21 Aug 2020In 2018, new Australian Consumer Law legislation was passed by parliament. With a focus on increased penalties, these laws have had a significant impact on the way business is conducted in Australia.
Consumer protection legislation increases penalties for companies breaching law
Under the Competition and Consumer Act 2010, the legislation increased the maximum penalty for a company that breaches relevant consumer laws. The fines were lifted from $1.1 million, up to whichever is the greater amount out of $10 million; three times the value of the benefit obtained from the offence; or ten per cent of group turnover in the previous 12 months.
The penalty that could be imposed on individuals rose from $220,000 to $500,000 per breach.
Massive fines for unconscionable conduct and false or misleading representations
The consumer law penalties apply to a range of offences, but are mainly targeted toward businesses that give false and misleading representations or act unconscionably.
While the 2018 legislation raised the bar in terms of the scale of fines that companies could face for breaches, there were numerous instances of significant fines being imposed for corporate wrongdoing in previous years.
In April 2018, the Federal Court fined Ford $10 million for unconscionable conduct in the way it dealt with customer complaints.
In the same year, Heinz was ordered to pay $2.25 million in penalties for “misleadingly and deceptively” targeting toddlers with sugar-heavy snacks. (See Australian Competition and Consumer Commission v H.J. Heinz Company Australia Limited [2018] FCA 360.)
In 2016 Nurofen was fined $6 million for its claims about pain relief products.
In 2014 the Federal Court fined Coles $10 million for its dealings with suppliers. (See Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405.)
Also in 2014, Fisher & Paykel was fined $200,000 for misleading customers when offering an extended warranty. (See Australian Competition and Consumer Commission v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393.)
Selling an extended warranty is not uncommon amongst retailers. But in this case, many had been caught telling customers they needed to buy it to ensure they could get a replacement fridge or oven if their new one malfunctioned. However, in a number of cases, the customers’ right to a replacement could be covered under consumer law.
Apple ordered to pay $9 million for breaching Australian Consumer Law
Apple Inc corporation had to pay $9 million in penalties for breaching consumer law when it told its customers that the company was not liable for a remedy if a device had been repaired by a third party. (See Australian Competition and Consumer Commission v Apple Pty Ltd (No 3) [2018] FCA 617.)
This stance was contrary to the Australian Consumer Law, contained in Schedule 2 of the Competition and Consumer Act, which includes strict regulations to protect consumers.
The ACCC issued a statement about the case, with ACCC Commissioner Sarah Court saying: “If a product is faulty, customers are legally entitled to a repair or a replacement under the Australian Consumer Law, and sometimes even a refund.”
Volkswagen penalty eclipses fine imposed on manufacturing cartel
In May 2018, the Japanese company Yazaki Corporation was fined $46 million for cartel conduct. (See Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73.)
At the time, this was one of the biggest fines ever handed down under the Australian Consumer Law.
Subsequently, however, in December 2019 car manufacturer Volkswagen was fined $125 million for installing “two mode” software in its vehicles, designed to dupe consumers by fooling the equipment used to perform emissions tests and make it appear that the vehicle produced lower levels of diesel emissions than it actually did in normal operation on the road.
False or misleading statements about consumer guarantees prove to be costly
In 2016, ten Harvey Norman franchisees were fined a total of $286,000 after it was found that they had made false or misleading statements about consumer guarantees.
In a similar case, US-based Valve Corporation, one of the world’s largest online game retailers, was ordered to pay a $3 million penalty for misleading customers about their guarantees.
Harsh consumer law penalties apply to businesses of all sizes
Many smaller businesses have also been fined for breaching consumer protection legislation. In one case, a firm selling hair restoration treatment had to refund $3,659 when their customer’s hair didn’t grow back. (See Norman Enterprises Pty Ltd v Deng [2013] QCATA 47.)
In another matter, a person who had bought a show horse for $12,000, which soon afterwards fell lame, won their court case and had their money returned. (See Campbell v Lane (No2) [2013] QCATA 307.)
In yet another case, a bathroom tiler who caused a water leak was ordered to pay for a plumber to repair the damage. (See Tait Management Service Pty Ltd v Boyle and Anor [2012] QCAT 90.)
Are consumer law penalties enough to deter businesses from breaking the law?
The ACCC has stated that under the current penalties, large corporations can now face billion-dollar fines, pointing out that previously, the fines inflicted by the courts caused some damage to reputations, but no real financial damage.
Regrettably, some companies still saw such fines simply as a cost of doing business.
However, under the current legislation, companies which breach the Australian Consumer Law face penalties which will affect their share price. This is intended to provide a strong enough incentive to persuade corporations to consider changing their behaviour.
Businesses must understand their obligations under Australian Consumer Law
Businesses should be aware of the legal limits of their actions under consumer law, as the consequences can be severe. With the courts already demonstrating they are fully prepared to impose stiff penalties for corporate malfeasance, now is a good time to seek professional legal advice.
While the spotlight has been on large corporations for their bad behaviour, it’s important to note that smaller businesses could also find themselves targeted.
For more information please see the articles below.
Cartel conduct in waste disposal industry ends in criminal convictions
Heavy penalties for cartel conduct by roofing companies in NSW
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