Australian Government consulting on a draft bill to increase penalties to eye-watering levels
19 August 2022
19 August 2022
On 18 August 2022, the Government released for consultation the Treasury Laws Amendment (Competition and Consumer Reforms No. 1) Bill 2022: More competition, better prices.
The draft bill proposes to significantly increase the maximum penalties applicable for certain contraventions of the Competition and Consumer Act 2010 (CCA). The Bill is intended to fulfil one of the Government's election promises, to strengthen Australia's competition laws.
The draft bill proposes to increase the maximum civil and criminal penalties for corporations to the greatest of:
For individuals, the draft bill proposes to increase the maximum civil penalty from $500,000 to $2.5 million. The bill does not propose to change the maximum criminal penalties for individuals (which include imprisonment for up to 10 years and a fine of up to 2000 penalty units). It is unclear whether this is intentional or an oversight in the bill.
The draft Bill also proposes to increase the civil penalties for contravention of the "competition rule" in Part XIB of the CCA, which applies to corporations and individuals the telecommunications industry.
The bill proposes that the increased maximum civil and criminal penalties would have widespread, but not blanket application. They would nonetheless apply to arguably the most significant parts of the CCA and Australian Consumer Law.
Key competition provisions to which the new penalties would apply include:
Key consumer provisions to which the new penalties would apply include:
The proposed increased penalties will not apply to the civil penalty provisions of Industry Codes, along with a number of other carve-outs. As the general prohibition on misleading or deceptive conduct is not a civil or criminal penalty provision, the proposed new penalties will also not apply to it (although such conduct is often alleged with other Australian Consumer Law prohibitions which attract penalties and to which the proposed increased penalties will apply).
The draft bill introduces a new concept known as "adjusted turnover", which replaces annual turnover in the third limb of the maximum penalty calculations. Under the draft bill, "adjusted turnover" means the sum of the value of all the supplies made by the body corporate or related bodies corporate in connection with Australia's indirect tax zone. There are exceptions for supplies made between related bodies corporate, supplies not in connection with the body corporate's business, supplies that are input taxed and supplies that are not for consideration. The exception for supplies that are not connected with Australia has been updated to cover supplies that are not connected with the indirect tax zone.
The draft bill also introduces the new concept of the "breach turnover period". The breach turnover period will generally begin at the start of the month in which the body corporate began committing the offence or the contravention started occurring, and end at the end of the month in which the body corporate ceased committing the offence or contravention (or was charged with the offence or proceedings were commenced). The minimum breach turnover period is 12 months, and this will be adopted if the actual breach turnover period is shorter, or if the relevant contravention / offence is an "instantaneous" one, such as making a contract, arrangement or understanding without giving effect to it. There is no maximum turnover period. This proposed amendment allows a potentially significantly longer period to be incorporated into the maximum penalty calculation, if the conduct has continued over more than a year.
If the draft bill is passed without amendment, the increased penalties will commence the day after the bill receives Royal Assent. However, updated penalties will only apply in relation to acts, omissions or offences that occur on or after commencement of the relevant Schedule of the Act.
The Government is currently completing a short consultation period on the draft bill, concluding on 25 August 2022. The brevity of the consultation may signal an intention to bring the bill before Parliament sooner rather than later. The Spring sittings of Parliament commence on 5 September.
The draft bill does not address the second part of the Government's election promise in relation to competition – the proposal to establish a ‘Super Complaint’ function within the Australian Competition and Consumer Commission. Little detail is yet available about this proposal, but it appears to be intended to give trusted consumer groups and business sector advocates a "hotline" to the ACCC to report serious complaints. In addition to these reforms, the Government has foreshadowed introducing penalties for unfair contract terms. The unfair contracts bill is also expected to be introduced in the Spring sittings of Parliament.
Authors: Melissa Fraser, Partner; and Amanda Tesvic, Senior Expertise Lawyer.