Significantly increased penalties for breaching key competition and consumer protection provisions of the Competition and Consumer Act (2010)(CCA) are now in effect, with the amending legislation sailing through Parliament.
Unfair contract terms in small business and consumer contracts will also be illegal for the very first time, attracting these same higher penalties in 12 months’ time. As recently outlined by the new ACCC Chair, Gina Cass-Gottlieb, these increased penalties provide more incentive for businesses to have the ACCC’s updated enforcement priorities front of mind. Here’s what you need to know.
Five-fold increase in maximum penalties
The Government has fulfilled its election promise to increase the maximum penalties available for breaching key competition and consumer protection provisions of the CCA. Under these changes, maximum penalties for civil breaches of the CCA increased on 10 November 2022 for companies to the greater of up to $50 million (up from $10 million), three times the value of the benefit derived from the breach, or, if the value cannot be determined, 30% of the company’s turnover during the period it engaged in the conduct (up from 10% of annual turnover). Maximum penalties for individuals have increased to $2.5 million (up from $500,000).
The uplift is designed to support businesses who “play fair” and ensure that financial penalties under the CCA are not seen as a “cost of doing business, but rather as a significant impost”1. It also brings these penalties in Australia more into line with other international jurisdictions. The higher penalties apply to breaches which take place from 10 November 2022.2 For more information on this, see our previous article on this topic.
Updated priority areas for the ACCC for the year ahead
Understanding the regulator’s current enforcement priorities has never been more important. The new ACCC Chair, Gina Cass-Gottlieb, recently added these priorities to the ACCC’s list:
- To strengthen the ACCC’s enduring priority of stamping out cartel conduct, the regulator will be ramping up measures to foster pro-active cartel detection. The ACCC will develop cartel screening tools for bid rigging, promote their anonymous online portal for whistleblower reporting and invest in intelligence and analytics capabilities to assist with cartel enforcement.
- With rising interest rates and cost of living pressures at an all-time high, the ACCC is ready to pounce where a business makes false or misleading claims about the reason for price changes.
- More substantiation notices will be issued to businesses that are making environmental and sustainability claims, forcing them to demonstrate they have reasonable grounds for the claims and that they are accurate and verifiable. This comes on the back of the Australian Securities and Investments Commission (ASIC) ramping up its focus on false and misleading sustainability claims, with the corporations regulator recently taking its first action for “greenwashing” against listed energy company Tlou Energy Limited.3
- Ownership of minority interests in competing companies and the risk of anti-competitive concerted practices will be given a new focus, especially in the context of the ACCC’s merger reviews. The questions being specifically considered by the ACCC include whether holdings across competing companies stifle competition, whether they create financial incentives that distort or dampen competition and how information from different companies is quarantined when a party owns a minority interest in two or more companies.
- Further law reform has been flagged. The ACCC will continue the push for merger law reform as the Chair believes they are not fit for purpose. Additional reforms to other sections of the competition and consumer laws have also been flagged, including the consumer guarantee and product safety regimes and the introduction of a general unfair trading practices prohibition.
Actions for businesses in 2022-23
- Prioritise your efforts to comply with competition and consumer laws. Get your compliance programs refreshed and tailored to your businesses as a first step.
- Review and update your standard form consumer and small business contracts before the new penalties for unfair contract terms take effect in November 2023.
- Take care with claims you’re making about the rationale for price rises. The reasons your business gives for price changes must be truthful and verifiable. Don’t be tempted to use the current economic circumstances to explain unrelated price rises.
- Make sure you can fully substantiate your environmental and sustainability claims. Don’t be tempted to over-reach with your recyclability, net zero or carbon neutral claims.
- If your business has a minority interest in a competitive company or has a director on the board of a competing company, how are you mitigating the risk of collusion? As a start, make sure you have protocols in place which prevent competitively sensitive information from being inappropriately shared and used. The ACCC is waiting to run a test case on the anti-competitive concerted practices prohibition that was introduced back in 2017, so make sure this doesn’t end up involving you!