The ACCC has said it will re-think its approach to penalties for breaches of the competition law after an OECD report found that average Australian penalties are significantly lower than those imposed in other comparable OECD jurisdictions.
The OECD report, Pecuniary Penalties for Competition Law Infringements in Australia, compared the penalties for companies which breach competition laws in Australia with those in the EU, the UK, Germany, Japan, Korea and the US.
It found that in Australia, both the maximum and average penalties imposed by the Courts for competition law breaches are significantly lower than in the OECD jurisdictions considered, especially for large firms or for long-standing anti-competitive behaviour.
The OECD calculated an average Australian penalty based on a sample of cartel cases and estimated penalties would have to be increased by 12.6 times to be comparable with the level of the average penalty in these OECD countries.
The ACCC chairman, Rod Sims, said the report is illuminating.
“The OECD report provides valuable insight and a vital point for debate and discussion about the future of penalties in the context of competition law enforcement in Australia,”
The report found that in most OECD countries, financial penalties are set according to a set methodology, which includes sales of the infringing company’s product. But in Australia, the penalties are determined by the Federal Court, following an “instinctive synthesis” of various factors.
OECD Economist Dr Sean Ennis said this difference does not prevent Australia from imposing substantial and deterrent sanctions for competition law violations.
“Clearer guidance on the size of penalties could be useful in Australia to ensure penalties deter and that companies are aware of the likely size of fines,” he said.
“The ACCC has been concerned that penalties in competition cases historically have not been sufficiently high to deter breaches. Whilst the OECD’s report focusses [sic] on penalties in competition cases, the ACCC is similarly concerned to ensure that penalties imposed in consumer cases are also high enough to achieve deterrence.”
The OECD report also found that the comparative disparity in penalties has the potential to limit the effective deterrence of fines imposed in Australia.
Mr Sims said the ACCC did not want breaches of Australian competition law to be seen as an acceptable cost of doing business.
“We need penalties that will be large enough to be noticed by senior management and company boards, and also shareholders,” Mr Sims said.