Legal Restrictions on Trade in Australia: Practical Compliance Guide

If you run a small business, you’ve probably seen phrases like “restraint of trade”, “non-compete”, or “exclusive dealing” pop up in contracts, negotiations, or even customer complaints.

Often, the underlying issue is similar: a legal restriction imposed on trade - meaning a legal rule (or contract term) that limits how trade can happen, who you can trade with, what you can say in advertising, or how you can compete.

Some restrictions are legitimate and help businesses protect goodwill, confidential information, and customer relationships. Others can be risky, unenforceable, or even unlawful (and can expose you to serious penalties).

This guide breaks down what trade restrictions commonly look like in Australia, where small businesses get caught out, and practical steps you can take to keep your contracts and processes compliant. This article is general information only and isn’t legal advice.

What Is A “Legal Restriction Imposed On Trade” In Australia?

“Legal restriction imposed on trade” isn’t a formal legal term, but it’s a useful way to describe any legal limitation that restricts commercial activity. In practice, restrictions usually come from one of two places:

• Contract-based restrictions (e.g. a clause in a contract that limits what one party can do); and/or
• Law-based restrictions (e.g. Australian Consumer Law restrictions on misleading advertising, or competition law restrictions on certain market conduct).

From a small business perspective, you’ll most commonly come across restrictions that affect:

• how you compete (for example, a non-compete or non-solicitation clause)
• who you can supply or buy from (exclusivity, minimum purchase commitments, resale restrictions)
• how you set prices or market your products
• what you can do with information, IP, or customer lists
• how you structure your business (for example, transfer of shares and control)

The key is that a “restriction” doesn’t automatically mean “bad”. The real question is whether the restriction is necessary, reasonable, and lawful in your circumstances.

Common Contract Terms That Create Trade Restrictions (And When They’re Risky)

Many small businesses accidentally agree to trade restrictions because they’re buried in standard form contracts, supplier terms, marketplace policies, or “quick” agreements drafted without legal review.

Here are the most common types of contract terms that can amount to a legal restriction imposed on trade.

Restraint Of Trade Clauses (Non-Compete, Non-Solicitation, Non-Dealing)

A restraint clause usually tries to stop someone from competing with a business or taking its customers after the relationship ends.

In small business contracts, these clauses often appear in:

• sale of business agreements (protecting the buyer’s goodwill)
• contractor agreements (protecting customer relationships and confidential methods)
• partnership and founder arrangements
• shareholder exits

In Australia, restraint clauses aren’t automatically enforceable just because they’re written down. They generally need to be reasonable (in scope, time, and geographic area) and designed to protect a legitimate business interest (like goodwill or confidential information), not just to block competition.

As a small business owner, a practical warning sign is a restraint clause that is:

• very long (e.g. 3–5 years without a clear justification)
• very broad (e.g. “cannot work in the industry anywhere in Australia”)
• not tied to what the person actually did (e.g. a contractor with minimal customer contact is restricted from “all customers”)

If you’re relying on a restraint clause to protect your business, it’s usually worth getting it drafted properly from the start, rather than hoping an overly broad clause will hold up later.

Exclusive Supply Or Exclusive Purchasing Terms

Exclusivity can be attractive commercially - it gives certainty of supply, stabilises pricing, or supports investment in marketing and equipment.

But exclusivity is also a common restriction on trade because it limits who someone can deal with.

Common examples include:

• a supplier requiring you to buy all of a product category from them
• a distributor being granted exclusive rights to a territory
• a service provider requiring you not to use competitors while the contract is active

Exclusivity isn’t automatically unlawful. The risk increases where the arrangement has the purpose, effect, or likely effect of substantially lessening competition (which is very context-specific and depends on factors like market definition, market power, and the practical impact on customers and competitors). Some exclusive dealing conduct can also be managed via ACCC processes (such as notification) in certain circumstances.

Even where competition law isn’t the issue, exclusivity can still be commercially dangerous if the contract doesn’t include:

• clear service levels and delivery timeframes
• quality standards
• termination rights if the relationship isn’t working
• clear renewal terms

From a practical perspective, exclusivity should feel “earned” - meaning it should exist because it creates real value for both sides, not just because one party has more bargaining power.

Pricing Restrictions And “You Must Sell At This Price” Clauses

Small businesses often get told (especially by suppliers) that they must sell at a set price, must not discount, or must not advertise below a certain level.

In Australia, suppliers can recommend a resale price, but they generally must not require a reseller to sell at or above a specified price, or pressure them not to discount. This can amount to resale price maintenance, which is prohibited in most cases. There can also be risks with “minimum advertised price” (MAP) style rules depending on how they’re structured and enforced, and whether they involve threats, penalties, withholding supply, or other pressure.

If you’re seeing contract terms that tightly control your resale price or how you advertise pricing, it’s worth pausing and getting advice before signing.

Broad Confidentiality Clauses That Block Normal Trading

Confidentiality clauses are usually legitimate. They protect genuinely confidential information like:

• supplier pricing
• customer lists
• software or product roadmaps
• operational processes and know-how

However, a confidentiality clause can become a restriction on trade if it is drafted so broadly that it effectively prevents you from operating normally - for example, restricting you from referencing basic, non-confidential details in marketing, or stopping you from using general skills and knowledge you’ve developed.

A good confidentiality clause is clear about what’s confidential, how long the obligation lasts, and what’s excluded (like publicly available information).

Legal Restrictions On Trade Under Australian Consumer Law (ACL)

Some of the most important restrictions for small businesses aren’t in your contracts - they’re imposed by law.

The Australian Consumer Law (ACL) sets boundaries on how you trade with customers. If you sell products or services (online or in person), these rules apply to you.

Misleading Or Deceptive Conduct

One of the biggest restrictions under the ACL is that you must not engage in misleading or deceptive conduct. This affects marketing, pricing, packaging, online product descriptions, testimonials, and sales conversations.

Even if you didn’t intend to mislead, you can still be exposed if your advertising creates a misleading overall impression.

This is why it’s worth being careful with:

• before-and-after claims
• “limited time” or “only X left” urgency tactics
• “best” or “#1” claims that can’t be substantiated
• pricing statements that hide important costs

For many small businesses, the safest approach is to ensure your marketing claims are true, can be supported, and are presented clearly. If you want a deeper view of what regulators look at, misleading or deceptive conduct is a key concept to understand early.

Consumer Guarantees And Warranties

You can’t contract out of the ACL’s consumer guarantees. That’s a major legal restriction imposed on trade in practice because it limits what you can say in your refund policy, and it affects how you handle returns, repairs, and replacement requests.

For example, you generally can’t rely on “no refunds” signs to avoid your obligations where a consumer guarantee applies.

If your business sells goods, it’s worth ensuring your team understands the difference between:

• a voluntary warranty you provide; and
• the automatic consumer guarantees that apply by law.

Even something as common as advertising a “2-year warranty” can create confusion if it’s not aligned with consumer guarantees. If this is relevant to your business, warranty rules under the ACL are worth getting clear on.

Unfair Contract Terms (Especially For Standard Form Contracts)

If you use standard form contracts with customers or small business customers, you also need to be mindful of unfair contract term risks.

Clauses that heavily restrict the other party’s rights (while giving you broad discretion) can be challenged and may be unenforceable.

This can include terms that:

• let you change price or scope unilaterally without a right for the customer to cancel
• make deposits “non-refundable” in all circumstances
• exclude liability in a way that goes further than the law allows

If your business relies on online checkout terms or a service agreement, it’s worth reviewing your liability language. limitation of liability clauses are common, but they need to be used carefully.

Competition Law Risks: When Trade Restrictions Can Become Illegal

Competition and Consumer Act rules can feel “big business”, but they can absolutely affect small businesses - particularly where a contract or conduct restricts how markets operate.

Not every restriction is unlawful. But certain categories of behaviour are higher risk, including:

• anti-competitive agreements (arrangements between competitors that reduce competition, including cartel conduct in serious cases)
• misuse of market power (more relevant where a business has substantial market power)
• exclusive dealing that has the purpose, effect, or likely effect of substantially lessening competition (depending on effect and market context)
• price coordination and other arrangements that undermine independent pricing (including certain information sharing between competitors)

For small businesses, the most practical takeaway is this: if a deal is designed to stop others competing (rather than to improve service, quality, or efficiency), you should get advice before you sign or implement it.

Also, be careful about informal arrangements. A trade restriction doesn’t need to be “a contract signed by lawyers” to create risk. Emails, messages, and handshake deals can still create evidence of an arrangement.

How To Manage Trade Restrictions In Your Business (Without Slowing Growth)

It’s one thing to understand what a legal restriction imposed on trade can look like - it’s another to manage it in the real world when you’re trying to grow, sign deals quickly, and keep relationships smooth.

Here’s a practical framework many small businesses use.

1. Identify What You’re Actually Trying To Protect

Before you add restrictions into a contract (or agree to them), get clear on the “why”. Typical legitimate interests include:

• Goodwill (especially in a business sale or franchise-style model)
• Confidential information (pricing, methods, product roadmap)
• Customer relationships (where you’ve invested time and money acquiring customers)
• Intellectual property (branding, software, content, designs)

If you can’t articulate the legitimate interest, the restriction is more likely to be excessive and vulnerable later.

2. Keep Restrictions Narrow, Measurable, And Time-Limited

Restrictions are most defensible when they are:

• specific (clearly defined customers, activities, products, or territories)
• time-limited (only as long as reasonably needed)
• proportionate (not more restrictive than necessary)

For example, instead of “you can’t work in the industry”, you might focus on “you can’t solicit our customers you had dealings with for X months”.

This is also a good point to ensure your agreement clearly states what the underlying relationship is (supplier, contractor, reseller, etc.) and what each party is responsible for. A tailored Service Agreement can help keep these boundaries clear.

3. Use The Right Legal Tool (Not Just A Bigger Restriction)

Sometimes small businesses try to solve the wrong problem with a restraint clause.

For example:

• If your concern is “they’ll use our confidential info”, you may need a better confidentiality clause, IP ownership clause, and security processes - not an aggressive non-compete.
• If your concern is “they’ll poach our customers”, you may need a narrow non-solicitation clause and clearer ownership of client relationships.
• If your concern is “we’ll be stuck with a bad supplier”, you may need better termination rights and service levels - not exclusivity with no exit.

The goal is to reduce business risk without creating unnecessary friction or legal exposure.

4. Don’t Forget Your Operational Processes

Trade restrictions don’t live only in contracts. They also live in your day-to-day practices. For example:

• who has access to customer lists and pricing information
• how you store and share data
• what you record in writing during negotiations
• what your staff and contractors say to customers

If your business handles customer data (for example, eCommerce, bookings, marketing lists), your privacy compliance matters too. A clear Privacy Policy can be part of building trust and reducing complaints, especially where your business uses online tools.

What Legal Documents Help You Handle Trade Restrictions Properly?

Most problems we see with restrictions on trade come down to documents that were copied from the internet, drafted without context, or never updated as the business changed.

Depending on your business model, these are some of the most helpful documents to consider.

• Terms and Conditions / Customer Contract: Sets out payment terms, scope, delivery, cancellations, and liability limits so you’re not relying on informal promises.
• Supplier or Distribution Agreement: Clarifies exclusivity (if any), territory, minimum orders, service levels, and exit rights.
• Employment Contract: If you’re hiring staff, you’ll want clear expectations around duties, confidentiality, IP created at work, and post-employment obligations. An Employment Contract is often the foundation document here.
• Non-Disclosure Agreement (NDA): Useful when you’re sharing confidential information in negotiations, pitching, or early supplier discussions.
• Website Terms: Helps set rules for website use and manage risk around content, availability, and online purchasing. Website Terms and Conditions are especially relevant if customers buy through your site.
• Shareholders Agreement: If you have co-founders or investors, a Shareholders Agreement can set decision-making rules, exits, and restraints connected to the business (particularly on sale or departure).

Not every business needs all of these documents on day one. But if you’re signing deals, onboarding staff or contractors, or scaling partnerships, it’s usually cheaper to set these up properly early than to fix a dispute later.

Key Takeaways

• A legal restriction imposed on trade can come from your contracts (like restraint clauses and exclusivity) or from laws (like Australian Consumer Law and competition law).
• Trade restrictions aren’t automatically bad - but they should protect a legitimate business interest and be reasonable in scope, time, and geography.
• Australian Consumer Law restricts how you market, price, and handle refunds and warranties, and you generally can’t contract out of consumer guarantees.
• Competition law risks can arise where restrictions affect pricing, supply arrangements, or competition - even for small businesses, especially in tightly contested industries.
• The best approach is practical: be clear on what you’re protecting, keep restrictions narrow, and use the right documents (customer terms, supplier agreements, privacy, employment, and founder documents).

If you’d like help reviewing or drafting contracts that include restrictions on trade (or you want to make sure your business terms are enforceable and compliant), reach out to Sprintlaw on 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.