The Treasury Laws Amendment (More Competition, Better Prices) Bill 2022 has passed both Houses.
The Bill was debated and passed by the Senate without amendment this afternoon, following the non-controversial passage of the Bill in the House of Representatives on Wednesday. The Bill is now pending Royal Asset. The increased penalties will take effect the day after Royal Assent, while the unfair contract term (UCT) reforms will commence in 12 months.
We reported on the Bill when it was tabled by the Federal Government on 28 September 2022. The Bill significantly increases penalties for contraventions of both competition and consumer laws, broadens the scope of existing UCT laws, prohibits UCTs outright, imposes financial penalties for breach of the UCT provisions, and expands orders available to the court following UCT breaches.
What should businesses do?
Businesses should use the 12-month grace period for the UCT reforms to monitor, review and, if necessary, amend their contracts and current practices. Use this time to:
- Identify whether any of the businesses you contract with fall within the expanded scope of the unfair contract terms regime as well as whether you are utilising ‘standard form’ contracts.
- Ensure that your existing standard form contracts do not conflict with the newly expanded unfair contract terms regime.
- Compare the terms of your current and future standard form contracts with those that have previously been declared by the Court to be void and unenforceable.
- Update all existing templates and future standard form and small business contracts to ensure they remain compliant with the expanded regime.
Submissions
Treasury provided a one-week public consultation period on the draft Bill. The general sentiment of submissions was supportive of the Government’s policy objectives of disincentivising large businesses from participating in anti-competitive behaviours, strengthening penalties to deter breaches of consumer law, promoting competition and better corporate behaviour, and ensuring consumers are afforded protection.
However, the proposed increases to maximum penalties, and in particular the 30% adjusted turnover threshold, provoked concern. Many parties noted that the magnitude of the changes had not been proved necessary, were not explained in the Explanatory Memorandum and might have disproportionate effects.
Based on the new $50 million threshold, the Law Council of Australia submission observed that the maximum penalty for ACL breaches will have increased by 4,445.5% over a five-year period (from $1.1m prior to September 2018 to $50m in 2022). The Federal Chamber of Automotive Industries calculated the percentage increase since 2018 using the new 30% adjusted turnover threshold:
With an annual turnover of $1 billion, the maximum penalty facing a company would be $300 million. So, for these companies… the maximum penalty has increased by almost 300 times.
The telco service providers alliance, Commpete, suggested that ‘there is not the same necessity to increase penalties for breaches of the ACL as exists in relation to the enforcement of anti-competitive conduct provisions’. They went on to note that ACL breaches tend to have more limited effects than competition law breaches – for example, ACL breaches typically do not damage the market itself or cause long term damage to competitors or competition, and are typically easier to enforce than breaches of the competition law.
While larger players such as Optus noted that the 30% adjusted penalty threshold might disproportionately impact larger bodies which have more complex corporate operations, the Law Council noted that the application to ACL breaches might also disproportionately affect smaller businesses:
Australia has the highest consumer law penalty regime in the world (ahead of the US and UK), and this is the area in which increased penalties are likely to have the harshest and unintended consequences for smaller businesses.
Related reform
ACL protections applicable to financial services are mirrored in the ASIC Act 1989 (Cth). Today’s Bill amends the ASIC Act only in relation to the UCT reforms. In relation to penalties, today’s Bill does not amend the ASIC Act, but we understand that penalties for consumer law breaches under the ASIC Act will be brought into line with today’s Bill.
The new penalty regime appears to have found favour more generally within Government. As we reported yesterday, the same penalty regime is proposed in the Government’s new privacy legislation (the Privacy Legislation Amendment (Enforcement and Other Measures) Bill 2022) that will significantly increase maximum penalties under the Privacy Act.
We have deep experience in conducting UCT reviews and are helping clients to comply with the new laws.
