FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Virgin Australia Airlines Pty Ltd (No 2) [2017] FCA 204

ORDERS

THE COURT DECLARES THAT:

1.    On 16 April 2014, the respondent (Virgin Australia) contravened ss 18, 29(1)(i) and 29(1)(m) of the Australian Consumer Law by making representations on its mobile website at https://mobile.virginaustralia.com/ (Virgin Australia Mobile Site) that the price it would charge for air passenger services from Brisbane to Sydney on selected dates would be from $85 per person without adequately disclosing until the very end of the booking process that:

(a)    The said air passenger services were subject to a condition that required the payment of a Booking and Service Fee of $7.70 per passenger per booking for all Australian domestic air passenger services booked through the Virgin Australia Mobile Site (Mobile Booking Fee Condition) in addition to the sum of $85; and

(b)    The lowest price (including the Booking and Service Fee) that could be payable by a customer purchasing the air passenger services referred to above through the Virgin Australia Mobile Site was $92.70 per person.

BY CONSENT, THE COURT ORDERS THAT:

2.    Pursuant to s 224 of the Australian Consumer Law, in respect of its conduct referred to in par 1 above, Virgin Australia pay to the Commonwealth of Australia a pecuniary penalty in the sum of $200,000.

3.    The proceeding otherwise be dismissed.

4.    Each party is to bear its own costs.

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

REASONS FOR JUDGMENT

FOSTER J:

1    In a Judgment delivered by me on 17 November 2015 (Australian Competition and Consumer Commission v Jetstar Airways Pty Limited [2015] FCA 1263; [2016] ATPR 42-523 (the liability judgment)), I found that Virgin Australia Airlines Pty Ltd (Virgin) had contravened s 18 and s 29(1)(i) and (m) of the Australian Consumer Law (ACL) by making representations on its mobile website (mobile site) which were false and misleading. The conduct in question occurred on 16 April 2014. As pleaded by the applicant (ACCC), the false representations were made on two pages contained within the mobile site. One was entitled “Flight Specials” and the other was entitled “Select Flights”.

2    A contravention of s 18 of the ACL does not render the contravener liable to a pecuniary penalty whereas a contravention of s 29(1) of the ACL does render the contravener liable to the imposition of a pecuniary penalty.

3    The liability judgment also addressed a separate proceeding instituted by the ACCC against Jetstar Airways Pty Limited (Jetstar) (proceeding NSD 615 of 2014). The two proceedings were heard at the same time.

4    Although in the liability judgment I addressed the ACCC’s case against Virgin as well as its case against Jetstar, for reasons which will become apparent, it is appropriate that I deliver separate judgments dealing with the remedies to be ordered by the Court in respect of the particular case brought against each of the airlines rather than deliver a single judgment dealing with all outstanding issues in both cases.

5    I have assumed that any person who reads these Reasons for Judgment will already have read and considered the liability judgment.

6    At [202]–[203] of the liability judgment, I said:

I have also found contraventions against both Jetstar and Virgin in respect of the booking processes required to be undertaken by consumers who navigate the mobile site of each of them. In respect of those contraventions, I propose to make declarations and grant appropriate injunctive relief.

For the above reasons, I will require the ACCC to formulate the declaratory and injunctive relief which I have indicated I am prepared to grant. The balance of both sets of proceedings will be dismissed. I propose to hear the parties on costs.

7    After I delivered the liability judgment, the ACCC and Virgin agreed that an appropriate penalty for the contravention which I had found had been committed by Virgin was $200,000 and that the appropriate order for costs in this proceeding was that each party should bear its own costs. The parties did not agree on the form of declaration to be made by the Court but they did agree that some form of declaration was warranted. The parties also agreed that it was not necessary for the Court to grant any injunctive relief as Virgin had promptly modified its mobile site in order to take appropriate account of the liability judgment.

8    As a result of the broad agreement reached between the ACCC and Virgin, the parties filed and relied upon a joint Written Submission dated 18 April 2016 (joint submission) in support of their agreement as to penalty and costs. The facts and matters addressed in the joint submission were supported by a number of affidavits read and relied upon by the parties. No statement of agreed facts was tendered in evidence.

9    In the joint submission, the parties addressed the relevant general principles and then made specific submissions addressing the relevant penalty factors in the present case. I shall approach the matter in the same way.

General Principles

10    As submitted on behalf of the parties, when deciding whether to make orders which are consented to by the parties, the Court must be satisfied that it has the power to make the orders proposed and also that the orders are appropriate (Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 161 ALR 79 at 86–87 [17]–[21] per French J (as his Honour then was) and Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [1] per French J (as his Honour then was)).

11    In Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 326 ALR 476 (CFMEU), the Justices of the High Court unanimously agreed that the reasoning of that Court in Barbaro v The Queen (2014) 253 CLR 58 (Barbaro) did not apply to civil penalty proceedings brought under Commonwealth legislation. The Court held that a trial court dealing with applications for such penalties may receive submissions as to the quantum thereof and may receive submissions directed to persuading the court to impose an agreed civil penalty. The Court held that there is an important public policy in promoting predictability of outcome for regulators and wrongdoers by encouraging corporations to acknowledge contraventions and thereby avoid lengthy and complex litigation.

12    At 482–485 [25]–[32], the plurality (French CJ, Kiefel, Nettle and Gordon JJ) referred to and discussed the well-established practice in this Court in relation to civil penalty proceedings prior to the decision of the Full Court of this Court in CFMEU itself. At 482 [25], the plurality said:

Until the Full Court’s decision in this matter, the practice followed in relation to civil penalty proceedings generally accorded with the decisions of the Full Court (Burchett, Carr and Kiefel JJ) in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [(1996) 71 FCR 285; 141 ALR 640 (NW Frozen Foods)] and the Full Court (Branson, Sackville and Gyles JJ) in Minister for Industry, Tourism & Resources v Mobil Oil Australia Pty Ltd [(2004) ATPR 41-993; [2004] FCAFC 72 (Mobil Oil)].

13    At 483 [28]–[29], the plurality went on to observe:

The Full Court [in NW Frozen Foods] further observed that, given the public interest in promoting the negotiated resolution of civil penalty proceedings, and that the fixing of the quantum of penalty is not an exact science, the task of a court in setting a pecuniary penalty was not necessarily to ask itself whether it would independently have come to the precise quantum proposed by the parties. Rather, the court should determine whether the parties’ proposal could be accepted as fixing an appropriate penalty [NW Frozen Foods at FCR 290–1; ALR 643–4]. Burchett and Kiefel JJ explained the reasons for that as follows [NW Frozen Foods at FCR 291; ALR 644]:

“There is an important public policy involved. When corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts to deal with other matters, and investigating officers of the Australian Competition and Consumer Commission to turn to other areas of the economy that await their attention. At the same time, a negotiated resolution in the instant case may be expected to include measures designed to promote, for the future, vigorous competition in the particular market concerned. These beneficial consequences would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. A proper figure is one within the permissible range in all the circumstances. The Court will not depart from an agreed figure merely because it might otherwise have been disposed to select some other figure, or except in a clear case.”

Thereafter, the approach thus sanctioned in NW Frozen Foods was routinely followed until the matter was revisited by the Full Court in Mobil Oil.

14    The plurality in CFMEU then referred to certain reservations as to the correctness of NW Frozen Foods which had been expressed by Finkelstein and Weinberg JJ in the early 2000s. Their Honours then turned to Mobil Oil.

15    At 484–485 [31]–[32], the plurality said:

In Mobil Oil, the Full Court rejected those concerns as unfounded. Taking them in turn, their Honours observed that when and if a poorly resourced respondent were party to a joint penalty submission, the court should scrutinise the submission and supporting statement of facts with particular care to ensure, so far as possible, that the statement of facts was accurate and the contravener’s will had not been overborne [Mobil Oil at [63]]. In reality, there was no particular shortage of reported cases in which the question of penalties had been fully agitated in a contested hearing. In any event, each case depended on its own merits and, as NW Frozen Foods demonstrated, if a judge considered that previous cases provided insufficient guidance for the case to be determined, he or she was free to act on that view [Mobil Oil at [66]]. Contrary to the supposed improbability of a judge departing from an agreed penalty submission, Wilcox J had only recently done just that in Australian Competition and Consumer Commission v FFE Building Services Ltd [(2003) ATPR 41-969]: in effect rejecting an agreed penalty submission of $1.5 million and imposing in its place a penalty of more than twice that amount. Contrary, moreover, to the supposed danger of the court being perceived as a “rubber stamp” for agreed penalty submissions, NW Frozen Foods required the court always to form its own view about the appropriate range of penalties [Mobil Oil at [70]]. Finally, there would be little advantage in limiting parties to an agreed range as opposed to an agreed figure. A better way of reinforcing the court’s responsibility to determine an appropriate penalty was for the court to scrutinise the material presented to it carefully and satisfy itself that it was sufficient to determine whether the agreed penalty was appropriate [Mobil Oil at [78]].

By way of explication, the Full Court added five observations, in substance as follows [Mobil Oil at [52]–[58]]:

(1)    As noted in Allied Mills and NW Frozen Foods, the rationale for giving weight to a joint submission on penalty rests on the saving in resources for the regulator and the court, the likelihood that a negotiated resolution will include measures designed to promote competition and the ability of the regulator to use the savings to increase the likelihood of other contraveners being detected and brought before the courts.

(2)    NW Frozen Foods does not mean that a court must commence its reasoning with the penalty proposed by the parties and then limit itself to a consideration of whether the penalty proposed is within the range of permissible penalties. That is one option, but another is to begin with an independent assessment of the appropriate range of penalties and then compare it with the proposed penalty.

(3)    The decision in NW Frozen Foods represented a correct application of the approach enunciated by Sheppard J in Allied Mills [Mobil Oil at [43]]. As Sheppard J stated, the court is not bound by the figure suggested by the parties. Rather, the court has to satisfy itself that the submitted penalty is appropriate while acknowledging that, uninformed by the agreed penalty submission, the court might have selected a slightly different figure [See Mobil Oil at [38] quoting Allied Mills at 259]. That approach is correct in principle and it has been cited with approval by the High Court of New Zealand in Commerce Commission v New Zealand Milk Corporation Ltd [[1994] 2 NZLR 730 at 733].

(4)    The decision in NW Frozen Foods is consistent with the imperative recognised in Australian Competition and Consumer Commission v Ithaca Ice Works Pty Ltd [(2002) ATPR 41-851; [2001] FCA 1716] that the regulator should explain to the court the process of reasoning that justifies a discounted penalty.

(5)    The decision in NW Frozen Foods allows for the following possibilities:

(a)    if the court is not satisfied that the evidence or information offered in support of an agreed penalty submission is adequate, it may require the provision of additional evidence, information or verification and, if that is not forthcoming, may decline to accept the agreed penalty;

(b)    if the absence of a contradictor inhibits the court in the performance of its task of imposing an appropriate penalty, the court may seek the assistance of an amicus curiae or an individual or body prepared to act as an intervener;

(c)    if the court is not prepared to impose the penalty proposed by the parties, it may be appropriate to allow the parties to withdraw their consent and for the matter to proceed on a contested basis.

16    The plurality then moved to discuss Barbaro and the divergent authority within this Court as to the applicability of the reasoning of the plurality in Barbaro to civil penalty proceedings.

17    At 489 [46], the plurality said:

The Full Court’s reasoning in this matter should be rejected. Middleton J and McKerracher J were correct in their view that there is an important public policy involved in promoting predictability of outcome in civil penalty proceedings and that the practice of receiving and, if appropriate, accepting agreed penalty submissions increases the predictability of outcome for regulators and wrongdoers. As was recognised in Allied Mills and authoritatively determined in NW Frozen Foods, such predictability of outcome encourages corporations to acknowledge contraventions, which, in turn, assists in avoiding lengthy and complex litigation and thus tends to free the courts to deal with other matters and to free investigating officers to turn to other areas of investigation that await their attention.

18    At 489–490 [48]–[53], the plurality continued:

NW Frozen Foods and Mobil Oil do not suggest that the task of a judge faced with an agreed civil penalty submission is to determine whether the submitted penalty is “wholly outside” the “range of penalties reasonably available” or that the court is “bound to impose [an agreed] penalty irrespective of whether it is considered appropriate” [Cf Ingleby at [29] per Weinberg JA]. To the contrary, as was emphasised in Mobil Oil, those cases make plain that the court is not bound by the figure suggested by the parties. The court asks “whether their proposal can be accepted as fixing an appropriate amount” [NW Frozen Foods at FCR 291; ALR 644 (emphasis added)] and for that purpose the court must satisfy itself that the submitted penalty is appropriate.

Nor is it “pious” to suppose that judges will do their duty, as they have sworn to do, and therefore reject any agreed penalty submission if not satisfied that what is proposed is appropriate. It would be a travesty of justice if that were not the case. It may be presumed that a judge will do his or her duty according to the oath of office. The public may have confidence that it will be so.

Middleton J and McKerracher J were also correct in their view that what was said in Barbaro applies only to criminal proceedings and, consequently, that nothing said in Barbaro is antithetical to continuing the practice of agreed penalty submissions in civil penalty proceedings.

Contrary to the Full Court’s reasoning, there are basic differences between a criminal prosecution and civil penalty proceedings and it is they that provide the “principled basis” for excluding the application of Barbaro from civil penalty proceedings.

A criminal prosecution is an accusatorial proceeding which is governed by the fundamental principle that the burden lies in all things upon the Crown to establish the guilt of the accused beyond reasonable doubt and by the companion rule that the accused cannot be required to assist in proof of the offence charged [RPS v R (2000) 199 CLR 620; 168 ALR 729; [2000] HCA 3 at [22] per Gaudron ACJ, Gummow, Kirby and Hayne JJ; Azzopardi v R (2001) 205 CLR 50; 179 ALR 349; [2001] HCA 25 at [34] per Gaudron, Gummow, Kirby and Hayne JJ; Dyers v R (2002) 210 CLR 285; 192 ALR 181; [2002] HCA 45 at [9] per Gaudron and Hayne JJ; X7 v Australian Crime Commission (2013) 248 CLR 92; 298 ALR 570; [2013] HCA 29 at [97]–[100] per Hayne and Bell JJ; Lee v R (2014) 253 CLR 455; 308 ALR 252; [2014] HCA 20 at [32]–[33]].

Civil penalty proceedings are civil proceedings and therefore an adversarial contest in which the issues and scope of possible relief are largely framed and limited as the parties may choose, the standard of proof is upon the balance of probabilities and the respondent is denied most of the procedural protections of an accused in criminal proceedings [See Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; 286 ALR 501; 88 ACSR 246; [2012] HCA 17 at [153]–[155] (Hellicar) per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ, at [243] per Heydon J].

19    At 491–492 [57]–[61], the plurality emphasised that, in civil proceedings, there is generally very considerable scope for the parties to agree on the facts and upon the consequences. They said:

In contrast, in civil proceedings there is generally very considerable scope for the parties to agree on the facts and upon consequences. There is also very considerable scope for them to agree upon the appropriate remedy and for the court to be persuaded that it is an appropriate remedy. Accordingly, settlements of civil proceedings are commonplace and orders by consent for the payment of damages and other relief are unremarkable. So are court-approved compromises of proceedings on behalf of infants and persons otherwise lacking capacity, court-approved custody and property settlements, court-approved compromises in group proceedings and court-approved schemes of arrangement. More generally, it is entirely consistent with the nature of civil proceedings for a court to make orders by consent and to approve a compromise of proceedings on terms proposed by the parties, provided the court is persuaded that what is proposed is appropriate.

Possibly, there are exceptions to the general rule. There is, however, no reason in principle or practice why civil penalty proceedings should be treated as an exception. Subject to the court being sufficiently persuaded of the accuracy of the parties’ agreement as to facts and consequences, and that the penalty which the parties propose is an appropriate remedy in the circumstances thus revealed, it is consistent with principle and, for the reasons identified in Allied Mills [Allied Mills at 259 per Sheppard J. See also NW Frozen Foods at FCR 291; ALR 644; Mobil Oil at [53]], highly desirable in practice for the court to accept the parties’ proposal and therefore impose the proposed penalty. To do so is no different in principle or practice from approving an infant’s compromise, a custody or property compromise, a group proceeding settlement or a scheme of arrangement.

It is true that there is a public interest in the imposition of civil penalties as opposed to the purely private interests which are in issue in many civil proceedings. But civil penalty proceedings are by no means the only civil proceedings in which the public interest is involved. Custody disputes involve the public interest. So do group proceedings and schemes of arrangement. So also do taxation, customs and social security appeals, and detention orders; and examples can be multiplied. Yet in each of those cases, it is wholly unexceptionable for a court to accept an agreed submission as to the nature and quantum of relief, provided the court is persuaded that it is an appropriate remedy. Once it is understood that civil penalties are not retributive, but like most other civil remedies essentially deterrent or compensatory and therefore protective, there is nothing odd or exceptionable about a court approving an agreed settlement of a civil proceeding which involves the public interest; provided of course that the court is persuaded that the settlement is appropriate.

It is also true, as the Full Court observed, that the regulator in a civil penalty proceeding is not disinterested [FWBII at [139]; cf Barbaro at [29]]. As has been seen, under the BCII Act, the Director’s statutory functions include monitoring and promoting appropriate standards of conduct by building industry participants generally. It is, therefore, naturally to be assumed that the Director will fashion penalty submissions with an overall view to achieving that objective and thus perhaps, if not probably, with one eye to considerations beyond the case in hand. That consideration, however, supports, rather than detracts from, the propriety of a court receiving joint (or separate) submissions as to facts and penalty and imposing the proposed penalty if persuaded that it is appropriate. As was emphasised in NW Frozen Foods [NW Frozen Foods at FCR 290–5; ALR 643–8] it is the function of the relevant regulator to regulate the industry in order to achieve compliance and, accordingly, it is to be expected that the regulator will be in a position to offer informed submissions as to the effects of contravention on the industry and the level of penalty necessary to achieve compliance.

That being said, the submissions of a regulator will be considered on their merits in the same way as the submissions of a respondent and subject to being supported by findings of fact based upon evidence, agreement or concession. As was also said in NW Frozen Foods [NW Frozen Foods at FCR 298; ALR 651]:

“Courts have learned to be suspicious of claims of secret knowledge; and justice should be done in the light, with the relevant facts exposed to view. It is the Court which bears the responsibility.”

But, subject to that imperative, there is no indication in the purpose or text of the BCII Act that the court should be less willing to receive a submission as to the terms and quantum of penalty in a civil penalty proceeding than to receive a submission as to the terms and quantum of relief put up for approval by the court in any other kind of civil proceeding.

20    Justice Gageler delivered a separate judgment in which his Honour agreed with the conclusion reached by the plurality that the reasoning of the plurality in Barbaro has no application to a civil penalty proceeding and that the principles applicable to agreed penalty submissions in a civil penalty proceeding remain those which had been articulated by the Full Court of this Court in NW Frozen Foods and Mobil Oil (494 [68]). His Honour went on to hold that Barbaro has nothing to say about the conduct of any party to a civil penalty proceeding (496 [78]).

21    Justice Keane also delivered a separate judgment although he agreed with the reasons given by the plurality. His Honour emphasised the difference between criminal proceedings and civil penalty proceedings in order to explain that the underlying reasoning of the plurality in Barbaro has no application to civil penalty proceedings.

22    The effect of CFMEU is to restore the previously well-established line of authority reflected in NW Frozen Foods and Mobil Oil.

Civil Penalties under the ACL

23    Section 224(1) empowers the Court to impose a civil penalty on a person who or corporation which infringes s 29(1) of the ACL.

24    Under s 224(3), the maximum penalty that may be imposed on a body corporate for a contravention of s 29(1) is $1.1 million. That is the maximum penalty which might be imposed in respect of the contravention which I have found in the present case.

25    Section 224(2) sets out certain mandatory considerations which must be taken into account by the Court when determining the appropriate pecuniary penalty. That subsection is in the following terms:

(2)    In determining the appropriate pecuniary penalty, the court must have regard to all relevant matters including:

(a)    the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission; and

(b)    the circumstances in which the act or omission took place; and

(c)    whether the person has previously been found by a court in proceedings under Chapter 4 or this Part to have engaged in any similar conduct.

26    Section 224(4) is also relevant. That subsection provides:

(4)    If conduct constitutes a contravention of 2 or more provisions referred to in subsection (1)(a):

(a)    a proceeding may be instituted under this Schedule against a person in relation to the contravention of any one or more of the provisions; but

(b)    a person is not liable to more than one pecuniary penalty under this section in respect of the same conduct.

27    In Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 (MT Solar) at [67]–[72], I set out my understanding of the way in which the Court is required to approach the imposition of a civil penalty in a case such as the present. MT Solar was decided after NW Frozen Foods and Mobil Oil but before CFMEU. I remain of the view that the observations which I made in that case accurately summarise the relevant principles. At [67]–[72], I said:

The relevance of maximum penalties when consideration is being given by the Court to the imposition of a pecuniary penalty in a criminal case has been authoritatively determined by the High Court in Markarian v The Queen (2005) 228 CLR 357 (Markarian). At 372 [31] in Markarian, Gleeson CJ, Gummow, Hayne and Callinan JJ said:

It follows that careful attention to maximum penalties will almost always be required, first because the legislature has legislated for them; secondly, because they invite comparison between the worst possible case and the case before the court at the time; and thirdly, because in that regard they do provide, taken and balanced with all of the other relevant factors, a yardstick. That having been said, in our opinion, it will rarely be, and was not appropriate for Hulme J here to look first to a maximum penalty (The maximum selected by his Honour was not, as will appear, the maximum available in respect of the principal offence.), and to proceed by making a proportional deduction from it. That was to use a prescribed maximum erroneously, as neither a yardstick, nor as a basis for comparison of this case with the worst possible case. That he used the maximum penalty impermissibly appears from his Honour’s particular deference to it in this passage ((2003) 137 A Crim R 497 at 506 [37]):

“Parliament cannot have intended that, other things being equal, the penalty for supplying more than 250 g should be less than for supplying that quantity.”

The form of the statement is explained by the fact that his Honour did not start with the maximum penalty for an offence involving the quantity in question, but used another maximum penalty as his starting point, that is, the maximum for an offence in the category of seriousness immediately below that of the principal offence.

In this Court, these remarks by the High Court in Markarian have been held to apply to the imposition of civil penalties (see Australian Ophthalmic Supplies Pty Ltd v McAlary-Smith (2008) 165 FCR 560 (Australian Ophthalmic Supplies) at 584 [108] (per Buchanan J); Minister for Sustainability, Environment, Water, Population and Communities v Woodley [2012] FCA 957 (Woodley) at [40]–[41] (per Foster J); Australian Communications and Media Authority v Bytecard Pty Ltd [2013] FCA 38 (Bytecard) at [38]–[39] (per Foster J); and Secretary, Department of Health and Ageing v Export Corp (Australia) Pty Ltd (2012) 288 ALR 702 at 714 [49]–[50] and at 718 [67] (per Perram J)).

It is plain that the legislature has given the clearest possible indication that contraventions of s 24B and s 154N of the REE Act are to be considered as serious matters when a court comes to determine an appropriate civil penalty.

The principal object of civil penalty provisions is to ensure deterrence. In Trade Practices Commission v CSR Limited (1991) ATPR 41-076, which was a case dealing with s 76 of the Trade Practices Act 1974 (Cth), French J (as he then was) said (at p 52,152):

The principal, and I think the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.

The dictum of French J in Trade Practices Commission v CSR Limited which I have extracted at [70] above has been applied not only in the trade practices context but in a wide variety of regulatory regimes. In particular, the need for a penalty to have a proper deterrent effect has been emphasised in the context of laws passed by the Parliament to protect the environment (eg Woodley [2012] FCA 957, esp at [53]–[67]).

In both Woodley and in Bytecard, I approached the determination of civil penalties by applying the process commonly called “instinctive synthesis”. As I said in both of those cases, that process, as I understand it, has the following attributes:

(a)    There must be a weighing of all relevant factors, rather than starting from a predetermined figure and making incremental additions or subtractions for each separate factor (Markarian, at 373–375 [36]–[39] (per Gleeson CJ, Gummow, Hayne and Callinan JJ) and at 385–387 [69]–[73] (per McHugh J); and

(b)    It is critical that the reasoning process involved in synthesising the penalty be transparent (Markarian at 373–375 [36]–[39] (per the plurality) and at 390 [84] (per McHugh J).

28    Similar views were expressed by the Chief Justice in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540 at 543 [6].

Penalty Factors

29    As submitted on behalf of the parties, in fixing the appropriate penalty for a contravention of (inter alia) s 29(1) of the ACL, the Court is obliged to have regard to “… all relevant matters …” (as to which see s 224(2)). The Court is then directed to three specific mandatory considerations.

30    This Court has emphasised on many occasions that the central consideration in determining pecuniary penalties is deterrence, both general and specific (see NW Frozen Foods at 292–293). Penalties must be set at a level which will not be seen as “an acceptable cost of doing business” (see Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 659 [65]–[66]) so as to deter the “cynical calculation” of weighing the risk of penalty against the profitability of the contravention (Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 at 265 [63]).

31    As I said in MT Solar (at [71]), it will usually be the case that the assessment of an appropriate penalty in any given case will also involve consideration of the factors identified by French J in Trade Practices Commission v CSR Limited (1991) ATPR 41-076.

The Nature and Extent of the Contravening Conduct

32    At [10]–[12] of the joint submission, the parties adequately addressed this factor in the following terms:

Virgin Australia contravened the ACL by making representations on 16 April 2014 on its Mobile Site that certain flights from Brisbane to Sydney on selected dates would be available for purchase from $85 (2014 Virgin Australia Representations), in circumstances where it failed to disclose adequately the booking and service fee of $7.70 on its Mobile Site until the very end of the booking process (Reasons at [197]). That is, the Court recognised that while the booking and service fee was ultimately disclosed prior to the consumer completing the transaction, it was not disclosed in an adequate or timely way.

The booking and service fee was compulsory in respect of all bookings made via Virgin Australia’s Mobile Site (Reasons at [195]). A price of $85 per person was never available for bookings made through Virgin Australia’s Mobile Site although it was possible to avoid the booking and service fee by booking through Virgin Australia’s website (which was accessible using a mobile device).

It is apparent that this conduct had the potential to lead to consumer harm. The actual price for the displayed flights, if the consumer proceeded with a purchase through the Mobile Site, was at least $92.70 per person. A consumer may have been attracted to the displayed price of $85 per person, and even though the consumer was made aware of the booking and service fee prior to purchasing the airfare, having already invested time in the process the consumer may have elected to proceed with booking on the Mobile Site and paid the additional $7.70 booking and service fee rather than making the booking through Virgin Australia’s website where the payment of the booking and service fee could be avoided or looking elsewhere.

The Amount of Loss or Harm that the Contravention Caused

33    There was no evidence of any consumer actually being misled by the process that Virgin required consumers to undertake in order to make a booking via its mobile site. Given that the alleged contravention took place on only one day, it is likely that the actual harm caused was insignificant. This is a mitigating factor.

34    The evidence before me established that no bookings were made on 16 April 2014 for the flight referred to in par 31.1 of the Amended Fast Track Statement. Three bookings for eight passengers in total were made on that day through the “Flight Specials” page. The evidence did not go so far as to suggest that any of these bookings involved the Brisbane to Sydney fare referred to in par 30.1 of the Amended Fast Track Statement.

The Circumstances in which the Conduct Took Place

35    Although, in percentage terms, a relatively small number of bookings made with Virgin are made through its mobile site, the actual numbers of bookings involved are still quite significant. Evidence of the precise numbers was tendered before me. I have made a non-publication order in respect of that material. It is not necessary for present purposes to refer to the actual numbers in question.

36    There was evidence before me at the penalty hearing that Virgin had previously given two undertakings to the ACCC in respect of the type of booking process which I have found in the liability judgment infringed the ACL. Senior Counsel for Virgin submitted that the terms of the two undertakings in question supported a submission which he advanced to the effect that Virgin had proactively engaged with the ACCC in order to see whether an industry-wide agreement could be reached with the ACCC as to the way in which the types of processes in question in the present case could be undertaken without infringing the ACL or its predecessor, the Trade Practices Act 1974 (Cth). I am satisfied that the evidence supported the submissions made by Senior Counsel for Virgin. The conduct of Virgin in the period between about 2002 and 2014 should also be weighed in its favour.

The Size of the Contravening Entity and its Financial Position

37    Virgin is a substantial corporation. It is the second largest airline in Australia.

38    In the evidence tendered before me at the penalty hearing, Virgin provided a good deal of detail as to its financial position and the size of its business.

39    At [23] of the joint submission, the parties said:

Although Virgin Australia is a large company with large resources, this does not mean that the maximum penalty should automatically be awarded against it unless this was otherwise warranted by the nature of its conduct, nor are these necessarily reasons for imposing a higher penalty than would otherwise be imposed. As was observed by Allsop CJ in Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2015] FCA 330, the financial resources of a firm “do not alone justify a higher penalty than might otherwise be imposed…[however], they are clearly relevant to considering the size of the penalty required to achieve specific deterrence and can be weighed against the need to impose a sum which will be recognised by the public as significant and proportionate to the seriousness of the contravention for the purposes of achieving general deterrence.”

40    I accept that submission. It is correct.

Was the Contravention Deliberate?

41    The design of the booking process and the implementation of that design were decisions deliberately made. However, it is quite clear that, in proceeding as it did, Virgin believed that it was not contravening the ACL and was operating within the law. That belief was not unreasonable although I have found that it was incorrect.

42    Given the history of engagement between Virgin and the ACCC over several years relevant to the conduct in question, I conclude that there was no flouting of the law or wilful breach of the relevant provisions. Again, this is a matter also to be weighed in favour of Virgin.

Virgin’s Corporate Culture

43    Virgin had a compliance program in place at the time of the contraventions, which it licensed from a third party vendor. However, it appears that that program was not sufficient to prevent it from engaging in the contraventions found in this proceeding.

44    Since 2014, Virgin has developed its own “bespoke” “in house” compliance program. Additional training has been undertaken with a particular eye to the liability judgment.

45    I conclude that there is good reason to think that the corporate culture of Virgin is conducive to complying with the ACL.

Virgin’s Co-Operation in Relation to this Proceeding

46    In the joint submission, at [29], the parties made the following submissions in relation to this factor:

Co-operation is a mitigating factor for the purposes of penalty: ACCC v Westminster Retail Pty Ltd [2005] ATPR 42-084. It may take the form of admissions in relation to liability, and, to a lesser extent, co-operation during the investigative phase of the matter.

During the investigation phase, Virgin Australia cooperated with the investigation by providing information and documents on a voluntary basis.

The ACCC initially wrote to Virgin Australia in relation to the Virgin Australia website on 20 August 2013. Virgin Australia responded on 11 September 2013.

On 11 March 2014 the ACCC wrote to Virgin Australia seeking further information about the Virgin Australia website and, for the first time, requesting information in relation to the Mobile Site. That letter indicated that its purpose was to assist the ACCC in determining appropriate next steps but did not articulate any allegations or concerns in relation to the Mobile Site.

The ACCC instituted proceedings on 19 June 2014. Shortly after the ACCC instituted proceedings, Virgin Australia initiated discussions with the ACCC in which Virgin Australia voluntarily proposed working with the ACCC on broad adjustments to aviation industry practice regarding the disclosure of non-compulsory fees and surcharges, including the disclosure of such fees on surcharges on airlines’ websites.

In response to Virgin Australia’s proposal, the ACCC stated its preparedness to host discussions with key industry participants to determine if they would be willing to address matters identified by the ACCC in its proceedings against Virgin Australia and Jetstar, as well matters that went beyond the issues in those proceedings. Virgin Australia’s approach was made on the basis that Virgin Australia would not unilaterally change its advertising practices without similar changes being made by other industry participants.

On 22 July 2014, Virgin Australia and the ACCC met to discuss Virgin Australia’s proposal.

On 4 September 2014, the ACCC informed Virgin Australia that:

36.1.    other key industry participants were not willing to engage with the ACCC on industry-wide adjustments to the disclosure of non-compulsory fees and surcharges and other matters raised by the ACCC;

36.2.    in the circumstances the ACCC considered it difficult to pursue an industry-wide agreement as proposed by Virgin Australia.

The parties were ultimately unable to reach an agreed resolution and Virgin Australia contested liability at trial. It was entitled to do so and no additional penalties are payable by Virgin Australia by reason of its choice to contest liability: ACCC v Westminster Retail Pty Ltd [2005] ATPR 42-084 at [31].

The Court published its reasons on 17 November 2015. Following the publication of the Court’s reasons, Virgin Australia added additional disclaimers to the Virgin Australia Mobile Site on 11 December 2015, approximately three weeks after judgment was delivered. As a consequence, the ACCC did not press for any injunctive relief against Virgin Australia.

While Virgin Australia contested liability, it has cooperated with the ACCC in the penalty phase of the proceedings by reaching agreement with the ACCC in relation to these joint submissions and as to costs.

The parties submit that this can be treated by the Court as evidence of contrition and an acceptance of responsibility by Virgin Australia. Virgin Australia’s willingness to agree penalties also indicates a willingness to facilitate the course of justice [See Clean Energy Regulator v MT Solar Pty Ltd [2013] FCA 205 at [118] and the authorities cited in that paragraph].

Virgin Australia is entitled to a discount for its cooperation in the penalty phase, although that discount will be lower than the discount which would have been available if Virgin Australia had also admitted liability.

47    These submissions are sound and are amply supported by the evidence. I accept them. I will proceed to consider the question of penalty with the last paragraph of the extract from the joint submission set out at [46] above in mind.

Similar Conduct in the Past

48    Virgin has not previously been found by a Court to have contravened the ACL.

The Appropriate Penalty and Costs

49    In all the circumstances, I am required to consider whether the agreed penalty and the agreed position in relation to costs are reasonable. As far as the penalty is concerned, I am obliged to satisfy myself that the agreed penalty is within the range of appropriate or permissible penalties. I have taken into account all of the matters to which I have referred above. I am more than satisfied that the agreed penalty is an appropriate penalty. The conduct of Virgin was serious. However, Virgin has acted responsibly in light of the liability judgment. Also, prior to the Court’s decision, it had engaged with the ACCC in a way that was not unreasonable. In the end, however, its stance proved to be an incorrect one and it must now face the consequences. However, there was nothing flagrant or contumelious about the contraventions which I have found.

50    On the question of costs, it must be remembered that the ACCC failed to establish a substantial part of its case being its case that Virgin also engaged in making false and misleading representations on its website and in its promotional material called “V-mail”. Although the hearing of this proceeding was conducted in fairly short compass, the costs of preparing for that hearing were no doubt quite substantial. Each party has had some success and I am satisfied that the agreement as to costs reached between them is a fair solution to the mixed success that each of them has had.

51    Accordingly, I propose to make the orders which the parties have agreed. I also intend to make an order dismissing the balance of the proceeding.

The Form of the Declaration

52    The parties have not agreed the precise form of the declaration which they both accept should be made. Virgin has sought a declaration in the following terms:

THE COURT DECLARES THAT:

1.    On 16 April 2014, the Respondent (Virgin Australia) contravened sections 18, 29(1)(i) and 29(1)(m) of the Australian Consumer Law by making representations on its mobile website at https://mobile.virginaustralia.com/ (Virgin Australia Mobile Site) that the price it would charge for air passenger services from Brisbane to Sydney on selected dates would be from $85 per person without adequately disclosing the existence and quantum of the Booking and Service Fee until the very end of the booking process

53    The ACCC claims a more detailed declaration which it contends more accurately reflects my reasons in the liability judgment.

54    I have decided not to accept either form of proposed declaration but to redraft the ACCC’s version so as to arrive at a form of declaration which I consider more accurately reflects my reasons in the liability judgment.

55    There will be orders accordingly.

Associate:

Dated:    7 March 2017