As we mentioned in July, the Labor Government’s "Better Competition" statement promised to “tackle anti-competitive behaviour” by increasing penalties and establishing a new "Super Complaint" function at the Australian Competition and Consumer Commission (ACCC).
A draft bill, Treasury Laws Amendment (Competition and Consumer Reforms No. 1) Bill 2022: More competition, better prices, together with explanatory material, has now been released for public consultation.
This exposure draft legislation focuses on one part of the "Better Competition" statement, namely a substantial increase in penalties for anti-competitive conduct under Part IV of the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL). There are also proposed changes to the relevant provisions of Part IVBA (News Media and Digital Platforms Mandatory Bargaining Code); Part XIB (the Telecommunications industry); Part XICA (the Electricity Industry) of the CCA.
Why are these changes to penalties being made?
The intention is to increase the severity of Australia's penalty regime and facilitate the imposition of penalties that are more in line with overseas jurisdictions. As we previously noted, 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.
The Government wants the price of misconduct to be high enough to deter unfair activity and improve competition, and to achieve deterrence in consumer cases. By strengthening penalties, the intention is to promote competition and better corporate behaviour in Australia, thus ensuring consumers obtain a robust level of protection.
The significant penalty increases at a glance
The proposed increase in maximum penalties is a very significant step-up from existing penalties but will not have retrospective application. The new maximum penalty for a breach of a relevant offence or civil penalty provision for competition and consumer law breaches for corporations will be the greater of:
$50 million
This is a large increase from the current penalties (ie. an increase from $10 million to $50 million for corporations).
if the court can determine the value of the benefit obtained, three times the value of that benefit
This is unchanged from the current position.
if the court cannot 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.
This is an increase from the current position of 10% of annual turnover in the 12 months prior to the breach, to 30% of the adjusted turnover for the period of the breach.
The adjusted turnover will be calculated using the body corporate's turnover during the period of the breach, which may not be an annual period. Under the draft legislation, there is a formula for determining the period of time over which the adjusted turnover may be valued. However the minimum breach turnover period will be 12 months.
For individuals, there will also be a significant increase in the maximum pecuniary penalties, from $500,000 to $2.5 million.