Article Increased penalties for competition and consumer law infringements in Australia

Increased penalties for competition and consumer law infringements in Australia: a search for effective deterrence

11 November 2022

On 10 November 2022, an Act proposing significant increases to the maximum penalties for contraventions of the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL) came into force. This development follows a concerted, multi-year lobbying effort by the Australian Competition and Consumer Commission (ACCC), and is intended to signal to the business community that penalties for CCA and ACL infringements can no longer be considered a ‘cost of doing business’.

With this change, the risks of contravening the CCA and ACL have substantially increased. Continuing recent trends in practice and ACCC strategy, it is inevitable that penalties sought by the ACCC, and awarded by Australian courts, for CCA and ACL infringements will increase dramatically.

What does the Act do?

The Act introduced two sets of reforms:

A major expansion of Australia’s existing unfair contract terms (UCT) regime, including the introduction of a civil penalty regime prohibiting the use of and reliance on UCTs in standard form contracts. An overview of these reforms, which will come into force on 10 November 2023, and their likely impact on the business community, is available in our previous article, Time to revisit your standard form contracts? Australia set to introduce heavy-hitting penalties for unfair contract terms.
Significant increases to the maximum pecuniary penalties for contraventions of the CCA and ACL, which are reflected below.

	Previous	Current (as of 10 November 2022)
For companies, the maximum pecuniary penalty will be the greatest of:	$10 million	$50 million
	Three times the value of benefits obtained or attributable to the breach (if quantifiable)	No change
	10% of the corporation’s annual turnover in the 12 months prior to the breach (if the court cannot determine the value of benefit obtained)	30% of the corporation’s ‘adjusted turnover’ during the ‘breach turnover period’ (if the court cannot determine the value of benefit obtained)
For individuals, the maximum penalty is:	$500,000	$2.5 million

‘Adjusted turnover’ will mean the sum of the value of all supplies made by the company in connection with Australia. The ‘breach turnover period’ begins at the start of the month in which the offence or contravention occurred or began occurring, and ends at the end of the month in which it ceased – subject to a minimum ‘breach turnover period’ of 12 months.

These increased maximum penalties apply to most civil and criminal contraventions of the competition law prohibitions of the CCA, the consumer law provisions of the ACL, and some industry-specific prohibitions (such as those relating to telecommunications), as well as the news media and digital platforms mandatory bargaining code, international liner cargo shipping provisions, and energy market provisions.

Accelerating recent trends

The proposed changes reflect an ongoing effort by the ACCC to ensure that the penalties for breaches of competition and consumer laws effectively deter businesses and individuals from anticompetitive behaviour and unfair activity.

The changes are designed to accomplish three main objectives:

serve as a strong deterrent;
ensure compliance; and
promote the view that penalties are “not seen as a cost of doing business, but rather as a significant impost and something likely to raise the serious attention of owners or shareholders”.

The genesis of the changes is the ACCC’s long-held view that CCA and ACL penalties in Australia have historically been too low. The ACCC has for several years said that penalties have not been sufficiently high to deter contraventions (particularly by large businesses) and that penalties imposed in Australia for CCA and ACL breaches are significantly lower than in other jurisdictions (such as the EU, US and UK).

The ACCC has described the disparity between Australia and several comparator jurisdictions as ‘extremely concerning’. In parallel, the ACCC has also been emboldened and chastened by commentary from the Australian courts in a succession of matters in which the ACCC agreed to pecuniary penalties for a range of large corporations that were "at the very bottom of the range"^{^[1]} or "manifestly inadequate".^{^[2]}

In practice, these policy goals and judgments have in recent years supported material increases in penalties awarded for contraventions of the CCA and ACL. The top five largest fines imposed on companies for competition and ACL infringements have been handed down in the last four years.

Following the new legislative changes, the maximum pecuniary penalties for contraventions of the ACL and the CCA have increased five-fold. We anticipate that these changes will accelerate the underlying trends. However, it remains likely that the largest penalties will be reserved for the most egregious contraventions, such as cartel conduct offences and conduct that gives rise to material harm to consumers.

Takeaways

It is therefore more important than ever for businesses to have effective competition and consumer law compliance programs in place to ensure that they comply with their obligations under the CCA and ACL and that their staff are well-equipped to understand the implications of, and how to avoid, CCA and ACL contraventions.

This development and the increased risk it creates means that now is an opportune time to revisit your competition and consumer law compliance practices that apply in Australia. Prevention will increasingly be better than cure.

_[1]_{ACCC v Australia and New Zealand Banking Group Limited [2016] FCA 1516, 39 [146].}

_{[2] ACCC v Volkswagen Aktiengesellschaft [2019] FCA 2166, 87 [273].}

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