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Proposed penalties raise the bar on competition and consumer law breaches – Trade Regulation & Practices



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The federal government has fired the starter’s gun on its
competition and consumer law reform agenda, with the release of a
Draft Bill that would see companies and individuals face
significantly higher penalties for breaching the Competition and
Consumer Act 2010 and the Australian Consumer Law.

The
Treasury Laws Amendment (Competition and Consumer Reforms No. 1)
Bill 2022: More competition, better prices
, proposes to
increase the maximum pecuniary penalties for corporations to $50
million and to 30 per cent of a corporation’s annual turnover
over the period the breach occurred (whichever is  greater).
The Bill would also see the maximum fines for individuals who
engage in anti-competitive conduct and breaches of the consumer law
protections increase from $500,000 to $2.5 million.

The table below sets out how the proposed new penalties compare
to existing penalties.

1228714a.jpg

These amendments follow a
2018 Organisation for Economic Co-operation and Development
(OECD) report
that found Australia’s
average and maximum competition penalties in particular were
substantially lower than those in comparable international
jurisdictions. 

Eager to act on this report, the Draft Bill’s passing is
likely to be a quick win for the new government while also
fulfilling an election
commitment
.

Current playing field

The release of the Draft Bill is a continuation of previous
efforts to increase the penalties for breaches of Australia’s
competition and consumer laws.

It has been almost 30 years since the maximum penalty for
breaches of the competition provisions was increased to $10 million
for corporations and $500,000 for individuals. As a result, there
were concerns within government that a breach of competition law
may be seen as an acceptable cost of doing business, particularly
for large corporations.

The amendments proposed by the Draft Bill seek to increase the
severity of Australia’s competition penalty regime
substantially and said to bring the fines more in line with maximum
penalties available in comparable international jurisdictions.

The most significant change (which does appear out of step with
other comparable jurisdictions for competition law contraventions)
is the change to the ‘turnover penalty’.  This change
would see not only a change in the duration of the calculation of
the penalty but also the percentage of the calculation. Given
competition contraventions often extend over a considerable amount
of time before detection, there is a significant threat to
businesses should such a penalty be imposed.  Balancing this
with the potential for significant penalties, it is arguable that
such penalties can no long be treated as ‘the cost of doing
business’.

Conversely, the penalties under the Australian Consumer Law were
last increased in 2018 to align with the competition law penalties.
While the penalties for competition law breaches were substantially
lower than similar competition law regimes, in a global context,
Australia’s consumer law penalties are among the highest in the
world. The proposed updates to the consumer penalties would see
this position maintained.

With this Draft Bill, the federal government hopes to further
deter non-compliant conduct by ensuring the price of misconduct is
high and reducing the financial benefits and incentives for
businesses to engage in conduct that breaches competition and
consumer laws.

If it was to pass, only time would tell whether this Draft Bill
has the intended effect. Competition law proceedings are slow to
progress through the courts and it could be years before the new
penalties filter through and create any real deterrent.

While it doesn’t appear that the current consumer law
penalties have been inadequate. In fact, the Australian Competition
and Consumer Commission (ACCC) has had more
success enforcing consumer law breaches and judges have been
prepared to impose significant penalties (even in cases where the
penalties imposed were not wholly under the current penalty
regime). For example, the Australian Institute of Professional
Education Pty Ltd (in liquidation) was fined $53 million in 2021
and Volkswagen was penalised $125 million in 2019 for Australian
Consumer Law breaches.

Consequences

The federal government still needs to clear the parliamentary
hurdle in order to get this Draft Bill across the finish line.

In the meantime and given the potential consequences of this
Draft Bill, companies should remain vigilant in minimising the risk
of competition and consumer law breaches, and any associated ACCC
investigation or enforcement action.

Companies should therefore consider the competition and consumer
law policies they currently have in place and ensure they maintain
adequately resourced compliance programs through appropriate
training.

Understanding and maintaining key responsibilities and
obligations under Australia’s competition and consumer laws
will enable all corporations to compete on their merits in a fair
and open market, while also ensuring consumers are treated
fairly.

How can we help?

Our team can assist you in understanding your competition and
consumer law risks, developing mitigating policies and processes,
and delivering compliance training.

We can also assist you in dealing with any ACCC investigations
and enforcement actions. If you have any questions, please contact
us or send in
your enquiry here
.

This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader’s
specific circumstances. If you have found this publication of
interest and would like to know more or wish to obtain legal advice
relevant to your circumstances please contact one of the named
individuals listed.



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