Competition and Consumer Law Update - Q&A: Increase in civil penalty maximums for contraventions of the Competition and Consumer Act 2010 (Cth)

With the passage of legislation increasing the quantum of penalties under the Competition and Consumer Act 2010 (Cth) (CCA), and the High Court’s confirmation in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 that ‘proportionality’ has no role to play in determining the quantum of civil penalties, it is expected that in 2023, we will see an increase in regulator action against businesses and individuals, and bigger financial consequences when they are successful.

Background

In October 2022, the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) introduced a tranche of changes to the CCA, including increasing the maximum in penalties that can be ordered for a variety of contraventions of the CCA. This includes unfair contract terms which, from 9 November 2023, will go from being void to being illegal.

The increased penalty maximums will apply to contravening conduct occurring on or after 9 November 2022.

What are the new maximums for civil penalties?

Maximum penalties for contraventions of civil penalty provisions have increased five-fold under this new regime.

The new maximum penalty against businesses will be capped at the greatest of

• $50 million;
• three times the value of the “reasonably attributable” benefit obtained from the conduct, if the court can determine this; or
• If a court cannot determine the benefit, 30 per cent of the business’s adjusted turnover during the breach period.

The new maximum penalty against individuals will be capped at $2.5 million.

What civil penalty provisions are covered?

Civil penalty provisions subject to the new maximums are set out at ss 224(3) and (3A) of the Australian Consumer Law (ACL) and s 76 of the CCA.

Examples of provisions that will be subject to the new maximums include:

• Part 2-2 of the ACL (unconscionable conduct);
• Part 3-1 of the ACL (unfair practices) (excluding multiple pricing provisions under ss 47-50);
• ss 106, 107, 118 and 119 of the ACL (supplying goods not compliant with safety standards);
• s 127 of the ACL (failing to comply with recall notices);
• ss 136 and 137 of the ACL (supplying goods that do not comply with information standards);
• Part IV of the CCA (Restrictive Trade Practices) (excluding boycotts under ss. 45D and 45DB of the CCA);
• ss 52ZC, 52ZH, 52ZS and 52ZZE of the CCA (news media and digital platforms mandatory bargaining code provisions); and
• ss153E, 153F, 153G, 153H, 153J and153K of the CCA (prohibited conduct in energy market provisions).

Do course of conduct limits still apply?

Course of conduct restrictions still apply to contraventions against civil penalty provisions. This means that if a person contravenes two or more civil penalty provisions by engaging in one course of conduct, they will not be liable for more than one pecuniary penalty in respect of the same conduct (s 224(4) of the ACL and s 76 of the CCA).

Will courts take into account the severity of the contravention when determining the civil penalty to award?

By a majority of 6:1, the High Court of Australia confirmed in Australian Building and Construction Commissioner v Pattinson [2022] HCA 13 that deterrence is the primary objective of civil penalty regimes: [9] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ.

Because of this, criminal law notions of proportionality (i.e., that the civil penalty must be proportionate to the seriousness of the conduct constituting the convention) do not constrain the court in awarding penalties under statute: [9] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ.

The upshot of this is that seemingly less “serious” breaches of statutes such as the ACL or the CCA may still lead to large penalties being imposed.

However, it is important to note that, even though the role of proportionality in the award of civil penalties has been limited, other features of a contravener’s conduct – and its consequences – may encourage courts to reduce the quantum of civil penalties.

In the December 2022 case of Australian Competition and Consumer Commission v Uber B.V. [2022] FCA 1466, the Federal Court of Australia declined to enforce the parties’ agreed penalty of $26 million against Uber for contraventions relating to misleading representations on the Uber app and website.

In lowering the penalty to $21 million, Justice O’Bryan took into account the following factors (at [128]):

• the absence of any significant loss or damage to consumers or drivers;
• the fact that His Honour had not been invited to find that the misrepresentation was deliberate;
• the absence of any benefit to Uber from the contravening conduct;
• the fact that no Uber Group corporate entity had previously been found to have contravened the ACL;
• the fact that Uber had ceased the conduct after the ACCC had raised concerns;
• the fact that Uber had exhibited a high level of cooperation with the ACCC; and
• the fact that, while Uber maintained policies and training designed to make relevant employees aware of competition and consumer protection laws, there had been no training given specifically in relation to Australian consumer protection laws.

What are the key takeaways?

1. The maximum penalties that can be awarded for contraventions of ACL and CCA civil penalty provisions have increased five-fold.

2. This increase, coupled with High Court authority that eradicates the need to consider proportionality of civil penalties to the severity of the contravening conduct, means that courts will be better equipped to award significantly larger penalties against contraveners of the ACL and CCA.

3. Although the role of proportionality has been limited, other features of contravening conduct can still mitigate civil penalties imposed under the ACL and the CCA.