Companies breaching the Australian Consumer Law will be hit with higher fines after the Federal Parliament on Thursday passed a bill that aligns the maximum penalties with fines for competition law violations.
The legislation, which passed the Senate with no amendments, increases maximum financial penalties for ACL breaches from $1.1 million to either $10 million or three times the proceeds of misconduct.
Passage of the Treasury Law Amendment (2018 Measures No. 3) Bill, introduced in the House of Representatives in February, was hailed by the consumer watchdog, which has vowed to go after bigger fish with bigger fines.
“Companies will now face more serious financial consequences for breaching consumer law that align with competition law breaches,” ACCC Chair Rod Sims said, calling the legislation a “profound change”.
“We have strongly advocated for higher maximum penalties to enable courts to impose more substantial penalties. Penalties need to hit the bottom line so they are not simply seen as the cost of doing business. Perhaps more important, penalties need to be high enough to be noticed by boards and senior managers so that compliance with the law is a higher priority. ”
Under the law, penalties against individuals have also increased from $220,000 to $500,000. The law also allows for penalties against companies up to 10 percent of annual turnover if the proceeds of the consumer law breaches can’t be calculated.
The legislation follows recommendations to up the penalties by Consumer Affairs Australia and New Zealand (CAANZ).
The highest penalty imposed by the Federal Court for a corporate breach of the ACL was $10 million. The highest penalty issued by the court for a competition law breach was $46 million, against Japanese auto parts supplier Yazaki,
Coles was hit with the record penalty in December 2014 after the court found the supermarket chain had engaged in unconscionable conduct in its dealings with suppliers.
Ford Motor Company was ordered to pay $10 million in April this year, also for unconscionable conduct under the ACL. The car maker was found to have misled owners of Ford Fiesta, Focus and EcoSport vehicles fitted with defective PowerShift transmission.
The old penalty regime was recently criticised by Federal Court Justice Michael Lee, who remarked that a $9 million consumer case settlement between the ACCC and tech giant Apple Inc. was a “paradigm example” of the need for higher maximum fines.
“It is difficult to escape the conclusion that a penalty of $9 million to a corporation such as Apple Inc might be regarded as loose change,” Judge Lee said in begrudgingly signing off on the agreement.
Apple faced allegations that its repair policies breached the ACL. The company, which reported a net income of over US$48 billion for the year ending September 2017, settled the case on the eve of trial.
“One might think that this case is a paradigm example of the difficulties that can arise when a penalty regime fixes maximum penalties as to body corporates, without reference to size of the contravener,” Judge Lee said in July.