New financial year, new penalties – green light for increased ACL penalties

Published On 09/10/2018 | By Paula Mucha | Consumer protection, Enforcement, Reform

This article was written by Paula Mucha and Michael Evans.

On 23 August 2018, the Australian Parliament passed the Treasury Laws Amendment (2018 Measures No. 3) Bill 2018 (Cth) (Bill).  The Bill aligns the maximum penalties under the Australian Consumer Law (ACL) with the maximum penalties for breaches of the competition provisions in the Competition and Consumer Act 2010 (Cth) (CCA).  The Bill received Royal Assent on 31 August 2018. Consequently, the new penalties took effect on 1 September 2018.

The ACCC has long called for higher penalties for breaches of the ACL. This was to ensure that they act as an effective deterrent, and are not simply viewed as a cost of doing business.[1]  As the maximum penalty for a breaching corporation was previously one-tenth of the lowest maximum penalty for a breach of the competition provisions of the CCA, the ACCC has been of the view that there is no good reason for this difference, as we have seen cases where consumer law breaches have led to substantial harm to many consumers.[2]  In particular, the ACCC has been a very vocal advocate for larger penalties for large corporations, so much so that this formed part of their formal enforcement priorities for this year – “[p]ut simply, we believe large businesses should bear penalties which are commensurate to their size, in order to achieve specific and general deterrence. Making this happen is a huge priority and challenge for the ACCC in 2018.”

The ACCC had found support for its position from the Australian Consumer Law Review Final Report, which stated:

“[w]hile the overall mix of penalties and remedies is effective, the maximum financial penalties available for a breach or attempted breach of the ACL (and corresponding penalties in the ASIC Act) are insufficient to deter highly profitable non-compliant conduct and can be seen by some entities as ‘a cost of doing business’. They are also inconsistent with penalties available under the competition provisions of the CCA, to which the ACL is a schedule… As such, there is scope to strengthen ACL penalties and remedies by increasing the maximum financial penalty to sufficiently deter highly profitable conduct contrary to the ACL and to improve the scope of community service orders by allowing third parties to give effect to those orders.”[3]

For more information about this report, see our previous alert here.

Now, with the passage of the Bill, the maximum civil pecuniary penalties and penalties for criminal offences for a breach of the ACL increased from $1.1M for corporations to the greater of:

  • $10 million;
  • 3 times the value of the benefit (to the corporation and any related bodies corporate) attributable to the contravention; or
  • if the court cannot determine the value of that benefit—10% of the annual turnover of the body corporate during the 12-month period ending at the end of the month in which the body corporate committed, or began committing, the offence.

The maximum penalty for individuals has also been increased from $220,000 to $500,000.

While there remains no pecuniary penalty for engaging in misleading and deceptive conduct, the increases will apply to most of the existing ACL civil penalty and offence provisions including those relating to unconscionable conduct, unfair practices (such as false or misleading representations, unsolicited supplies, pyramid schemes and single pricing), breaches of safety standards, supplying goods covered by a ban and failures to comply with recall notices or information standards.

For more information about the change, please see our previous alert here.

Image credit: Image by  Credit Score Geek /CreativeCommons 2.0 / remixed to B&W and resized

[1] Chair Rod Sims, ACCC Media Release, ‘Federal Court finds Valve made misleading representations about consumer guarantees’, 29 March 2016.

[2] Chair Rod Sims, ACCC Media Release, ‘ACCC focuses on energy, broadband, net economy and financial services in 2018’, 20 February 2018.

[3] Australian Consumer Law Review, Final Report, March 2017, page 87.

About The Author

is a Solicitor in the Melbourne office of King & Wood Mallesons.

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