Allens

Competition, Consumer & Regulatory

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Client Update: Higher penalties for consumer law breaches come into effect

4 September 2018

In brief: New laws come into effect this week that substantially increase the maximum penalties for contraventions of the Australian Consumer Law. The changes were a headline recommendation of the Australian Consumer Law Review, and a range of other recommended reforms are currently before Federal Parliament. We take a look at the new penalties and at the status of other proposed changes to the Australian Consumer Law.

New, higher penalties now in force

The maximum penalties for contravening key provisions in the Australian Consumer Law (the ACL) have been substantially increased and now align with the maximum penalties for contravention of the competition law provisions.

 

Old maximum penalty

New maximum penalty

Companies

$1.1 million

  • $10 million
  • three times the benefit derived from the offending conduct or
  • 10% of annual turnover

whichever is greater

Individuals

$220,000

$500,000

The new penalties apply to false or misleading representations about goods or services, unconscionable conduct, and other unfair practices, such as bait advertising and pyramid schemes, and the provisions governing product safety and information standards.

Consumer law reform – where are we now?

The ACL Review was completed in March 2017 and included 19 legislative proposals. Of the proposals:

  • two have passed Parliament and come into effect;
  • nine are included in a Bill currently before the Senate;
  • six are the subject of further consultation; and
  • two proposals that the Government previously accepted appear to have been dropped or deferred.

Changes implemented into law

  • Reform of ACL penalties to bring them into line with competition law penalties
  • Extension of the application of warranties against defects to supplies of services

Changes currently before the Senate

  • Extension of application of unconscionable conduct provisions to listed public companies
  • Clarification that unsolicited consumer agreement provisions apply where the agreement occurs in a public place or the dealer could enter the place without invitation
  • Extension of false billing provisions, to apply where unsolicited services have not been provided
  • Clarification that the exemption to consumer guarantees regarding the transportation or storage of goods only applies where the buyer is purchasing for a business purpose
  • Expansion of ACCC's information-gathering powers to cover unfair contract terms, and compulsion of third parties to provide information about potentially unsafe goods or services
  • Changes made so that private litigants can rely on admitted facts (as well as findings of facts) from earlier proceedings
  • Definition of 'financial services' extended to includes 'financial products'
  • Changes made so that 'opt out' extras must be included in the single price requirement
  • Allowing community service orders to be performed by a third party engaged by the person in contravention

Changes subject to further consultation

  • Altering consumer guarantees so that if a good fails within a short period of time after purchase, consumers can elect for a refund or replacement without having to prove a major failure
  • Clarification that multiple non-major failures can constitute a major failure
  • Enhanced requirements regarding extended warranties information
  • Applying unfair contract terms regime to insurance contracts
  • Applying consumer guarantees regime to online auctions
  • Altering the definition of 'consumer' so that threshold of goods bought increases from $40,000 to $100,000
  • Introducing a general safety provision requiring traders to ensure the safety of a product before it enters the market

Changes that appear to have been dropped or deferred

  • Introduction of a definition of a 'voluntary recall'

What does this mean for you?

It is more important than ever that you ensure your business operations are compliant with the ACL. The ACCC has made clear that it will seek higher penalties for consumer law breaches. The increase in the maximum available penalties reflects the seriousness with which violations of consumer law are now treated.

The ACCC has been active in taking enforcement proceedings under the ACL, with a particular focus on consumer guarantees and unfair contract terms, both of which are enforcement priority areas for 2018. Although there are no penalties for breaching these provisions, where a company fails to comply, the ACCC has frequently brought actions for false or misleading representations and/or unconscionable conduct.

We can expect to see significantly higher penalties for violations of the ACL, particularly as a result of the turnover test. Ensuring that you have a culture of compliance is essential to minimising your exposure to potentially costly enforcement action.

For further information, please contact:

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