The Government has announced that potential penalties for breaching the Fair Trading Act are to be significantly increased. This follows a strong push by the Commerce Commission for higher penalties, based on concerns that fines had just become a 'cost of doing business' for some businesses.
The proposed changes will mean that the maximum penalty for conduct like false or misleading representations will increase from $600,000 for companies and $200,000 for individuals, to the greater of:
- $5m (for companies) or $1m (for individuals)
- Three times the value of the commercial gain made or loss avoided
- The value of the consideration for the relevant transaction(s).
There will also be a change from the criminal liability regime to a civil regime for most breaches. This will mean that most breaches of the Fair Trading Act will not involve a criminal conviction, but it may be easier for the Commission to establish a breach (with the standard of proof changing from 'beyond reasonable doubt' to 'on the balance of probabilities').
It has also been announced that changes will be made to help ensure product safety standards are kept up to date (rather than referring to outdated versions of standards).
Legislation to give effect to the changes is expected to be introduced next year.
Interestingly, it looks like changes to the enforcement regime for unfair contract terms to align with recent changes in Australia will not be included in this package of changes. The current unfair contract term regime involves a two-step process, with penalties only applying after a term has been declared to be unfair by a court. The Government announcement states, however, that it has opted not to progress proposals to expand unfair contract terms provisions.
The changes, together with signals from the Commerce Commission that it will be a more active enforcer, highlight the importance of having effective compliance programmes, including training for staff. If you want help in refreshing your compliance programmes, contact a member of our consumer law team.
