Companies face $1b fines under tougher consumer law penalties
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Companies face $1b fines under tougher consumer law penalties

Companies could face billion-dollar plus fines under sweeping changes to consumer laws squarely aimed at large corporates.

On Thursday, the Australian Competition and Consumer Commission chairman Rod Sims warned corporate Australia that if companies breached consumer laws, it was no longer just their reputation on the line.

“Previously they could breach the law with some reputational damage but no real financial damage - that changes today,” Mr Sims told Fairfax Media.

“If you [companies] breach the law, you will face a penalty that will affect your share price.”

ACCC chairman Rod Sims says companies now face serious financial damage if they breach consumer laws.

ACCC chairman Rod Sims says companies now face serious financial damage if they breach consumer laws.Credit:Dean Lewins

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Under the new laws which passed federal Parliament, maximum financial penalties a court can award have increased from $1.1 million per contravention to the greater of: $10 million; or three times the value of the benefit the company obtained from the act; or where the benefit cannot be calculated, 10 per cent of a company’s annual turnover.

Penalties against individuals under Australian Consumer Law [ACL] will also increase from $220,000 to $500,000 per breach.

Mr Sims said for a $10 billion company that would mean the maximum penalty could be $1 billion. “$1 billion versus $1.1 million is a stunning difference,” he said.

The highest penalty the Federal Court has ordered for breaches of Australian Consumer Law was $10 million in recent ACCC actions against supermarket giant Coles, car manufacturer Ford and telco Telstra.

The highest penalty the Federal Court has ordered for breaches of competition law is $46 million in an ACCC action against Yazaki.

“It’s hard to draw parallels, but we recently took action against Ford, Coles and Telstra, and in each case got $10 million,” Mr Sims said. “[Under the new laws] you could imagine those penalties could easily be north of $100 million,” he said.

The threat of such high penalties would be noticed by boards and senior managers, he said, and would hopefully result in greater compliance. “If you want your share price to keep rising and if you want to keep distributing dividends, then you better take this seriously," he said.

If you want your share price to keep rising and if you want to keep distributing dividends, then you better take this seriously.

ACCC chairman Rod Sims

CHOICE head of campaigns and policy Sarah Agar said previously penalties for breaches were not high enough to stop companies from behaving badly and could be considered as just the cost of doing business.

"For instance, Nurofen eventually got a $6 million fine in 2016 for its dodgy targeted pain relief products," she said. "This was pocket change compared to the profits the company would have made by tricking people into buying a product that was no more effective than cheap, generic pain medication."

There had been a number of cases in recent years where the penalties handed down were far too low to act as an appropriate deterrent against bad conduct. "We look forward to seeing the impact that the higher penalties will have," she said.