Legislation increases competition law breach penalties to up to 10 per cent of annual turnover

Legislation passed today will increase the financial penalties for competition law breaches to up to 10 per cent of annual turnover.

ACCC Chairman Rod Sims at Parliament House in Canberra. Picture Kym Smith

Legislation passed by Federal Parliament today will increase the maximum financial penalties for breaches of competition law to up to 10 per cent of annual turnover.

ACCC chairman Rod Sims welcomed the new “serious financial consequences”, saying that the previous penalties were too low to grab the interest of corporate Australia.

“Before those sized penalties just did not affect their share price,” he told The Australian.

“In future they will affect their share price.

“The investors will take notice, there management will take notice, and the boards will take notice — it will make a transforming difference to how corporate Australia reacts to Australian Consumer Law, and it will make huge difference to the effect they make to comply with it.”

The legislation will mean that the maximum penalty for a breach of Australian Consumer Law be raised from $1.1 million for companies to the greater of $10m, three times the value of the benefit received, or where the benefit cannot be calculated, 10 per cent of annual turnover in the preceding 12 months.

Penalties against individuals will also increase from $220,000 to $500,000 per breach.

“If you think about the penalties we’ve got from Coles, Ford, Telstra, where we’ve got $10 million, that penalty now for that sort of penalty could be well north of $100m and much more,” Mr Sims said.

The highest penalty the Federal Court has ordered for breaches of competition law is $46m, against Yazaki.

“We have strongly advocated for higher maximum penalties to enable courts to impose more substantial penalties,” he said.

“Penalties need to hit the bottom line so they are not simply seen as the cost of doing business.

“Perhaps more important, penalties need to be high enough to be noticed by boards and senior managers so that compliance with the law is a higher priority.”

It comes after Consumer Affairs Australia and New Zealand recommended the increase in a report following a review of Australia Consumer Law.