31 August, 2018
What you need to know
Parliament has increased the maximum penalties that a Court may impose in relation to certain breaches of the Australian Consumer Law.
The increased penalties will apply to various consumer law protections, including unconscionable conduct, false or misleading representations about goods or services, various other unfair practices, certain provisions regarding the safety of consumer goods and product-related services and information standards.
The maximum civil and criminal penalties for corporations have been increased to the greater of (per contravention): (i)$10 million; (ii) if it can be calculated, 3 times the gain from the contravention, or (iii) if that cannot be calculated, 10% of the annual turnover of the body corporate during the prior 12 month period.
The maximum civil and criminal penalties for individuals have been increased to $500,000 per contravention.
The new penalties will commence the day after the Bill receives Royal Assent and will apply to acts or omissions that occur on or after that date.
Unrelated to the penalty increases, the amendments also introduce a new "safe harbour" defence to an allegation of false, misleading or deceptive conduct in relation to free range eggs and technical changes to ensure that confidential supplier information obtained by the Australian Energy Regulator in performing its wholesale electricity market monitoring and reporting functions remains confidential.
What you need to do
Inform your business that the same maximum penalties now apply to many consumer law protections, as apply to the competition law rules in the CCA.
Update your compliance materials to ensure your business is training its people on the most recent developments in the law.
Parliament has passed amendments to the Competition & Consumer Act 2010 (CCA) to increase the maximum penalties that a Court may impose for certain contraventions of the Australian Consumer Law (ACL).
What are the new maximum penalties?
For the relevant parts of the ACL, the maximum civil and criminal penalties for corporations have been increased, per contravention, from $1.1 million to the greater of $10 million:
- if it can be calculated, 3 times the gain from the contravention, or
- if that cannot be calculated, 10% of the annual turnover of the body corporate and related bodies corporate, connected with Australia, during the prior 12 month period prior to the contravening act or omission occurring.
The maximum civil and criminal penalties for individuals have also been increased from $220,000 to $500,000 per contravention.
The changes to the maximum penalties for ACL contraventions were recommended by Consumer Affairs Australia and New Zealand, in its final report on its review of the ACL, released in April 2017.
The changes make the maximum ACL penalties consistent with the existing financial penalties available for contraventions of the competition rules under the CCA. (Imprisonment is not available as a remedy for ACL contraventions.)
To which sections of the ACL do the increased penalties apply?
The increased maximum penalties will apply to various contraventions of the ACL, including those set out below (both civil and criminal, unless specified):
- unconscionable conduct (civil only);
- false or misleading representations about goods or services or the sale of land;
- misleading conduct relating to employment or the nature of goods or services;
- offering, with the intention of not providing, rebates, gifts or prizes;
- bait advertising;
- wrongly accepting payment;
- unsolicited supply of cards (eg, credit or debit cards);
- assertion of a right to payment for unsolicited goods or services;
- participation in pyramid schemes;
- failing to prominently specify a single figure (full) price (where required);
- referral selling;
- harassment or coercion in connection with the supply of or payment for a good or service, or an interest in land;
- supplying consumer goods or product related services that do not comply with safety standards or that are banned goods;
- supplying goods or services that do not comply with information standards; and
- non-compliance with a recall notice.
The general prohibition on misleading or deceptive conduct in section 18 of the ACL is not affected (penalties cannot be imposed for contravention of that section). However, there is very significant overlap between section 18 and a number of the sections listed above, such that many types of misleading conduct will be captured.
Was this really necessary?
The ACCC has been lobbying for Government to increase ACL penalties for some time.
On the passing of the amendments, ACCC Chair Rod Sims said:
“We have strongly advocated for higher maximum penalties to enable courts to impose more substantial penalties. Penalties need to hit the bottom line so they are not simply seen as the cost of doing business. Perhaps more importantly, penalties need to be high enough to be noticed by boards and senior managers so that compliance with the law is a higher priority.”
“Increased penalties will help to deter large companies from breaching consumer laws. This is a profound change that I believe will improve corporate behaviour significantly, and so improve the Australian economy and how it works for consumers.”
However, on one view, the legislative increase was not really necessary. In recent months the ACCC had already achieved very significant penalty decisions in both contested and uncontested ACL cases in the Federal Court. For example, in December 2016, the Full Federal Court (on appeal) increased the penalty payable by Reckitt Benckiser (Australia) Pty Ltd from $1.6 million to $6 million for misleading representations about its Nurofen Specific Pain products. In its judgment, the Court described the $6 million penalty as "modest" and noted that the theoretical maximum was in the trillions of dollars (some 5.9 million contraventions at $1.1 million per contravention).
In April 2018, the Federal Court ordered Telstra to pay $10 million for false or misleading representations to customers and (separately) ordered Ford Motor Company of Australia Limited to pay $10 million for unconscionable conduct in its dealing with complaints. In June 2018, it ordered Apple Inc to pay $9 million for false or misleading representations to consumers regarding their ACL rights.
These recent cases were all decided under the existing penalty regime where the maximum penalty for corporations was $1.1 million per contravention. The decisions indicate that even before the increase in maximum penalties, Courts have been increasingly willing to take a harder line on penalties in recent ACL cases.
It would be surprising if such cases were not already being "noticed by boards and senior managers".
Now that the maximum penalties have been increased, there is a real possibility of a significant "step-change" in the imposition of penalties in ACL cases. This is particularly so when ACL cases may involve representations to large numbers of consumers and therefore possibly many millions of contraventions.
When do the new maximum penalties commence? Do they apply to previous conduct?
The new maximum penalties will commence the day after the Bill receives Royal Assent. The date of proposed Royal Assent has not yet been determined.
The new penalties will apply only to acts or omissions that occur on or after commencement (ie, not retrospectively).
Other amendments passed in the Bill
Two other unrelated amendments were also made by the Bill.
First, the amendments introduce a safe harbour defence to an allegation of false, misleading or deceptive conduct in relation to free range eggs, where a person has complied with the labelling or display requirements that are specified in the information standard for free range eggs. An information standard for free range eggs already exists, and commenced on 26 April 2018. The representations covered by the safe harbour are those limited to complying with the labelling or display requirements for free range eggs and conduct outside the scope of the information standard will not be protected. This defence commences on the day after the Bill receives Royal Assent.
Secondly, some technical amendments are made to the CCA, to ensure that confidential supplier information obtained by the Australian Energy Regulator in performing its wholesale electricity market monitoring and reporting functions remains confidential. These amendments apply to use or disclosure of information after the Bill receives Royal Assent, regardless of when the information was acquired.
For further information, please contact:
Ross Zaurrini, Partner, Ashurst
ross.zaurrini@ashurst.com
