THE Australian corporate watchdog and consumer commission have been given the power to fine businesses up to $10.5 million, or 10 per cent of their annual turnover, under sweeping changes to ensure consumers are protected from misconduct by businesses.
The Australian Securities and Investments Commission (ASIC) can also aim its fines at individuals, boosting the penalties to 10 years imprisonment “and/or the larger of $945,000 or three times the benefits”.
The reforms, which are among the first corporate penalty changes in more than 20 years, follow international legislation and particularly change the focus to the individual.
Parallel to the ASIC penalties, the Australian Competition and Consumer Commission (ACCC) chairman Rod Sims announced that stronger penalties for consumer breaches by a company will rise from $1.1 million to $10 million, or 10 per cent of turnover. Fines for individuals will increase from $220,000 to $500,000.
“We really need much larger penalties for big companies when they mislead consumers as this can cause a lot of consumer harm and it has to be stopped,” Mr Sims said.
“For larger companies, we really need penalties of well above $100 million for those companies to get the message that this is behaviour that they should not be engaged in.”
Mr Sims said in a statement that the ACCC “may have gone too soft” on companies in the past.
“I am happy to admit that we haven’t done enough on our side,” he said.
“We may have in the past settled too many cases on the basis of low penalties.”
The dramatic increases in fines were announced before the recent Australian Automobile Dealers Association (AADA) conference, where attendees heard plans for an automotive industry franchise code of conduct between car-makers and their dealers.
The code, agreed to by the opposition and potentially the government, is being introduced in response to ongoing franchise car dealer complaints about escalating unconscionable treatment by OEMs.
In its statement about the penalty increases, ASIC said it “will be able to seek additional remedies to strip wrongdoers of profits illegally obtained, or losses avoided from contraventions resulting in civil penalty proceedings”.
In addition to monetary penalties, ASIC powers have also been significantly increased through:
- Expanding its ability to ban individuals from performing any role in a financial services company where they are found to be unfit, improper, or incompetent.
- Strengthening its power to refuse, revoke or cancel financial services and credit licences where the licensee is not fit or proper.
- Boosting its tools to investigate and prosecute serious offences by harmonising its search warrant powers to provide greater flexibility to use seized materials, and granting ASIC access to telecommunications intercept material.
By Neil Dowling