The Federal Court has imposed a landmark $14 million penalty on City Beach for breaching the mandatory button battery standards. We take a look at the case and the key takeaways.
On 22 December 2025, the Federal Court of Australia ordered City Beach to pay $14 million in penalties for supplying products that didn’t comply with the Consumer Goods (Products Containing Button/Coin Batteries) Safety Standard 2020 (Safety Standard) and the Consumer Goods (Products Containing Button/Coin Batteries) Information Standard 2020 (Information Standard) (together, the Standards) in contravention of the Australian Consumer Law (ACL).
The ACCC commenced proceedings against City Beach in April 2025, marking its first court action for non-compliance with the Standards since coming into effect in June 2022.
The case, which resulted in the first court-imposed penalty for breaching the Standards, signals a shift from the ACCC’s previous reliance on infringement notices and undertakings toward stronger court enforcement, with the ACCC reaffirming its commitment to “take strong enforcement action” against businesses that breach the Standards.
In determining the penalty, the Court emphasised the importance of general deterrence, making clear that breaches involving life-threatening risks will not be treated as a mere “cost of doing business”.
The ACCC’s approach and the penalty imposed on City Beach benchmarks the regulatory expectations on businesses to document and implement policies, procedures and processes to ensure product safety obligations are met, and any potential concerns or risks are promptly escalated and addressed.
Short-circuiting compliance processes: What went wrong?
City Beach is a national and international clothing and accessories retailer. It also sells novelty consumer products such as toys, digital notepads, keyrings and lights that are sourced from third parties, which comprise approximately 2% of its total product range by sales.
- In mid-2022, several suppliers of the novelty products informed City Beach employees that some products may not comply with the Standards and provided remediation advice. The City Beach employees engaged with suppliers but did not escalate the issue to senior management or take any other steps to ensure ongoing compliance with the Standards.
- In late 2022 through to 2023, City Beach received warnings from NSW and Queensland Fair Trading regulators regarding non-compliant products identified through in-store inspections. In some cases, the regulatory warnings were not brought to the attention of City Beach directors.
- The ACCC first contacted City Beach on 30 August 2023 outlining its concerns and requesting City Beach to take action to ensure compliance, including conducting a voluntary recall for any non-compliant products. This was the first occasion where City Beach senior managers became aware of the existence of, and City Beach’s obligation to comply with, the Standards. City Beach engaged with the ACCC’s investigation and made admissions in subsequent correspondence. Despite this, City Beach did not conduct a voluntary recall until 1 March 2024 and continued to supply non‑compliant products until 24 October 2024.
- Through the ACCC’s investigation, it came to light that certain non-compliant products had continued to be supplied even after the recall, and that there were additional non‑compliant product lines not previously disclosed to the ACCC. City Beach attributed this to a combination of human error, limited records of discontinued stock, technological issues and IT anomalies.
Ultimately, City Beach admitted that between 22 June 2022 and 24 October 2024, it had:
- sold more than 65 types of novelty products containing button batteries that did not comply with the Safety Standard and/or Information Standard;
- supplied goods that did not comply with the Safety Standard on more than 54,000 occasions; and
- supplied goods that did not comply with the Information Standard on more than 56,000 occasions.
Fully charged: Record penalty decision
The ACCC submitted that a $14 million penalty was appropriate in the circumstances, while City Beach characterised that amount as “excessive and oppressive”, contending that the appropriate penalty was $4.5 million, subject to a 30% discount for early admissions and cooperation, resulting in a proposed penalty of $3.15 million.
The Court accepted the ACCC’s proposed penalty was appropriate in the circumstances, calling out the following as some of the factors influencing the decision:
- General deterrence: The penalty needed to ensure that non-compliance was not merely seen as the “cost of doing business”. The Court observed that the penalty amount served this purpose and did “not reach a level of undue severity or oppressiveness”, notwithstanding that it reflected more than half of City Beach’s average annual profit.
- Nature and extent of the contraventions: The conduct “occurred over an extensive period in which City Beach ought to have known of the existence of the Mandatory Standards”. It was also relevant that a high volume of products were sold in breach of the Standards, many of which were marketed to, or intended for, children.
- Ignorance of standards: Although City Beach’s contraventions were not deliberate, the Court described the ignorance of its directors as “astonishing having regard to the publicised dangers of button batteries”.
- Aggravating factors: City Beach did not have in place effective systems for ACL compliance, staff failed to escalate compliance issues to senior management, and the business continued to sell the products after the ACCC raised concerns and after a recall notice had been issued. The Court observed that at no time prior to 30 August 2023 did City Beach have internal processes designed to ensure compliance with the Standards, and that senior management failed to exercise proper supervision.
- Sluggish improvement to compliance culture: City Beach submitted that it had taken substantial action to ensure that its systems and practices promote compliance with the Standards. However, the Court observed that some of these steps (for example, instructing external lawyers to develop policies and processes) were not taken until two years after the first ACCC contact. The Court also noted an apparent continued lack of accountability, for example, when giving evidence, City Beach’s Head of Operations could not identify an individual with overall responsibility for compliance.
- Limited weight given to cooperation: City Beach’s cooperation with the ACCC was afforded little weight because it continued to contravene the Standards after becoming aware of its obligations, delayed its voluntary recall and failed to promptly address internal compliance deficiencies.
- Significant turnover and profits: City Beach is a substantial corporation with significant turnover and profits. Its failure to implement compliance programs prior to regulatory intervention indicated a systemic failure of corporate compliance and a disregard for its obligations under the ACL.
While ultimately adopting the ACCC’s proposed penalty, the Court acknowledged the following factors in the case:
- the non-compliant products were predominantly low-value novelty items (average price $15.60; lowest price $4.99);
- there were no reported injuries or actual harm caused by the products;
- City Beach had not previously been found by a court to have engaged in any breach of the ACL nor been investigated or sanctioned by the ACCC; and
- City Beach did not make substantial revenue or profit from the sale of the non-compliant products (which generated revenue of $542,314 and direct profit of $34,368).
Key takeaways
- As this case illustrates, and as the ACCC has made clear, it’s willing to use the full scope of its enforcement powers to take action against businesses that breach the Standards.
- General deterrence is a key driver of penalty setting for non-compliance with the Standards. Courts will seek to ensure penalties are not a mere “cost of doing business”, particularly where life‑threatening risks are involved.
- Systemic non-compliance across a large product range can justify a substantial penalty irrespective of the value of, or profit derived from, the relevant products.
- Businesses should have documented policies and procedures, alongside implemented systems and practices, to ensure that issues related to mandatory standards, product safety concerns, recalls and regulatory notices are escalated to senior management. These frameworks should be supported by accountability frameworks, staff training and consistent decision-making protocols.
- Ignorance isn’t bliss. The onus sits squarely with directors and senior management to ensure they understand, and take action to ensure compliance with, all product safety requirements.
- Retailers cannot solely rely on manufacturers or wholesalers for compliance. It’s critical for retailers to satisfy themselves that the products they supply to consumers are compliant and safe.