Risky business – Australia’s competition and consumer laws set to shift

5 minute read  28.10.2022 Miranda Noble, Kathryn Finlayson, Haydn Flack, Noelia Boscana, Geoff Carter, Paul Schoff, Katrina Groshinski, Katrina Alidenes

Two major reforms to Australia's competition and consumer laws are on their way, following the passing of the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 (Bill) by both Houses of Parliament on 27 October 2022.

 

The Bill, which is still awaiting Royal Assent, contains two significant reforms to Australia's competition and consumer laws.

The reforms will see:

  • first, from the day after Royal Assent, a significant step-change increase in the maximum penalties for engaging in anti-competitive conduct in contravention of the Competition and Consumer Act 2010 (Cth) (CCA) and conduct that contravenes key parts of the Australian Consumer Law (ACL);
  • secondly, after a 12 month window from Royal Assent, the use, application of or reliance on unfair terms in a wider range of standard form contracts become illegal, with contraventions attracting the new higher maximum penalties (among other remedies).

Watch out for our parallel alert for greater detail on the reforms to the UCT regime.

The penalty reforms under the Bill (as passed) increase the importance of businesses and individuals maintaining strict compliance with their Australian competition and consumer law obligations. Through the reforms, the government is seeking to ensure the price of misconduct is high enough to deter unfair activity. Relatedly, the reforms also highlight the need to review and strengthen compliance processes, and to seek specialist advice before engaging in any conduct which may give rise to potential risk.

Watch out - significantly higher maximum penalties

Once the penalty reforms come into effect, Courts will be able to order significantly higher maximum penalties against businesses and individuals for breaches of key prohibitions of the CCA and ACL.

For corporations, in broad terms, the new maximum penalty for a contravention will be the greater of:

  • $50 million
  • three times the benefits obtained and reasonably attributable to the conduct
  • if the court cannot determine the total value of the benefit – 30% of the corporation's adjusted turnover during the breach turnover period.

This is a five-fold increase on the first limb (previously $10 million). It is also a significant increase of the third alternate limb, increasing the percentage (from 10% to 30%), as well as the period over which the relevant turnover measure is calculated such that 12 months is now a minimum period and otherwise turnover is considered over the entire period of the breach (whichever is longer).

Individuals will face potential maximum penalties of $2.5 million per contravention, also a five-fold increase on existing penalty levels.

* While not the focus of this article, there are different amendments to the maximum penalty amounts for contravention of the competition rule in regulating the telecommunications industry (Part XIB of the CCA), as well as other refinements to the penalty regime under the CCA. For example, the concept of 'adjusted turnover' is adopted for a range of penalty provisions without any change to the maximum penalty amounts (see consumer data right regulation in Part IVD of the CCA, for example).

What conduct will attract the new maximum penalties?

The new penalties will apply to offences committed, or contraventions, acts or omissions that occur on or after the day after Royal Assent is received, and will not apply retrospectively. The new higher maximum penalties will apply to a range of conduct:

  • anti-competitive conduct in breach of Part IV of the CCA, including criminal cartel conduct (although the maximum for certain secondary boycott provisions is unchanged)
  • unconscionable conduct, certain false or misleading representations and a range of other conduct in breach of the ACL (including, for example, bait advertising, wrongly accepting payment, component pricing, referral selling, pyramid schemes, and supplying goods which do not comply with a safety standard or information standard, or are subject to a safety ban)
  • breaches of certain provisions regulating the electricity industry (Part XICA of the CCA), and the news media and digital platforms mandatory bargaining code (Part IVBA of the CCA)

What are the implications?

In partially fulfilling the government's Better Competition election commitments, the penalty reforms under the Bill as passed means that businesses and individuals now face dramatically higher potential penalties for engaging in conduct which contravenes the CCA and the ACL.

These reforms could contribute to a continuing upward trajectory in penalties. Notably, larger penalties awarded by the court for contraventions of the CCA and the ACL have already been a feature in recent years under prior penalty regimes. As a brief illustration, under the ACL, recent penalties ordered against corporations have included penalties in the order of $153 million (against Australian Institute of Professional Education in 2021 for unconscionable conduct), $125 million (against Volkswagen in 2019 for false or misleading conduct), $60 million (against Google in 2022 for various false or misleading conduct) and $50 million (against Telstra in 2021 for unconscionable conduct).

The new maximum penalty levels will be a yardstick, and will be balanced with other relevant factors by the court, whose role is to determine the appropriate penalty in the circumstances of each specific case. It has long been recognised that 'civil penalties are imposed primarily, if not solely, for the purpose of deterrence' (Australian Building and Construction Commissioner v Pattinson and Anor [2022] HCA 13, [15]). While deterrence could be achieved with lower penalties in some cases, in appropriate cases significantly higher penalties could be ordered in future.

The message is clear – the reforms significantly increase risk for businesses and individuals associated with non-compliance with the CCA and ACL, and businesses must prioritise and invest in compliance measures.

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https://www.minterellison.com/articles/step-change-to-australias-competition-and-consumer-laws-on-the-way