Higher penalties for consumer law breaches take effect.

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Overview

On 23 August 2018 the Commonwealth Parliament passed amendments to the Competition and Consumer Act 2010 (Cth) to significantly increase the penalties for breaches under the Australian Consumer Law (ACL). This follows recommendations arising from the review of the ACL which reported in 2018.

The increased penalties are as follows:

  • ·for companies: a breach of the ACL has been increased from $1.1 to the greater of:

    • $10 million;

    • 3 times the value of the benefit received by the company; or

    • where the benefit cannot be determined, 10% of the company’s annual turnover in the preceding 12 months;

  • for individuals: a breach of the ACL has been raised from $220,000 to $500,000 per breach.

Consequences

The financial penalty increases are substantial – particularly where there are multiple breaches which can increase the amount of the maximum penalties exponentially.

The increased penalties will have a profound impact on businesses who are found in breach of the ACL and where the Court imposes a financial penalty order. Potential breaches of the ACL which will attract the increased penalties include misleading and deceptive statements about goods or services, unconscionable conduct and other unfair commercial practices as well as breaches of product safety and information standards set out in the ACL.

Recent cases have shown an increased willingness on the Courts to impose substantial financial penalties for breaches of the ACL - even under the old penalty regime. For example:

  • ·in mid 2018 Meriton was ordered to pay a pecuniary penalty totalling $3 million in respect of multiple instances of misleading and deceptive conduct arising from the posting of online serviced accommodation reviews on TripAdvisor;

  • in April 2018 Ford was ordered to pay financial penalties totaling $10 million in respect of multiple counts of unconscionable conduct arising from incorrectly advising consumers that the shuddering of some vehicles was caused by their driving style when it was, in fact, caused by an inherent defect in the PowerShift transmission of certain vehicle models.

We can expect to see much higher pecuniary penalty orders when cases come before the Courts under the new penalty regime. The laws are likely to encourage the ACCC to undertake an even greater number of enforcement actions.

Considerations as to the quantum of pecuniary penalty orders

If a business does breach the ACL and a pecuniary penalty order is imposed, then the amount of the pecuniary penalty will depend on a variety of factors. Those factors include the nature of the conduct and the damage caused, whether the conduct was deliberate or inadvertent, whether the offender received financial gain from the conduct, whether the conduct has occurred previously, the length of time over which the conduct occurred and the size and culture of the offending company.

Key Take-Aways

It is now more important than ever that businesses take all necessary precautions to avoid non-compliance with the Australian Consumer Laws - otherwise there will be the risk of substantial financial penalties. It is imperative that businesses have in place all necessary policies, procedures and training to reduce the risk of potential breaches. The existence of such procedures will also help to minimise the financial penalties which may be imposed if breaches do arise.

 

For further information please don’t hesitate to contact:

Daniel St George
Senior Associate
daniel@couttslegal.com.au
1300 268 887

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.