INSIGHT

What to expect from the new Labor Government on competition policy? Part 1

By Felicity McMahon, Sheridan Wood
Competition law Consumer law

Key areas of focus for the Labor Government 6 min read

On 20 May 2022, the new Labor Government published a competition policy outline that pointed to a strong focus on consumer and small business protections. The objectives shared included:

  • increasing maximum penalties for anti-competitive behaviour from $10 million to $50 million;
  • introducing a 'Super Complaint' function within the ACCC; and
  • Making unfair contract terms (UCT) illegal and subject to ACCC investigation and pecuniary penalty, consistent with legislation that was before parliament prior to it being prorogued for the election.

According to the Labor Government, increased penalties and the Super Complaint function are necessary to address anti-competitive behaviour that is driving up the cost of living for Australian families. In terms of the UCT law reform, the Labor Government views small businesses as having suffered enough with unpredictable cash flows and staff shortages in the last few years without the added pressure of accepting unfair terms.

Potential changes to Australia's mergers regime, first proposed by the Australian Competition and Consumer Commission (ACCC) last year under previous Chair Rod Sims, did not get a mention. While Andrew Leigh, speaking in February 2022 as Labor's Shadow Assistant Treasury spokesperson, has previously supported taking a fresh approach to merger laws to combat increasing market power both hurting consumers and small businesses, and slowing productivity and wages, we are yet to hear about the Labor Government's official position on merger reforms.

Increasing penalties

The Labor Government has said it will strengthen the Competition and Consumer Act 2010 (Cth) (CCA) by increasing maximum penalties for anti-competitive behaviour. Currently, the maximum fine or pecuniary penalty for each criminal or civil cartel offence is the greater of:

  • $10 million;
  • three times the total value of the benefit the organisation received from the breach; or
  • 10% of annual turnover of the business in the preceding 12 months if the benefit cannot be determined.

The Labor Government's competition policy outline intends to increase the maximum penalty fine from $10 million to $50 million in an effort to ensure the price of misconduct is 'high enough to deter unfair activity'. This move is intended to bring penalty figures closer to fines imposed in other jurisdictions (eg maximum fines of 10% of global turnover can be imposed by the European Commission for contraventions of European competition laws).

The proposals to increase penalties are consistent with previous Labor Party policy positions citing the need to strengthen competition laws by increasing penalties announced in 2019 during policy proposal statements, and more recently at the 2021 Special Platform Conference. Labor forecasts that this increase in penalties will raise $558 million.  

Super Complaint function

Another competition policy objective of the Labor Government is to introduce a 'Super Complaint' function within the ACCC. The Labor Government has said the mechanism will mean trusted consumer groups such as CHOICE and business sector advocates will be able to direct the ACCC to investigate serious complaints of behaviour brought to its attention and will increase the overall responsiveness of regulator action to the needs of consumers and businesses.

Mr Leigh relayed in 2019 that this policy objective is inspired by a similar UK function where the Competition and Markets Authority (CMA) is required to consider and publish how it proposes to deal with the complaint made by designated consumer groups within 90 days after receipt of the complaint. At that time, the proposal received positive support from the Council of Small Businesses of Australia (COSBOA) saying, 'This is good news as we need better ways for complaints to be handled – faster and with less process and red tape'.1 Mr Leigh said the first step in implementing this function will be to hold consultations to establish which groups the power will apply to.

It will be interesting to see what the effect of this change is in practice. It is possible this proposal will result in more market studies being conducted by the ACCC. This has often been the result when Super Complaints have been lodged with the CMA and its predecessor, the OFT, in the past. However, it is unlikely to significantly increase investigations into anti-competitive conduct as complaints can already be lodged with the ACCC about alleged anti-competitive conduct, including anonymously reporting cartel conduct.

The ACCC is yet to comment on this proposal.

Unfair contract terms

In February 2022, legislation proposing changes to the UCT regime in Australia was introduced to Federal parliament. The proposed reforms before parliament included:

  • Illegality: entering a contract in which a business proposed a UCT, or sought to rely on a UCT, would be unlawful and exposed the business to the risk of serious civil penalties to the maximum extent under the Australian Consumer Law (ACL);
  • Expanded scope: a broader range of small business contracts captured, as the financial thresholds were removed, and the definition of 'small business' expanded to capture parties that employ fewer than 100 people or have an annual turnover of less than $10 million; and
  • New powers: empowering courts to make more flexible orders to prevent or reduce loss or damage.

However, the bill containing these reforms lapsed when Parliament was prorogued with the announcement of the federal election held in May 2022.  

In the days before the election, the Labor Party announced its intention to proceed with the UCT reforms if elected to form government, including at a minimum that:

  • the proposal, reliance on or inclusion of any UCTs will be illegal;
  • the threshold of what constitutes a 'small business' will be increased to include businesses with fewer than 100 staff members or annual turnover less than $10 million.

This is consistent with the legislation that was before Parliament before the election.

The ACCC has long campaigned for this change, with former ACCC Chair Rod Sims saying that 'unfair contract terms and mandatory codes are only as good as their enforceability is, and, as a regulator, we can only be as effective as our enabling legislation allows us to be.'2

What these policy objectives mean for your organisation

The ACCC has sought higher penalties for anti-competitive conduct for some time to help deter contraventions by ensuring that companies cannot expect anti-competitive conduct to be a mere 'cost of doing business'. The combination of the initiatives proposed, including higher penalties and the prospect of additional ACCC investigations resulting from the Super Complaints process, underscores the importance of ensuring your business operations are compliant with the CCA. The increase in the maximum available penalties reflects the seriousness with which violations of the CCA will be treated - an attitude adopted by courts in imposing increasing penalties in recent periods, as detailed in our article.

For the proposed UCT reforms, your business should ensure its existing and standard-form template contracts do not contain any UCTs to avoid attracting ACCC scrutiny and penalties. For further information on what this means for your business, see our Insight: Significant changes to unfair contract terms laws ahead.

Footnotes

  1. Matthew Elmas, 'Business groups will be empowered to force ACCC investigations under Labor's 'super-complaint' policy', Smart Company (online, 1 February 2019) <Business groups will be empowered to force ACCC investigations under Labor's "super-complaint" policy - SmartCompany>.

  2. Rod Sims, 'Major changes needed to get rid of unfair contract terms' (Speech, COSBOA National Small Business Summit, 31 August 2018).