The Government has introduced legislation which:
- increases pecuniary penalties significantly for breaches of the Competition and Consumer Act 2010, the Australian Consumer Law and the ASIC Act: and
- redefines what is meant by ‘Small Business’ and gives the Courts broader powers to make orders concerning ‘unfair contracts’.
Large manufacturing and consumer good companies, in particular, automotive manufacturers, should pay particular attention to the increase in penalties, which can be linked to turnover, resulting in significant potential penalties for sizeable businesses selling high value goods.
There are two parts to the Bill. The first part deals with ‘more competition, better prices’ and the second part, with ‘unfair contract terms’.
‘More competition, better prices’
The Bill proposes 2 main changes:
- For companies, the maximum pecuniary penalties are increased to:
- $50 million, or
- three times the value of the benefit (if the court can determine the value of the benefit obtained), or
- if the court can’t determine the value of the benefit obtained, 30% of the adjusted turnover during the breach turnover period for the offence (minimum of 12 months)
Previously the maximum penalties stood at $10 million or 10% of the annual turnover of the company.
- For Individuals: an increase in maximum pecuniary penalties from $500K to $2.5million.
When you consider that prior to September 2018, the maximum penalty for a corporation breaching many of the provisions of the ACL was $1.1million, this represents a massive increase in just 4 years.
For automotive companies, this is particularly significant. Motor vehicles are high value items and consequently many automotive companies have high annual turnovers (some in excess of $1billion). With an annual turnover of $1billion, the maximum penalty a company could face for a breach of the ACL is $300 million – an increase by a factor of almost 300 in 4 years.
It’s hard to see why an increase in the maximum penalties will necessarily lead to better prices but this seems to be accepted by the Government.
‘Unfair Contract Terms’
There are a number of changes in this area, including:
- ‘Small businesses’ (which receive the protections offered by the Bill) are defined as employing fewer than 100 people or turning over less than $10million
- pecuniary penalties apply for seeking to rely on an ‘unfair term’,
- Courts have much broader powers to make orders concerning ‘unfair contracts’
This part of the Bill won’t take effect for 12 months.
The CIE Legal team will continue to monitor its progress and provide updates on the implications of the Bill for you.
