ACCC checks in on penalty notice regime

On 13 February 2012 the ACCC provided an update on its use of new powers to issue infringement notices to business. These powers allow the ACCC to issue infringement notices where:

• it has reasonable grounds to believe that there has been a contravention of certain consumer protection provisions under the Australian Consumer Law, such as provisions relating to:
  • unconscionable conduct;
  • false or misleading representations regarding goods, services and employment;
  • pyramid schemes;
  • unsolicited marketing (e.g. door to door, telephone sales or sales other than from a place of business);
  • instalment payment (‘lay-by’) agreements;
  • product safety and standards;
  • failure to provide invoices or warranty documentation; or
• a business fails to substantiate marketing claims in response to a ’substantiation notice’ issued by the ACCC or responds with false or misleading information.

Since the introduction of the infringement notice powers on 15 April 2010, the ACCC has issued almost 70 infringement notices for marketing related breaches, with a total value of over $450,000.

The ACCC has reported that many of these infringement notices were issued for misleading and deceptive conduct, including false and misleading claims in advertising and marketing.

The ACCC can issue an infringement notice up to 12 months after an alleged contravention.

Individual penalties can vary depending on the allegation; they are generally fixed at $6,600 for a corporation, ($66,000 for a listed corporation) and $1,320 for an individual.

A business issued with a penalty notice is not obliged to pay, however by doing so it may avoid legal proceedings being initiated by the ACCC. Passing up an opportunity to resolve the matter by paying an infringement notice is also likely to lead to a higher penalty being imposed, should the ACCC commence legal proceedings. Payment does not amount to an admission of liability or that the Competition and Consumer Act was contravened. Payment may be made within 28 days, however the ACCC may extend this period for a further 28 days.

Businesses need to ensure that claims made to consumers, particularly in the course of advertising and marketing, can be substantiated even where marketing material is prepared by external consultants.

As well as the risk that businesses may receive an infringement notice or have other action taken by the ACCC or by competitors, businesses should be mindful of the reputational risk associated with receipt of an infringement notice. The ACCC publishes information on the Infringement Notice Register about businesses that have been issued with and paid infringement notices. This may also have flow on effects such as encouraging claims for compensation from consumers who have suffered harm.

For more information please contact David Grace, Partner, on 07 3231 2421.