Australian businesses that engage in anti-competitive and anti-consumer practices will face dramatically higher penalties if the Labor Party is elected on July 2.
Under a suite of reforms proposed by the federal opposition, civil penalties under the Australian Consumer Law (ACL) would increase from $1.1 million to $10 million.
This would bring penalties into line with competition provisions under the Competition and Consumer Act 2010.
The ALP would also adopt a European-style penalty system for anti-competitive practices, which would penalise companies at a rate of 30% of the annual sales of the relevant product or service multiplied by the number of years over which the infringement occurred. These penalties would be capped at whichever is greater: 10% of the company’s annual turnover or $10 million.
Labor says it will “crack down” on “dodgy business practices” and equip the Australian Competition and Consumer Commission with a tougher whip to fight fraud.
Speaking at the Consumer Action Law Centre this afternoon, shadow assistant treasurer Andrew Leigh announced the reforms as part of the Labor Party’s Fairer Markets for a Fairer Australia policy.
“The policy reforms I have announced today will deter and punish anti-competitive and anti-consumer conduct by dramatically increasing penalties,” he said.
“[It] will deter and punish unscrupulous conduct by businesses that hurt consumers – particularly vulnerable community members.”
The new reforms are an attempt by the Labor government to impose greater penalties for anti-competitive conduct, which it says are currently too small by international standards to be an effective deterrent.
ACCCC chairman Rod Sims has previously questioned whether the current penalty regime is strong enough and provides enough deterrence.
Delivering a keynote address at the Consumer Law Roundtable in December 2015, 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.
Labor will also seek to bolster the resources of the ACCC, with Leigh pledging for some of the revenue generated through increased penalties to be directed to the ACCC’s litigation budget, which would be doubled it to a maximum of $49 million.
Melissa Monks, special counsel at King & Wood Mallesons, says small businesses are unlikely to be the target of these penalties.
“It is companies with huge turnovers that can arguably ‘afford’ to engage in prohibited conduct because it is ultimately profitable in comparison to the current penalties,” she told SmartCompany.
“However, it really is a further reason why all businesses should ensure that they have effective competition and consumer law compliance processes and procedures in place and that they actively enforce these so that they can avoid being the subject of any form of penalty.”
The proposed changes will also seek to amend the Competition and Consumer Act 2010 to help the ACCC with market studies so it can explore issues of public interest such as pricing discrepancies.
“Formal market studies can guide policy makers, instigate legal action, and inform consumer information campaigns,” said Leigh.
“We believe the ACCC is a natural fit for market studies, our proposal formalises and significantly expands some of the market study functions available to the ACCC.