September 2018

New ACL Penalties: no longer just the cost of doing business

The Australian Consumer Law (ACL) penalties imposed by the Competition and Consumer Act 2010 (Cth) (Act) have often been viewed by highly profitable corporates as an inconvenience or just ‘a cost of doing business’ – rather than a deterrent. This perception has fostered a culture of non-compliance, in direct contrast to the very purpose for which the penalties are imposed.

Why have they changed?

Up until 23 August 2018, the regime imposed penalties for breach of the ACL at just $1.1 million for companies and $220,000 for individuals. As noted by Gordon J in ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405, these penalties were inadequate for a company with, for example, annual revenue in excess of $22 billion. Effectively, the penalties did not have the teeth necessary to truly deter highly profitable non-compliant companies from breaching the ACL.

What are they now?

On 23 August 2018, the Australian Government passed the Treasury Laws Amendment (2018 Measures No.3) Bill 2018 seeking to strengthen the ACL penalties to deter non-compliant conduct and reduce the financial incentives for businesses to continue to breach the ACL. The penalties are now:

1. For breach by a company, the greater of:

(a) $10 million;

(b) three times the value of the benefit of the transaction received; or

(c) where the benefit of the transaction cannot be calculated, 10% of the annual turnover of the company for the preceding 12 months.

2. For breach by an individual:

(a) $500,000 per breach.

What does this mean?

The penalties now allow the courts to take into account the size of the business concerned and the benefit gained from the breach to ensure the court imposes a penalty that leaves the perpetrator with a sufficient sting so as to deter them from any future contemplated breaches. It is hoped that corporate behaviour will change now that a breach will see companies face more serious financial consequences.

Conclusion

Now that the Australian Competition and Consumer Commission (ACCC) is armed with these new penalties, compliance with the ACL will become more important to businesses than ever. Companies should in particular, be aware of the ACCC’s focus on breaches involving misleading and deceptive conduct, unfair contract terms not only with consumers but also small businesses, as well as franchisor compliance with the Franchising Code of Conduct. A breach now not only carries reputational damage but also, serious financial consequences.

If you require more information about your obligations to comply with the ACL or are concerned your business activities may be in breach of the ACL, please contact us.

Author: Sam Harmer