We have in recent alerts discussed the increasingly aggressive enforcement activities of the Australian Competition and Consumer Commission. Unremittingly higher penalties is one unfortunate characteristic of the ACCC's enforcement program, mitigated somewhat by its willingness to accept settlements that involve a fine and often court-enforceable undertakings on a company's future conduct.

Increased penalties

The ACCC continues to focus on increasing fines on companies found to have violated Australia's competition laws. The ACCC believes that low penalties sometimes have failed to deter unlawful conduct, as offenders consider these penalties merely a cost of doing business. This authority now seeks to make penalties more painful.

The ACCC has backed up its warnings with action, appealing recent decisions seeking substantially higher fines than those awarded at first instance. For example, today the ACCC is appealing a court-ordered fine of AUD$18.6 million for anticompetitive agreements relating to fly ash (a byproduct of burning coal, used as a substitute for cement), seeking instead penalties in excess of AUD$90 million.

The ACCC describes its current penalty target as an amount that is "commercially relevant," which means high enough to be painful. This raises the stakes for businesses accused of anticompetitive conduct. If the ACCC succeeds, an enforcement action will bring tough penalties, not to mention significant legal costs and reputational consequences.

Resolution of ACCC proceedings outside of court

Although not the right strategy in every case, one option for a company charged by the ACCC is to accept a settlement in exchange for a specified penalty and perhaps undertakings on future conduct.

The upsides of agreeing to settle include more certainty for the company, the potential for a lower penalty, and avoiding expensive litigation. Both sides ultimately are resource constrained, and the prospect of a cheaper option is understandably attractive even to the ACCC.

On the other hand, in an era of increasing penalties, the ACCC has demanded more in settlements and more onerous undertakings on future conduct, such as largely reversing a completed acquisition. Undertakings may include ongoing audits and reporting to the ACCC. Finally, the ACCC may demand the company admit guilt, and the public disclosure of this carries its own risks, such as exposing the company to third party lawsuits.

Comment

Avoiding a violation and dispute with the ACCC is the preferable course. But in the event of an enforcement action by the ACCC, a company must consider carefully how to respond. The ACCC will impose a tough penalty whenever it can, and therefore management and counsel should position the company to protect its interests.

Prior alerts covered the ACCC's current use of criminal prosecutions, dawn raids, and actions against companies from other juisdictions.