Labor Government’s plans for “better” competition and consumer law

Elizabeth Richmond, Sophia Haq and Natalie Antoon
07 Jul 2022
Time to read: 3.5 minutes

Higher penalties, changes to unfair contract terms laws and a new enforcement mechanism may be on the way.

The Labor Government’s "Better Competition" statement promises to “tackle anti-competitive behaviour” by increasing penalties and establishing a new "Super Complaint" function at the Australian Competition and Consumer Commission (ACCC). While the well-intentioned proposal expresses a desire to improve competition in Australia for the benefit of consumers and small businesses, the details are scarce so it is not yet clear how any developments will play out in practice.

Penalty increase from $10m to $50m

Labor has stated an intention to deter anti-competitive conduct by increasing penalties from $10m to $50m. Currently, the maximum penalty for businesses that have contravened the Competition and Consumer Act 2010 (Cth) (CCA) is the greater of:

  • AU$10 million;
  • (if the court can determine the total value) three times the value of any benefit from the contravention; or
  • (if the value of the benefit cannot be determined) 10% of Australian turnover in the 12 month period prior to the contravention.

Since the maximum is the highest of the three options and the ACCC has been increasingly relying on the third limb when seeking penalties, increasing the $10m option to $50m may not have a significant impact on the largest corporations. It will, however, be a substantial change for many.

How do Australian competition penalties compare to other jurisdictions?

Labor has said it wants to bring competition penalties under Australian law closer in line with penalties imposed in other jurisdictions. In Europe companies breaching competition laws can be penalised up to 10% of global turnover for the entire corporate group in the prior year. Meanwhile in the USA, companies can be penalised up to USD100m per offence.

Labor’s penalty increase proposal may stem from ACCC concern after an Organisation for Economic Co-operation and Development (OECD) 2018 report found that the average and maximum competition penalties in Australia are substantially lower than those in comparable jurisdictions. To be in line with those jurisdictions (such as Europe, the UK, Germany, Japan, Korea and the USA) the average Australian competition penalty would need to be multiplied by a factor of 12. Even after the proposed increase, there would be some way to go to catch up.

Will increased penalties also apply to contraventions of consumer law?

It is not entirely clear. Although Labor states the penalty increase is to strengthen competition laws, the examples given in the statement emphasise consumer protection issues – for example, power companies lying about the reasons for increased charges, or booking platforms falsely claiming to show the best deals (both forms of misleading or deceptive conduct).

Consumer penalties were increased in 2018 to align with competition penalties and further amendment of the kind proposed would be a significant shift in a short time. However there has been no subsequent statement which clarifies the matter – so we will have to wait and see.

Establishing a "Super Complaint" function at the ACCC

The proposed new function would allow certain consumer groups (eg. CHOICE) and business sector advocates to enlist the ACCC to investigate serious complaints. Labor notes this proposal is meant to make the ACCC more responsive to the needs of consumers and businesses. Many questions remain on how a Super Complaint function will work, but a similar process currently exists in the UK.

How do "super complaints" work in the UK?

Super Complaints can be made by designated bodies to three UK regulators (competition, financial and payment systems). Super Complaints can be made by these designated bodies where "any feature, or combination of features, of a market in the UK for goods or services is or appears to be significantly harming the interests of consumers". Regulators then have discretion to either take enforcement action, agree voluntary changes with the industry, investigate the market, or find the complaint is unfounded or requires no action.

How will it work in Australia?

All we know is that Labor’s intention is that certain groups would be able to enlist the ACCC to investigate serious complaints. The following issues remain unclear:

  • Status of groups who can make Super Complaints: currently, anyone can report an issue to the ACCC. While they do not resolve these complaints, the ACCC use them to identify areas where enforcement action should be taken. Will the groups who can make Super Complaints have an elevated status, where the ACCC gives a priority focus to their complaints over the complaints of ordinary consumers and businesses?
  • ACCC resourcing: will the ACCC receive more resources to establish and run a Super Complaint function, or will it come from their existing budget? Funding a Super Complaint function may be at odds with Labor’s economic recovery plan to reduce government spending. On the other hand, expecting the ACCC to fund the Super Complaint process from its current budget may stretch its resources or require the ACCC to prioritise certain of its processes. Neither of the latter scenarios seems acceptable when the objective is enhanced consumer protection.
  • Effectiveness: is allocating additional resources such as the Super Complaint function to trusted consumer groups more effective than implementing tools to identify and manage issues earlier at an industry level? For example, to address the increasing prevalence of phone and SMS scams, the Australian Communications and Media Authority (ACMA) has worked with telcos to develop industry codes which empower telcos monitor and block phone and SMS scams from reaching consumers. This industry level intervention has reduced phone scam complaints to the ACCC by almost half in 2022. Similarly a Super Complaint function may be useful to identify problems which the ACCC are not aware of, then other tools such as industry codes could be implemented to tackle the issue.

Unfair contract terms

In addition to the proposals above, Labor has also released a separate statement supporting amendments to the Unfair Contract Terms (UCTs) regime. Labor confirmed it will make the use or reliance on UCTs illegal and subject to penalties. It will also broaden the UCT regime to protect businesses with fewer than 100 staff or a turnover of less than $10 million. For more information on proposed amendments to the UCT regime, see our overview.

Getting ready for the changes to competition and consumer law

Businesses should keep watch on the status of these proposals as they develop and more information is released. But with penalty increases on the horizon, it is more important than ever to make sure you comply with the CCA, have current competition and consumer compliance protocols in place, and do not use or rely on UCTs in your standard form contracts.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.