Australian Competition Law: Is an Enforceable Undertaking a Panacea to Litigation?

You may be reading this article because of a genuine desire to inform yourself and as a general knowledge building exercise (in which case, give yourself a pat on the back). Alternatively, you may harbour concerns that you have breached the Australian Competition and Consumer Act 2010 (Cth) (Act).

Irrespective of your motivation, it’s beneficial to understand the arsenal of options our competition watchdog can deploy to ensure consumers and businesses have the freedom to operate in a free, open market. Violations of this central tenet of capitalism are taken seriously by the ACCC, and an enforceable undertaking is just one of the instruments the ACCC can use to secure compliance.

What is an Enforceable Undertaking?

An enforceable undertaking is a promise made by an entity found to have breached competition law by the ACCC to, for example:

• remedy the harm caused by the conduct;
• accept responsibility for their actions; and 
• establish or review and improve their trade practices compliance programs and culture.

Section 87B of the Act sets down the circumstances in which an enforceable undertaking is permissible.

Enforceable Undertakings v Court Action

The ACCC can bring a court action against an entity that has breached, or is likely to have breached Australian competition law. However in some cases, an enforceable undertaking can be a more appropriate option.

The ACCC will accept an enforceable undertaking if it considers that this will produce the best results. The ACCC considers:

• the nature of the breach (how blatant, how serious, the impact of the conduct on the community, the size of the entity involved);
• the ability of an undertaking to redress harm suffered by individuals/other entities;
• the apparent good faith of the company involved; and
• the history of complaints against the company.

If the ACCC accepts an undertaking, it can contain the elements below:

• committing to ceasing the conduct;
• an admission of wrongdoing;
• specific details of how the entity will address any harm caused (such as by reimbursement); and 
• definite actions to be taken in the future aimed to prevent a recurrence.

If the breaching company involved is small, does not have a history of dealings with the ACCC, acts in a good faith manner, and has a positive idea of what can be done to redress harm to consumers, then an enforceable undertaking may be more appropriate than court action. If an entity does not comply with its commitment, the ACCC can take the entity to court to enforce the undertaking.

Conclusion

An enforceable undertaking is not a ‘soft’ option employed by the ACCC. An undertaking is a promise to make definite changes to firm culture, to take action to reimburse consumers and a genuine commitment to further breaches. An enforceable undertaking is an essential tool in the ACCC’s box to ensure Australians can enjoy access to a free, open and efficient market. 

Questions? Get in touch with us on 1300 544 755 and speak with one of LegalVision’s specialist competition and consumer lawyers.