Restorative Justice in Business Regulation? The Australian Competition and Consumer Commission's Use of Enforceable Undertakings
| Date | 01 March 2004 |
| Author | Christine Parker |
| Published date | 01 March 2004 |
| DOI | http://doi.org/10.1111/j.1468-2230.2004.00484.x |
Restorative Justice in Business Regulation? The Australian
Competition and Consumer Commission’s Use of
Enforceable Undertakings
Christine Parker
n
Enforceable undertakings are now used extensively by both the Australian Competition and
Consumer Commission (ACCC)and other Australian regulatorsto formalise dec isions to forego
enforcementl itigationon the basi s that o¡enders will correct their misconduct and comply in the
future. A‘fairness’ critique warns that regulators might exert undue pressure in negotiating en-
forceableu ndertakings and that the terms agreed mightbe inappropriately broad and not legally
authorised. A‘bias’critique argues that enforceableu ndertakings favourbusiness above the public
interest in taking tough court action against business o¡ences. The article draws on empirical
research into the ACCC’s use ofenforceable undertakings to s howhow they are us ed in practice,
and argues that, if appropriately implemented, enforceable undertakings can be a valuable ‘re-
storative justice’ alternative to traditional regulatorye nforcementaction, si multaneously addres-
sing both fairness and bias co ncerns.
INTRODUCTION
It is quite common for regulators to decide not to take tough enforcement action
against possible regulatory breaches on the basis that theycan accomplish accep-
table (perhaps even superior) compliance through negotiation and settlement
with (alleged) o¡enders.
1
Enforceable undertakings are an Australian develop-
ment that legitimate and formalise such agreements.
2
Under section 87B of the
Trade Practices Act 1974 (Cth) (TPA), the Australian Competition and Consumer
Commission (ACCC) has power to accept undertakings in connection with any
matter for which the Commission has a power or function. Once accepted, the
n
Senior Lecturer, LawSchool, University of Melbourne, and Research Associate,Centre for Competi-
tion and Consumer Policy, Australian National University. This research was funded by the Centre for
Competition and Consumer Policy, Regulatory Institutions Network, Australian National University
and is part of a wider research projecton the compliance impact of Australian Competition and Consu-
mer Commission (ACCC)enforcement activity.The work of the centrei s partially funded bythe ACCC.
The author would like to thank theACCC and anonymous interviewees for cooperating with this re-
search.Thanks arealso due to Maurice Bailey and especially Natalie Stepanenko for invaluable research
assistance, and to RobertAntich, John Braithwaite, ImeldaMaher, KarenYeung for manyhelpful com-
ments on earlier versions of this paper.
1 Empiricalresearchers have found ‘negotiated compliance’to be very common in both the British
and Australian context.See A. Ogus, Regulation: LegalForm and EconomicTheory (Oxford:Claren-
don Press,1994)97 on‘negotiatedcompliance’. Forempirical studies of the compliance practices of
regulators see P. Grabosky and J.Braithwaite, Of Manners Gentle:EnforcementStrategiesof Australian
BusinessRegulatoryAgencies (Melbourne: OxfordUniversity Press,1986); K. Hawkins,Environment
and Enforcement: Regulation and the Social De¢nition of Pollution (Oxford: Clarendon Press, 1984);
K. Hawki ns, Lawas Last Resort (Oxford: Oxford University Press, 2002); B. Hutter, Compliance:
Regulation and Environment (Oxford:Clarendon Press, 1997).
2 See Australian Law ReformCommiss ion (ALRC), Securing Compliance:Discussion Paper 65: Civil
and AdministrativePenaltiesin AustralianFederalRegulation (Commonwealthof Australia, 2002) 100.
rThe Modern LawReview Limited 2004
Published by BlackwellPublishing, 9600 Garsington Road,Oxford OX4 2DQ,UK and 350 Main Street, Malden, MA 02148, USA
(2004) 67(2)MLR 209^246
undertakings are enforceable in court. Potential ACCC enforcement actions that
have recently been settled by enforceable undertakings include selling cots, sun-
glasses,bicycles and othergoods that do not meet prescribed safetystandards, col-
lusive arrangements and exclusive dealing between health care providers,
misleading and deceptive advertising of air fares, and unconscionable and mis-
leading conduct by ¢re protection businesses in failing to perform contracted
maintenance services and checks of ¢re protection equipment for customers. Be-
cause of theire⁄ciency, £exibility and e¡ectiveness, enforceable undertakings are
generally well regarded by regulatory sta¡, industry and lawyers.
3
The ACCC’s
enforceable undertakingpower has been considered so successful, it is nowbeing
copied in a number of other regulatory regimes.
4
Some commentators, however, have suggested that section 87B may confer
‘unacceptably broad discretionary power on the Commission for which it is in-
adequately accountable’.
5
Certain critics (mostly big business and commercial
lawyers) have even said that the ACCC has used ‘its positionof strength to ‘bully’
business into complying with its directives without necessarily sticking to the
formal legal process,’
6
and that theACCC has been too willing to‘twist arms’ to
3 See ALRC, Civiland Administrative Penalties in Australian FederalRegulation, Report 95 (Common-
wealth of Australia, 2003) para 16.59.
4 Most signi¢cantly, the Australian Securitiesand Investments Commission(Australia’s main corpo-
rate lawand ¢nancial s ervices regulator)was given the powerto accept enforceable undertakings
in July1998: see ASICAct (Cth), ss 93A,93AA. TheAustralian Prudential RegulatoryAuthority
also has the power to accept enforceableu ndertakings under Superannuation Industry (Supervi-
sion) Act1993 (Cth), s 262A.The Civil Aviation SafetyAuthority has the same power (as of July
2003)u nder CivilAviation Act1988(Cth), s 31A and so does the New SouthWalesDepartment of
FairTrading under FairTrading Act1987(NSW), s 73A,the Chief Executive O⁄cer, Queensland
Department of Industrial Relationsunder Workplace Health and SafetyAct 1995 (Qld),Part 5 (as
of June 2003). The Secretary of the Tasmanian Department of Infrastructure, Energy and Re-
sources has the power to enter into enforceable agreements rather than prosecuting a breach under
Workplace Health and Safety Act 1995(Tas) s 55A (as of November 2002). Other regulators that
have asked forthe power to accept enforceable undertakings i nclude the Australian Broadcasting
Authority (ALRC, Discussion Paper 65, Chapter16, footnote 66)a nd the NewSouth Wales O⁄ce
of the Legal Services Commissioner 2000, Final Submissionto NSW Law Reform Commission Issues
Paper 18 ^ Lawyers and Complaints: Review of Part 10, Sydney. See also S. Streets, P. Kruzas and
M. Payton,‘EnvironmentalUndertakings: Ownersh ip and Obligations’(2002)19(3) Environmen-
tal and Planning Law Journal 180, proposing enforceable undertakings powers for environmental
regulators.
5 K.Yeung,‘Negotiated ComplianceStrategies: The Quest for E¡ectiveness and the Importance of
Constitutional Principles’ in ALRC Conference, (7^9 June 2001, Sydney) Penalties: Policy, Princi-
plesa nd Practice in Government Regulation, 24. See also K. Yeung,The Public Enforcementof Australian
Competition Law (Canberra: ACCC, 2001) ch 5, and Securing Compliance ^ A Principled Approach
(Oxford:Hart Publishi ng,forthcoming) chs 6 and 7. See alsoT.Voon,‘OverstatedUndertakings:
Recent Developments for Compliance Programs’ (1998) 6 Trade Practices Law Journal 19 6, a n d
F. Zumbo,‘Section 87B Undertakings:There’s NoAccounting For Such Conduct!’ (1997) 5 Tr a d e
Practices LawJournal121.
6 HR Standing Committee on Economics, Finance and Public Administration,CompetingInterests:
IsThereBalance? Review of theAustralian Competition and Consumer Commission Annual Report 1999^
2000 (Canberra: Parliament of the Commonwealth of Australia, 2001) 41. Some criticisms are
likely to stem from personality politics, particularly relating to industry perceptions of the
recently departed chair of the ACCC and his use of publicity: see S. Bartholomeusz,‘Fels Takes
Battleto H is Opponents’(11^12May 2002) SydneyMorningHerald47, C.Ryan,‘Why Fels Jumped’
(7 September 2002) AustralianFinancial Review 21.
Restorative Justice in Business Regulation?
210 rTheModern Law Review Limited 2004
‘extract’ unjusti¢ed or unduly expansive undertakings.
7
This ‘fairness critique’
concludesthat the discretionto enter into an enforceableu ndertaking (on thepart
of both theregulator and theregulated entity)must be con¢ned and narrowed so
that undertakings resemble, as muchas possible, lenient,non-punitive versions of
what a court mighthave ordered. Regulators’powers to accept enforceableu nder-
takings should be subject to greater procedural safeguards and their permissible
content de¢ned and limited bylegislation.
8
This paper argues the opposite. Enforceable und ertakings are valuable because
they are an alternative to traditional coercive, regulatory enforcement action.
Their potenti al can best be describe d as a potential for restorative justice, although
the ACCC itselfhas neverdescribed them as such.Restorative justice requires that
all parties (the regulator, regulated entity and those a¡ected by the breach) should
be empowered together to make innovative, £exible and expansive undertakings
that go beyond what a court would order with the purpose of identifying, cor-
rectingand preventing theoriginal breach and its underlying causes. It is truethat
consent, notcoercion, together with participation, transparency and accountabil-
ity provide the only legitimate underpinning for such undertakings. However,
fairness critiques of enforceable undertakings over-estimate the power of most
regulators in most circumstances to dictate and enforce the provisions of enforce-
able undertakings.They also ignore or under-estimate the ways in which restora-
tive justice in the negotiation of enforceable undertakings can meet concerns
about adequate procedural fairness and accountability.
In contrast to the ‘fairness critique’ of enforceable u ndertakings is a ‘bias cri-
tique’ that suggests enforceable undertakings are just another example of the pri-
vileged treatment usually given to business deviance in comparison with street
crime. It is a‘soft option’ that gives business o¡enders another chance to comply
voluntarily when it would be more appropriate and e¡ective to punish them
in proportion to the massive amounts of ¢nancial harm their conduct has caused
and their greater capacity to pay.
9
According to this critique the popularity of
7 See HR Standing Committee on Economics, Finance and Public Administration, n 6 above, 41
for the allegation of ‘arm twisting’. See Business Council of Australia, Submission to theTrade Prac-
tices Act Review #71 (2002) 66 for the allegation that the ACCC uses the threat of litigation to
‘extract’terms. Both terms were also used by lawyers in the interviews for this research. See also
Business Council of Australia, Submissionto theTrade PracticesAct Review #71 (2002) 53^61,Austra-
lian Bankers Association, Submission to theTrade Practices Act Review #118 (2002) 12^13, Minter
Ellison Legal Group, Submission toTrade Practices Act Review #48 (2002) 12. All submissions to
the 2002^2003 Dawson Committee’s Review of the Trade Practices Act are available at http://
tpareview.treasury.gov.au/submissions.asp (last visited 1 May 2003).
8 ALRC n 3 above,para 16.79^16.86 and 16.114,a ndrecommendations 16^2and 16^3. See also refer-
ences at n 5 and 7 above.
9 For example see H. Glasbeek,Wealth by Stealth: Corporate Crime,CorporateLaw,and the Perversion of
Democracy (Toronto:Between the Lines, 2002); F.Pearce and S.Tombs,‘Ideology, Hegemony, and
Empiricism’(1990) 30(4)BritishJournalof Criminology 423;F. Pearce and S.Tombs,To x i c Ca p i t a l i s m :
Corporate Crime and the Chemical Industry (Dartmouth: Ashgate, 1998); S.Tombs,‘Stemming the
Flow of Blood? The Illusion of Self-regulation’ (1992) 3 TheJournalof Human Justice 75. See also
K. D. Krawiec,‘Cosmetic Compliance: An Incomplete Contracts Governance Theory’ (2003)
81(2) Washington University Law Quarterly forthcoming; F. Hai nes, Corporate Regulation: Beyond
‘Punish or Persuade’ (Oxford: Clarendon Press, 1997); F. Hai nes and A. Sutton,‘The Engineer’s
Dilemma: A SociologicalPerspective on Juridi¢cation and Regulation’(2003) 39 Crime, Law and
SocialChange 1; A.Hopkins, Ma king Safe tyWork (St Leonards, NSW: Alle n &Unwin, 1995). Note
Christine Parker
211rThe Modern LawReview Limited 2004
To continue reading
Request your trial