Whopping Fines for Telling Whoppers: increase in penalties for breach of ACL
Legislation to increase the maximum financial penalties under the Australian Consumer Law (ACL) received Royal Assent last week on 31 August 2018. The Treasury Laws Amendment (2018 Measures No. 3) Act 2018 amends the ACL to align the maximum civil penalties with those currently applicable to the competition provisions of the Competition and Consumer Act 2010 (Cth).
Previously, companies faced a maximum penalty of $1.1 million per consumer law breach.
The amendment increases the maximum penalty for a company at least 10-fold to the greatest of the following:
- 3 times the value of the benefit obtained from the contravention or offence (where the value can be calculated); and
- if the value of the benefit cannot be determined, 10% of the company’s annual turnover in the preceding 12 months.
For individuals (including managers and directors involved in the contravention), the penalties have increased from $220,000 to $500,000 per breach.
The changes have already come into effect.
Contraventions covered by the new penalty regime include false or misleading representations, unfair sales practices (like bait advertising, harassment or coercion) as well as unconscionable conduct. The Australian Competition and Consumer Commission (ACCC) has also been very successful in using those contraventions as a way to fine companies for insisting on unfair terms in their contracts with small businesses or consumers, or refusing to honour the consumer guarantees under the ACL on all goods and services under $40,000 and household and personal goods and services.
To date, the highest penalty ordered by the Federal Court for consumer law breaches is $10 million, in recent cases against Coles and Ford. On the other hand, the highest penalty ordered by the court for a competition law breach is $46 million, against Yazaki. The most serious ACL breaches will now be treated as deserving of similar penalties as the most serious competition law breaches.
The investigator and enforcer of the ACL, the ACCC has highlighted that it thinks these penalties will be big enough to make company boards and senior management sit up and take compliance seriously.
The ACCC has been very active in pursuing companies in court in recent years, and has flagged unfair contract terms and consumer guarantees as areas of particular concern.
What does it mean for you?
Compliance has never been more critical than it is now given the increase in penalties and the recent trend indicating that the ACCC is likely to seek, and the Courts are likely to order, larger penalties for breaches of the ACL. For example, in June this year, Apple was fined $9 million for misleading conduct after its repair policies were found to be in breach of the consumer guarantee requirements of the ACL. The ACCC also chased Netgear and Fitbit for breaches relating to warranties.
Almost every commercial business (as well as most nonprofit businesses) are involved in transactions and activities that are covered by the ACL. We strongly recommend that you treat this as the incentive to review their compliance and risk management plans to limit your risk of any breaches of the ACL and much higher fines.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.