Out-Law / Your Daily Need-To-Know

Australia increases civil penalties for breaches of competition and consumer law

Out-Law News | 21 Nov 2022 | 11:30 am | 2 min. read

Civil penalties for companies and individuals in Australia who breach the 2010 Competition and Consumer Act (CCA) will increase significantly under the 2022 Treasury Laws Amendment (More Competition, Better Prices) Bill which received Royal Assent earlier this month.

The Bill also amends the CCA to broaden the application of the unfair contract term (UCT) provisions. Australia’s previous penalties for breaches of competition and consumer law have been considered low relative to other countries. The increased penalties will bring Australia in line with enforcement regimes in Europe and the US and improve the operation of the CCA to increase market competition by deterring anti-competitive behaviour and better protecting consumers.

Under the previous regime, a corporation that breached the CCA faced maximum penalties that were the greater of:

  • AUS$10 million
  • three times the value of the benefit obtained from the breach, if this could be determined by a court
  • 10% of the firm’s annual turnover in the 12 months prior to the breach, if the value of the benefit from the breach could not be determined by a court

The Bill increases the maximum penalties for breaching the CCA to the greater of:

  • AUS$50 million
  • three times the value of the benefit obtained from the breach, if this can be determined by a court
  • 30% of the firm’s annual turnover during the period of the breach (at least 12 months) if the value of the benefit obtained from the breach cannot be determined by a court

The maximum penalty that can be imposed on individuals has also increased from AUS$500,000 to AUS$2.5 million. The new penalties apply from 10 November 2022 and will not apply retrospectively. The courts will still retain their discretion in applying these penalties, but businesses should be aware that the changes will likely result in a significant increase in the level of the penalties imposed. These amendments serve as an important reminder to businesses to ensure they understand their obligations under the CCA and implement appropriate competition law compliance and training measures to minimise the risk of breaches occurring.

Unfair contract terms

The UCT provisions contained in the Australia Consumer Law (ACL) under the CCA protect consumers from any unfair contract terms that are included in standard form contracts between consumers or small businesses. The Bill makes several amendments to the UCT provisions to improve their application. Some of the key changes include expanding the definition of ‘small businesses’ and ‘non-party’ to increase the scope of application of the UCT provisions and broadening the list of excluded contracts to provide greater clarity on the types of contracts captured by the UCT provisions.

Previously, contravention of the UCT provisions would only result in the courts rendering the relevant clause or contract void. The amendments to the CCA mean that the maximum penalties set out above for breaches of competition law also apply to breaches of the UCT provisions. Increasing financial penalties for breaches of consumer protection law, so they mirror the level of penalties that can be imposed for competition law breaches, is also being proposed in other international jurisdictions, including the UK.

The CCA amendments to the UCT provisions will apply from November 2023. This transitional period is intended to allow businesses sufficient time to review and amend their standard form contracts to ensure they comply with the new CCA requirements. Businesses can also use these reforms as an opportunity to refresh their internal compliance procedures and training regarding UCT provisions.

Co-written by Kaitlin Pert of Pinsent Masons.

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