Slap businesses with bigger fines: Productivity Commission

Review of ACL picks apart its shortcomings.

Big businesses should be hit with $10 million fines for breaching consumer laws and have complaints against them made public, reveals a report by the government's independent advisory body.

The Productivity Commission's report into the effectiveness of Australian Consumer Law has identified shortcomings with consumer protections, suggesting a number of recommendations before a final report is released.

Australian Consumer Law (ACL) applies generically to all consumer goods and services, specifically to those issues dealing with consumer protections. Currently it is administered and enforced by 10 regulatory bodies – two Federal and eight across states and territories – under what is known as a multiple regulator model.

The Productivity Commission found the model operates "reasonably effectively", though the fines issued to businesses and a lack of transparency for consumers were causes for concern.

Businesses will think twice with larger fines

Current fines under Australian Consumer Law were deemed too little to deter businesses from breaching consumer rights, the report found. Businesses can – and have – made more money breaching consumer laws, even after they've paid the maximum fines.

This was the case when the manufacturer of Nurofen, Reckitt Benckiser, was fined $1.7 million for offences estimated to make them $63 million.

The fine has since been raised on appeal to $6 million – the largest to date for misleading practices under Australian Consumer Law.

"The Commission agrees that there is a strong case for increasing maximum financial penalties for breaches of the ACL," the report reads.

"Study participants cited several cases where the penalty imposed for a breach of the ACL seemed to have been swamped by the commercial returns generated by that breach."

The maximum fine per penalty under Australian Consumer Law is $1.1 million for companies, or $220,000 for an individual. 

The report recommended raising the penalties to be in line with the legislation to which the ACL belongs, the Competition and Consumer Act 2010.

The greater of three penalties can be handed down under the Act, including fines up to $10 million, or three times as much money made from the breach.

In instances where the value of a breach can't be calculated, then the fine will be 10% of the revenue generated in the previous financial year.

Fines for individuals are greater too, having increased to $500,000 for a breach.

Make consumer complaints transparent

Complaints made by consumers against businesses should be made public, recommends the report. Doing so would help consumers make informed buying decisions and motivate poor performing businesses to "lift their game".

The Complaints Register introduced by NSW Fair Trading was used as an example, though several improvements were suggested due to "business groups [raising] ... concerns about its design".

Suggested improvements include the filtering of complaints, including information about an outcome and framing complaints with some context, such as revealing how many were made as part of all the products sold.

The final report on the Australian Consumer Law Review is expected to be released in April 2017.

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