Australian businesses that are found to have breached the Australian Consumer Law (ACL) could face harsher penalties in the future, following a review of the legislation next year.
Australian Competition and Consumer Commission chairman Rod Sims today questioned whether the current penalty regime is strong enough and provides enough deterrence.
Corporations currently face a maximum penalty of $1.1 million per contravention of the ACL, while individuals can be fined up to $220,000 per contravention.
Delivering a keynote address at the Consumer Law Roundtable in Canberra today, Sims said since the regime was introduced, courts have ordered penalties of more than $44 million, with 18 cases attracting penalties of $1 million or more.
“But are our penalties strong enough and are they keeping pace with deterrence?” Sims said.
“That has been the burning question since the Coles judgment in December 2014.”
Sims was referring to an agreement from Coles to pay a penalty of $10 million in relation to claims it engaged in unconscionable conduct towards suppliers.
Melissa Monks, special counsel at King & Wood Mallesons, told SmartCompany this morning the ACCC has over the past 18 months “questioned the adequacy” of the current penalty regime for corporations.
“Its key concern has been whether such penalties can offer a sufficient deterrent to large corporates with large turnovers who can easily manage such a fine,” Monks says.
“However, the ACCC has not yet revealed just what level of penalty it considers would be appropriate.”
Monks says corporations that are found to have breached the ACL current face “a far lower penalty” than those that are found to have breached the competition provisions contained in the Competition and Consumer Act 2010.
Contravening the latter attracts a penalty of whichever is greater; up to $10 million, three times the benefit gained as a result of the breach or 10% of the corporation’s annual turnover in Australia.
“So it will be interesting to see the position that the ACCC takes,” Monks says.
However, Monks says it is concerning that the ACCC has flagged potentially subjecting the general misleading conduct provision of the act to penalties.
“Conduct that may breach that section is generally not black and white and therefore whether it breaches the law and the appropriate penalty that should apply are questions best assessed by an independent judiciary rather than a regulator such as the ACCC,” she says.
“It is certainly something that was considered and ultimately rejected in the original review leading to the current ACL.”
A review of the ACL will be undertaken by Consumer Affairs Australia and New Zealand in 2016.
Sims also flagged several other possible areas for review, including how the ACL applies to businesses in the sharing economy and phoenix companies.
A phoenix company is one that has previously traded as another entity and declared insolvency to avoid debts or tax payments but then re-emerged to do business again.
“We need to consider whether the ACL can adequately address any consumer protection issues that may arise within these transactions,” Sims said in relation to the sharing economy.
“Finally, we strongly believe there is scope to look at the extent to which the CL facilitates consumers, including business consumers, obtaining redress for contraventions of the ACL when companies phoenix.”
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Eloise is an experienced business journalist and editor, who has held senior editorial roles at SmartCompany since 2014. Prior to joining SmartCompany, Eloise was news editor at Books+Publishing, the trade press for the Australian book industry. Eloise has degrees in media and communications, marketing and business management, and political science. You can follow her on LinkedIn, and Twitter at @ellykeating.
