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Red hot regulators focus on business

Red hot regulators focus on business

30 Oct 2018

Red hot regulators focus on business
WRITTEN BY
Suzie Leask
Suzie Leask
Associate Director

Red hot regulators focus on business

30 Oct 2018

Article by Suzie Leask, Associate Director and Lauren Kaplan, Associate

ACCC - Active on prosecution and enforcement
The regulatory environment for business in Australia is heating up, with the Australian Competition and Consumer Commission (ACCC) FY18 Annual Report capturing just how active the ACCC has been, having issued nearly $170 million in penalties for breaches of the Competition and Consumer Act 2010 (Cth) (the Act).   The ACCC is sending a clear message to businesses that breaches of the law will not be tolerated, with a record high penalty of $46 million for one business this year. They also showed they are not afraid of big businesses, having successfully secured penalties of around $10 million each against Telstra, Ford and Apple for consumer protection issues (see ACCC Infographic for more details).

ASIC - ‘Winter is coming’ as this regulator toughens up
Meanwhile, in the wake of the Royal Banking Commission, the Australian Securities and Investments Commission (ASIC) has announced it intends to be a strategic and forceful regulator in the market, ensuring that companies comply with their obligations to small businesses, focusing on illegal phoenix behavior, non-compliance with financial reporting obligations and director misconduct. In light of this amplified regulatory environment, it’s important that businesses review their current practices for potential non-compliance. Recent cases highlight where businesses should review practices, including:
  • Highest penalty ever against an individual director for breach of competition laws (EGR case - total penalties of $11.95 million)
  • Excessive card payment surcharge prosecution (Fitness First - penalty of $12,600)
  • False or misleading representation prosecution (Australian Hearing Service - penalty of $37,800)
  • Proposed increases to Corporations Act penalties, and
  • Changes to the Australian Consumer Law (ACL) and increased penalties.
Stronger Corporate and Financial Sector Penalties
With ASIC publicly stating that it intends to be a strategic and forceful regulator, we can expect to see more action and enquiry from ASIC into business practices and director conduct in the coming months.  In particular, ASIC has identified that it will, in addition to the focus on the financial services industry, focus on compliance by small business, in particular, illegal phoenix behaviour, non-compliance with financial reporting obligations and director misconduct. 

Further, new legislation introduced into Parliament on 24 October 2018 seeks to greatly increase penalties, both civil and criminal, for breaches of corporations, credit and financial services laws.  Under the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Bill 2018, the Corporations Act 2001 (Cth) will be amended to to:
  • more than double maximum imprisonment penalties for some of the most serious ‘white-collar’ crimes
  • increase civil penalties for individuals by more than five-fold, and
  • increase civil penalties for individuals by more than ten-fold. 
Courts will also be empowered to consider even higher penalties where the profits from misconduct are high or a company’s annual turnover exceeds $104 million.
 
Australian Consumer Law - Increased Maximum Penalties and More
On 18 October 2018, a series of changes to the ACL were passed by Parliament arising from the April 2017 Final Report of the ACL Review. In particular, the changes include:
  • amendments to the single figure pricing provisions to address pre-selected options
  • permitting the ACCC and ASIC to use their investigative powers in relation to potentially unfair contract terms
  • extending the ACCC's powers to enable it to require third parties to produce safety-related documents/information
  • extending the unconscionable conduct protections to publicly-listed companies. 
With penalties for breaches of the ACL increasing from a maximum of $1.1 million for companies, to now in excess of $10 million (depending on the revenue received), it is now more important than ever for businesses to ensure that they are compliant with the ACL.  The increase in regulator activity is a reminder that businesses and particularly directors need to ensure their agreements are not anti-competitive, and that communications they make to the public and to their customers are not misleading or otherwise prohibited under the law.
If you have any questions or concerns about your company’s business practices in relation to the Competition and Consumer Act, contact one of our Corporate and Commercial lawyers today on 1300 565 846 or email us at info@ablawyers.com.au.
 
 

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