The Trade Practices Act applies to just about every aspect of a business—for example advertising, price setting and transactions with other businesses or consumers. Complying with it minimises the risk of breaking the law and may actually improve performance by giving businesses a competitive edge. It can improve profitability through innovation and the improved safety and quality of products and services, and enhance business reputation and strengthen consumer trust through good corporate citizenship.
If something does go wrong and a contravention of the Trade Practices Act is established, the existence of a substantial and successfully implemented compliance program and whether the company has a corporate culture conducive to compliance with the Act ('compliance culture') is likely to be taken into consideration when the quantum of penalty is determined. On the other hand, the courts may impose a higher penalty if there is a poor or ineffective compliance regime. A poor compliance culture exposes a company to negative consequences such as adverse publicity and substantial financial and human resource costs.
Costs of non-compliance
Under the Trade Practices Act 1974 (the Act) financial penalties are substantial. Companies can be fined up to the maximum of:
$10 million or
where the value of the illegal benefit can be ascertained, 3 times the value of the illegal gain or
where the value of the illegal benefit cannot be ascertained, 10% of the turnover in the preceding twelve months.
Penalties for individuals reach up to $500 000 for contraventions of the Part IV provisions of the Act, which prohibit anti-competitive practices. Monetary penalties for contraventions of the unfair practices provisions of Part V of the Act are up to $220 000 for individuals and up to $1.1 million for companies. Court action is generally initiated when an offending party refuses to acknowledge the contravention or does not work with the ACCC to reach an appropriate settlement.
Other penalties may include fines and compensation to victims of the conduct, probation orders, community service orders, corrective advertising, provision of repairs and spare parts, or divestiture of shares or assets illegally acquired or a declaration that a share transaction is void in the case of a prohibited merger.
Civil or administrative remedies the ACCC may seek include:
Section 87B undertakings
Section 87 B undertakings provide a swift, flexible, and cost effective resolution. They do not require court approval but can be enforced by the court in cases where there is a failure to comply. The terms of a s. 87B undertaking are negotiated between the ACCC and offending parties. Common elements are that alleged offenders will:
refrain from engaging in the unlawful conduct in the future
make restitution to affected parties
implement a trade practices compliance program.
A compliance program is a common requirement of s. 87B undertakings or negotiated court penalties, and is usually used in conjunction with other remedies such as injunctions, penalties and restitution. It recognises that breaches of the Act may be the result of lack of adequate systems to prevent breaches or lack of knowledge of the prohibitions of the Act, and is designed to prevent future breaches of the Act. When a compliance program is a requirement it must be approved by the ACCC and implemented within a fixed time frame.
Negotiated penalties
Negotiated penalties usually form part of a settlement agreement that also includes other remedies such as injunctions and the introduction of a compliance program. The settlement agreement is presented to the court for approval.
Administrative undertakings
Administrative undertakings are not a frequently used alternative but may be accepted in circumstances where the alleged breach of the Act is minor or easily fixed.
Corporate leniency
The ACCC’s corporate leniency program was designed to encourage individuals and corporations to come forward and apply for immunity or leniency. Consideration is given to the value of the information, whether disclosure is full and frank, extent of cooperation with the ACCC, and to the type of involvement in the activity. Those seeking leniency should display a willingness to make restitution, to terminate involvement in the unlawful activity and ensure there is no recurrence.
Representative actions
The ACCC has the power under s. 87(1B) of the Act to seek damages on behalf of consumers and people who have suffered damage and who sometimes cannot afford to undertake such actions.
