Tough new penalties on the way for companies that breach consumer law

Companies that are found to have breached Australian Consumer Law now face significantly higher penalties, under changes passed by the Federal Parliament on Thursday.

Back in May 2017, the Coalition revealed plans to introduce tougher penalties for Australian Consumer Law breaches, bringing them in line with existing penalties for competition breaches under the Competition and Consumer Act 2010.

Previously, companies faced a maximum penalty of $1.1 million per consumer law breach.

Those penalties will now be increased to $10 million, or three times the value of the benefit the company received, or in the case that cannot be determined, 10% of the company’s annual turnover in the preceding 12 months.

For individuals, the penalties have increased from $220,000 to $500,000 per breach.

The increased penalties follow a review of Australian Consumer Law conducted by the Commonwealth, state and territory governments throughout 2016 and 2017.

To date, the highest penalty ordered by the Federal Court for consumer law breaches is $10 million, in cases against Coles, Ford and Telstra.

In contrast, the highest ever penalty recorded by the court for a competition law breaches is $46 million, against Yazaki.

In a statement on Thursday, Australian Competition and Consumer Commission chair Rod Sims the changes will act as a deterrent for big businesses doing the wrong thing.

“We have strongly advocated for higher maximum penalties to enable courts to impose more substantial penalties,” Sims said.

“Penalties need to hit the bottom line so they are not simply seen as the cost of doing business. Perhaps more important, penalties need to be high enough to be noticed by boards and senior managers so that compliance with the law is a higher priority.”

While small and medium companies will also be subject to the new penalties, LegalVision principal Ursula Hogben told SmartCompany in 2016, SMEs may also benefit from the changes, as consumer law protections apply to all goods and services purchased for $40,000 or under.

“Increased enforcement should decrease consumer law breaches, which [affect] both individuals and SMEs as consumers, as many SME transactions fall within the ACL,” she said.

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