In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20 the Full Federal Court reduced Optus’ civil pecuniary penalties in relation to advertising for the ‘THINK BIGGER’ and ‘SUPERSONIC’ broadband internet plans from $5.26 million ordered originally (see here) to $3.61 million.

The Full Court concluded that the severity of the penalty imposed by the trial judge was based on an error of fact that lead the judge to conclude that Optus did not take its obligations under the Act seriously. Nevetheless, the Full Court concluded Optus’ conduct was very serious.

The Full Court rejected Optus’ argument that it was excessive to impose a penalty apt to strip Optus of profits not shown to stem directly from the contravention.

“There may be room for debate as to the proper place of deterrence in the punishment of some kinds of offences, such as crimes of passion; but in relation to offences of calculation by a corporation where the only punishment is a fine, the punishment must be fixed with a view to ensuring that the penalty is not such as to be regarded by that offender or others as an acceptable cost of doing business. The primary judge was right to proceed on the basis that the claims of deterrence in this case were so strong as to warrant a penalty that would upset any calculations of profitability. The purpose of Optus’ conduct was to generate sales, and hence, profits. The advertising deployed by Optus was calculated to win business from its rivals. The same share of business might not have been attracted by a more balanced presentation of the advantages of the plans. There is no reason to doubt that Optus knows its business sufficiently well that it is safe to proceed on the footing that its course of conduct in the campaign reflected informed calculation. While one cannot isolate the profits attributable to the campaign, it is necessary and desirable to impose a penalty which is apt to affect in a substantial way the profitability of Optus’ misconduct.

Generally speaking, those engaged in trade and commerce must be deterred from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention. The primary judge did not engage in a surgical exercise calculated to deprive Optus of the profits referable to the increase in business generated by the campaign. It cannot seriously be suggested that this Honour was concerned to engage in an exercise in “profit stripping”. To so describe his Honour’s approach is to distract from the legitimate claims of deterrence in a case like the present.

In the present case the sheer magnitude of the advertising campaign, and its likely effect in the market, mean that a penalty which did not substantially affect the profitability of Optus’ campaign could not reasonably be countenanced. We would, therefore, reject Optus’ argument under this heading…

In exercising afresh the discretion, this Court should proceed on the footing that Optus’ conduct was very serious. The contraventions were on a grand scale. They were also unexplained. They were certainly not sufficiently explained on the evidence as a failure of diligence on the part of the lawyers in its in-house legal department. … It remains the case, however, that there is simply no satisfactory explanation for these contraventions.

At first instance, Optus advanced the suggestion that whether the advertisements contravened the Act was a case of mere error of judgment on which reasonable minds might differ. …The primary judge was entitled to reject the explanation proffered by Optus for the contravention. We too reject that explanation.

Optus cannot be regarded as a “first offender”. It failed to observe the requirements of the Act, and not for the first time. The absence of a satisfactory explanation for the contraventions and the evident laxity in its internal compliance program mentioned by the primary judge mean that Optus has given the Court no reason to be confident that, in the absence of a very substantial penalty, it will not regard as acceptable the risk of a fine for contravention. The Court must fashion a penalty which makes it clear to Optus, and to the market, that the cost of courting a risk of contravention of the Act cannot be regarded as acceptable cost of doing business.

It is also a circumstance of concern that a misleading advertising campaign is apt to increase the market share of the contravenor at the expense of law-abiding competitors. In this case Optus’ conduct was contrary to the undertaking in which Optus and its competitors had joined with the express intention of improving advertising standards in the telecommunications industry.”

The ACCC has published its Compliance and enforcement policy setting out the principles it follows to achieve compliance with the law and outlining the ACCC’s enforcement powers, functions, priorities, strategies and regime.

The ACCC has explained that it is unlikely to become involved in resolving individual disputes and that its role is to focus on widespread consumer detriment: it directs its resources to the investigation and resolution of matters that provide the greatest overall benefit for consumers.
“… the ACCC gives enforcement priority to matters that demonstrate one or more of the following factors:
• conduct of signifi cant public interest or concern
• conduct resulting in a substantial consumer (including small business) detriment
• anticompetitive conduct involving cartel behaviour or misuse of market power
• unconscionable conduct, particularly involving large national companies or traders
• conduct demonstrating a blatant disregard for the law
• conduct involving issues of national or international significance
• conduct detrimentally affecting disadvantaged or vulnerable consumer groups
• conduct in concentrated markets which impacts on small business consumers or suppliers
• conduct involving a significant new or emerging market issue
• conduct that is industry-wide or is likely to become widespread if the ACCC does not intervene
• where ACCC action is likely to have a worthwhile educative or deterrent effect, and/or
• where the person, business or industry has a history of previous contraventions of competition, consumer protection or fair trading laws….

In addition to those matters that demonstrate the factors above, the ACCC is currently prioritising its work in the following areas:
• consumer protection in the telecommunications and energy sectors
• conduct that may impede emerging competition involving online traders
• competition and consumer issues in highly concentrated sectors, in particular in the supermarket and fuel sectors
• carbon pricing representations
• the ACL consumer guarantees regime
• consumer protection issues impacting on Indigenous consumers.”

We noted the new Australian Consumer Law consumer warranty provisions that started on 1 January 2012 here.

The ACCC has now published its policy on transitional arrangements where due to the long lead times associated with many consumer products, and the nature of the packaging of those products, there will be some goods in the supply chain that, as at 1 January 2012, do not contain warranty documents that are compliant with the warranty against defects requirements of the ACL.

The ACCC says that until September 2012, when considering the appropriate enforcement response to any contravention of the warranty against defects requirements that apply to stock in the supply chain manufactured and packaged prior to 1 November 2011, the ACL Regulators (ACCC and ASIC) will have regard to:

• whether there are serious practical difficulties in updating warranty documents—e.g. the warranty is in a tamper-proof package; and
• whether the supplier has taken all reasonable steps to otherwise convey the mandatory text and information required by the ACL to consumers—e.g. by placing a compliant sticker on the outside packaging, or by erecting prominent, clear, point-of-sale signs including the mandatory text and information at all cash registers in a prominent position.

The ACCC gives an example of an appropriate sign to be displayed.

In these circumstances the ACCC says the ACL Regulators are unlikely to take enforcement action.

Comlaw has published a consolidated Australian Securities and Investments Commission Act incorporating new sections 12CB and 12CC made by the Competition and Consumer Legislation Amendment Act 2011 in relation to unconscionable conduct in connection with financial services.

The sections simplify the unconscionable conduct provisions of the Australian Securities and Investments Commission Act 2001 by including a list of interpretative principles and remove the distinction in the existing provisions between unconscionable conduct affecting businesses and those affecting consumers. It does not apply to listed public companies.

The changes commenced 1 January 2012.

From 1 January 2012 suppliers of consumer goods and services must include standard wording in warranties against defects: Schedule 3 of The Trade Practices (Australian Consumer Law) Amendment Regulations 2010 (No. 1).

The new rules make it clear that supplier warranties are in addition to 12 basic statutory consumer guarantees. Staff should be trained to understand the rights of consumers. A requirement to pay for a contractual right to which a consumer is already entitled by law will be a false and misleading representation.

Warranty terms must be reviewed to ensure they comply.
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The COAG Legislative and Governance Forum on Consumer Affairs (CAF) has agreed to amend the Australian Consumer Law (ACL) (in Schedule 2 of the Competition and Consumer Act) to allow a supplier under an unsolicited consumer agreement to deliver goods with a price of up to $500 to a consumer as soon as an agreement is entered into.

From 1 January 2012, under section 86 of the ACL consumers are entitled to a 10-day cooling off period during which neither goods nor services can be supplied or payment made.

The amendment agreed to by CAF allows consumers to immediately take receipt of goods they have consented to buy. This amendment does not allow the supply of services or payment for goods within the cooling off period.

If a consumer invokes their right to terminate the unsolicited agreement during the cooling off period, suppliers have an obligation to collect the goods within 30 days or the goods become the consumer’s property.

Regulations will be made before the end of this year.

The Government is also reviewing the regulation of door to door selling of credit.

UPDATE 25 November 2011: Competition and Consumer Amendment Regulations 2011 (No. 2) made.