Significant increases to Competition and Consumer Law penalties proposed

Last Friday afternoon, Treasury released exposure draft legislation proposing significant increases to the maximum penalties that apply to various contraventions of the Competition and Consumer Act 2010 (Cth) and the Australian Consumer Law (ACL) by companies and individuals.

Interested parties will have to be quick with any comments on the proposed changes, because public consultation closes on 25 August 2022.

Under the proposals, the proposed maximum penalty for any individual violation by corporation of a relevant provision will be raised to the greater of:

• $50 million (up from $10 million);
• three times the value of the benefit obtained; and
• 30% of the company’s adjusted turnover during the breach turnover period (up from 10% of annual turnover in preceding 12 months) if the court cannot determine the value of the benefit obtained.

For individuals, the maximum penalty would be raised to $2.5 million (up from $500,000).

The proposed changes in part reflect the Government’s ‘Better Competition’ election policy, which proposed amending the $10 million limb to $50 million for anti-competitive conduct, however the exposure draft goes further than the stated election policy by:

• adopting also the Government’s 2019 election policy to amend the 10% limb to 30%;
• increase the maximum penalty five-fold for contraventions by individuals; and
• apply the revised penalty regime to breaches of the ACL, and specific provisions related to the news media bargaining code, electricity market misconduct and competition in the telecommunications sector, where the equivalent penalty regime is in place.

Particularly noteworthy for corporations are the amendments to the third limb of the regime (where the court cannot determine the value of the benefit obtained). The maximum penalty will no longer be 10% of the annual turnover in the preceding 12 months, but 30% of the company’s adjusted turnover during the breach turnover period.

• Adjusted turnover: The sum of the value of all the supplies made by the body corporate or related bodies corporate in connection with Australia’s indirect tax zone, which may not be an annual period.
• Breach turnover period: Provides the formula for determining the period of time over which the adjusted turnover may be valued. The breach turnover period will begin at the start of the month in which a body corporate committed, or began committing, an offence, and end at the end of the month in which the body corporate ceased committing the offence or was charged with the offence. However, the minimum breach turnover period will be 12 months, ending at the end of the month in which the body corporate ceased committing the offence or was charged with the offence.

The new calculation basis will therefore increase from 10% of annual turnover to 30% turnover in any relevant period which could potentially span years.

The amendments increase the severity of Australia’s penalty regime substantially and would bring them in line with maximum penalties available in international jurisdictions for breaches of competition laws. The increase also aligns ACL penalties, which were last updated in 2018, with those available for breaches of competition provisions. Record penalties ordered against Google ($60 million in 2021), AIPE ($153 million in 2021) and Volkswagen ($125 million in 2019) for breaches of Australian Consumer Law would have the potential to increase dramatically if the same conduct were to occur after the proposed amendments come into effect.

An increase in penalties is unlikely to be controversial when considered by Parliament, however such a short consultation period is less than ideal, particularly when the legislation is unlikely to face extended Parliamentary inquiry.

Ultimately, it is clear that businesses need to be vigilant in minimising the risk of contraventions of the Act and the ACL, and that potential penalties for larger businesses will be less likely to be perceived as a ‘cost of doing business’.

Please reach out if you would like to know more.

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Authored by:

Sinead Lynch, Partner (Foreign Qualified, not admitted in Australia)
Adam Walker, Special Counsel
Freya vom Bauer, Associate