Breaches of the Australian Consumer Law attract a record breaking $26.5 million penalty

09 October 2019

In 2018, the Competition and Consumer Act 2010 (Cth) was amended to align the maximum penalties for contraventions of the Australian Consumer Law with the maximum penalties for contraventions of competition law. The amendment increased the maximum penalty for a body corporate’s contravention from $1.1 million to the greater of the following:

  1. $10,000,000;
  2. Three times the value of the benefit obtained from the contravention (where the value can be determined); and
  3. If the value of the benefit cannot be determined, 10% of the Australian connected group turnover in the preceding 12 months.

Commenting on the penalty increase, ACCC Chair Rod Sims said “We have strongly advocated for higher maximum penalties to enable courts to impose more substantial penalties. Penalties need to hit the bottom line so they are not simply seen as the cost of doing business. Perhaps more important, penalties need to be high enough to be noticed by boards and senior managers so that compliance with the law is a higher priorityi.

Prior to the amendment, the highest penalty ordered by the Federal Court for breaches of the Australian Consumer Law was $10 million and the highest for breaches of competition law was $46 million.

In September 2018, the Federal Court found Cornerstone Investments Aust Pty Ltd, trading as Empower Institute (in liquidation) (Empower) had engaged in unconscionable conduct, misleading or deceptive conduct and breached the unsolicited consumer agreement provisions of the Australian Consumer Law. The proceedings concerned Empower’s practices for marketing and selling VET FEE-HELP funded courses to consumers in remote communities, indigenous communities and low socio-economic areas.

In September 2019, the Federal Court ordered a record breaking $26.5 million in penalties against Empower, as well as a $56 million repayment to the Commonwealth for funding it had received. The penalty sends a stark reminder to businesses of the strength of the Australian Consumer Law and the consequence of non-compliance.

As the proceedings against Empower demonstrate, ensuring compliance extends beyond reviewing contracts. Consumer facing businesses must also ensure that their marketing, sales and complaint-handling processes are compliant with the Australian Consumer Law and that their employees are appropriately trained.

This article was written by Teresa Torcasio, Partner and Marian Ngo, Senior Associate.


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