for the supply of the goods or services, if it includes an amount payable for the goods or services themselves. A transaction based charge is (i) a charge that is payable by the purchaser for the supply of goods or services, (ii) is not an amount payable for the goods and services themselves, and (iii) is or would be payable at the same time as the amount payable for the goods or services themselves.

An example of a transaction based charge is a compulsory booking or administration fee. A transaction based charge does not include an optional charge, a payment surcharge (within the meaning of Part IVC of the CCA) or any tax (such as GST).

Display requirements

Where a supplier displays a base price for goods or services to which a transaction based charge applies, the supplier must also display the following information:

(i) the amount of the transaction based charge or, if the amount is unknown at the time, the method for calculating the transaction based charge;

(ii) that it is a 'per-transaction' charge;

(iii) whether the transaction based charge will or may apply to the supply of the good or service; and

(iv) whether the base price includes the transaction based charge.

If the new display requirements are triggered, the relevant information must be displayed while the base price is displayed, in a legible, prominent and unambiguous way, and in close proximity to the base price. It must not be included in fine print or on a different web page.

New subscription contract requirements to target "subscription traps"

The amendments also create new requirements for subscription contracts, to ensure that consumers are adequately protected from unfair subscription practices commonly known as 'subscription traps'.

What is a subscription contract?

Various types of subscription contracts are captured, including contracts for:

• an indefinite period (i.e. rolling contracts such as music streaming);
• a fixed period with automatic renewal / continuing supply after the end of the fixed period; or
• an initial free period or initial discount period, after which a person automatically incurs a liability to pay for the supply of goods or services or to pay for them at a higher rate.

The following subscription contracts are exempt from the new obligations:

• leases and licences of real property;
• hire purchase contracts;
• instalment payment contracts; and
• school fee and childcare contracts.

What information will businesses need to provide about new subscription contracts?

When offering to supply goods or services under a subscription contract (including through advertising, marketing, publishing and promotion), the supplier must disclose the following information when making the offer:

• a statement that if entered into, the contract would be a subscription contract;
• any liabilities a party would or may incur under the contract. This includes the subscription price and any fees/charges the subscriber may incur;
• the period of the contract;
• details regarding the renewal, extension or other continuation of the contract (e.g. when it may automatically renew);
• any notice required to be given before a subscriber can end the contract; and
• how the subscriber can end the contract (i.e. the specific steps to cancel).

The disclosure must be made (i) in a legible, prominent and unambiguous way, in close proximity to where a contract is available to be entered into by a person, or (ii) in a comprehensible, audible and unambiguous way, within a reasonable time before a person could agree to enter the contract.

The regulations may also prescribe additional information that must be disclosed and a specific manner of disclosure for certain kinds of goods or services or circumstances.

What do businesses need to do when a subscriber wants to end a subscription contract?

Under the amendments, suppliers of goods or services under subscription contracts with consumers or small businesses must provide a way for the subscriber to end the contract, and ensure that each method available to the subscriber to end the contract is:

• easy to find,
• straightforward, and
• requires the subscriber to take only steps that are reasonably necessary to end the contract and protect the subscriber's interests.

The Explanatory Memorandum clarifies that what is "reasonably necessary" depends on the nature of the subscription product or service and the relevant industry. However, practices that unreasonably hinder a subscriber exiting a subscription contract would not comply with the new requirements. This may include, for example, requiring a subscriber to attend a branch in person in order to exit, despite having moved interstate or overseas.

In addition, if the subscriber enters the contract online, or the supplier provides an online way of entering into a subscription contract for the same kind of goods or services, then one of the ways the supplier provides for the subscriber to end the contract must be online.

Importantly, these requirements will apply to subscription contracts which meet the "consumer requirement" and the "small businesses requirement". The consumer requirement will be met if the contract is a contract for the supply of goods or services under which an individual acquires the goods or services wholly or predominantly for personal, domestic or household use or consumption. The small business requirement will be met if the contract is a standard form contract for the supply of goods or services and the subscriber meets either or both of the following conditions: (i) the subscriber makes the contract at a time when it employs fewer than 100 persons; or (ii) the subscriber's turnover for the last income year is less than $10 million. The consumer and small business requirements are consistent with those used elsewhere in the ACL in relation to unfair contract terms.

Framework for requiring subscribers to be notified for subscription contracts in effect

The amendments also introduce a new framework for the imposition of ongoing notification requirements while a subscription contract is in effect. This framework is intended to ensure that subscribers receive key information about subscription contracts and can make informed decisions about whether to continue under the contract.

A person who supplies goods or services under a subscription contract prescribed in the regulations will be required to give the subscriber the information prescribed by the regulations. No regulations have yet been made, but it is important to note that this power provides Government with the ability to impose requirements on existing subscription contracts in the future and is intended to ensure the legislation remains up to date in an evolving market of new technologies and business practices relating to subscriptions.

Penalties

Corporations that contravene the new prohibition on unfair trading practices or the new requirements in relation to drip pricing and subscriptions will be subject to a maximum pecuniary penalty of the greater of $100 million, three times the benefit obtained, or 30% of the body corporate's adjusted turnover during the breach period. The maximum penalty for contravention by a person that is not a body corporate is $2.5 million. The ACCC will also have the power to issue infringement notices.

Commencement and application

The amendments have passed Parliament and will commence on 1 July 2027. Penalties will apply for contraventions of the new laws from this date.

The new general prohibition on unfair trading practices will apply in relation to conduct that occurs on or after commencement (1 July 2027), whether in connection with a supply or offer to supply made before, on or after that date.

The provisions in relation to subscription contracts will apply in relation to a contract entered into on or after commencement (1 July 2027). Those provisions will not apply to a contract entered into before commencement, but will apply if the contract is renewed, extended or otherwise continued after commencement (on and from that date) or if the contract is varied on or after commencement (from the variation date).

Overseas companies selling to Australian customers

Companies located overseas but selling products or services (including subscriptions) to Australian consumers online will be caught by these provisions. Additionally, companies located overseas but selling subscriptions to Australian small businesses will also be caught.

Key takeaways

All businesses operating in Australia (including those based overseas but selling to Australian customers) should take note of the new general prohibition on unfair trading practices, and the new requirements in relation to drip pricing and subscription contracts. While there will be obvious examples of conduct that will need to be altered in order to comply with the new laws, in many cases there will be no clear line between legitimate influence and illegal manipulation. The challenge for businesses will be interpreting the new laws in relation to these more borderline examples, in the context of very significant potential penalties for getting it wrong.

We recommend all businesses take the following actions before 1 July 2027:

• Review terms and conditions: Review terms and conditions for clarity and accessibility. Consider whether key information is clearly articulated and not unduly complicated or overwhelming.
• Consider website/app design, user interface and end-to-end user journey: Review website design and app interfaces to ensure that a customer's end-to-end journey is compliant with the new provisions, and does not contain unfair trading practices such as dark patterns. Limit the use of marketing practices that exploit common behavioural or cognitive biases as part of a user's end-to-end journey. Pay specific attention to pre-checked boxes which advantage the seller, pressurised tactics to achieve sales, confirm-shaming, or obstacles to the consumer exercising their rights. Scrutinise whether any sales practices go further than reasonably accepted marketing practices.
• Review sales and pricing practices to avoid drip pricing: Review all sales and marketing offers (online and offline) to ensure that where a transaction-based charge applies, it is displayed throughout the purchase process and in a manner compliant with the new obligations, and not merely added at the end.
• Set up compliant subscriptions: Ensure that where subscriptions are offered, they comply with the new disclosure requirements. Where sign up is possible online, ensure subscription contracts can also be cancelled online.

Other authors: Rowan Kendall, Counsel, Amanda Tesvic, Expertise Counsel and Venthan Brabaakaran, Expertise Lawyer