The ACCC has released new guidelines on its approach to penalties for competition and consumer law contraventions (Guidelines). The Guidelines were released against the backdrop of the recent imposition of record penalties by the Federal Court both in competition and consumer law cases.
The Guidelines explain the ACCC’s general approach when it makes submissions on the appropriate penalty for breaches of the Competition and Consumer Act 2010 (Cth) (CCA), such as cartel conduct or misleading and deceptive conduct. The publication marks the first detailed guidance the ACCC has given about its approach to penalties, a longstanding practice of competition regulators in other jurisdictions.
Globally, the US, UK, and EU have published guidance documents for competition law infringements. While those documents are similar to the new ACCC guidelines in terms of the broad principles applicable to the calculation of penalties sufficient to achieve general and specific deterrence, there are limits to their comparability across borders given the differences between the competition and consumer law enforcement regimes and the status of the guidelines.
How do the Guidelines change the position?
In Australia, pecuniary penalties can only be imposed by a court. Courts determine pecuniary penalties through an ‘instinctive synthesis’ of certain factors prescribed in statute, as well as non-mandatory criteria developed over time (the “French Factors”). The exercise aims to arrive at a penalty amount reflecting the seriousness of the conduct and deterring future contraventions (both specifically and in general). To the extent penalties may be jointly proposed by the ACCC and a defendant, the Court will have regard to those submissions, but will ultimately impose the penalty it considers appropriate in all the circumstances.
In this context, the Guidelines clarify how the ACCC will weigh up the different factors to form a view as to an appropriate penalty, which will inform the position the ACCC may take in negotiating a penalty, and in making submissions to a Court. In particular, the Guidelines clarify the ACCC’s approach to:
- identifying the relevant contraventions (including the overlap of multiple contraventions);
- determining the applicable maximum penalty (including the treatment of turnover for that purpose and the ACCC’s view of the relationship between maximum penalties and the benefits obtained from the contravening conduct);
- the role of loss or harm (whether actual or potential) as an aggravating factor;
- the nature of the potential discounts for cooperation with the ACCC, noting that while at there is no automatic application of a discount, full and meaningful cooperation may result in a discount in the range of 30-50%; and
- the extent to which admissions and the implementation of compliance systems are mitigating factors.
While not binding, the Guidelines are intended to be followed by the ACCC in all enforcement scenarios, including negotiated settlements and contested penalties.
The ACCC’s quest for higher pecuniary penalties
For the last decade the ACCC has called for increases to the maximum penalties and expressed a concern that courts were not setting penalties at levels sufficient to create the necessary deterrence.
Following increases to the maximum penalties in 2009 and again in late 2022, the Guidelines represent an attempt to bridge the gap the ACCC perceives remains. However, while a 2018 OECD report found that competition law penalties in Australia were on the lower end of the spectrum compared to other jurisdictions, in the intervening period, penalties awarded by Australian courts for breaches of the CCA have trended upwards and are expected to continue along this trajectory.
Guideline envy: how does Australia compare to the US, UK, and EU?
The legal principles in the Guidelines draw from the existing penalties framework, and are similar to public guidance issued in comparable jurisdictions such as the US, UK, and EU.
While the principles in the Guidelines themselves do not differ largely from our international counterparts’ guidance, the circumstances in which the Guidelines operate differs in important respects due to the differences between the legal systems. For example:
What impact will the Guidelines have on penalties in Australia?
The Guidelines do not change the existing system in Australia; the ‘instinctive synthesis’ by the Courts will continue. However, in a world of drastically increased maximum penalties and an upward trajectory in penalties being imposed, the Guidelines will provide an important insight into:
- the basis on which the ACCC will negotiate; and
- the approach the ACCC will take to making submissions to Courts in both contested cases and matters resolved by agreement.
Anticipating pecuniary penalties can often be an oracular task. Over time, the ACCC will be hoping that its approach can influence the Court’s view on appropriate penalty levels upwards. In the meantime, the Guidelines will assist businesses and executives to understand the ACCC’s position in relation to the criteria it considers important to penalty calculation. Parties should bear in mind, however, that the Guidelines are general in nature, are not binding on the ACCC and that, in any pecuniary penalty proceeding, the Court will have the final say in the penalty imposed on parties who are found to contravene the CCA.
