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Competition and Consumer Act 2010 (Cth)

Section 76
Pecuniary penalties

 

The provision

(1) If the Court is satisfied that a person:

(a) has contravened any of the following provisions:

(i) a provision of Part IV (other than section 44ZZRF or 44ZZRG);

(ia) section 55B;

(ii) section 60C

(iia) section 60K

(iii) section 95AZN;

(iv) a civil penalty provision of an industry code; or

(b) has attempted to contravene such a provision; or

(c) has aided, abetted, counselled or procured a person to contravene such a provision; or

(d) has induced, or attempted to induce, a person, whether by threats or promises or otherwise, to contravene such a provision; or

(e) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or

(f) has conspired with others to contravene such a provision;

the Court may order the person to pay to the Commonwealth such pecuniary penalty, in respect of each act or omission by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission, the circumstances in which the act or omission took place and whether the person has previously been found by the Court in proceedings under this Part or Part XIB to have engaged in any similar conduct.

Note: Section 87AA provides that, if boycott conduct is involved in proceedings, the Court must have regard to certain matters in exercising its powers under this Part. (Boycott conduct is defined in subsection 87AA(2).)

(1A) The pecuniary penalty payable under subsection (1) by a body corporate is not to exceed:

(aa) for each act or omission to which this section applies that relates to section 44ZZRJ or 44ZZRK - the greatest of the following:

(i) $10,000,000;

(ii) if the court can determine the total value of the benefits that have been obtained (within the meaning of Division 1 of Part IV) by one or more persons and that are reasonably attributable to the act or omission - 3 times that total value;

(iii) if the Court cannot determine the total value of those benefits - 10% of the annual turnover (within the meaning of Division 1 of Part IV) of the body corporate during the period (the turnover period) of 12 months ending at the end of the month in which the act or omission occurred; and

(a) for each act or omission to which this section applies that relates to section 45D, 45DB, 45E or 45EA - $750,000; and

(b) for each act or omission to which this section applies that relates to any other provision of Part IV—the greatest of the following:

(i) $10,000,000;

(ii) if the Court can determine the value of the benefit that the body corporate, and any body corporate related to the body corporate, have obtained directly or indirectly and that is reasonably attributable to the act or omission - 3 times the value of that benefit;

(iii) if the Court cannot determine the value of that benefit—10% of the annual turnover of the body corporate during the period (the turnover period) of 12 months ending at the end of the month in which the act or omission occurred; and

(ba) for each act or omission to which this section applies that relates to section 55B, 60C or 60K - 6,471 penalty units; and

(c) for each act or omission to which this section applies that relates to section 95AZN - $33,000; and

(ca) for each act or omission to which this section applies that relates to a civil penalty provision of an industry code--the amount set out in the civil penalty provision of the industry code; and

(d) for each other act or omission to which this section applies - $10,000,000.

Note: For annual turnover, see subsection (5).

(1B) The pecuniary penalty payable under subsection (1) by a person other than a body corporate is not to exceed:

(aa) for each act or omission to which this section applies that relates to section 55B, 60C or 60K - 1,295 penalty units; and

(a) for each act or omission to which this section applies that relates to section 95AZN - $6,600; and

(aaa) for each act or omission to which this section applies that relates to a civil penalty provision of an industry code--the amount set out in the civil penalty provision of the industry code; and

(b) for each other act or omission to which this section applies - $500,000.

(2) Nothing in subsection (1) authorises the making of an order against an individual because the individual has contravened or attempted to contravene, or been involved in a contravention of, section 45D, 45DA, 45DB, 45E or 45EA.

(3) If conduct constitutes a contravention of two or more provisions of Part IV (other than section 44ZZRF or 44ZZRG), a proceeding may be instituted under this Act against a person in relation to the contravention of any one or more of the provisions but a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct.

(4) The single pecuniary penalty that may be imposed in accordance with subsection (3) in respect of conduct that contravenes provisions to which 2 or more of the limits in paragraphs (1A)(aa), (a) and (b) apply is an amount up to the highest of those limits.

Annual turnover

(5) For the purposes of this section, the annual turnover of a body corporate, during the turnover period, is the sum of the values of all the supplies that the body corporate, and any body corporate related to the body corporate, have made, or are likely to make, during that period, other than:

(a) supplies made from any of those bodies corporate to any other of those bodies corporate; or

(b) supplies that are input taxed; or

(c) supplies that are not for consideration (and are not taxable supplies under section 72­5 of the A New Tax System (Goods and Services Tax) Act 1999); or

(d) supplies that are not made in connection with an enterprise that the body corporate carries on; or

(e) supplies that are not connected with Australia.

(6) Expressions used in subsection (5) that are also used in the A New Tax System (Goods and Services Tax) Act 1999 have the same meaning as in that Act.

 

Legislative history

Amended by Competition and Consumer Amendment (Payment Surcharges) Act 2016 (Act 9 of 2016)

Inserted references to s 55B

The current penalty regime for contraventions of Part IV of the Act was inserted by Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (Act 59 of 2009)

More history forthcoming

 

Cases

CDPP v Nippon Yusen Kabushiki Kaisha [2017] FCA 876
Compare civil penalty provision with criminal fines

ACCC v Visy Industries Holdings Pty Ltd (No 3) [2007] FCA 1617 (2 November 2007)
Penalties of $36m imposed for price fixing (principles discussed)
Note: at the time this case was decided the maximum penalty applicable was $10m for a coroporation and $500,000 for an individual.

NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; 71 FCR 285
Penalties - agreed penalties - principles

External linkTPC v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076
Misuse of market power - pecuniary penalties

 

Commentary

General principles

In Trade Practices Commission v CSR Ltd [1990] FCA 521; (1991) ATPR 41-076 Justice French set out the general principles surrounding pecuniary penalties in s 76. These have been frequently approved in subsequent cases.

Pecuniary Penalties - General Principles

[para 38] The provisions of Pt. IV of the Trade Practices Act 1974 are directed to procuring and maintaining competition in trade and commerce ... They are of a regulatory rather than penal character. Proceedings for their enforcement by recovery of pecuniary penalties are not classed as criminal prosecutions. ... Unlike many kinds of criminal prosecution, therefore, it is not necessary to measure the contravening conduct against some general communal morality in which the law is embedded. Aspects of some commercial behaviour, such as ruthlessness and expansionary ambition, are not elements of the classes of conduct prohibited by Pt. IV nor even aggravating factors. For those same attributes may be found in vigorous and lawful competition.

[para 39] characterisation of contravening conduct in terms of a morality larger than that which is defined by the legislative purpose is misplaced. ...

[para 40] Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt. IV. Nor, if it be necessary to say so, is there any compensatory element in the penalty fixing process ... The principal, and I think probably the only, object of the penalties imposed by s.76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.

[para 41] There has been a significant number of decisions of the Court which have considered the operation of s.76 ... The primacy of the deterrent purpose in the imposition of penalty was identified at an early stage

[para 42] The assessment of a penalty of appropriate deterrent value will have regard to a number of factors which have been canvassed in the cases. These include the following:

1. The nature and extent of the contravening conduct.

2. The amount of loss or damage caused.

3. The circumstances in which the conduct took place.

4. The size of the contravening company.

5. The degree of power it has, as evidenced by its market share and ease of entry into the market.

6. The deliberateness of the contravention and the period over which it extended.

7. Whether the contravention arose out of the conduct of senior management or at a lower level.

8. Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.

9. Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.

The first three factors are all expressly mentioned in s.76. They can be regarded as measures of the scope and impact of the conduct and it is conducive to deterrence that the greater the significance of these elements, the heavier the penalty should be. ... The need for commercial realism in fixing penalties has been mentioned in more than one decision of the Court. In Trade Practices Commission v. Stihl Chain Saws (Aust) Pty Ltd (1978) ATPR 40-091, Smithers J. at 17,896 said:

"The penalty should constitute a real punishment proportionate to the deliberation with which the defendant contravened the provisions of the Act. It should be sufficiently high to have a deterrent quality, and it should be kept in mind that the Act operates in a commercial environment where deterrence of those minded to contravene its provisions is not likely to be achieved by penalties which are not realistic. It should reflect the will of Parliament that the commercial standards laid down in the Act must be observed, but not be so high as to be oppressive."

 

In ACCC v Visy Industries Holdings Pty Ltd (No 3) [2007] FCA 1617 (2 November 2007) Justice Heerey noted the factors to be taken into account by s 76(1) when determining penalties. He also noted other factors that outght to be taken into account. Collectively, the factors to consider are:

(i) the nature and extent of the act or omission constituting the contravening conduct; (para 302; reflecting s 76(1))

(ii) the nature and extent of any loss or damage suffered as a result of the contravening conduct; (para 302; reflecting s 76(1))

(iii) the circumstances in which the act or omission took place; and (para 302; reflecting s 76(1))

(iv) whether the contravenor has previously been found by the Court to have engaged in similar conduct. (para 302; reflecting s 76(1))

(v) the size of the contravening company; (para 303)

(vi) the degree of its power, evidenced by its market share and the ease of entry into the market; (para 303)

(vii) the deliberateness of the contravention and the period over which it extended; (para 303)

(viii) whether the contravention arose out of the conduct of senior management or at a lower level; (para 303)

(ix) whether the company had a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; (para 303)

(x) whether the contravenor has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention; (para 303)

(xi) similar conduct in the past; (para 303)

(xii) financial position; (para 303)

(xiii) deterrent effect. (para 303)

In ACCC v ABB Transmission and Distribution Limited (No 2) [2002] FCA 559, Justice Finkelstein rejected the optimal penalty theory' in the context of s 76.

[21] I wish to mention some criticisms that can be made of the optimal penalty theory to show why it should not be accepted here. The first and most important requires reference to the antitrust legislation. Typically, and this case is no exception, the legislation proscribes both the making of, and the giving effect to, an anti-competitive arrangement. If the optimal penalty theory were to be applied to a prosecution that is only concerned with the making of an anti-competitive arrangement, the penalty would be confined to the cost of detection and the cost of prosecution, for there would be no other social costs to recover, and the potential effect of the anti-competitive arrangement would have to be ignored. In such a case the penalty would be very small indeed, and would certainly be insufficient to have effect as a deterrent. In any event, s 76 of the Trade Practices Act requires the court to take into account a number of matters including the circumstances in which the contravention took place and whether the person has previously been found to have engaged in similar conduct. Those factors are ignored under the optimal penalty theory.

[22] The second criticism is that the optimal penalty theory assumes that the corporation is a rational actor and will choose from among all available options the course of action that would maximise its profits. This is not always so, and may be an unrealistic view of corporate behaviour. The decisions which guide corporations are made by individuals, and profit maximisation is not the only consideration taken into account. Sometimes individuals may be driven by a personal desire to succeed. Fines or other liabilities imposed against their corporation may have little effect on the agents who are responsible for the conduct in question.

[23] Thirdly, the model is far too rigid because in many cases it is impossible to calculate, or it may be far too costly to calculate, the damage that has been caused by the contravention. In addition, although it would be useful information to have, it may be impossible to calculate the cost of apprehension. Further, determining the factor to represent the probability that a violation will be detected will always be little more than an arbitrary exercise.

[24] A fourth criticism is that the effect of a fine imposed on a corporation will often be passed on to the consumer, rather than the individual actor who was responsible for the conduct. So the suggestion that the corporation alone and not its agents should bear the fine is not without its difficulties.

[25] Finally, optimal fines “depend only on the marginal harm and cost and not at all on the economic positions of the offenders”: G Becker, The Economic Approach to Human Behaviour at 65 (1976). According to this theory, large and small corporations alike would pay the same fine (or at least a fine that is proportionately the same) as it must be based on an objective determination of the social cost of their wrongdoing. The adoption of such a principle would undermine both the specific deterrence that a penalty may have and as its general deterrent effect. When sentencing with specific deterrence in mind, a large penalty is often imposed to ensure that future decisions whether to violate the law are not made on the same cost benefit analysis as past contraventions. For example, repeating or continuing the same offence should be met with an increased penalty, though its social cost remains constant. Optimal penalty theory pays no regard to general deterrence and may cause the penalty to be little more than a “licence fee” for engaging in the proscribed conduct.

 

Comparison with criminal fines

In CDPP v Nippon Yusen Kabushiki Kaisha [2017] FCA 876, the first case imposing criminal fines for cartel conduct pursuant to s 44ZZRG, Justice Wigney observed:

[215] ... Curiously, the maximum pecuniary penalty payable by a corporation for contravening s 44ZZRK is effectively the same as the maximum fine payable by a corporation which has been convicted of an offence against s 44ZZRG: see s 76(1) and (1A) of the C&C Act. It would seem that the only difference is that a criminal conviction attracts opprobrium and societal condemnation in a way that the imposition of a civil penalty cannot: Commonwealth of Australia, The Review of Competition Law Provisions of the Trade Practices Act (the “Dawson Inquiry”), Chapter 10: Penalties and other remedies, Canberra, April 2003.