In March, ASIC published a report that contrasts the penalties available to it for enforcement corporate wrongdoing with those available to regulators in overseas jurisdictions for similar types of conduct and to other regulators in Australia, including the ACCC.
While making no recommendations, the report makes clear that the maximum civil penalties available to ASIC remain well below those that the ACCC can pursue for breaches of the competition provisions of the CCA.
Click here to view the image.
Source: ASIC Report 387 Penalties for corporate wrongdoing (March 2014), page 2.
In fact, the ACCC’s jurisdiction involves some of the highest civil penalties available for Australian regulators to pursue. This is the case both for contraventions by individuals ($500,000) and bodies corporate (the greater of $10 million or 3 times the value of the benefit gained or, if the benefit cannot be ascertained, 10% of annual turnover.
These penalties apply to contraventions of most provisions in Part IV of the Competition and Consumer Act 2010, including agreements that substantially lessen competition, misuses of market power, exclusive dealing, resale price maintenance, mergers that substantially lessen competition and non-criminal breaches of the cartel conduct provisions. The penalties for criminal breaches of the cartel conduct provisions are in the same quantum, but are criminal rather than civil in nature, and are accompanied by the threat of a gaol sentence for individuals.
It is however important to note that, in relation to breaches of the consumer protection provisions, the ASIC Act now provides for penalties of up to $1.7 million for conduct in relation to financial services, while the ACL is limited to $1.1 million.
The report also serves as a useful reminder that jurisdiction for civil penalty matters under each of the Corporations Act and the Australian Consumer Law (ACL) is not limited to the Federal Court.
As with civil penalties under the Corporations Act, both the Federal Court and the Supreme Courts of the states and territories can impose civil penalties for breaches of the ACL. Lower courts, such as the County Court, Magistrates Court and VCAT in Victoria (with certain limitations on VCAT’s powers) and the District Court and Local Court in NSW, are also given jurisdiction under the relevant state legislation.
Reform on the way?
ASIC has stated that it will use the findings in its report to inform its submission to the Federal Government’s Financial System Inquiry. It is expected that ASIC will push for increased civil penalties, with Chair Greg Medcraft recently stating that:
“…one of the big problems for ASIC is that penalties for corporate crime are often small in comparison to the proceeds of the crime… Often [internationally] the penalty is you get to disgorge your financial gain and in fact the concept in many jurisdictions is triple damages … You actually have a penalty that is three times your gain and if you think about it, that is actually what having a deterrent is all about – if you wanted to consider breaking the law, then there will be a significant penalty.”
The adequacy of current penalties is also likely to be considered by the Government’s ‘root and branch’ review of Australia’s competition law and policy. The Terms of Reference include consideration of whether new enforcement powers, remedies or enhanced penalties might be necessary and appropriate to prohibit anti-competitive conduct (see 3.4.2).
The Review Panel consists of:
- Professor Ian Harper (Chair), an economist whose experience spans academia, government and advising business. He was a member of the 1996-97 Financial Systems Inquiry (the Wallis Inquiry) and between 2005 and 2009 was inaugural Chairman of the Australian Fair Pay Commission.
- Mr Peter Anderson, a national business leader and public policy specialist in national and international affairs. He is also a former legal practitioner and educator to small businesses, as well as a senior adviser to governments, including on trade practices. Mr Anderson recently stepped down from the position of Chief Executive of the Australian Chamber of Commerce and Industry.
- Ms Su McCluskey, the Chief Executive Officer of the Regional Australia Institute, an independent policy think tank and research organisation which seeks to achieve a vibrant and sustainable future for regional Australia. Ms McCluskey has had extensive public and private sector experience, and she is also a beef cattle farmer.
- Mr Michael O’Bryan, a Senior Counsel at the Victorian Bar. Mr O’Bryan has considerable competition law experience both as a solicitor and barrister, and he is a member and past chairman of the Competition and Consumer Committee of the Law Council of Australia.