5 years ago
TOUGHER PENALTIES FOR COMPETITION RIP-OFFS
CHRIS BOWEN MP
Labor will make the Australian economy fairer and more competitive by raising the penalties for competition and consumer breaches to levels in line with other advanced nations.
In recent years, the Australian Competition and Consumer Commission (ACCC) has brought cases against a veritable who’s who of major firms. Telstra was fined for misleading consumers about its premium direct billing services. Ford was fined for engaging in unconscionable conduct in relation to a problem with its transmissions. Japanese shipping companies Nippon Yusen Kabushiki Kaisha and K-Line were convicted of criminal cartel conduct. Senior staff at three major banks currently face criminal cartel charges relating to a $2.5 billion capital raising.
Yet as the OECD noted last year, ‘the maximum penalties that are imposed in Australia are nonetheless lower than in comparable jurisdictions for competition law infringements’. The OECD pointed out that in a sample of major Australian cartel cases, the average pecuniary penalty in Australia was just one twelfth as large as in comparator jurisdictions.
To address this, Labor will raise the maximum dollar penalty for companies that break competition laws and rip off consumers from $10 million to $50 million.
We will also adopt a higher standard for competition law breaches, being 30 per cent of the annual sales of the product or service relating to the infringement, multiplied by the number of years the infringement took place. This follows the approach taken by the European Union.
Australian markets are heavily concentrated. In petroleum wholesaling, department stores, banking, health insurance, supermarkets, newspapers, domestic airlines, internet service providers and iron ore mining, the four largest firms control more than 80 per cent of the market. Increased concentration is often associated with reduced competition, resulting in higher prices and higher inequality, and lower productivity, innovation, investment, quality and consumer choice.
As ACCC head Rod Sims said a year ago: “We do not want the penalties for breaches of our competition laws to be seen as an acceptable cost of doing business in Australia… to achieve effective deterrence we need penalties that are large enough to be noticed by senior management and company boards, and also shareholders. This is certainly not the case now.”
Labor has led the policy debate on ensuring that the penalties fit the offence. We went to the 2016 election pledging to increase maximum penalties under the Australian Consumer Law from $1.1 million to $10 million. The Coalition adopted our policy in their 2017 budget.
Concentrated industries have had a range of competition and consumer scandals in recent years, including in banking, insurance, supermarkets and petrol.
Penalties must be high enough that no company can dismiss them as the mere cost of doing business.
Competition reform is a vital part of Labor’s growth agenda. Labor’s competition reforms of the early-1990s are widely regarded as one of the factors behind the productivity surge in that decade. Today’s announcement builds on our extensive suite of pro-competition measures, including:
In recent years, the Australian Competition and Consumer Commission (ACCC) has brought cases against a veritable who’s who of major firms. Telstra was fined for misleading consumers about its premium direct billing services. Ford was fined for engaging in unconscionable conduct in relation to a problem with its transmissions. Japanese shipping companies Nippon Yusen Kabushiki Kaisha and K-Line were convicted of criminal cartel conduct. Senior staff at three major banks currently face criminal cartel charges relating to a $2.5 billion capital raising.
Yet as the OECD noted last year, ‘the maximum penalties that are imposed in Australia are nonetheless lower than in comparable jurisdictions for competition law infringements’. The OECD pointed out that in a sample of major Australian cartel cases, the average pecuniary penalty in Australia was just one twelfth as large as in comparator jurisdictions.
To address this, Labor will raise the maximum dollar penalty for companies that break competition laws and rip off consumers from $10 million to $50 million.
We will also adopt a higher standard for competition law breaches, being 30 per cent of the annual sales of the product or service relating to the infringement, multiplied by the number of years the infringement took place. This follows the approach taken by the European Union.
Australian markets are heavily concentrated. In petroleum wholesaling, department stores, banking, health insurance, supermarkets, newspapers, domestic airlines, internet service providers and iron ore mining, the four largest firms control more than 80 per cent of the market. Increased concentration is often associated with reduced competition, resulting in higher prices and higher inequality, and lower productivity, innovation, investment, quality and consumer choice.
As ACCC head Rod Sims said a year ago: “We do not want the penalties for breaches of our competition laws to be seen as an acceptable cost of doing business in Australia… to achieve effective deterrence we need penalties that are large enough to be noticed by senior management and company boards, and also shareholders. This is certainly not the case now.”
Labor has led the policy debate on ensuring that the penalties fit the offence. We went to the 2016 election pledging to increase maximum penalties under the Australian Consumer Law from $1.1 million to $10 million. The Coalition adopted our policy in their 2017 budget.
Concentrated industries have had a range of competition and consumer scandals in recent years, including in banking, insurance, supermarkets and petrol.
Penalties must be high enough that no company can dismiss them as the mere cost of doing business.
Competition reform is a vital part of Labor’s growth agenda. Labor’s competition reforms of the early-1990s are widely regarded as one of the factors behind the productivity surge in that decade. Today’s announcement builds on our extensive suite of pro-competition measures, including:
- Banning price parity clauses to give Australia hotels greater control over their own business
- Giving consumer and small business advocacy groups the power to make ‘supercomplaints’ about consumer rip-offs;
- Protecting small business through making unfair contract terms illegal;
- Making it easier and cheaper to send money to family and friends overseas by requiring full fee disclosure on remittances;
- Making it more affordable to fix your car by requiring car manufacturers to share technical information with independent mechanics on commercially fair and reasonable terms;
- Introducing an industry-specific code under the Competition and Consumer Act to deliver clear rules to better regulate negotiations between manufacturers and dealerships;
- Doubling the competition regulator’s litigation budget and amending the Competition and Consumer Act to give a truly independent market studies function to the regulator;
- Allowing the Courts to apply higher penalties for conduct that targets or disproportionately impacts disadvantaged Australians;
- Requiring the Australian Competition and Consumer Commission prioritise investigations of conduct that targets or disproportionately impacts disadvantaged Australians;
- Investigating the impacts of increased market concentration on income inequality in Australia and produce policy recommendations on how the negative effects of market concentration can be mitigated; and
- Encouraging States and Territories to include competition principles in planning and zoning legislation, as recommended by the Harper Review, with a specific focus on shortfalls of appropriately zoned land for key services in disadvantaged communities.
Australians want a government that’s committed to the fair go, instead of the top end of town.