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Financial experts forecast that Medibank is looking at a cost in the hundreds of millions of dollars to put the scandal behind it. A substantial financial hit, but not insurmountable for a company worth more than $10 billion.
Crown Resorts settled its breaches with AUSTRAC for $450 million rather than the $1 billion penalty that could have been applied. Credit: Bloomberg
Like its fellow regulators, the competition watchdog has been given a big stick to use only in the most extreme cases of abuse of power by the grocery giants against suppliers, which are up against the most concentrated supermarket sector in the developed world.
While the maximum penalties make great headlines, the reality is tempered with pragmatism and that generally brings the fines back into reasonable territory.
Nowhere is this spelt out more clearly than the Federal Court judgment in May last year, when it approved AUSTRAC’s $450 million settlement with Crown Resorts over the group’s anti-money laundering and counter-terrorism failings at Crown Perth and Crown Melbourne. The alleged breaches could have attracted a fine of more than $1 billion.
While the presiding judge, Justice Michael Lee, approved the penalty, he did warn that if AUSTRAC was too eager to reach agreements with the parties it is prosecuting, it ran the risk of being perceived as a “soft touch”.
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But he also recognised the costs and risks for the regulators contesting these cases in court and spelt out what these settlements needed to achieve.
When considering whether to approve settlements, Lee noted that the primary purpose of a civil penalty is “the promotion of the public interest in compliance”.
This means the penalty must act as an effective deterrence and not be shrugged off as an acceptable cost of doing business.
So the question is, what is a suitable deterrent for Woolworths with a market valuation of $41 billion, which faces the prospect of a $5 billion fine? Likewise, for the $23 billion Coles, which could face a penalty of up to $3.8 billion?
Let’s hope we never have to find out.
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