The Australian Consumer Law, introduced as a part of the Australian Competition and Consumer Act 2010 (Cth) (the Act) in 2011, now provides for the imposition of civil pecuniary penalties for contraventions of certain provisions of that law. The Australian Competition and Consumer Commission (ACCC) is clearly focussing on these penalties as its principal remedy in consumer matters and appears to be showing less interest in administrative settlements and seeking restitution for consumers impacted by breaches. This article examines how these developments may increase the likelihood of follow-on representative actions in consumer matters.
ACCC enforcement of the Australian Consumer Law
The ACCC has a history of vigorous and successful enforcement of consumer protection laws in Australia. Since the introduction of the Australian Consumer Law (ACL) in 2011, a number of legislative changes have further enhanced the ACCC’s consumer protection armoury by expanding the range of enforcement options available to it. In particular, substantial civil pecuniary penalties can now be ordered by the Federal Court for certain contraventions of the ACL.
The ACCC has made extensive use of the new civil penalty regime. In August 2013, the ACCC reported that total penalties of $24.4 million had been ordered, in 37 consumer protection and fair trading proceedings, since the inception of the ACL. These orders include orders for payment of substantial penalties by Optus ($3.61 million), Hewlett Packard ($3 million), Apple ($2.25 million) and Harvey Norman ($1.25 million).i
Previously, many of these consumer matters were settled via administrative arrangements, such as undertakings given under s.87B of the Act, without court proceedings being instituted.
These undertakings would commonly provide for, amongst other things, the implementation of improved compliance programs, arrangements for the payment of refunds, or reimbursement of consumers for losses suffered as a result of the contraventions.
In contrast, the orders obtained from the Federal Court by the ACCC in the more recent consumer matters involving pecuniary penalties have often not included orders for the payment of restitution to consumers.
Private actions for consumer compensation under the ACL
The ACCC aims to direct enforcement of the ACL towards cases where substantial consumer detriment is identified, or where conduct affects vulnerable or disadvantaged consumers. It is particularly concerned about online consumer issues, consumer guarantees, credence claims (claims that give the impression that a product, or its attributes, has an added benefit when compared to similar products and services) and unfair contract terms.ii
Matters of this nature lend themselves to representative action as a means of compensating victims, as individual losses are often relatively low in value, the cost of pursuing remedies can easily outweigh the compensation and the conduct often affects a large number of unidentified people across the community.
In the past, however, the prevalence of administrative settlements with the ACCC in consumer matters, with provision for some form of restitution, has not provided the incentive or basis for the institution of separate representative actions in relation to those matters. In particular, the tendency for administrative settlements to be agreed without admissions or court findings of contravention, has made the evidentiary burden of consumers seeking to take proceedings for damages greater.
In general terms, proceedings for damages under s.236 of the ACL that “follow on” from regulatory proceedings by the ACCC pose lesser evidentiary burdens for consumers seeking redress, particularly where a court has already made findings of fact in relation to the contravention. Section 137H of the Act provides that findings of fact made by a court in proceedings under the ACL constitute prima facie evidence in subsequent proceedings relating to that contravention.
In matters where pecuniary penalties are sought, it is necessary for the court to have a factual basis on which to order to the payment of penalties, and to determine the appropriate level of pecuniary penalties to impose. Findings by a court that particular facts existed, and that conduct was of a particular level of seriousness, or that particular detriment resulted from the conduct, will all assist potential claimants.
Now that the ACCC is instituting court proceedings for breaches of the ACL more frequently, and seeking orders for pecuniary penalties in those proceedings, there will be substantially more consumer law matters in which factual findings have been made by a court (either on the evidence or by agreed statements of fact) which can be used to assist follow-on representative proceedings.
Whether or not these developments actually result in increased numbers of representative private consumer law actions remains to be seen. However, with these changes, there does appear to be a greater incentive and basis for those actions.