Penalties

Increases to penalties for competition and consumer law breaches have been passed by Parliament. In addition, the same maximum financial penalties for businesses are being proposed for privacy law breaches, being the greatest of:

• $50,000,000;
• Three times the value of the "reasonably attributable" benefit obtained from the conduct, if the court can determine this; or
• If a court cannot determine the benefit, 30 per cent of adjusted turnover during the breach period.

For competition and consumer law breaches, this is a five-fold increase. The increases will come into effect once receiving Royal Assent. In relation to privacy law breaches this is a twenty-fold increase, and it is anticipated that the increase will be passed by Parliament this year.

These increases in penalties serve as a deterrent to ensure that businesses comply with competition, consumer and privacy obligations. In particular, businesses should ensure that they do not make false or misleading representations in relation to goods or services or privacy, or act unconscionably, in their dealings with other businesses as well as individuals.

It is also a timely reminder to businesses that they should implement and undertake regular competition, consumer and privacy training (and update any outdated compliance training), for both employees and contractors. There should be a particular focus on terms and conditions applicable to the supply of goods or services, advertising and contractual arrangements including with potential competitors, as well as personal information handling/ data management practices.

Penalties Introduced for Unfair Terms in Standard Form Contracts

There are existing laws relating to unfair terms in standard form contracts, also known as “take it or leave it” contracts. Examples of standard form contracts are numerous and include but are not limited to the following:

• Insurance policies
• Electricity/ gas supply contracts
• Leases
• Building contracts
• Loans
• Financial products and services
• Business sale / Land sale
• Franchising
• Retail supply
• Airlines & travel
• Terms & Conditions incorporating Privacy Policies
• Software and online services

At present, if a standard form contract incorporates an unfair term, a court can declare that term void, such that the infringing term will not apply. Parliament has now passed laws for the introduction of penalties for businesses that include unfair contract terms in their standard form contracts with consumers and small businesses. Accordingly, not only may a term be declared void but penalties may also apply for having included that term into a standard form contract.

There have been complaints regarding unfair terms in standard form contracts made not just by individuals but also by small businesses in their dealings with other (larger) businesses. Currently, individuals as well as small businesses employing fewer than 20 persons can take action for breaches under existing unfair term provisions. The new laws extend the reach to small businesses that employ fewer than 100 persons or have an annual turnover of less than $10 million being able to take action, and the new laws will apply irrespective of the value of the contract between the parties. In addition, the ACCC is already proactive in taking action against businesses for unfair term breaches and will soon be able to seek the imposition of penalties.

Businesses should review and amend their standard form contracts and terms and conditions to ensure compliance with the unfair term provisions of the Australian Consumer Law. It is intended that the amendments to these provisions will come into effect in 12 months.

Conclusion

The increases in penalties for competition, consumer and privacy law breaches should not be ignored by businesses. Previous increases in penalties in 2017 for competition and consumer law breaches resulted in a significant increase in penalties imposed by the Federal Court. This new set of amendments will likely result in equally significant increases in penalties. Historically, the ACCC has prioritised action in response to changes in competition and consumer laws, and we can certainly expect to see increased investigation and enforcement action by the ACCC in response to these changes. Certainly, with respect to the twenty-fold increase in penalties for privacy law breaches businesses must invest more resources in ensuring compliance with privacy law obligations.

As first steps, businesses are encouraged to update, implement and (re)deliver their competition and consumer compliance programmes and privacy compliance programmes, undertake privacy impact assessments, as well as review and amend relevant contracts, terms and conditions and privacy policies to ensure compliance with relevant laws.