Australian Securities and Investments Commission v American Express Australia Limited

The Australian Securities and Investments Commission (ASIC) brought proceedings against American Express Australia Limited for contraventions of the Corporations Act 2001 (Cth), specifically concerning the design and distribution obligations in Part 7.8A of the Act. The dispute centred on American Express’s distribution of two credit cards in David Jones stores, and whether the company had contravened sections 994C(4) and 994C(5) of the Act by failing to review or cease issuing these cards after certain events suggested that the target market determinations (TMDs) were no longer appropriate. American Express admitted two contraventions of sections 994C(4) and 994C(5) of the Act, but contested the knowledge requirement in the chapeau of s 994C(4) and the meaning of “first knew” in s 994C(5)(c). The court had to decide whether the knowledge requirement applied to each sub-paragraph of s 994C(4) and whether the phrase “first knew” in s 994C(5)(c) should be interpreted as “first knew or ought reasonably to have known”. The court also considered the parties’ joint submissions on the penalty and the duties of counsel to the court in providing reasons for their proposed construction of the Act.

The court found that the knowledge requirement in the chapeau of s 994C(4) did not apply to each sub-paragraph of that section. It also held that the phrase “first knew” in s 994C(5)(c) should be construed in context as meaning “first knew or ought reasonably to have known”. The court noted that the drafting of s 994C(4)(c) was poorly done and suggested that Parliament should amend it. Regarding the contraventions, the court concluded that American Express had contravened s 994C(4) by not reviewing the TMDs for the DJs Cards or ceasing to issue them, as by 11 May 2022, American Express ought reasonably to have known that certain events suggested the TMDs were no longer appropriate. The court did not find a contravention of s 994C(5) as American Express did not have actual knowledge of the matter. The court then proceeded to determine the appropriate penalty and costs order, taking into account the agreed penalty submissions and ASIC’s views on the appropriate penalty.

The court ordered American Express to pay a pecuniary penalty of $8,000,000 to the Commonwealth within 90 days of receiving a penalty invoice. It also ordered American Express to pay ASIC’s costs of and incidental to the proceeding in the agreed sum of $200,000 within 90 days of receiving a costs invoice. The court’s decision highlighted the importance of clear drafting in civil penalty provisions and the court’s role in ensuring that penalties are appropriate and serve the public interest in promoting compliance and predictability in civil penalty proceedings.