A recent decision has clarified that the Federal Court is unable to receive submissions on an appropriate penalty (or range of penalties) from the Australian Competition and Consumer Commission (ACCC).  This represents a significant change to the settlements process under the Competition and Consumer Act 2010 (Cth) (CCA) and, because it affects all current or contemplated negotiations with the ACCC, is likely to have a chilling effect on future settlements.

The current process

In civil proceedings under the CCA, the ACCC has had a long-standing practice of making submissions to the Federal Court on the appropriate amount of pecuniary penalties to be imposed, either:

  • in submissions on its own behalf; or
  • in joint submissions with the respondent as part of an agreement to settle the proceedings.

No submissions permitted on the appropriate penalty

This most recent decision in a series, overturns previous decisions by the Federal Court, and clarifies that the Federal Court can only receive submissions (by the ACCC, or jointly with the respondent) setting out penalties that have been imposed in other cases.  Any submissions – by the ACCC or jointly – on the appropriate amount of penalty (or a range within which the penalty should fall) are now clearly not permitted.

The Full Federal Court's decision

The Full Federal Court's decision in Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union [2015] FCAFC 59 (the CFMEU case) has resolved the ongoing debate surrounding agreed penalties.  This debate had intensified since the High Court's decision in Barbaro v The Queen (2014) 305 ALR 323 (Barbaro), in which the High Court found that the prosecution in criminal proceedings could not make submissions on the sentencing range or appropriate sentencing outcome. Since Barbaro, there have been a number of cases in which the Federal Court has rejected applications on pecuniary penalties agreed between regulators and respondents.  In the CFMEU case, joint submissions to the Federal Court by a regulator and two respondents (including the CFMEU) contained penalties that had been agreed between them. The Full Federal Court found that the Federal Court was unable to have regard to those agreed penalties, following the reasoning in Barbaro.

The Court's reasoning

Although the Court in CFMEU acknowledged there were differences between regulators and criminal prosecutors, it found that both required an assessment of a wide range of factors and engagement in the process of 'instinctive synthesis'. Consequently, while the parties were free to propose agreed facts, highlight relevant evidence of comparable cases and make submissions on the proper approach to fixing a penalty, ultimately the Court was responsible for considering the various factors and drawing inferences from those factors to determine the proper penalty.  The Court also found that cases concerning criminal sentencing and civil penalties often involved the coercive power of the State and must therefore be subject to a proper review by the court. The Court considered that penalties were punitive rather than compensatory in nature given that they mark the public's disapproval of breaches of law.  Finally, the Court stated there was public interest in the open administration of justice which may be hindered by the limitations that agreed penalties place on the Court's discretion. Proposed agreements potentially limit this discretion and, as mere opinions, are not proper submissions on which the Court should make its orders.

Impact on settlements with the ACCC

This change affects any current or contemplated negotiation with the ACCC on penalties imposed under the CCA, and is likely to have a chilling effect on future settlements.  Many respondents may now be unwilling to resolve matters with the ACCC if the ACCC is unable to agree to put joint submissions to the Court on the appropriate penalty.  The change is also likely to compound the existing disincentives for respondents to settle matters with the ACCC.  In the Final Report of the Harper Review released on 31 March, the Panel proposed (contrary to a number of submissions) to extend the scope of section 83 of the CCA. That section currently allows findings of fact made against a corporation in one proceeding (usually brought by the ACCC) to be used as prima facie evidence against that corporation in another proceeding (brought by another litigant). Before the CFMEU decision, section 83 already had an adverse effect on the willingness of corporations to cooperate with the ACCC.

Points to take away

  • In proceedings brought by the ACCC under the CCA, neither the ACCC nor the respondents are able to make submissions as to the amount of penalty to be imposed (whether agreed or not).
  • This is likely to have a chilling effect on settling matters with the ACCC.
  • Watch this space to see whether the CFMEU decision will be appealed, or whether Parliament will amend the CCA to allow the ACCC and respondents to make submissions as to the appropriate penalties to be imposed under the CCA.