ACCC committed to tougher penalties for businesses in breach of the Australian Consumer Law

Throughout the 2014 calendar year, the ACCC’s consumer law activities involved:

• Instigating Federal Court proceedings in relation to 20 consumer protection matters and 8 competition matters;
• Accepting 14 consumer protection undertakings from businesses; and
• Issuing 15 infringement notices.

As a result of court action instigated by the ACCC throughout 2014, penalties totalling $14.5 million were paid by businesses found to be in breach of the Australian Consumer Law (ACL).

With the 2015 calendar year now underway, the ACCC has released its 2015 Compliance and Enforcement Policy (Policy). The Policy, published annually, lists the current priority focus areas for the ACCC. A key priority is the intention of handing down tougher penalties for breaches of the ACL.

Consequently, it is likely that the total sum of pecuniary penalties handed down by the ACCC in 2015 will be significantly higher than that which was imposed throughout 2014.

The ACCC has confirmed that the purpose of imposing penalties is to punish the wrongdoer and to deter others from breaching the ACL. As this reason is two-fold, we are likely to see significant penalties being imposed. This may go some way towards quietening the criticism faced by the ACCC surrounding the level of pecuniary penalties imposed in 2014 as a consequence of action taken. Penalties, such as that imposed on Flight Centre for price fixing (which was an 8 figure penalty), were ridiculed for merely representing the cost of doing business for large corporations.

However, the release of the Policy is not to say that a pecuniary penalty will always be imposed. The recent investigation by the ACCC into Kia’s “capped price” service offerings demonstrates that the ACCC may agree to settle an investigation with the business before proceeding to court where the business is willing to work with the ACCC to rectify the breach. In this case, the ACCC was concerned that Kia’s terms and conditions were misleading as they allowed the so called “capped price” to be increased at any time. Kia co-operated with the ACCC and agreed to:

•  amend its terms and conditions to ensure that its service prices were genuinely capped;
• write to affected consumers confirming the applicable capped service prices for their vehicle;
• offer to refund any amounts paid by consumers above the capped service prices that applied to their vehicle when it was purchased;

introduce systems to ensure that consumers are not charged higher prices than the capped service prices which applied when their vehicle was purchased; and

implement a consumer law compliance program.

Accordingly, the ACCC did not impose a pecuniary penalty as the ACCC was satisfied that the business was taking steps to become compliant with the ACL. However, given the release of the Policy, if Kia had not cooperated with the ACCC by taking steps to rectify the breach, the ACCC would likely have proceeded to court seeking a significant penalty.

Other areas of focus for 2015 include:

• Cartel conduct;
• The health sector;
• Product safety; and
• The introduction of a code of conduct for the grocery industry, designed to curb unfair practices in supermarket supply chains.

It is therefore more important than ever for businesses to ensure they are aware of their obligations under the ACL to ensure that they are not subject to penalties that could significantly impact the businesses ability to continue to operate.

If you would like more information on the ACL or to ensure your business documents are compliant, please contact:

Joanne D’Andrea
Principal
Harwood Andrews
T: 03 5226 8567
E: jdandrea@harwoodandrews.com.au

Nicole Stornebrink
Lawyer
Harwood Andrews
T: 03 5225 5209
E: nstornebrink@harwoodandrews.com.au