Be competitive or pay up – the cost of anti-competitive conduct is set to increase

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By Kathryn Edghill, Partner and Camilla Miles, Lawyer

In a move designed to ensure that businesses do not regard penalties for non-compliance with competition laws as just a cost of doing business, the Federal Government has announced its plans to increase those penalties up to fivefold, taking them to amongst the highest penalties in the world.

On Wednesday 28 September, the Federal Government introduced the Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 (Bill) following consultation on an exposure draft of the Bill which occurred from 18 August 2022 to 25 August 2022.

If enacted, Schedule 1 of the Bill will implement the most significant and extensive set of changes to the current penalty regime applying to breaches of the Competition and Consumer Act 2010 (Cth) (CCA) and the Australian Consumer Law (ACL) in nearly 30 years, honouring the Federal Government’s Better Competition election commitment to substantially increase the maximum penalties under the CCA and ACL.

The Explanatory Memorandum circulated by the Hon Dr Andrew Leigh MP, the Assistant Minister for Competition, Charities and Treasury, states the purpose of Schedule 1 to the Bill is to:

increase the maximum penalty applicable to certain breaches of competition and consumer law to ensure that the price of misconduct is high enough to deter anti-competitive behaviour and unfair activity, and to ensure consumers retain a robust level of protection  

The introduction of the Bill into Parliament means businesses and individuals should prepare for the Federal Government to follow through with its commitment to toughen the position of competition and consumer law in Australia, particularly the severity of the penalties under the CCA and ACL

What are the new proposed maximum penalties?

The maximum penalties for contravening both competition and consumer laws under the CCA are set to significantly increase for companies and individuals, with some penalties increasing as much as fivefold. Importantly, the changes will not be retrospective, meaning the current penalty regime will still apply to breaches committed prior to the amendments being enacted.

The table below provides a summary comparison the current and proposed  penalty rates as they apply to civil claims of breaches of the anti-competitive conduct provisions in Parts IV, IVBA, X and XICA of the CCA:

      Current maximum civil penalty Proposed maximum civil penalty
Companies The greater of:

  • $10 million;
  • if the court is able determine the value of the benefit obtained – three times the value of the benefit; or
  • if the court is unable to determine the value of the benefit – 10% of the annual turnover of the body corporate.
The greater of:

  • $50 million (a fivefold increase);
  • if the court is able to determine the value of the benefit obtained—three times the value of that benefit; or
  • if the court is unable to determine the value of the benefit obtained—30% of the body corporate’s adjusted turnover during the breach turnover period for the offence, act or omission.
Individuals The maximum penalty is $500,000. The maximum penalty is $2.5 million for each (a fivefold increase)

How will the changes affect your business?

Despite receiving approximately 20 stakeholder submissions in response to the exposure draft of Schedule 1 to the Bill, the Federal Government has not been persuaded to significantly alter the Bill in response to stakeholder consultation.

The Federal Government has made it clear that it is committed to the Bill in its current form to address, what it considers, a view from within the business community (particularly large businesses), that risking contravention of the CCA and the ACL may be seen as an acceptable cost of ‘doing business’ in circumstances where the maximum pecuniary penalty of $10 million under the CCA has not been increased for nearly 30 years.

Tellingly for the Australian business community, the Hon Dr Andrew Leigh MP stated:

“we only get increased competition if the big companies play by the rules. That’s why Labor is increasing penalties, to ensure that there’s a level playing field for all Australian businesses, big and small. Fines should not be so modest that companies can treat them as a mere cost of doing business.”

Individuals too, should be acutely aware of the severe increase in the maximum penalty for individuals under Schedule 1 from $500,000 to $2.5million. The impact on individuals who contravene the CCA is particularly significant when it is considered that the companies they are directors of, or work for, are prohibited at law from indemnifying them if found liable for breach. This includes a prohibition on indemnifying payment of any legal fees.

What now? 

Expect the worst (i.e. the Bill will pass) and prepare to safeguard your business against it by ensuring that the risk of breach is avoided.

With the proposed penalty increases expected to generate $555 million in penalties over the next four years, it is imperative that businesses ensure their internal competition and consumer law compliance training and procedures are updated, and all employees are familiar with, and understand their obligations to comply with the CCA and ACL.

For further information, please do not hesitate to contact us.

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    Be competitive or pay up – the cost of anti-competitive conduct is set to increase