This is the latest in a series detailing developments in competition and consumer law in Australia, including the activities of Australia's competition and consumer regulator, the Australian Competition and Consumer Commission (ACCC), published judgments, recently issued proceedings and any relevant changes in the law.
This article covers events which occurred between March 2021 and July 2021. The previous update is available here.
Judgments
Google misled Android phone users about the collection of their personal data
The Federal Court has found that Google misled Android phone users in relation to the personal location data it collected through those phones. As reported in our June/July 2020 update, the ACCC alleged that Google represented that users could opt out of location data collection by turning off the 'Location History' setting, whereas actually, even with the setting off, Google would continue to collect, store, and use personally identifiable location data unless another setting under 'Web & App Activity' was turned off. The Court will now decide appropriate penalties, with the ACCC seeking declarations, pecuniary penalties, publication orders, and compliance orders. The matter has been set down for a three day hearing beginning on 8 September 2021. On 16 August, the Federal Court handed down a decision granting the ACCC discovery of documents which might establish a state of mind on the part of Google relevant to penalties in respect of the established contraventions. Justice Thawley found that the documents sought were directly relevant to determining the question of appropriate relief. Certain categories of discovery sought, and which Google is now required to discover, included documents relating the infamous "Oh Shit" internal meeting between various Google employees after news of Google's conduct broke in the press. The ACCC media release can be viewed here.
Volkswagen's appeal against record $125 million penalty dismissed
The Full Federal Court has dismissed an appeal by Volkswagen of the Federal Court's decision regarding the penalties payable by Volkswagen in relation to admitted contraventions of the Australian Consumer Law (ACL). Volkswagen admitted that it had made false representations in relation to its compliance with Australian diesel emissions standards, as reported in our December 2019/January 2020 update and, jointly with the ACCC, had submitted that $75 million was an appropriate penalty in respect of those contraventions. The penalty ultimately handed down by the Federal Court, which is five times higher than the previous highest penalty for a breach of the Australian Consumer Law, was upheld by the Full Court notwithstanding the parties joint submissions as to the appropriate penalty. The Full Court held that the Court has a wide discretion in ordering penalties for breaches of the ACL and found that the penalty was appropriate having regard to the "egregious and deliberately deceptive nature of Volkswagen's conduct" which was of "an unprecedented kind and scale". The ACCC media release can be viewed here.
ACCC's appeal against Quantum Housing Group decision upheld
As reported in our June/July 2020 update, the ACCC was largely successful in its case against Quantum House Group in the Federal Court, with the Court ordering Quantum to pay $700,000 in penalties for admitted contraventions of the ACL. The conduct in issue concerned Quantum making false or misleading representations by sending letters and emails to investment property owners pressuring them to terminate their relationship with existing property managers and, instead, appoint a property manager approved or recommended by Quantum, without telling them that it had commercial links with those property managers. The ACCC had also alleged that Quantum's conduct was unconscionable, but the Court dismissed that part of the claim on the basis that Quantum had not exploited a 'special disadvantage' of sophisticated investors. The ACCC appealed this aspect of the decision to the Full Federal Court. The Full Court upheld the appeal and found that, in order for conduct to be 'unconscionable' under the ACL, it does not need to be shown that the conduct exploited some disadvantage or vulnerability on the part of consumers or small businesses. Rather, the assessment required is an evaluation of whether the conduct in question is a sufficient departure from the norms of acceptable commercial behaviour as to be against conscience or to offend conscience. The ACCC did not appeal the Court's original decision on penalties, and therefore the $700,000 pecuniary penalty will stand. The ACCC media release can be viewed here.
Lorna Jane ordered to pay $5 million in penalties for COVID-19 claims
The Federal Court has ordered activewear company Lorna Jane to pay $5 million in penalties for contravening the ACL by making misleading claims that its clothing provided protection against the spread of COVID-19, as first reported in our November 2020 – February 2021 update. Lorna Jane admitted the allegations, on the basis that it had no scientific or technological basis for making the claims, which were authorised or approved by the company's director, Ms Lorna Jane Clarkson. Lorna Jane made joint submissions with the ACCC regarding the appropriate penalties, which were accepted by the Court. The ACCC media release can be viewed here.
Jump Swim franchisor ordered to pay penalties of $23 million
The franchisor Jump Swim has been ordered by the Federal Court to pay $23 million in penalties for contravening the ACL by falsely representing to franchisees that they would have an operational swim school within 12 months of signing a franchise agreement, without any reasonable basis to support this. We first reported on the Jump Swim litigation in our June 2019 update, which noted that the Court had made a freezing order against the assets of Jump Swim and its director, Ian Campbell. While Jump Swim is now in liquidation and therefore may not ultimately be in a position to pay the penalty ordered by the Court, the Court also ordered (following joint submissions on relief by the ACCC and Mr Campbell) that Mr Campbell personally pay $500,000 in compensation to franchisees and a penalty of $400,000. The ACCC media release can be viewed here.
Federal Court finds that Captain Cook College engaged in unconscionable conduct
The Federal Court has found that Captain Cook College engaged in systematic unconscionable conduct by deliberately enrolling students who it knew were unlikely to ever complete their online courses, to claim millions of dollars in benefits from the Commonwealth government. The ACCC alleged that about 86% of the relevant students never even logged into their course. The Court also found that the college had contravened the ACL in respect of its recruitment of five specific consumers (conduct which was admitted by the college), and that the college's parent company and its former Chief Operating Officer were knowingly concerned in the unconscionable conduct. The Court will decide appropriate penalties at a later date. This is the latest in a series of cases run by the ACCC against colleges in relation to the VET FEE-HELP loan scheme. The ACCC media release can be viewed here.
ISPs to pay $2.5 million for misleading NBN speed claims
The Federal Court has ordered (by consent) that the ISPs Dodo and iPrimus pay penalties of $1.5 million and $1 million respectively for misleading claims about their NBN speeds. This case is the latest in a series of enforcement actions by the ACCC regarding NBN speed claims. As reported in our June/July 2020 update, both companies (which are a part of the same corporate group) advertised 'typical evening speeds' which were calculated by reference to only the 75 fastest speeds across their networks. The ACCC media release can be viewed here.
Sumo Power misled consumers regarding electricity plans
The Federal Court has ordered Sumo Power to pay $1.2 million in penalties for contravening the ACL by misleading consumers about their savings if they switched to Sumo Power's electricity plans. The parties made joint submissions on the appropriate penalties, which the Court ultimately accepted. We reported on the ACCC instituting this proceeding in our August/September 2020 update. The Court declared that Sumo Power had advertised that it would maintain the low rates it had advertised, when in fact it had planned to, and did, increase the rates paid by customers substantially. The ACCC media release can be viewed here.
Superfone ordered to pay penalties for telemarketing
As reported in our December 2019/January 2020 update, the ACCC commenced proceedings in the Federal Court against Superfone alleging that it had misrepresented to consumers during telemarketing calls that they could not terminate their contracts without paying a penalty, in contravention of the ACL. Superfone subsequently admitted liability, but the parties disagreed as to the appropriate penalties (the ACCC sought $400,000, whereas Superfone sought $60,000). The Federal Court ordered that Superfone pay $300,000 in penalties, acknowledging that the penalty award, coupled with consumer redress orders and costs, could have the result of pushing Superfone into insolvency, but stating that the imposition of the penalty was appropriate in light of the seriousness of the contraventions and the need for deterrence. The ACCC media release can be viewed here.
Australian 4WD Hire and ex-directors engaged in unconscionable conduct
The Federal Court has found that Australian 4WD Hire (now in liquidation) contravened the ACL by including unfair contract terms in its standard form contracts for rental vehicles that allowed it to deduct amounts from its customers' security bonds for trivial breaches that did not cause any harm to the vehicle. The Court also found that the company acted unconscionably by sending threatening emails to consumers regarding withholding their deposits. Australian 4WD Hire has been ordered to pay $870,000 in penalties, and its former directors have been disqualified from managing companies for three years and ordered to pay $179,000 and $174,000 in damages respectively. The ACCC media release can be viewed here.
Jayco ordered to pay $75,000 regarding consumer guarantee rights
As reported in our November 2020 – February 2021 update, the Federal Court largely dismissed the ACCC's case against caravan manufacturer Jayco. The ACCC had claimed that Jayco had engaged in unconscionable conduct and misleading or deceptive conduct in relation to representations made to customers about their rights in respect of defective caravans. However, the ACCC was successful in its claim that Jayco had contravened the ACL on one occasion in relation to one specific customer, by representing to that customer that he was not entitled to a repair of his caravan, when in fact he was entitled to a refund or replacement under the ACL. In its decision on relief, the Federal Court ordered Jayco to pay a $75,000 penalty. Jayco made joint submissions with the ACCC regarding the penalty, which the Court accepted. The ACCC media release can be viewed here.
Megasave pays $1.9 million penalty for misleading franchisees
The Federal Court has made declarations (by consent) that Megasave, a parcel delivery business franchisor, and its sole director, Gary Bourne, made false or misleading representations to prospective franchisees in contravention of the ACL, and that Mr Bourne was knowingly concerned in this conduct. Megasave admitted that it represented to prospective franchisees that they would receive guaranteed minimum weekly payments and a guaranteed annual income, when it had no reasonable basis for doing so. In a subsequent decision on relief, the Federal Court ordered Megasave to pay $1.9 million in penalties and Mr Bourne pay $120,000 in penalties. Megasave and Mr Bourne were also ordered to pay $500,000 in partial redress to affected franchisees for the losses suffered. The ACCC media release on the declaration can be viewed here, and the media release on the penalties can be viewed here.
Appeal by Geowash directors dismissed
The Full Federal Court has dismissed an appeal by the directors of carwash franchisor Geowash against a decision that they were knowingly concerned in breaches of the ACL and the Franchising Code of Conduct by Geowash, as reported in our December 2019 / January 2020 update. The Full Court rejected the appeal on the basis that the primary judge had correctly found that the pattern of unconscionable conduct was "founded upon deliberate deceptiveness and dishonesty" and that the directors had failed to act in good faith. The ACCC media release can be viewed here.
FE Sports to pay $350,000 penalty for resale price maintenance
The Federal Court has ordered FE Sports to pay a $350,000 penalty and has made declarations by consent that FE Sports engaged in resale price maintenance, in contravention of section 48 of the Competition and Consumer Act 2010 (Cth) (CCA). FE Sports, a wholesaler of bike parts and cycling accessories, provided over 300 terms of trade to retail dealers (or prospective dealers) which contained a term prohibiting the dealer from advertising or promoting certain brands online for less than the recommended retail price. FE Sports admitted liability and made joint submissions with the ACCC to the Federal Court in relation to relief, including the penalty to be imposed, which were ultimately accepted by the Court. The ACCC media release can be viewed here.
Garuda drops appeal, to pay $19m price fixing penalty in instalments
In May 2019, PT Garuda Indonesia Ltd (known as Garuda, the majority Indonesian government owned airline) was ordered to pay a penalty of $19 million by the Federal Court for engaging in collusion with other global airlines regarding price fixing charges. Garuda, along with other airlines, was found to have made and given effect to agreements that fixed the price of security and fuel surcharges, on the supply of air cargo services, as well as customs fees. Garuda appealed the penalty judgment in June 2019, but has now withdrawn its appeal. This concludes the ACCC's long running litigation against 15 global airlines in relation to a global air cargo cartel, which has resulted in the imposition of penalties of over $130 million. The ACCC media release can be viewed here.
Court dismisses ACCC case against NSW Ports
In June this year, the Federal Court dismissed the ACCC's action against NSW Ports and its subsidiaries, which alleged that these parties had entered into anti-competitive agreements as part of the privatisation of Port Botany, Port Kembla and the Port of Newcastle by the NSW Government. In July, the ACCC filed an appeal of the decision, with ACCC Chair Rod Sims saying that the ACCC believes that the purpose and likely effect of the compensation provisions in those agreements was anti-competitive. No date for the appeal hearing has been set as yet. The ACCC media release on the appeal can be viewed here and the media release on the original decision can be viewed here.
TasPorts declared to have misused its market power
Following the instigation of proceedings by the ACCC against Tasmanian Ports (TasPorts), the Federal Court has ordered (by consent) that Tasmanian Ports breached section 46 of the CCA by engaging in conduct that had the likely effect of substantially lessening competition in the markets for towage and pilotage services in Inspection Head in northern Tasmania. TasPorts imposed a new port access charge on one of its customers after that customer notified TasPorts that it was going to switch to a new provider of towage and pilotage services. No penalty order was pressed by the ACCC but TasPorts has agreed to spend at least $1 million on wharf infrastructure at Inspection Head. The ACCC media release can be viewed here.
New Proceedings
ACCC appears as intervener in successful Epic v Apple appeal
As reported in our website article here, video game developer Epic Games is currently locked in a battle with each of Apple and Google regarding agreements with each company that require developers such as Epic to pay a percentage of all in-app purchases to Apple or Google.
In May, Justice Perram of the Federal Court granted Apple a temporary stay of the proceeding against Apple on the basis that the agreement between Apple and Epic required all disputes to be determined in the Northern District of California. Epic appealed this decision to the Full Court. The ACCC sought leave to appear in the appeal, to make submissions that it was in the public interest for the dispute to be heard and determined by an Australian court. Justice Middleton granted the ACCC leave to appear and to make written submissions in the appeal, which was ultimately successful, meaning that the stay has been lifted. The ACCC media release regarding its decision to seek leave to appear can be viewed here.
The ACCC's position in the case is in line with its findings in its second Digital Platform Services Inquiry interim report, which found that there were issues with the terms of access to app marketplaces for app developers and that measures needed to be taken to address Apple and Google's significant market power in the distribution of mobile apps in Australia. The ACCC media release on this report can be viewed here.
ACCC commences proceedings against SmileDirectClub
The ACCC has commenced proceedings in the Federal Court against SmileDirectClub and its US parent company alleging that SmileDirectClub made false and misleading statements that Australian purchasers of its teeth aligners may be eligible for a reimbursement from their health fund when this was not the case. The ACCC also alleges that many consumers who filled an insurance inquiry form provided by SmileDirectClub were sent emails which falsely represented that Smile Direct Club had contacted their health insurer and determined that the consumer was entitled to a reimbursement. The ACCC media release, including the Concise Statement used to initiate the proceeding, can be viewed here.
ACCC takes action over alleged attempted cartel for National Gallery of Australia tender
The ACCC has instituted proceedings in the Federal Court against Delta Building Automation Pty Ltd and its sole director, Timothy Davis, alleging that Delta and Mr Davis had engaged in cartel conduct as a result of their involvement in an alleged bid rigging attempt in connection with a tender put out by the National Gallery of Australia in Canberra (NGA). The ACCC alleges that Mr Davis attempted to make or attempted to enter into an arrangement or undertaking with a competitor to fix the price of bids in respect of building management systems being offered by Delta and its competitor in response to the NGA's tender. The matter has not yet been set down for trial. The ACCC media release can be viewed here.
Legislative and Other Developments
Mosaic Brands pays $630,000 in penalties over COVID-19 claims
Following receipt of an infringement notice from the ACCC, ASX listed specialty fashion group Mosaic Brands has agreed to provide a court-enforceable undertaking and pay $630,000 in penalties for various false claims regarding COVID-19 in its advertising, including that its hand sanitiser was approved by the World Health Organisation, that its face masks were 'CE/FDA certified', and that its sanitiser contained 70% alcohol (when it only contained 17%). The ACCC media release can be viewed here.
APT commits to providing customers with full refunds for COVID-19 cancellations
Australian Pacific Touring has agreed to stop deducting marketing and overhead costs from refunds provided to customers of its cruises who cancelled their booking as a result of COVID-19, following "months of engagement" with the ACCC. The ACCC was concerned that APT had deducted, and represented to consumers that it was entitled to deduct, greater amounts than were provided for under its terms and conditions. The ACCC alleged that APT was not entitled to deduct these amounts as they were incurred before the booking was made and would have been incurred regardless of whether a booking was made. However, the ACCC has again stressed that consumer guarantee provisions are "unlikely to apply to cancellations as a direct result of government restrictions", and that a right to a credit note or a refund will depend on the terms and conditions of each booking. The ACCC media release can be viewed here.
digiDirect pays penalties for misleading 'storewide' sales
Retailer digiDirect has agreed to pay $39,240 in penalties following receipt of infringement notices from the ACCC. The ACCC alleged that digiDirect advertised a 'storewide' sale, when in fact between five and seven percent of digiDirect's products were excluded from the promotion. The promotional advertising included a small font disclaimer that 'terms and exclusions apply', but the ACCC was of the view that this was insufficient to dispel the misleading impression of the advertisements. The ACCC media release can be viewed here.
Grape Co agrees to penalties for grape origins claims
Victorian table grape trader Grape Co has agreed to pay $34,920 in penalties in relation to claims it made about the origins of its grapes, following infringement notices issued by the ACCC. Grape Co had claimed on its website that "Every single one of our grapes is personally hand-selected from the finest fruit on our family's estate in Sunraysia Australia", when in fact some of its grapes were grown on other properties. Grape Co also agreed to pay a further $21,600 in penalties for alleged contraventions of the Horticulture Code. The ACCC media release can be viewed here.
Report on competition exemptions related to COVID-19
As covered in our previous updates, the ACCC continues to receive a large number of applications for authorisation of conduct that may otherwise be considered anti-competitive as a result of the unique commercial environment caused by the COVID-19 pandemic. The ACCC has released a new report which describes the process that was undertaken by the ACCC in considering these exemptions, which can be viewed here.
ACCC to explore consumer issues in online marketplaces such as eBay and Amazon
The ACCC has released an issues paper inviting consumers and small business to share their experiences in dealing with online marketplaces such as eBay, Amazon, and Kogan. The ACCC has recognised that online marketplaces are a growing part of the Australian economy which may offer benefits to consumers, but is also wary of the need for the marketplaces to operate fairly and comply with consumer laws. The issues paper will inform the ACCC's fourth report, which will be submitted as part of its five-year Digital platform services inquiry. The ACCC media release can be viewed here.
ACCC announces 2021 product safety priorities
The ACCC has announced its product safety priorities for 2021, being:
- education and monitoring regarding a new quad bike safety standard;
- implementing new safety standards for button batteries;
- implementing measures designed to prevent injuries and deaths to infants caused by unsafe sleeping products;
- strengthening product safety online; and
- efforts to prevent injuries and death caused by toppling furniture.
The ACCC media release can be viewed here.
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