Australia's competition watchdog is setting its sights on making unfair contracts illegal.

Australian Competition and Consumer Commission chairman Rod Sims said there was nothing to protect small businesses against blatantly unfair behaviour.

Mr Sims wants greater powers to stop companies gobbling up smaller fish and gaining too much power.

He said it was not illegal to have unfair contract terms between big and small businesses.

"You can go to court and get them voided but there is no penalty and it is not against the law to have those terms," he told ABC radio on Wednesday.

"This is a rotten deterrence model."

Mr Sims said even when companies were dragged through the courts, there were no broader repercussions.

"Even if we win the court case there is no wider deterrence message," he said.

"So if we want unfair contract terms to stop in Australia, they need to be made illegal and they need to be subject to large penalties."

The competition tsar is confident of winning over the Morrison government, pitching the proposed legislation as aggressively pro-small business.

At the moment, large companies can demand small businesses who supply goods hand over all their contracts.

Big corporations can then duplicate the products and drive small businesses into the dirt.

"There is no law stopping that at the moment - we need laws to do that," Mr Sims said.

He has also warned of a looming battle over consumer data rights.

Mr Sims said plans to legislate this right would have far-reaching consequences.

"That, I think, will rival tariff reform and the floating of the dollar because it will run throughout the entire economy," he said.

"And it will allow people who have got their data with one company to have it transferred to another."

Mr Sims said the legislative fix would benefit banking, energy and communications customers.

"Once you roll that out over the entire economy you've got a very powerful force for consumer empowerment and for competition," he said.

"We're making sure also there are a lot of privacy safeguards to make sure that the consumer's data is safe."

Australian Associated Press