ACCC may increase competition law penalties

Australian penalties low on a global scale.

The ACCC will re-think its approach to penalties for breaches of the competition law after an OECD report found that average Australian penalties are significantly lower than those imposed in other comparable OECD jurisdictions.

The OECD report compared penalties for companies which breach competition laws in Australia with the EU, the UK, Germany, Japan, Korea and the USA. It found that in Australia, both the maximum and average penalties imposed by courts for competition law breaches are significantly lower than in the OECD jurisdictions considered, especially for large firms or for long-standing anti-competitive behaviour.

An average Australian penalty based on a sample of cartel cases and estimated penalties would have to be increased by 12.6 times to be comparable with the level of the average penalty in these OECD countries.

“The OECD report provides valuable insight and a vital point for debate and discussion about the future of penalties in the context of competition law enforcement in Australia,” ACCC chairman Rod Sims said.

The report says that in most OECD countries financial penalties are set according to a set methodology which includes sales of the infringing company’s product. In Australia the penalties are determined by the Federal Court following an “instinctive synthesis” of various factors.

OECD economist Dr Sean Ennis said, “This difference does not prevent Australia from imposing substantial and deterrent sanctions for competition law violations. Clearer guidance on the size of penalties could be useful in Australia to ensure penalties deter and that companies are aware of the likely size of fines.”

“The ACCC has been concerned that penalties in competition cases historically have not been sufficiently high to deter breaches, especially in cases involving large businesses. Whilst the OECD’s report focusses on penalties in competition cases, the ACCC is similarly concerned to ensure that penalties imposed in consumer cases are also high enough to achieve deterrence,” Sims said.

“In particular, we acknowledge the OECD’s comment that in the past we may not have given the size of the contravening corporation sufficient weight in our penalty submissions to the Court.

“As I have said before, we do not want breaches of our competition law to be seen as an acceptable cost of doing business. We need penalties that will be large enough to be noticed by senior management and company boards, and also shareholders,” Sims said.

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