Businesses beware. The penalty regime for consumer law in Australia has undergone a serious overhaul – just in time for the countdown to Christmas.
From 1 September 2018, the maximum pecuniary penalties the ACCC can seek for contraventions of key provisions of the Australian Consumer Law (ACL) increased significantly:
- for corporations – from $1.1 million to the greater of: (a) $10 million; (b) 3x the value of the benefit; and (c) if the benefit cannot be determined, 10% of annual Australian turnover in the preceding 12 months; and
- for individuals – from $220,000 to $500,000.
Notably, these penalties apply for each contravention. Where a business is found guilty of multiple contraventions, as has often been the case, the total penalty imposed by a Court could easily spiral far beyond these amounts.
As we all know, one of the busiest times of the year is fast approaching for businesses in Australia. In the flurry of activity, it can be tempting to take more risks and even cut a few corners in order to meet those tight deadlines and keep the commercial team happy.
However, the new penalties legislation means that all businesses need to take a moment to reassess the risk profile of their marketing, promotional and other trading activities in Australia, having regard to the ACL – before it’s too late.
1. Reassess your current risk appetite
The threat of higher penalties under the ACL needs to be flagged with Boards and senior managers. Moving forward, businesses which contravene the ACL face not just reputational damage – they could be looking at hefty financial penalties that will have a material impact on their bottom line. To give you some perspective, the new penalties legislation means that for a company with a $500 million Australian turnover, the maximum penalty per contravention could be $50 million – almost 5x the amount previously available under the ACL. As noted by Rod Sims, chairman of the ACCC: “If you want your share price to keep rising and if you want to keep distributing dividends, then you better take this seriously.”
2. Get your house in order
One thing to bear in mind is that, whilst the amount of the penalties has changed, your obligations under the ACL have not.
False or misleading representations will no doubt continue to be a key enforcement area for the ACCC this Christmas. Also, as you may be aware, consumer guarantees have been on the ACCC’s watch-list for a number of years now, with LG Electronics and Apple the latest targets in a string of high-profile, successful cases brought by the regulator.
In light of the increased risks, we strongly recommend conducting a review of all compliance policies and procedures, to ensure that they are up-to-date and adequately address any risk exposure in your business, before the commercial madness hits.
Some key areas to focus on are:
- Staff Training: Provide comprehensive training to all staff, especially customer helpline employees and other customer-facing staff, around consumer rights – particularly in respect of refunds and exchanges for faulty products. Remember, all goods sold to a consumer come with minimum statutory guarantees that cannot be contracted out of by any manufacturer or supplier.
- Corporate governance: If you don’t already, you should consider having a marketing communications approval matrix in place. This is to ensure that any potentially high-risk claims are escalated to the attention of a senior manager as early as possible, so that they can be dealt with before they become a major issue.
- Record keeping: Keep a register to record whether and, if so, how conflicts with consumers are resolved, with a record of the date of the complaint, the complainant’s details, and details around the nature of the complaint, the relevant product SKU, any investigative procedures undertaken, and the solution offered to the consumer (e.g. “full refund offered”). This will help to prevent any complaints from falling by the wayside amidst the festive rush.
- Advertising and Marketing: Closely review any product packaging and advertising and marketing materials to ensure that all claims can be readily substantiated and do not overreach the facts. Remember, it isn’t always enough just to include a disclaimer on a product label or in advertising and marketing – that disclaimer needs to be sufficiently clear and the overall impression of the advertising or marketing must not be false or misleading. Otherwise you may run a real risk of breaking the law.
To wrap up, ACL penalties have become much more than just another cost of doing business in Australia. No doubt, after campaigning hard for these changes to the ACL, the ACCC will be eager to test out the scope of its latest gift from Parliament.
This is one year you won’t want to be on the ACCC’s black list.