ACCC says corporate fines too low and it will pursue penalties in the 'hundreds of millions'

https://www.theguardian.com/australia-news/2018/mar/26/accc-says-corporate-fines-too-low-and-it-will-pursue-penalties-in-the-hundreds-of-millions

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Billion-dollar Australian companies must be fined more for breaching the law, the head of the Australian Competition and Consumer Commission has said, after a new report found Australian fines are 12 times lower than other developed countries.

An OECD report, released on Monday, found the average Australian fine for uncompetitive or cartel behaviour was $25.4m, while the average fine across similar developed nations was $320.4m.

Rod Sims, the chairman of the ACCC, said Australia’s low penalties were clearly failing as a deterrent.

“We see continuing breaches of the act by companies that have been caught before,” he said. “We see that there is really no effect on share prices.

“The finance writers have immediately declared it inconsequential, saying ‘Let’s just move on, no issue here’.”

The OECD report compared Australia to the European Union, the UK, the United States, Germany, Japan and South Korea. While the those countries calculate penalties based on the size of the company and its turnover, Australian courts look at “an ‘instinctive synthesis’ of various factors”.

Australia “does not follow a structured methodology” for determining the size of fines, the report found.

Current Australian law allows for a maximum fine of 10% of turnover but Sims said this was never enforced on the largest companies.

A 2014 federal court ruling against Flight Centre imposed a penalty of $11m – 1.4% of the company’s annual turnover of $766m in 2009.

A 2016 penalty against ANZ bank, for 10 incidents of collusion, totalled $9m, while the company made profits of $8bn in 2012.

In comparison, last year EU imposed a record €2.4 billion penalty against Alphabet, the parent company of Google, and the United States fined Citicorp $925m for foreign currency manipulation.

Sims said the ACCC would now begin pursuing penalties in the hundreds of millions, closer to Australia’s maximum of 10% turnover.

“When you have a company with a turnover of $10bn, that would be a maximum penalty of up to $1bn, so we’d be looking at penalties of hundreds of millions, and we haven’t had that yet,” he said.

Under Australian law, penalties are set by the courts but the ACCC submits claims for penalties in their submissions. Sims also said the ACCC would become less willing to settle, as it seeks to change the norm regarding higher penalties.

“It’s up to the courts to set penalties but we have a role in our submissions to the court and we need to change what we do,” he said. “We’ll have to be a little less likely to settle cases unless we get appropriate penalties.

“That’s the mindset change that needs to occur ... There needs to be a broader debate within the community.”

Australia’s competition laws prevent cartel behaviour, price fixing and other agreements between companies that substantially lessen competition. The ACCC is the primary enforcer of these laws, which are contained in part four of the Competition and Consumer Act 2010.

Before 2007, penalties for uncompetitive behaviour were capped at a maximum of $10m. For individuals, cartel behaviour can also attract criminal penalties up to 10 years jail time.