Show me the money

Published On 15/02/2017 | By Rob Hirst | Litigation

By James Gould and Rob Hirst

The ACCC has started the new year by flagging that it will be seeking much higher penalties from large companies in both consumer and competition cases.

Wind in the ACCC’s sails

In an interview with the Australian Financial Review, ACCC Chairman Rod Sims has said that the ACCC has been too cautious in the past and will be seeking higher penalties against large corporations after receiving “both encouragement and direction from the courts” in recent decisions.

Mr Sims pointed in particular to two decisions of the Federal Court from December 2016, including:

  • The Nurofen appeal, in which the Full Court of the Federal Court said that the penalty sought by the ACCC of $6 million was “modest” and “at the bottom of the appropriate range for the contraventions”. While the Court ultimately ordered the $6 million sought by the ACCC, it did so noting that it was “exercising a discretion on appeal which usually calls for a measure of restraint” and that they may have imposed a “considerably greater penalty” if they were sitting as trial judges.
  • The ACCC’s proceedings against ANZ and Macquarie for manipulating the benchmark rate for the Malaysian Riggit. Wigney J stated that the agreed $15m in penalties were “toward the very bottom of the range of appropriate penalties” and that he may have imposed significantly higher penalties if it was not for the agreed submissions.

Mr Sims has previously argued for penalties under the Australian Consumer Law (ACL) and Part IV of the Competition and Consumer Act (CCA) to be standardised. At present, the maximum penalty per breach for corporations is $1.1 million under the ACL and $10 million under the CCA, with the appropriate level of ACL penalties under consideration as part of separate reviews by CAANZ and the Productivity Commission.

Gordon J expressed her dissatisfaction with the level of maximum penalties under the ACL in the Coles case, where she said that the ACL maximum was “arguably inadequate for a corporation the size of Coles”, and the Court in each of Nurofen, ANZ and Macquarie identified the importance of penalties needing to be of sufficient size to provide real deterrence.

In practice, however, the statutory maximums are rarely determinative because they are available for every individual breach established, whether under the ACL or the CCA more generally. Many ACL cases (unlike the Coles case) involve hundreds or potentially thousands of contraventions, which means that the theoretical maximum penalty available to the court can be in the billions or even (in the case of Nurofen) trillions of dollars. In such cases, the Court can draw on the principle of totality to determine the appropriate overall penalty to deter both the respondent and the market more generally from engaging in similar conduct.

Implications

The ACCC has the ability to negotiate with respondents to “settle” enforcement litigation. In exchange for a respondent making admissions or not contesting a case, the ACCC may be willing to make joint submissions on the appropriate penalty for consideration by the Court. Unlike in some foreign jurisdictions, any such submissions are purely advisory and the court retains ultimate responsibility for setting the penalty. It has become court practice to accept agreed penalties so long as they are within a generally “permissible range”. It seems likely that the ACCC will seek to use the Court’s commentary from the ANZ/Macquarie case in future settlement negotiations with parties, arguing that the penalty needs to be sufficiently high to satisfy the Court that it is appropriate.

Similarly, the Court’s commentary in Nurofen is likely to give the ACCC confidence to vociferously argue for larger penalties in contested hearings.

What next?

The ACCC faces several upcoming tests on penalties, such as:

  • the Flight Centre case, which the High Court recently remitted to the Federal Court for the determination of penalties. The ACCC has not yet indicated the penalties it will seek, but this may become apparent at the directions later this week;
  • its appeal on penalties in its long-running proceedings against Cement Australia and others, in which the Federal Court ordered penalties totalling $18.6 million (since reduced to $17.1 million by consent orders). The ACCC had argued for over $90 million in penalties and has lodged an appeal to the Full Court, to be heard on 20 February 2017;
  • the penalty decision against Yazaki for collusive conduct in the supply of automotive wire harnesses. The penalty hearing took place last year and judgment has been reserved; and
  • the penalty decision in the ACCC’s litigation against Italian high voltage cable manufacturer Prysmian. Last year, the Federal Court of Australia found that Prysmian had engaged in cartel conduct in relation to the supply of high voltage cables. The Court has reserved its decision on penalty.

We will observe with interest the approach taken by the ACCC in these cases to see if it bears fruit.

Picture: Courtesy Openphoto / Adrian van Leen

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About The Author

is a solicitor in the competition team in the Sydney office of King & Wood Mallesons.

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