What type of failure has occurred when a new product introduction loses money for the company?

Contraventions of the Competition and Consumer Act 2010 (CCA) and the Australian Consumer Law (ACL) will attract fines and pecuniary penalties.

Fines are monetary fines (criminal penalty) imposed by courts in criminal proceedings. Criminal standard of proof is required.

Pecuniary penalties are monetary fines imposed and collected by civil courts. The civil standard of proof is applied (namely the balance of probabilities).

A number of factors are taken into account by the Court in determining the appropriate fine or level of penalty. The calculation of the monetary amount of a penalty is dependent on ‘penalty units’ that are set out in the Crimes Act 1914. On 1 July 2020 the value of the penalty unit for Commonwealth criminal offences increased from $210 to $222.

On 26 March 2018, the Organisation for Economic Cooperation and Development (OECD) hosted an Australian Penalties Workshop where it released its independent report, Pecuniary Penalties for Competition Law Infringements in Australia. The report compared Australia’s system of pecuniary penalties with other comparator jurisdictions and considered whether Australia’s current level of competition law penalties are sufficient to effect deterrence, particularly for large businesses. The report and related materials are available from the OECD website.

Part IV of the CCA prohibits anti-competitive practices such as:

• cartel conduct
• exclusionary conduct
• misuse of market power
• exclusive dealing
• resale price maintenance, and
• anticompetitive mergers.

The maximum penalties for breaches of Part IV for each act or omission will be the greater of:

For corporations:

• $10,000,000
• If Court can determine "reasonably attributable" benefit obtained, 3 times that value, or
• If Court cannot determine benefit, 10% of annual turnover in preceding 12 months.

For individuals:

The penalty provisions under s45D of Part IV are:

• For corporations $750,000 and for individuals $500,000.

The CCA prohibits cartels under civil law and makes it a criminal offence for businesses and individuals to participate in a cartel.

Individuals found guilty of cartel conduct could face criminal or civil penalties, and corporations could face fines or pecuniary penalties for each criminal cartel offence or civil contravention.

See: Cartels

Cartels - individuals

Individuals found guilty of cartel conduct could face criminal or civil penalties, including:

• up to 10 years in jail and/or fines of up to $420,000 per criminal cartel offence
• a pecuniary penalty of up to $500,000 per civil contravention.

It is illegal for a corporation to indemnify its officers against legal costs and any financial penalty.

Other forms of relief relating to the cartel offence include injunctions, orders disqualifying a person from managing corporations and community service orders.

Cartels - corporations

For corporations, the maximum fine or pecuniary penalty for each criminal cartel offence or civil contravention (whichever applies) will be the greater of:

• $10,000,000
• three times the total value of the benefits obtained by one or more persons and that are reasonably attributable to the offence or contravention where benefits cannot be fully determined
• 10% of the annual turnover of the company (including related corporate bodies) in the preceding 12 months.

The maximum penalties per breach of the ACL including unconscionable conduct, making false or misleading representations, and supplying consumer goods or certain services that do not comply with safety standards or which are banned:

For corporations, will be the greater of:

• $10,000,000
• 3 times the value of the benefit received, or
• 10% of annual turnover in preceding 12 months, if court cannot determine benefit obtained from the offence.

For individuals:

Infringement notices

Where the ACCC has reasonable grounds to believe a person has breached the provisions of the ACL it can issue an Infringement Notice in respect of the following:

• unconscionable conduct
• false or misleading conduct
• pyramid selling
• certain product safety and product information provisions
• failure to respond to a substantiation notice
• false or misleading information in response to a substantiation notice.

The penalty amount in each infringement notice will vary, depending on the alleged contravention, but in most cases is fixed at:

• $13,320 for a corporation (or $133,200 for a listed corporation) and
• $2,664 for an individual

for each alleged contravention.

In connection with substantiation notices, the infringement notice penalty amount for failure to comply with a substantiation notice is:

• $6,660 for a corporation and
• $1,332 for an individual.

The infringement notice penalty amount for providing false or misleading information, under a substantiation notice, is $11,100 for a corporation and $2,220 for an individual.

Gift cards

The maximum pecuniary penalty for a breach of the Rules for gift cards is $30,000 for a body corporate and $6,000 for an individual. 

Where the ACCC has reasonable grounds to believe a breach of the gift card provisions has occurred we can issue an infringement notice. Current infringement notice penalties for the gift card provisions are $12,210 for a corporation and $2,442 for an individual.

Section 155: Penalties can be granted for non-compliance with a s155 Notice. The Court can impose a fine of up to $22,200 or 2 years imprisonment for individuals, or up to $111,000 for companies.

Section 87B: Court can make an order directing the person to pay to the Commonwealth an amount up to the amount of any financial benefit that the person obtained directly or indirectly that can be attributed to the breach.

The Horticulture Code of Conduct contains financial penalties for:

• breaches of certain provisions, up to $66,600
• infringement notices for body corporate, $11,100
• infringement notices for individuals and other entities, $2,220.

The Dairy Code of Conduct contains financial penalties for:

• breaches of civil penalty provisions by a processor that is not a small business entity, up to $66,600
• breaches of civil penalty provisions by a processor that is a small business entity, up to $22,200
• breaches of civil penalty provisions by a farmer, up to $22,200
• infringement notices for body corporates, $11,100
• infringement notices for individuals and other entities, $2,220.

The franchising code contains financial penalties for breaches of certain provisions.

The penalty amount varies depending on the alleged contravention:

• in most cases, up to $133,200
• infringement notices for body corporates, $11,100
• infringement notices for individuals and entities $2,220.

Greater financial penalties

Some provisions of the franchising code contain greater financial penalties. These provisions relate to:

• disclosure of materially relevant facts (cl 17(1) and (2))
• restricting the freedom of association of franchisees or prospective franchisees (cl 33), and
• terms of agreement for new vehicle dealership agreements (cl 46A(1)-(3) and cl 46B).

For these provisions, the maximum pecuniary penalty per contravention is: 

for corporations, will be the greater of:

• $10,000,000
• 3 times the value of the benefit received, or
• 10% of annual turnover in preceding 12 months, if court cannot determine benefit obtained from the offence.

for individuals, will be:

Significant penalties apply to data providers for failing to comply with the obligations of the scheme.

A failure to comply with the main obligations of the scheme can attract:

• a maximum penalty of $10 million for a body corporate, or

• $500,000 for persons other than a body corporate.

The ACCC can also issue infringement notices up to 600 penalty units for a body corporate ($133,200) for breaches of certain obligations.

If we believe that a business has charged a payment surcharge which is excessive, we can issue an infringement notice to the business:

• 600 penalty units ($133,200) for a listed corporation
• 60 penalty units ($13,320) for a body corporate
• 12 penalty units ($2,664) for a person other than a body corporate.

We can also take court action against a business, in which we can seek pecuniary penalties:

• 6,471 penalty units ($1,436,562) for a body corporate
• 1,295 penalty units ($287,490) for a person other than a body corporate.

We can also seek redress on behalf of a group of consumers who have been charged an excessive surcharge, as well as seek injunctions and various non-punitive orders (including community service and probations orders).

In addition to ACCC enforcement action, an individual who suffers loss or damage due to a breach of the ban can bring an action seeking damages.

Legislation

ACCC announces priorities and strives for tougher penalties