The Labor Government’s plans for ‘better’ competition and consumer law
Higher penalties, changes to unfair contract terms laws and a new enforcement mechanism could be on the way.
The Labor government’s ‘Better Competition’ declaration promises to ‘tackle anti-competitive behaviour’ by increasing penalties and creating a new ‘super complaint’ function at the Australian Competition and Consumer Commission (ACCC). While the well-intentioned proposal expresses a desire to improve competition in Australia for the benefit of consumers and small businesses, details are scarce, so it is not yet clear how the developments will play out in practice.
Increase in penalties from $10 million to $50 million
Labor has declared its intention to deter anti-competitive behavior by increasing penalties from $10 million to $50 million. Currently the maximum penalty for businesses that have breached the Competition and Consumer Act 2010 (Cth) (ACC) is the greater of:
- AU$10 million;
- (if the court can determine the total value) three times the value of any benefit derived from the contravention; Where
- (if the value of the benefit cannot be determined) 10% of Australian turnover in the 12 month period preceding the offence.
Given that the maximum is the highest of the three options and that the ACCC is increasingly relying on the third limb to seek sanctions, increasing the option from $10 million to $50 million might not have a significant impact on larger companies. It will, however, be a substantial change for many.
How do Australian competition penalties compare to those in other jurisdictions?
Labor has said it wants to bring competition penalties under Australian law closer to penalties imposed in other jurisdictions. In Europe, companies that violate competition laws can be fined up to 10% of the overall turnover for the the whole group of companies in the previous year. Meanwhile, in the United States, companies can be penalized up to $100 million per violation.
The proposed labor penalty increase may stem from ACCC concern after an Organization for Economic Co-operation and Development (OECD) The 2018 report found that the average and maximum competition penalties in Australia are significantly lower than in comparable jurisdictions. To be consistent with these jurisdictions (such as Europe, UK, Germany, Japan, Korea and USA), the average Australian competition penalty would need to be multiplied by a factor of 12. Even after the proposed increase, there would be some way to go to catch up.
Will tougher penalties also apply to breaches of consumer law?
It’s not entirely clear. Although Labor says the increased penalties are aimed at strengthening competition laws, the examples given in the statement emphasize consumer protection issues – for example, electricity companies lying about the reasons increased charges, or booking platforms falsely claiming to offer the best deals (both forms of misleading or deceptive conduct).
Sanctions against consumers were increased in 2018 to align with competition sanctions and a further amendment of the type proposed would be a significant change in a short time. However, no subsequent statements have clarified the matter – so we’ll have to wait and see.
Implementation of a “Super Complaint” function at the ACCC
The proposed new feature would allow certain consumer groups (eg CHOICE) and business sector advocates to call on the ACCC to investigate serious complaints. Labor notes that this proposal aims to make the ACCC more responsive to consumer and business needs. Many questions remain about how a Super Complaint feature works, but a similar process currently exists in the UK.
How do ‘super complaints’ work in the UK?
Super complaints can be lodged by appointed bodies with three UK regulators (competition, financial and payment systems). Super Complaints can be made by these appointed bodies where “any feature or combination of features of a UK market for goods or services significantly harms or appears to harm the interests of consumers”. Regulators then have the discretion to take enforcement action, agree voluntary changes with industry, investigate the market, or conclude that the complaint is unfounded or requires no action.
How will this work in Australia?
All we know is that the intention of the Labor Party is that certain groups could call on the ACCC to investigate serious complaints. The following issues remain unclear:
- Status of groups that can make Super Complaints: currently, anyone can report a problem to the ACCC. Although they do not resolve these complaints, the ACCC uses them to identify areas where enforcement action needs to be taken. Will the groups that can file super complaints have a high status, where the ACCC will prioritize their complaints over ordinary consumer and business complaints?
- ACCC Resources: Will the ACCC receive more resources to establish and run a super complaint function, or will it come from its existing budget? Funding a super complaint function may be at odds with the Labor Party’s economic stimulus plan to cut public spending. On the other hand, expecting the ACCC to fund the super complaint process from its current budget may stretch its resources or force the ACCC to prioritize some of its processes. Neither of these two scenarios seems acceptable when the objective is to strengthen consumer protection.
- Efficiency: Is allocating additional resources such as the Super Complaint feature to trusted consumer groups more effective than implementing tools to identify and manage issues earlier at an industry level? For example, to address the growing prevalence of phone and SMS scams, the Australian Communications and Media Authority (ACMA) has worked with telecom operators to develop industry codes that enable telecom operators to monitor and prevent phone and text message scams from reaching consumers. This industry-level intervention reduced phone scam complaints to the ACCC by nearly half in 2022. Similarly, a super complaint feature can be useful in identifying issues that the ACCC is not aware of. current, then other tools such as industry codes could be implemented to tackle the problem. publish.
Unfair contract terms
In addition to the above proposals, Labor has also issued a separate statement supporting the Unfair Contract Terms Amendments (CPU) regime. The work confirmed that it would make the use or reliance on CPUs illegal and subject to penalties. It will also expand the UCT regime to protect businesses with fewer than 100 employees or less than $10 million in revenue. For more information on the proposed changes to the UCT scheme, see our overview.
Prepare for changes in competition and consumer law
Companies should monitor the status of these proposals as they develop and more information is released. But with increased penalties on the horizon, it’s more important than ever to make sure you’re CCA compliant, that you have current competition and consumer compliance protocols in place, and that you do not use or rely on CPUs in your standard contracts.