"More Competition, Better Prices” bill proposes increased competition law penalties and reintroduces changes to unfair contract terms

A new federal bill has been proposed in relation to Australia’s competition and consumer laws, which if passed, will significantly increase the penalties payable by individuals and companies found to have contravened competition and consumer law provisions.

The “More Competition, Better Prices” bill also reintroduces proposed changes to the Australian Consumer Law unfair contract terms regime. Many of these changes had been proposed in a bill that lapsed earlier this year when the federal parliament was dissolved for the May election.

Increase in penalties

The broadest change proposed by the bill is to the maximum penalty caps across Australian consumer law[1].

In respect of an individual, the current maximum penalty of $500,000 is proposed to increase to $2.5 million.

For a corporation, the proposed new maximum penalty is the greater of:

• $50 million (increased from $10 million); or
• three times the value of the benefit obtained by the contravention.

If the value of the benefit is unable to be determined, the new bill proposes penalties of 30% of an adjusted turnover during the “breach turnover period” for the contravention (rather than the existing 10%).

“Breach turnover period” is a new concept introduced by this bill, and will mean the longer of either:

• the period of 12 months ending at the end of the month in which the corporation was found to have been committing the contravention, or when it was charged or proceedings commenced in respect of the contravention; or
• the period ending at the same time as the period determined above, and starting at the beginning of the month when the corporation was found to have commenced committing the contravention.

The rationale for these proposed significant penalty increases includes to ensure that the cost of a contravention is not seen as simply “the cost of doing business”, and acts as a strong deterrent to doing the wrong thing.

The proposed changes to penalties would also apply to the unfair contract terms regime as discussed below.

Unfair contract term changes

The proposed amendments to the unfair contract terms are (other than in respect of penalty - see above) largely unchanged from what was proposed earlier this year. In summary, the proposed amendments will have the effect of:

• extending the scope of small businesses captured by the protections;
• capturing more standard form contracts with an expanded definition that doesn’t rely on an upfront price payable threshold;
• clarifying the factors that comprise a standard form contract.

Our earlier article explains these changes in more detail (noting that the financial penalties outlined in that article are now proposed to reflect the above instead).

What does this mean for businesses?

Given the Government’s announcements around its commitment to strengthening the unfair contract term regime, businesses should take this period of time before any changes are made to the regime to ensure that any standard form contracts used within the business are reviewed to consider whether they may captured by the proposed regime.

Further, given the significant increase in proposed penalties across the competition and consumer laws, businesses should carefully review and consider their practices to identify any potential areas of risk of contravention, and take steps to mitigate any such risk prior to any amendments being made to the maximum penalties attracted by these contraventions. This includes areas such as cartel conduct, anticompetitive conduct, misuse of market power (including exclusive dealing, resale price maintenance) and consumer law contraventions.

[1] Competition and Consumer Act 2010 (Cth), including the Australian Consumer Law

This article provides general commentary only. It is not legal advice. Before acting on the basis of any material contained in this article, seek professional advice.