ACCC's new direction for enforcement of consumer law breaches

Almost two years have passed since Mr Rod Sims stepped down as the Chair of the Australian Competition and Consumer Commission (ACCC) and was replaced by Ms Gina Cass-Gottlieb. As such, we are beginning to have a clear idea of life under the new leadership at the ACCC. Based on the past year, that leadership appears to be quite different – particularly on the consumer front. In the area of consumer protection, the ACCC appears more pragmatic and focussed on quick and cost-effective outcomes to deliver results for consumers rather than establishing precedent or securing larger penalties from offenders. The success of this strategy is reflected in the decrease in total penalties and merger assessments during the 2021-2022 financial year.

Whether that change comes at the cost of general deterrence is yet to be seen; however, it will certainly be something to watch. Anecdotally, one of the things that has made the ACCC so successful, is that business knows that the ACCC is prepared to litigate and seek substantial penalties for non-compliance with the Australian Consumer Law (ACL). There is a possibility that without the threat of litigation, some businesses may be prepared to roll the dice on lower-level misconduct and regard that risk as merely the ‘cost of doing business’.

• At a glance

  

Mergers

Unlike previous years, we have chosen to comment on mergers under the relevant sections dealing with specialised topics, , rather than give it a dedicated section. As a general comment, contrary to the ACCC's more pragmatic approach to consumer law enforcement, the ACCC has been prepared to take a harder stance regarding merger clearances. This is no surprise, given Ms Cass-Gottlieb’s background as a competition law specialist and her publicly calling out companies for (effectively) gaming the merger clearance process. The practical implications of this change in the ACCC’s approach can be seen in its ongoing calls for merger law reform (including, controversially, a mandatory formal clearance regime) and its opposition to several mergers, including Australian Clinical Labs' proposed acquisition of Healius, Qantas’ acquisition of Alliance and ANZ’s acquisition of Suncorp Group’s banking arm.

• At a glance

  

Consumer protection

A consequence of the ACCC’s apparent change in philosophy regarding consumer law enforcement has been an increase by the ACCC in the use of negotiated outcomes and infringement notices to address alleged consumer law breaches. For example:

• The ACCC issued two infringement notices against Costco for alleged false or misleading place of origin labels on lobster products; two infringement notices against Pet Circle for alleged misleading conduct concerning the online price of pet supplies; and at the end of the year, eight infringement notices concerning statements made by Riff Raff Baby about the safety of their comforter toys.
• The ACCC chose negotiated outcomes for its concerns regarding the conduct of both Mitsubishi Motors and MOO Premium Foods Pty Ltd (MOO).

On the flip side, the ACCC has commenced new actions where it considers the conduct is sufficiently serious and of apparent national significance, such as the proceedings brought against Qantas for so-called ‘ghost flights’ and eHarmony for alleged misleading statements about pricing.

• At a glance

  

Unfair contract terms

One notable success for the ACCC last year was the introduction of the long-awaited reforms to Australia’s unfair contract terms laws (UCT laws) in November 2023. The amendments should provide a strong deterrent for businesses using and relying on unfair contract terms in their standard form contracts. As we have previously reported, the legislation substantially expands the application of the UCT laws, giving protections to more small businesses and applying to a broader range of standard-form contracts. Notably, the introduction of financial penalties and greater remedial powers for the courts should see a significant and widespread change in this area, which will likely lead to an uptick in enforcement activity in this space in late 2023 and beyond.

Cartels and anti-competitive conduct

Another area in which the ACCC can rightfully congratulate itself is the successful conclusion of several civil prosecutions for cartels and other anti-competitive conduct. The ACCC obtained record penalties in both the BlueScope Steel Limited (BlueScope) cartel conduct case in August 2023 and the resale price maintenance case against Techtronic Industries Australia (Techtronic) in December 2023. BlueScope was ordered to pay $57.5m in penalties, the highest penalty ever imposed for cartel conduct in Australia. The total penalties for Techtronic, ordered by the Federal Court, are the highest imposed for resale price maintenance in Australia at $15m. New civil proceedings were also commenced by the ACCC against Swift Networks Pty Ltd (Swift) for alleged bid-rigging. What we didn’t see, however, was any new criminal prosecutions for cartel conduct, other than the follow-on proceedings against Aussie Skips Recycling (which was related to the ACCC’s earlier successful criminal proceedings against Bingo Industries).

Consumer markets, retail and franchising

The ACCC continued its focus on poor standards and conduct in the franchising sector – with several successful enforcement actions against both franchisors and retailers for consumer law breaches, as well as several policy and regulatory developments. Significantly, in the most recent review of the Franchising Code of Conduct (yes, another one), the ACCC called for a radical shake-up of franchising in Australia by proposing the requirement that franchisors in Australia be subject to a licensing regime. If implemented, this regime would, among other things, enable a regulator to quickly and cheaply suspend, cancel and impose conditions on a franchisor’s ability to promote and sell franchises. Given the falling number of complaints to the ACCC in this area, the question is whether such a radical change is truly necessary – on current evidence, we doubt it.

Essential services - Energy

With many Australians impacted by the rising cost of living, escalating electricity prices certainly put this sector into the spotlight. Consequently, while there were fewer prosecutions than we expected to see in this sector, the ACCC and the Federal Government used a variety of regulatory mechanisms to place downward pressure on energy suppliers and costs, including the Government’s emergency gas price cap measure implemented at the end of 2022; the renewal of the ACCC’s authorisation of the Australian Energy Market Operator (AEMO) to allow collective conduct in the electricity sector; and enforcement of the Electricity Retail Code.

• At a glance

  

Essential services - Telecommunications

As with the energy sector, the ACCC was primarily concerned with the cost of living effects of conduct in the telecommunications sector. In particular, the ACCC’s actions were focussed on ensuring greater consumer choice, stabilising pricing, encouraging competition and improving the stability of services. Once again, this sector had much less enforcement activity than we predicted.

Technology and data

Another area that did not see significant enforcement activity but did experience substantial regulatory activity was the technology sector, particularly digital platforms, online marketplaces and social media. Last year, in its Digital Platforms Services Inquiry, the ACCC examined the significant consumer harm resulting from the lack of competition in social media, the lack of adequate safeguards against scams and the ever-increasing expansion of large digital platforms through their growing product and service offerings. Together with the Office of the Australian Information Commissioner, it oversaw developments in the Consumer Data Right regime, with new rules being implemented for business consumers and focussing on improving the regime’s efficacy. Strangely (though probably in line with its new enforcement philosophy), the ACCC declined to seek enforcement outcomes against any social media influencers despite finding that over 87% of those reviewed had engaged in some form of concerning behaviour.

• At a glance

  

Environmental claims and sustainability

The ACCC continued its focus on greenwashing and issued much-needed guidance on environmental and sustainability claims. In March 2023, the ACCC published its findings of the 2022 internet sweep of environmental claims. It also secured enforceable undertakings on packaging falsely marketed as plastic waste collected from the ocean. Despite these steps, we saw far less public enforcement activity in 2023 than expected, especially considering the ACCC had expanded its compliance and enforcement priority regarding environmental claims and sustainability beyond consumer and fair trading matters to include product safety and competition concerns.

• At a glance

  

Closing thoughts

Overall, it’s been a quieter year for the regulator in terms of new Court proceedings, which is consistent with our 2023 prediction of significant change in the ACCC’s approach to enforcement. Offsetting that reduction in new proceedings has been a substantial amount of policy, educational and other regulatory work in key sectors of the Australian economy. In short, the last 12 months has all the hallmarks of a year of consolidation under the ACCC’s new approach and the leadership of Ms Gina Cass-Gottlieb.