Sims looks ahead to consumer law review

Published On 09/12/2015 | By Amelia Achterstraat | Consumer protection, Enforcement, Reform

Delivering the keynote address at the recent Australiasian Consumer Law Roundtable in Canberra, ACCC Chairman Rod Sims discussed the current state of the Australian Consumer Law (“ACL”) in light of the upcoming ACL review in 2016.

Mr Sims highlighted the following recent key successes of the ACL:

  • the broad and flexible provisions relating to misleading and deceptive conduct leading to penalties being ordered for breaches against Coles Supermarkets, Advanced Medical Institute and Lux Distributors (see our previous post on the Lux penalty judgement here);
  • cooperation with consumer regulators to ensure proper product safety; and
  • current safety recalls of Infinity electrical cables and Samsung washing machines.

However, in anticipation of the upcoming ACL review, Mr Sims indicated some areas of the regime that could be improved, including:

  • reducing duplication of safety standards by discouraging the imposition of Australian requirements on goods and services that comply with a reputable international standard;
  • extending the protection of the unconscionable conduct provisions in s 21 to public companies;
  • evaluating whether the ACL can adequately address consumer protection issues arising in the growth of the sharing economy (see our previous post regarding the ACCC’s action against AirBnB and eDreams in relation to drip pricing here); and
  • the need to improve price transparency.

Mr Sims commended the introduction of pecuniary penalties in 2010, noting its success as a “game changer” in deterring unconscionable and false and misleading conduct. Currently, the maximum penalty available for a breach of the ACL is $1.1 million for a corporation or $220,000 for an individual, and penalties of more than $1 million have been imposed in at least 18 cases since the regime’s introduction. Moving forward, however, Mr Sims raises the crucial question, “are our penalties strong enough and are they keeping pace with deterrence?”

This question was asked by Justice Gordon in determining the appropriate penalty in ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405, where a $10 million penalty was imposed on Coles for multiple breaches of the unconscionable conduct provisions: the highest penalty imposed under the ACL to date. In that case, Coles demanded its suppliers make payments it was not entitled to, and threatened harm if this was not complied with. Coles also withheld money from its suppliers with no right to do so.

While $10 million is a significant penalty under the ACL, it was noted that Coles’ annual revenue is in excess of $22 billion. Justice Gordon indicated that, ‘The current maximum penalties are arguably inadequate for a corporation the size of Coles.’ While her Honour may have been suggesting that the maximum penalties needed to be increased, she concluded that it was, of course, a matter for Parliament.

Mr Sims argues that there are merits in increasing the maximum penalty for corporations, and flagged this topic as a priority for the 2016 review. Along with this, he also raised the possibility of extending the reach of the penalties regime to cover the general prohibitions against misleading and deceptive conduct (s 18), which may bring with it the ability to use infringement notices (the penalty for listed companies is currently set at $108,000). The penalties already apply to false or misleading representations about goods or services under s 29 of the ACL, resulting in substantial overlap between these types of conduct.

While the Australian penalty regime has been compared to overseas jurisdictions to justify increased penalty levels, in fact international regimes vary:

  • The Canadian Competition Act (1985) imposes a maximum penalty of CAD$10 million for a corporation and $750,000 for an individual for deceptive marketing practices. For subsequent breaches, this maximum penalty increases to $15 million and $1 million respectively. The Canadian approach represents a significant premium on maximum penalties for breaches of the relevant consumer law in Australia. Indeed, the penalty on corporations in Canada is potentially 15 times that in Australia. This scheme may also suggest the need to increase the maximum penalty imposed for subsequent breaches, whether in conjunction with an increase to the base maximum penalty, or on its own. This approach may address concerns raised about the adequacy of penalties for large corporations engaging in multiple breaches.
  • On the other hand, the New Zealand Fair Trading Act (1986) imposes a maximum fine of NZ$600,000 for a corporation and $200,000 for an individual for unfair conduct. (A maximum $600,000 fine can be imposed on both corporations and individuals for pyramid selling schemes.) Breaches of consumer information standards and consumer transaction standards also attract a maximum fine of $30,000 for corporations and $10,000 for individuals. As the 2016 discussion will be conducted by the interagency body Consumer Affairs Australia and New Zealand, this differential is likely to be critically assessed when evaluating the potential reform of consumer law in these two jurisdictions.
  • In the US, the Federal Trade Commission uses a “cease and desist order” in the first instance, which is available under s 5 of the FTC Act to redress anti-consumer practices. Once final, a breach of this order can bring a maximum civil penalty of US$10,000 per violation.
  • In the United Kingdom, public remedies for consumer law are rare and civil injunctions are the most common remedy.

The differing approaches taken by overseas jurisdictions will be relevant to many aspects of the ACL review next year. Mr Sims’ speech is an indication that the ACCC’s focus in ACL reform will be to enhance its deterrent effect so as to improve the effectiveness of the ACL and satisfy its objectives. We will keep you updated on the status of the ACL review as it progresses in 2016.

Photo credit: Flickr / Jason Rogers

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is a Summer Clerk in the Sydney office of King & Wood Mallesons

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