The competition regulator has confirmed that penalties are set to rise.
Months after the Organisation for Economic Cooperation and Development (OECD) said that Australian penalties were weak in comparison to other jurisdictions the Australian Competition and Consumer Commission (ACCC) announced that there will be an increase in penalties.
The final recommendations by the Consumer Affairs Australia and New Zealand (CAANZ) are that breaches of the ACL should be of the greater of $10 million, three times the value of the benefit received or 10 per cent of the annual turnover ‘in the preceding 12 months’.
Also, that penalties for individuals should be raised from $220 000 to $500 000.
“We have strongly advocated for higher maximum penalties to enable courts to impose more substantial penalties,” ACCC Chairman Rod Sims said. “Penalties need to hit the bottom line so they are not simply seen as the cost of doing business. Perhaps more important, penalties need to be high enough to be noticed by boards and senior managers so that compliance with the law is a higher priority.”
He added that these strengthened penalties will be a step to deterring breaches.
George Kamencak, from CCL Consultants, said that these changes are significant and they will bring ACL penalties in line with competition law penalties.
“Ultimately the Courts will be asked to apply these penalties and that is where the regulators will seek to push the penalties to the upper end to ensure a strong deterrent message is sent to all businesses," Kamencak added. “Whilst it will be more difficult to calculate the benefit gained if seeking to determine penalty on that basis, it remains only one means by which the penalty might be determined. For most companies, the greater of $10 million per offence or 10% of annual turnover in the preceding year will still be very significant penalty amounts they could potentially face if found to have breached consumer laws. Importantly, businesses are run by individuals, and the penalties for individuals have also significantly increased adding to that deterrent effect.”
Bronwyn Gallacher Managing Director at CCL Consultants Tweeted shortly after the announcement:
"Legislation has passed Federal Parliament today to increase maximum financial penalties under Australian Consumer Law (ACL). Strong positive compliance message being sent today to Australian businesses."
Update Monday 27th, August
Gallacher told the GRC Professional that the stronger penalties will have a deterrent effect.. Her comments were made in relation to the ACCC action brought against Trivago last week.
"The new Australian Consumer Law penalty regime, which was passed by the Federal Parliament on Wednesday last week is designed to send a strong deterrence message to both companies and individuals that companies should ensure they have in put in place strong compliance measures to reduce their risk of breaching the Australian Consumer Law," she said. "Therefore, the new penalty regime has created an opportunity for compliance practitioners to conduct a 'health check' on their compliance management framework, in particular, review internal policies and procedures, marketing practices, complaint handling systems and face to face training to mitigate any potential and/or actual legal, operational and financial risks in relation to the Australian Consumer Law".