Competition and Consumer Law nutshell - Penalties

4 minute read  15.02.2013
An analysis of the core commercial issues in penalties from 2012, and those to watch closely in 2013.

2012: Records and firsts – for big fish and small fry

Record penalties for anti-competitive conduct and consumer law breaches

In 2012 the Competition and Consumer Act confirmed its status as the most consequential legislation for Australian business, with penalty records tumbling under the competition and consumer provisions alike.

Under the competition provisions, the total civil penalties in the high-profile air cargo price fixing cases reached A$98.5million, with the ACCC's proceedings against two other airlines ongoing. Under the Australian Consumer Law, penalties in excess of A$1million for misrepresentations in broadcast advertising were imposed on Optus (reduced on appeal to $3.61m), Energy Watch ($2m) and Apple ($2.25m).

This is not to say that smaller businesses escaped the ACCC's attention. The Federal Court also imposed penalties on telco telemarketer EDirect Pty Ltd (trading as VIPtel Mobile) (in liquidation) ($2.5 million for misleading sales tactics with consumers in remote communities who actually had no network coverage), beauty products distributor Eternal Beauty Pty Ltd ($90,000 for resale price maintenance), Gold Coast sheepskin products retailer UNJ Millenium Pty Ltd ($55,000 for misleading 'country of origin' claims), and home-business opportunity promoter Hakalia Pty Ltd (and its director Mr Hann) (a total of $900,000 for misrepresentations in the promotion and sale of a parcel delivery business).

First management banning orders imposed

The first management banning orders under the Australian Consumer Law were imposed in 2012, including one of 15 years against Mr Hann in the Hakalia case, and 5 years for a director of a publishing company involved in misleading and unconscionable conduct.
Infringement notices become a common alternative to court proceedings

The ACCC's use of its 'infringement notice' powers (an alternative to prosecution for certain breaches of the Australian Consumer Law) became commonplace – against both small and large companies (including Foxtel and Nissan). A total of 34 notices were issued in the 2012 financial year, with penalties totalling more than A$500,000.

2013: The only way for penalties is up...or is it?

Cartel penalties set to rise under post-2009 regime

Despite the record penalties imposed in 2012, penalties sought and imposed for anti-competitive conduct could well increase significantly in 2013 and beyond. This is because no cases have yet been prosecuted for conduct occurring under the post-2009 penalty regime.

Under the 2009 amendments, corporate civil pecuniary penalties were increased from a maximum of A$10 million per offence to the greater of A$10 million, three times the gain from the contravention and, where that gain cannot be ascertained, 10% of group turnover.

Cartel conduct was criminalised at the same time, with penalties including jail for up to ten years for persons involved in the breach.

Fines increase with uplift in 'penalty unit'…

From 28 December 2012, the amount of a statutory 'penalty unit' under s4AA of the Crimes Act 1914 (Cth) increased from $110 to $170. The penalty under every provision of the Competition and Consumer Act and Australian Consumer Law that refers to these units has increased accordingly. Of note, these include: 

  • (Individual) criminal cartel offence (2,000 penalty units): maximum penalty increase from $220,000 to $340,000; and
  • Infringement notices under the Australian Consumer Law (600 penalty units (listed corporation) or 60 penalty units for 'non-listed' corporation for the most common breaches): increase from $66,000 / $6,600 to $102,000 / $10,200

The other penalty uplifts under the Competition and Consumer Act primarily relate to offences for failing to comply with notices/information requests.

...But will penalties imposed under the Australian Consumer Law fall?

Despite the upwards pressure on penalties under the anti-competitive conduct provisions in 2013, the result of a pending appeal to the High Court may see those under the Australian Consumer Law fall.

The ACCC has filed for special leave to appeal to the High Court in the TPG matter. The ACCC was successful at trial; TPG having been found to have misrepresented the total price payable for its broadband services in a series of 'original' and 'amended' TV, radio, newspaper and website advertisements was ordered to pay a $2 million penalty. On appeal, TPG had the orders overturned for all but its original advertisements, with the court indicting that, even if the ACCC had been successful on all counts, the penalty of $2 million was 'outside the appropriate range in both terms of the components and the total penalty sum'. In considering the appropriate penalty, the Full Federal Court emphasised:

  • the breaches were at the 'lower end' of the range of serious conduct;
  • it was significant that TPG had acted to amend its advertisements in response to the initial complaint by the ACCC (even though those efforts were held to have failed); and
  • critically, that it was artificial for the ACCC to seek a penalty for each of the 11 contraventions found, as they could be aggregated into only three categories of breach.

Their Honours went on to conclude that a penalty of $250,000 for each of the three categories of breach would have been appropriate, reduced to $500,000 on application of the totality principle.

The outcome of the ACCC's special leave application, and any subsequent appeal to the High Court, will obviously have great bearing on appropriate penalties within the maximum set under the Australian Consumer Law.

Contact

eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJuYW1laWQiOiIxZTQxOGY1YS05MDZhLTRhNWUtYWMzMC02NjYyZjAxZjJmNjkiLCJyb2xlIjoiQXBpVXNlciIsIm5iZiI6MTczOTcwMzk1OCwiZXhwIjoxNzM5NzA1MTU4LCJpYXQiOjE3Mzk3MDM5NTgsImlzcyI6Imh0dHBzOi8vd3d3Lm1pbnRlcmVsbGlzb24uY29tL2FydGljbGVzL2NvbXBldGl0aW9uLWFuZC1jb25zdW1lci1sYXctbnV0c2hlbGwtcGVuYWx0aWVzIiwiYXVkIjoiaHR0cHM6Ly93d3cubWludGVyZWxsaXNvbi5jb20vYXJ0aWNsZXMvY29tcGV0aXRpb24tYW5kLWNvbnN1bWVyLWxhdy1udXRzaGVsbC1wZW5hbHRpZXMifQ.aHhh3hfXLgVryKIbng7mM9uXCm7bBUX5CNorJbJ7To8
https://www.minterellison.com/articles/competition-and-consumer-law-nutshell-penalties