Australian Competition and Consumer Commission v Spreets Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Spreets Pty Ltd [2015] FCA 382

Citation: Australian Competition and Consumer Commission v Spreets Pty Ltd [2015] FCA 382
Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v SPREETS PTY LTD (ACN 142 688 524)
File number: QUD 309 of 2014
Judge: COLLIER J
Date of judgment: 23 April 2015
Catchwords: CONSUMER LAW – misrepresentations to consumers by online group buyer concerning price of deals, consumer guarantees, voucher redemption and remedies – declarations, civil penalties and non-punitive orders sought – s 18 and s 29 Australian Consumer Law – statement of agreed facts and admissions pursuant to s 191(3)(a) Evidence Act 1995 (Cth)
Legislation: Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth)) Pts 3-1, 3-2, 5-4, ss 18, 19, 29, 29(1)(i), 29(1)(m), 224, 224(1)(a)(ii), 224(2), 224(4)(b), 246
Competition and Consumer Act 2010 (Cth)
Evidence Act 1995 (Cth) s 191(3)(a)
Federal Court of Australia Act 1976 (Cth) ss 21, 43
Federal Court Rules 2011 (Cth) r 40.02(b)
Cases cited: ACCC v Woolworths (South Australia) Pty Limited (2003) FCA 530
Australian Competition & Consumer Commission v Alvaton Holdings Pty Ltd [2010] FCA 760
Australian Competition and Consumer Commission v Construction, Forestry, Mining and Energy Union [2007] ATPR 42-140
Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330
Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378
Australian Competition and Consumer Commission v South East Melbourne Cleaning Pty Ltd (in liq) (No 2) [2015] FCA 257
Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640
Barbaro v The Queen (2014) 305 ALR 323
Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1
Forster v Jododex Australia Ltd (1972) 127 CLR 421
IMF (Australia) Ltd v Sons Of Gwalia Ltd (administrator appointed) (2004) 211 ALR 231
J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission (2000) 172 ALR 532
Markarian v The Queen (2005) 228 CLR 357
Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383
Matthews v The Queen [2014] VSCA 291
NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285
Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249
Thomson Australian Holdings Proprietary Limited v Trade Practices Commission (1981) 148 CLR 150
Thomson Holdings Pty Ltd v TPC (1981) 148 CLR 150
TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277
Trade Practices Commission v CSR Ltd (1991) ATPR 1141-076
Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375
Date of hearing: 10 April 2015
Place: Brisbane
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 153
Counsel for the Applicant: Ms M Brennan
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the Respondent: Mr MJ May
Solicitor for the Respondent: Johnson Winter & Slattery

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

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Details
Case
[2015] FCA 382
Decision Date

CaseChat Overview and Summary

The Australian Competition and Consumer Commission (ACCC) brought an action against Spreets Pty Ltd in the Federal Court of Australia, alleging that Spreets had engaged in misleading conduct in breach of sections 18 and 29 of the Australian Consumer Law (ACL). The ACCC sought various orders, including declarations, civil penalties, non-punitive orders, and costs. The central issues for the court were whether Spreets had indeed engaged in misleading conduct and, if so, what penalties and other relief should be imposed.

The court examined the nature of the misleading conduct, which involved misrepresentations about the price of deals, consumer guarantees, voucher redemption, and remedies. The court found that Spreets had admitted to the conduct and contraventions of the ACL as alleged by the ACCC. The ACCC and Spreets reached an agreement on the facts and the terms of the relief to be ordered by the court. The court considered various factors in determining the appropriate penalty, including the deliberateness of the contravention, the effect on the market, and the degree of cooperation with the ACCC. The court found that a penalty of $600,000 was appropriate, taking into account the totality of the contravening conduct and the need for general and specific deterrence.

In conclusion, the court ordered Spreets to pay a pecuniary penalty of $600,000 and the ACCC's costs of $25,000. The court also ordered Spreets to maintain its existing compliance practices for a period of three years. The decision underscores the importance of general and specific deterrence in setting penalties for breaches of consumer protection laws.

Orders

Orders of the court

13. Spreets pay to the Commonwealth of Australia, in respect of the contraventions of the ACL referred to in paragraphs 1 to 10 above, a pecuniary penalty in the amount of $600,000 within 28 days of the date of this order.

COSTS

14. Spreets pay the applicant’s costs of and incidental to these proceedings fixed in the amount of $25,000 within 28 days of the date of this order.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Finally, in the originating application filed on 30 June 2014, the ACCC sought the following orders:1.declaratory relief under s 21 of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”);2.orders for civil penalties under s 224 of Sch 2 to the Competition and Consumer Act 2010 (Cth) (“the Act”), comprising the Australian Consumer Law (“ACL”);3.non-punitive orders under s 246 of the ACL; and4.costs;as well as additional orders, being in summary:5.an order that Spreets pay a pecuniary penalty to the Commonwealth of Australia, in respect of the contraventions of the ACL referred to in paragraphs 1 to 13 of the originating application; and6.an order that Spreets at its own expense and within 90 days of the date of this order develop and implement a compliance program, being an enhancement of Spreets ‘ existing compliance guidelines, procedures or programs that are designed to minimise the risk of Spreets engaging in conduct which contravenes s 18 and s 29 of the ACL by:(a)conducting a review of existing compliance guidelines procedures or programs;(b) appointing and maintaining the appointment of a compliance officer;(c)issuing a written policy statement outlining its commitment to compliance with the ACL;(d)implementation of regular and practical training for all employees whose duties could result in being concerned with the ACL;(e)ensuring that the compliance program is included in all induction processes for new staff whose duties could result in being concerned with the ACL; and(f)maintaining the compliance program for a period of 3 years from the commencement date.JOINT SUBMISSIONS AND STATEMENT OF AGREED FACTS AND ADMISSIONS Before the Court were joint submissions and statement of agreed facts and admissions pursuant to s 191(3)(A) of the Evidence Act. These submissions were filed on 21 November 2014 on behalf of the ACCC and Spreets. In summary:·For the purpose of the proceeding and in order to resolve the allegations arising from the ACCC’s investigation, Spreets admitted the conduct and the contraventions of s 18 and s 29 of the ACL as pleaded in the Statement of Claim.·For the purposes of s 191(3)(a) of the Evidence Act, the ACCC and Spreets reached agreement in respect of the facts of this case and the terms of relief to be ordered by the Court to resolve the proceedings.·Spreets has agreed to maintain its existing compliance practices for a period of three years. These compliances practices reflect certain improvements to the compliance programme of Spreets made after the commencement of the ACCC investigation. The ACCC does not seek further orders in relation to the Spreets compliance program.·The parties recognise that, under s 224 of the ACL, it is for the Court to determine whether the contraventions occurred, and the quantum of any pecuniary penalties and other relief that should be ordered. At the hearing before me on 10 April 2014, Ms Brennan tendered a short minute of orders. Mr May consented to this tender and made no further submissions in this regard.DETAIL OF THE SHORT MINUTE OF ORDERSDeclarations

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I accept that Spreets’ willingness to improve its compliance systems should be considered as a mitigating factor. Further, I note that Spreets has taken steps to cooperate with the ACCC to resolve these proceedings, avoiding the need for a contested hearing in the matter which would consume time and resources of the Court as well as the regulator.Conclusions on appropriate penalties I have already noted concerning the importance of penalties being of sufficient magnitude to achieve general deterrence in the relevant industry and to specifically deter repetition of the contravening conduct by the respondent. The maximum penalty for a body corporate for each act or omission that relates to a provision of Pt 3-1 of the ACL, which includes s 29, is $1.1 million as per Item 2 of s 224(3) of the ACL. In this case there has been a course of conduct which has resulted in the investigation and action by the regulator. As the majority of the Full Court explained in Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1 at [41]:… the principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, the court must ensure that the offender is not punished twice for the same conduct. In other words, where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion. Applying these principles, the parties submit that it would be appropriate to group the various categories of contravening conduct of Spreets in order to assess penalty. More particularly, the parties submit that these categories are:·conduct involving Melbourne City Skydive Centre, Coffs City Skydivers and Rainbow Beach Skydive deals; and·representations concerning consumer guarantees;·representations to individual consumers. In my view it is appropriate to group the categories of conduct for the purposes of assessing penalties. Further, in determining the appropriate penalty, it is also relevant to take into account the “totality principle”, namely the Court should not order a total penalty for related offences which exceeds what is proper for the entirety of the contravening conduct involved: Trade Practices Commission v TNT Australia Pty Ltd (1995) ATPR 41-375; Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383. Taking all of these factors into account, the parties submitted that a total pecuniary penalty in the amount of $600,000 is appropriate, comprising the following:1. Representations about the price of deals:·$40,000 for the contravention of s 29(i) of the ACL relating to the Melbourne City Skydive Centre Deal email advertisement;·$60,000 for the contravention of s 29(i) of the ACL relating to the Melbourne City Skydive Centre Deal website advertisement and offer;·$40,000 for the contravention of s 29(i) of the ACL relating to the Coffs City Skydivers Deal email advertisement;·$40,000 for the contravention of s 29(i) of the ACL relating to the Coffs City Skydivers Deal website advertisement and offer; and ·$40,000 for the contravention of s 29(i) of the ACL relating to the Rainbow Beach Skydive Deal website advertisement and offer.2. Representations about consumer guarantees:·$50,000 for the contravention of s 29(1)(m) of the ACL relating to the Melbourne City Skydive Centre Deal voucher representations;·$50,000 for the contravention of s 29(1)(m) of the ACL relating to the Travel Smoove Hong Kong Holiday Deal voucher representations;·$50,000 for the contravention of s 29(1)(m) of the ACL relating to the Vivere Products Eight Cube Storage System Deal voucher representations; and·$50,000 for the contravention of s 29(1)(m) of the ACL relating to the Deals in Australia Wine Aerator Deal voucher representations.3. Representations to individual consumers:·$180,000 for the contravention of s 29(1)(m) of the ACL relating to the representations to individual consumers.

Ratio Decidendi

Legal Principle Established

This is a significant penalty for a contravention of s 29 of the ACL. It is appropriate to have regard to relevant principles as they apply in the circumstances of this case.Statutory consideration Section 224(2) of the ACL provides that, in determining the appropriate pecuniary penalty, the Court must have regard to all relevant matters including:·the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;·the circumstances in which the act or omission took place; and·whether the person has previously been found by a Court in proceedings under Chapter 4 or Pt 5-2 of the ACL to have engaged in any similar conduct. Section 224(4)(b) of the ACL provides that a person is not liable to pay more than one pecuniary penalty in respect of the same conduct. The factors relevant to the assessment of a pecuniary penalty under earlier equivalent legislation to s 224 of the ACL were identified by French J in Trade Practices Commission v CSR Ltd (1991) ATPR 1141-076 at 52, 152-153 as:·the nature and extent of the contravening conduct;·the amount of loss or damage caused;·the circumstances in which the conduct took place;·the size of the contravening company;·the degree of power of the contravener, as evidenced by its market share and ease of entry into the market;·the deliberateness of the contravention and the period over which it extended;·whether the contravention arose out of the conduct of senior management of the contravener or at a lower level;·whether the contravener has a corporate culture conducive to compliance with the legislation as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention; and·whether the contravener has shown a disposition to cooperate with the authorities responsible for the enforcement of the legislation in relation to the contravention. Those considerations have since been approved with the following extensions by Full Courts of this Court:·similar conduct in the past;·effect on the functioning of the market and other economic effects of the conduct;·the financial position of the contravening company; and·whether the conduct was systematic, deliberate or covert.(NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 290, 292-294 and 297; J McPhee & Son (Australia) Pty Ltd v Australian Competition and Consumer Commission (2000) 172 ALR 532 at [158] and [163]; TPG Internet Pty Ltd v Australian Competition and Consumer Commission (2012) 210 FCR 277 at [141].)Deterrence The High Court in Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 confirmed that the principal object of pecuniary penalties in the context of the consumer protection provisions in the Competition and is deterrence and that it should be taken into account in considering the appropriate amount of a penalty under s 224. As French CJ, Crennan, Bell and Keane JJ explained at [65]:General and specific deterrence must play a primary role in assessing the appropriate penalty in cases of calculated contravention of legislation where commercial profit is the driver of the contravening conduct.