Penalties for Competition and Consumer law breaches proposed to quintuple

3 minute read  05.09.2022 Miranda Noble, Geoff Carter

Exposure draft legislation proposes to significantly increase penalties for Australian competition and consumer law contraventions. We explore the details and implications of the proposed new regime.

Treasury has released an exposure draft for consultation which proposes to significantly increase penalties for both competition and consumer law contraventions under the Competition and Consumer Act 2010 (CCA).

The exposure draft, 'Treasury Laws Amendment (Competition and Consumer Reforms No. 1) Bill 2022: More competition, better prices', (Exposure Draft) would see increases in penalties for both corporations and individuals.

The Exposure Draft aims to fulfil a portion of the Government's 'Better Competition' election commitments.

Proposed penalty increases

If introduced and passed in its current form, the Exposure Draft would see a substantial step change in the level of penalties for contraventions under the CCA, for both corporations and individuals.

For corporations, the Exposure Draft would see the maximum civil penalties increased to the greater of:

  • $50 million (representing a fivefold increase of the current $10 million);
  • if the court can determine the value of the benefit obtained – three times the value of that benefit (unchanged); and
  • if the court cannot determine the value of the benefit obtained – 30% of the body corporate's 'adjusted' turnover during the period the breach occurred (increased from 10% of the body corporate's annual turnover in the 12 months prior to the act or omission).
  • For individuals, the Exposure Draft would see the maximum civil penalty jump from $500,000 to $2.5 million.

New concepts to penalty regime

Aside from the significant increases in the monetary value of penalties, the Exposure Draft seeks to introduce new concepts of 'adjusted turnover' and 'breach turnover period', which would replace the existing concept based on 'annual turnover'.

Under the Exposure Draft, if the court cannot determine the value of the benefit obtained, the third penalty limb would be based on 30% of the corporation's 'adjusted turnover' during the 'breach turnover period' in which the breach occurred. For these purposes, under the Exposure Draft:

  • Adjusted turnover means the sum of the value of all the supplies made by the body corporate or related bodies corporate, with some exceptions.
  • Breach turnover period means the beginning of the month in which the body corporate began committing the breach, and the end of the month in which the body corporate ceased committing the breach.

Commencement of the proposed regime

If the Exposure Draft is introduced and passed in its current form, it is proposed to commence the day after it receives Royal Assent, and importantly will not apply retrospectively.

Exposure draft's implications

The Government's proposal to substantially increase penalties occurs only a few years after penalties for consumer law breaches were significantly increased (in 2018) to their current level. This was so recent that some cases being brought by the ACCC involve conduct to which the regime preceding those changes applies. The 2018 changes already saw a step change in penalties for consumer law breaches, with penalties prior to those changes sitting at $1.1m for corporations and $220,000 for individuals.

The proposal also occurs in the context of concerted efforts by the ACCC to seek drastically increased penalties in recent years. This includes examples such as:

  • In 2022, Google was ordered to pay $60m in penalties and Trivago ordered to pay $44.7m for breaching the Australian Consumer Law under the CCA;
  • In 2021, Australian Institute of Professional Education was ordered to pay $153 million in penalties and Telstra ordered to pay $50m for breaching the Australian Consumer Law under the CCA;
  • In 2019, Volkswagen was ordered to pay $125 million for breaching the Australian Consumer Law under the CCA.

If introduced, the penalty regime contemplated by the Exposure Draft would see businesses and individuals face materially larger fines, increasing the risks associated with potential non-compliance under the CCA. Businesses and individuals should, in anticipation of such increases, place heightened emphasis on strict compliance with Australian competition and consumer law.

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https://www.minterellison.com/articles/penalties-for-competition-and-consumer-law-breaches-proposed-to-quintuple