FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Meriton Property Services Pty Ltd (No 2) [2018] FCA 1125

ORDERS

THE COURT DECLARES THAT:

1.    During the period November 2014 to October 2015, the respondent (Meriton), in trade or commerce, engaged in conduct that was likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law), by:

(a)    inserting the letters “MSA”:

(i)    at the front of the email address for guests who had complained (or were otherwise considered likely to have had a negative experience at a Meriton property) before sending it to TripAdvisor, so that the email address provided to TripAdvisor was invalid and the guest did not receive an invitation prompting the guest to provide a review through the Review Express system; or

(ii)    in the relevant field in its property management system for guests who had complained (or were otherwise considered likely to have had a negative experience at a Meriton property), so that the guest’s email address was not provided to TripAdvisor and the guest did not receive an invitation prompting the guest to provide a review through the Review Express system; and

(b)    withholding email addresses from TripAdvisor for any guests who had stayed at certain Meriton properties for a particular period when the property had been affected by a major service disruption.

This conduct by Meriton reduced the number of negative reviews of Meriton’s properties that were posted on the pages of the TripAdvisor website dedicated to those properties with the effect of improving the relative number of favourable reviews compared with unfavourable reviews of Meriton’s properties on the TripAdvisor website. This conduct created a more positive or favourable impression of the quality and amenity of Meriton’s serviced apartments, and had the effect of reducing, in the minds of consumers, awareness of the prevalence of service disruptions at Meriton’s properties. Further, in some cases, the conduct affected the ranking of Meriton’s properties on the TripAdvisor website.

2.    During the period November 2014 to October 2015, Meriton, in trade or commerce, engaged in conduct that was liable to mislead the public as to the characteristics or suitability for their purpose of the accommodation services at Meriton’s properties in contravention of s 34 of the Australian Consumer Law by:

(a)    inserting the letters “MSA”:

(i)    at the front of the email address for guests who had complained (or were otherwise considered likely to have had a negative experience at a Meriton property) before sending it to TripAdvisor, so that the email address provided to TripAdvisor was invalid and the guest did not receive an invitation prompting the guest to provide a review through the Review Express system; or

(ii)    in the relevant field in its property management system for guests who had complained (or were otherwise considered likely to have had a negative experience at a Meriton property), so that the guest’s email address was not provided to TripAdvisor and the guest did not receive an invitation prompting the guest to provide a review through the Review Express system; and

(b)    withholding email addresses from TripAdvisor for any guests who had stayed at certain Meriton properties for a particular period when the property had been affected by a major service disruption.

This conduct by Meriton reduced the number of negative reviews of Meriton’s properties that were posted on the pages of the TripAdvisor website dedicated to those properties with the effect of improving the relative number of favourable reviews compared with unfavourable reviews of Meriton’s properties on the TripAdvisor website. This conduct created a more positive or favourable impression of the quality and amenity of Meriton’s serviced apartments, and had the effect of reducing, in the minds of consumers, awareness of the prevalence of service disruptions at Meriton’s properties.

THE COURT ORDERS THAT:

3.    Meriton pay the Commonwealth of Australia within 30 days the sum of $3,000,000 by way of pecuniary penalty under s 224(1) of the Australian Consumer Law in respect of the contraventions that are the subject of the second declaration.

4.    Meriton whether by itself, its servants, agents, affiliates or howsoever otherwise, for a period of three years from the date of this order, in trade or commerce, be restrained from filtering, selecting or limiting the guest email addresses it supplies to TripAdvisor in relation to its use of TripAdvisor’s Review Express service, unless a guest consents to Meriton withholding, or requests Meriton to withhold, his or her email address from TripAdvisor, or such conduct accords with TripAdvisor’s own published rules or guidelines for the submission of email addresses.

5.    Meriton:

(a)    establish the Compliance and Education/Training Program set out in Annexure 1, which is specifically designed to:

(i)    ensure an understanding and awareness of all officers and employees of Meriton in its serviced apartment operations of the responsibilities and obligations in relation to the conduct declared by the Court in this proceeding to be in contravention of ss 18 and 34 of the Australian Consumer Law and any similar or related conduct; and

(ii)    review and revise the internal operations of its serviced apartment business that led to it engaging in the conduct declared by the Court in this proceeding to be in contravention of ss 18 and 34 of the Australian Consumer Law;

(b)    maintain and administer, at its own expense, the Compliance and Education/ Training Program set out in Annexure 1 for a period of three years; and

(c)    provide, at its own expense, a copy of any documents to be provided to the applicant pursuant to Annexure 1.

6.    In relation to costs:

(a)    within 14 days, each party file and serve a written submission (of no more than two pages) together with any material upon which it relies;

(b)    within a further seven days, each party file and serve any reply written submission (of no more than two pages) together with any material in reply.

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

ANNEXURE 1

Compliance and Education/Training Program

The Respondent (Meriton) will establish a Competition and Consumer Law Compliance Program (Compliance Program) that complies with each of the following requirements:

Appointments

1.    Within 30 days of the date of the Order of the Court, Meriton will appoint a director or a senior manager with suitable qualifications or experience in corporate compliance as a Compliance Officer with responsibility for ensuring the Compliance Program is effectively designed, implemented and maintained (the Compliance Officer).

2.    Within three months of the date of the Order of the Court, Meriton will appoint a suitably qualified, internal or external, compliance professional with expertise in competition and consumer law (the Compliance Advisor).

3.    Meriton will instruct the Compliance Advisor to conduct a consumer law risk assessment within three months of being appointed as the Compliance Advisor (Risk Assessment).

4.    Meriton will use its best endeavours to ensure that the Risk Assessment covers the following matters, to be recorded in a written report (Risk Assessment Report):

(a)    identifies the areas where Meriton is at risk of breaching s 18 or 34 of the Australian Consumer Law (ACL), comprising Sch 2 to the Competition and Consumer Act 2010 (Cth) (CCA);

(b)    assesses the likelihood of these risks occurring;

(c)    identifies where there may be gaps in Meriton’s existing procedures for managing these risks; and

(d)    provides recommendations for any action to be taken by Meriton having regard to the above assessment.

Compliance Policy

5.    Meriton will, within 30 days of the date of the Order of the Court, issue a policy statement outlining Meriton’s commitment to compliance with the CCA (the Compliance Policy)

6.    Meriton will ensure that the Compliance Policy:

(a)    contains a statement of commitment to compliance with the CCA;

(b)    contains an outline of how commitment to CCA compliance will be realised within Meriton;

(c)    contains a requirement for all staff to report any Compliance Program related issues and CCA compliance concerns to the Compliance Officer;

(d)    contains a guarantee that whistleblowers with competition and consumer law compliance concerns will not be prosecuted or disadvantaged in any way and that their reports will be kept confidential and secure; and

(e)    contains a clear statement that Meriton will take action internally against any persons who are knowingly or recklessly concerned in a contravention of the CCA and will not indemnify them in the event of any court proceedings in respect of that contravention.

Complaints Handling System

7.    Meriton will ensure that the Compliance Program includes a competition and consumer law complaints handling system (the Complaints Handling System).

8.    Meriton will use its best endeavours to ensure this system is consistent with AS/ISO 10002:2006 Customer satisfaction – Guidelines for complaints handling in organizations, tailored as required to Meriton’s circumstances.

9.    Meriton will ensure that staff and customers are made aware of the Complaints Handling System.

Whistleblower Protection

10.    Meriton will ensure that the Compliance Program includes whistleblower protection mechanisms to protect those coming forward with competition and consumer law complaints.

11.    Meriton will use its best endeavours to ensure that these mechanisms are consistent with AS 8004:2003 Whistleblower protection programs for entities, tailored as required to Meriton’s circumstances.

Staff Training

12.    Meriton will ensure that the Compliance Program provides for regular (at least once a year) training for all directors, officers, employees, representatives and agents of Meriton, whose duties could result in them being concerned with conduct that may contravene s 18 or 34 of the ACL.

13.    Meriton must ensure that the training is conducted by a suitably qualified compliance professional or legal practitioner with expertise in competition and consumer law.

14.    Meriton will ensure that the Compliance Program includes a requirement that awareness of competition and consumer compliance issues forms part of the induction of all new directors, officers, employees, representatives and agents, whose duties could result in them being concerned with conduct that may contravene s 18 or 34 of the ACL.

Reports to Board/Senior Management

15.    Meriton will ensure that the Compliance Officer reports to the Board and/or senior management every six months on the continuing effectiveness of the Compliance Program.

Compliance Review

16.    Meriton will, at its own expense, cause an annual review of the Compliance Program (the Review) to be carried out in accordance with each of the following requirements:

(a)    Scope of Review – the Review should be broad and rigorous enough to provide Meriton and the Applicant (the ACCC) with:

(i)    a verification that Meriton has in place a Compliance Program that complies with each of the requirements detailed in paragraphs 1-15 above; and

(ii)    the Compliance Reports detailed at paragraph 17 below.

(b)    Independent Reviewer – Meriton will ensure that each Review is carried out by a suitably qualified, independent compliance professional with expertise in competition and consumer law (the Reviewer). The Reviewer will qualify as independent on the basis that he or she:

(i)    did not design or implement the Compliance Program;

(ii)    is not a present or past staff member or director of Meriton;

(iii)    has not acted and does not act for, and does not consult and has not consulted to, Meriton in any competition and consumer law related matters, other than performing Reviews under the Order of the Court; and

(iv)    has no significant shareholding or other interests in Meriton.

(c)    Evidence – Meriton will use its best endeavours to ensure that each Review is conducted on the basis that the Reviewer has access to all relevant sources of information in Meriton’s possession or control, including without limitation:

(i)    the ability to make enquiries of any officers, employees, representatives and agents of Meriton;

(ii)    documents relating to the Risk Assessment, including the Risk Assessment Report;

(iii)    documents relating to Meriton’s Compliance Program, including documents relevant to Meriton’s Compliance Policy, Complaints Handling System, staff training and induction program; and

(iv)    any reports made by the Compliance Officer to the Board or senior management regarding Meriton’s Compliance Program.

(d)    Meriton will ensure that a Review is completed within one year of the date of the Order of the Court, and that a subsequent Review is completed within each year for three years.

Compliance Reports

17.    Meriton will use its best endeavours to ensure that within 30 days of the completion of a Review, the Reviewer includes the following findings of the Review in a report provided to Meriton (the Compliance Report):

(a)    whether the Compliance Program of Meriton includes all the elements detailed in paragraphs 1-15 above, and if not, what elements need to be included or further developed;

(b)    whether the Compliance Program adequately covers the parties and areas identified in the Risk Assessment, and if not, what needs to be further addressed;

(c)    whether the staff training and induction is effective and if not, what aspects need to be further developed;

(d)    whether Meriton’s Complaints Handling System is effective and if not, what aspects need to be further developed;

(e)    whether Meriton is able to provide confidentiality and security to competition and consumer law whistleblowers, and whether staff are aware of the whistleblower protection mechanisms;

(f)    whether there are any material deficiencies in Meriton’s Compliance Program, or whether there are or have been any instances of material non-compliance with the Compliance Program (Material Failure), and if so, recommendations for rectifying the Material Failure/s.

Meriton response to Compliance Reports

18.    Meriton will ensure that the Compliance Officer, within 14 days of receiving the Compliance Report:

(a)    provides the Compliance Report to the Board or relevant governing body;

(b)    where a Material Failure has been identified by the Reviewer in the Compliance Report, provides a report to the Board or relevant governing body identifying how Meriton can implement any recommendations made by the Reviewer in the Compliance Report to rectify the Material Failure.

19.    Meriton will implement promptly and with due diligence any recommendations made by the Reviewer in the Compliance Report to address a Material Failure.

Reporting Material Failures to the ACCC

20.    Where a Material Failure has been identified by the Reviewer in the Compliance Report, Meriton will:

(a)    provide a copy of that Compliance Report to the ACCC within 14 days of the Board or relevant governing body receiving the Compliance Report; and

(b)    inform the ACCC of any steps that have been taken to implement the recommendations made by the Reviewer in the Compliance Report; or

(c)    otherwise outline the steps Meriton proposes to take to implement the recommendations and then inform the ACCC once those steps have been implemented.

Provision of Compliance Program documents to the ACCC

21.    Meriton will maintain a record of and store all documents relating to and constituting the Compliance Program for a period of not less than 5 years.

22.    If requested by the ACCC during the period of 5 years following the date of the Order of the Court, Meriton will, at its own expense, cause to be produced and provided to the ACCC copies of all documents constituting the Compliance Program, including:

(a)    the Compliance Policy;

(b)    the Risk Assessment Report;

(c)    an outline of the Complaints Handling System;

(d)    staff training materials and induction materials;

(e)    all Compliance Reports that have been completed at the time of the request;

(f)    copies of the reports to the Board and/or senior management referred to in paragraphs 15 and paragraph 18.

ACCC Recommendations

23.    Meriton will implement promptly and with due diligence any recommendations that the ACCC may make that are reasonably necessary to ensure that Meriton maintains and continues to implement the Compliance Program in accordance with the requirements of the Order of the Court.

REASONS FOR JUDGMENT

MOSHINSKY J:

Introduction

1    On 10 November 2017, I published reasons for judgment on the issue of liability in this proceeding: Australian Competition and Consumer Commission v Meriton Property Services Pty Ltd [2017] FCA 1305 (the Liability Reasons). Subsequently, a hearing took place on issues concerning relief. These reasons, which deal with relief, should be read together with the Liability Reasons. I adopt the abbreviations used in the Liability Reasons.

2    As set out at [5] of the Liability Reasons, the case concerned two practices adopted by Meriton during the period November 2014 to October 2015 in relation to the Review Express system operated by TripAdvisor:

(a)    The MSA-masking practice, which was to add the letters “MSA” (which stand for Meriton Serviced Apartments) to the front of the email addresses of certain guests. This rendered the email address invalid. This practice was applied to guests who had made a complaint or were otherwise considered likely to have had a negative experience at a Meriton property.

(b)    The bulk withholding practice, which was to withhold from TripAdvisor the email addresses of all the guests who had stayed at a particular property during a period of time when there had been a major service disruption (such as the lifts not working, no hot water, etc).

3    As explained at [6] of the Liability Reasons, the effect of both practices was the same: the guest or guests did not receive an email invitation to post a review on TripAdvisor through the Review Express system.

4    Towards the end of the relevant period, as noted at [7] of the Liability Reasons, the method of masking the email addresses of individual guests changed. With the introduction of a new property management system, a field called “TA Mask” was created (the letters “TA” standing for TripAdvisor), and the letters “MSA” would be inserted into this field. In such cases, the email address of the guest was automatically not selected for provision to TripAdvisor. This practice is also referred to as the “MSA-masking practice”.

5    One of the main issues at the trial on liability was whether the impugned practices had the effect alleged by the ACCC. I dealt with this issue at [162]-[183] of the Liability Reasons. I concluded that the MSA-masking practice and the bulk withholding practice had the effect of reducing the number of negative reviews of the Meriton properties appearing on the TripAdvisor website, and that the practices had the effect of improving the relative number of favourable compared to unfavourable reviews of the Meriton properties on the TripAdvisor website. I also found that, at least in some cases, the practices affected the ranking (but not the rating) of the Meriton properties on the TripAdvisor website.

6    I concluded, at [205], that the impugned practices had the following effect on consumers searching for accommodation on TripAdvisor:

(a)    In the case of the bulk withholding practice, Meriton’s conduct served to reduce the number of negative reviews posted about major service disruptions at Meriton’s properties. In some instances, Meriton may successfully have eliminated all negative comments about the relevant issue. In other cases, Meriton may have only reduced the number of negative reviews (eg, from three reviews to one). In either case, Meriton’s conduct had the effect of reducing, in the mind of consumers, awareness of the prevalence of service disruptions at the Meriton properties. In doing so, Meriton created an impression that was incomplete and inaccurate.

(b)    In the case of the MSA-masking practice, Meriton’s conduct served to reduce the number of negative reviews left by consumers regarding a range of complaints in relation to the Meriton properties. It also improved the relative number of favourable to unfavourable reviews about each property. In doing so, Meriton’s conduct was designed to, and did, minimise the awareness of prospective patrons about the frequency and kinds of negative experiences encountered by its customers. As a result, Meriton created an unduly favourable impression about the quality and amenity of Meriton’s serviced apartments (including in respect of objective matters, such as lifts not working).

7    At [213] of the Liability Reasons, I concluded that, by engaging in the MSA-masking practice and the bulk withholding practice during the relevant period, Meriton engaged in conduct that was likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law).

8    I also concluded, at [214]-[216] of the Liability Reasons, that by engaging in the impugned practices during the relevant period, Meriton engaged in conduct that was liable to mislead the public as to the characteristics and suitability for their purpose of the accommodation services provided by Meriton at its serviced apartments in contravention of s 34 of the Australian Consumer Law. Contravention of s 34 may give rise to the imposition of a pecuniary penalty.

9    The issues concerning relief fall under the following headings:

(a)    declarations;

(b)    pecuniary penalty;

(c)    injunction;

(d)    compliance program; and

(e)    corrective publication order.

10    The main issue agitated at the hearing on relief concerned the amount of any pecuniary penalty. The ACCC submitted that a penalty of $20 million should be imposed. Meriton submitted that a penalty in the range of $330,000 to $440,000 was appropriate and proportionate in the circumstances. For the reasons that follow, I consider a pecuniary penalty of $3 million to be appropriate in the circumstances. In particular, I consider a penalty of this amount to be necessary to achieve the objects of specific and general deterrence.

11    I will refer, first, to the evidence led at the hearing on relief. I will then discuss each of the issues set out above.

Evidence

12    In addition to the evidence relied upon at the liability hearing, the parties relied on the following evidence at the relief hearing. The ACCC relied on a ‘tender bundle’ of documents. Meriton relied on an affidavit of Albert Chan, the Operations Manager – New South Wales for the Meriton suites division of the Meriton group, dated 3 April 2018 (the Second Chan Affidavit). Mr Chan was cross-examined. In addition, each side tendered a number of documents.

Declarations

13    The ACCC seeks a declaration to the effect that Meriton contravened ss 18 and 34 of the Australian Consumer Law. The text proposed by the ACCC includes a description of the MSA-masking practice and the bulk withholding practice and a brief explanation as to why they were found to have contravened the statutory provisions. Meriton contends that a declaration has no utility in circumstances where the Court has made detailed findings as to the nature of Meriton’s conduct and its legal consequences, and the declaration sought would do no more than reproduce those findings. Meriton also submits that a declaration would have no utility in circumstances where the Court grants an injunction and imposes a pecuniary penalty. It is submitted that the role of a declaration in marking the Court’s disapproval of infringing conduct would be entirely served by those orders.

14    The principles applicable to the making of a declaration in a context such as this were discussed by Middleton J in Australian Competition and Consumer Commission v Ford Motor Company of Australia Limited [2018] FCA 703 (Ford) at [31]-[33].

15    In my view, it is appropriate to make a declaration to the effect that Meriton contravened ss 18 and 34 of the Australian Consumer Law, including a description of the MSA-masking practice and the bulk withholding practice and a brief explanation as to why they infringed the provisions. First, there is considerable public interest in corporations observing the requirements of the Australian Consumer Law, which warrants the grant of declaratory relief when the Australian Consumer Law is contravened. Secondly, it is appropriate for the Court to record its disapproval of contravening conduct. Thirdly, declarations in cases of this kind assist the ACCC as regulator to carry out its duties under the Competition and Consumer Act including the Australian Consumer Law.

16    The text proposed by the ACCC deals with the contraventions of both s 18 and s 34 in a single declaration. As discussed at the hearing, I consider it appropriate to make a separate declaration with respect to each provision. This is in part due to the fact that the finding I made in the Liability Reasons regarding the effect on ranking (at [212]) formed part of my reasoning in relation to s 18, but not s 34: see the Liability Reasons at [214]. I also propose to make some adjustments to the language proposed by the ACCC having regard to Meriton’s suggested adjustments and also to more closely align with the findings in the Liability Reasons. The declarations I propose to make are as follows:

1.    During the period November 2014 to October 2015, the respondent (Meriton), in trade or commerce, engaged in conduct that was likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law), by:

(a)    inserting the letters “MSA”:

(i)    at the front of the email address for guests who had complained (or were otherwise considered likely to have had a negative experience at a Meriton property) before sending it to TripAdvisor, so that the email address provided to TripAdvisor was invalid and the guest did not receive an invitation prompting the guest to provide a review through the Review Express system; or

(ii)    in the relevant field in its property management system for guests who had complained (or were otherwise considered likely to have had a negative experience at a Meriton property), so that the guest’s email address was not provided to TripAdvisor and the guest did not receive an invitation prompting the guest to provide a review through the Review Express system; and

(b)    withholding email addresses from TripAdvisor for any guests who had stayed at certain Meriton properties for a particular period when the property had been affected by a major service disruption.

This conduct by Meriton reduced the number of negative reviews of Meriton’s properties that were posted on the pages of the TripAdvisor website dedicated to those properties with the effect of improving the relative number of favourable reviews compared with unfavourable reviews of Meriton’s properties on the TripAdvisor website. This conduct created a more positive or favourable impression of the quality and amenity of Meriton’s serviced apartments, and had the effect of reducing, in the minds of consumers, awareness of the prevalence of service disruptions at Meriton’s properties. Further, in some cases, the conduct affected the ranking of Meriton’s properties on the TripAdvisor website.

2.    During the period November 2014 to October 2015, Meriton, in trade or commerce, engaged in conduct that was liable to mislead the public as to the characteristics or suitability for their purpose of the accommodation services at Meriton’s properties in contravention of s 34 of the Australian Consumer Law by:

(a)    inserting the letters “MSA”:

(i)    at the front of the email address for guests who had complained (or were otherwise considered likely to have had a negative experience at a Meriton property) before sending it to TripAdvisor, so that the email address provided to TripAdvisor was invalid and the guest did not receive an invitation prompting the guest to provide a review through the Review Express system; or

(ii)    in the relevant field in its property management system for guests who had complained (or were otherwise considered likely to have had a negative experience at a Meriton property), so that the guest’s email address was not provided to TripAdvisor and the guest did not receive an invitation prompting the guest to provide a review through the Review Express system; and

(b)    withholding email addresses from TripAdvisor for any guests who had stayed at certain Meriton properties for a particular period when the property had been affected by a major service disruption.

This conduct by Meriton reduced the number of negative reviews of Meriton’s properties that were posted on the pages of the TripAdvisor website dedicated to those properties with the effect of improving the relative number of favourable reviews compared with unfavourable reviews of Meriton’s properties on the TripAdvisor website. This conduct created a more positive or favourable impression of the quality and amenity of Meriton’s serviced apartments, and had the effect of reducing, in the minds of consumers, awareness of the prevalence of service disruptions at Meriton’s properties.

Pecuniary penalty

Applicable principles

17    Section 224(1) of the Australian Consumer Law provides for the Court’s power to impose a pecuniary penalty upon a person who has contravened (among other provisions) s 34 of the Australian Consumer Law.

18    Section 224(2) provides that, 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;

(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 Ch 4 or Pt 5-2 of the Australian Consumer Law to have engaged in any similar conduct.

19    The maximum pecuniary penalty is specified in s 224(3). In the case of a body corporate, the maximum applicable penalty for each act or omission to which s 224 applies that relates to s 34 is $1.1 million.

20    The principles applicable to the discretion to impose pecuniary penalties have been discussed in many cases.

21    In Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 (FWBII), the High Court emphasised that the primary purpose of civil penalties is to secure deterrence. In contrast to criminal sentences, they are not concerned with retribution and rehabilitation but are “primarily if not wholly protective in promoting the public interest in compliance”: FWBII at [55]; see also at [59] and [110]. See also Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 351 ALR 190 at [44] and [87].

22    The High Court in FWBII affirmed and applied a long line of authority including the well-known statements of French J (as his Honour then was) in Trade Practices Commission v CSR Limited [1991] ATPR 41-076; [1990] FCA 762. In that case, his Honour referred to the “primacy of the deterrent purpose in the imposition of penalty” and described deterrence, both specific and general, as the “principal, and I think probably the only, object of the penalties”.

23    As I noted in Australian Competition and Consumer Commission v Optus Internet Pty Limited [2018] FCA 777, the primacy of deterrence has been emphasised in various cases in relation to contraventions of the Australian Consumer Law. For example:

(a)    The Full Court of this Court has explained the need to ensure that the penalty in such cases “is not such as to be regarded by that offender or others as an acceptable cost of doing business” and will deter them “from the cynical calculation involved in weighing up the risk of penalty against the profits to be made from contravention”: Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249 (Singtel Optus) at [62]-[63].

(b)    The High Court, applying the observations in Singtel Optus, has referred to the “primary role” of deterrence in assessing the appropriate penalty for contraventions where commercial profit is the driver of the contravening conduct: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [64]-[66].

(c)    The Full Court of this Court has emphasised that the “critical importance of effective deterrence must inform the assessment of the appropriate penalty”: Australian Competition and Consumer Commission v Reckitt Benckiser (Aust) Pty Ltd (2016) 340 ALR 25 (Reckitt Benckiser) at [153]. The Court explained that “the greater the risk of consumers being misled and the greater the prospect of gain to the contravener, the greater the sanction required, so as to make the risk/benefit equation less palatable to a potential wrongdoer and the deterrence sufficiently effective in achieving voluntary compliance”: Reckitt Benckiser at [151]; see also [57], [148]-[153], [164] and [176].

24    In Trade Practices Commission v CSR Ltd at 52,152-52,153, French J referred to the following factors as being relevant in considering a pecuniary penalty of appropriate deterrent value:

1.    The nature and extent of the contravening conduct.

2.    The amount of loss or damage caused [by the contravening conduct].

3.    The circumstances in which the conduct took place.

4.    The size of the contravening company.

5.    The degree of power it has, as evidenced by its market share and ease of entry into the market.

6.    The deliberateness of the contravention and the period over which it extended.

7.    Whether the contravention arose out of the conduct of senior management or at a lower level.

8.    Whether the company has a corporate culture conducive to compliance with the Act, as evidenced by educational programs and disciplinary or other corrective measures in response to an acknowledged contravention.

9.    Whether the company has shown a disposition to co-operate with the authorities responsible for the enforcement of the Act in relation to the contravention.

25    These factors have been referred to and applied in numerous cases, including in relation to the provisions of the Australian Consumer Law.

26    One of the factors referred to by French J was the size of the contravener. In Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2015) 327 ALR 540 (Coles), Allsop CJ referred to the decision of Goldberg J in Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301 and the decision of Middleton J in Australian Competition and Consumer Commission v Telstra Corporation Ltd (2010) 188 FCR 238, and said (at [92]):

These authorities make it clear that Coles’ financial resources 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 the end of 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. Further, the resources of Coles are relevant to understanding whether it can pay (and not be crushed by) an appropriate penalty, especially when one takes account of revenue earned by products sold using the impugned phrases.

27    See also Australian Securities and Investments Commission v Hochtief Aktiengesellshaft (2016) 117 ACSR 589 at [116]; Australian Competition and Consumer Commission v Apple Pty Ltd [2012] ATPR 42-404; [2012] FCA 646 at [38]; Ford at [43]. At the hearing on relief, senior counsel for Meriton submitted that the size of the contravener was relevant in reducing the penalty that would otherwise be imposed where the contravener would have difficulty in paying, but otherwise not relevant. In light of the authorities referred to above, I do not accept this submission.

28    The ‘course of conduct’ principle has been discussed in a number of recent cases, including by the Full Court of this Court in Australian Competition and Consumer Commission v Cement Australia Pty Ltd [2017] ATPR 42-557; [2017] FCAFC 159 at [421]-[424]; and Australian Competition and Consumer Commission v Yazaki Corporation [2018] FCAFC 73 (Yazaki) at [226]-[237]. In Yazaki, the Full Court emphasised at [227] that it is not appropriate or permissible to treat multiple contraventions as just one contravention for the purposes of determining the maximum limit dictated by the relevant legislation. The Full Court in Yazaki also cited with approval the following observations of Beach J in Australian Competition and Consumer Commission v Hillside (Australia New Media) Pty Ltd trading as Bet 365 (No 2) [2016] FCA 698 at [25]:

… the “course of conduct” principle does not have paramountcy in the process of assessing an appropriate penalty. It cannot of itself operate as a de facto limit on the penalty to be imposed for contraventions of the ACL. Further, its application and utility must be tailored to the circumstances. In some cases, the contravening conduct may involve many acts of contravention that affect a very large number of consumers and a large monetary value of commerce, but the conduct might be characterised as involving a single course of conduct. Contrastingly, in other cases, there may be a small number of contraventions, affecting few consumers and having small commercial significance, but the conduct might be characterised as involving several separate courses of conduct. It might be anomalous to apply the concept to the former scenario, yet be precluded from applying it to the latter scenario. The “course of conduct” principle cannot unduly fetter the proper application of s 224.

29    The ‘course of conduct’ principle means that consideration should be given to whether the contraventions arise out of the same course of conduct, to determine whether it is appropriate that a ‘concurrent’ or single penalty should be imposed for the contraventions: Yazaki at [234]. Even if the contraventions are properly characterised as arising from a single course of conduct, a judge is not obliged to apply the principle if the resulting penalty fails to reflect the seriousness of the contraventions: Yazaki at [235]. See also Australian Competition and Consumer Commission v Aveling Homes Pty Ltd [2017] ATPR 42-564; [2017] FCA 1470 (Aveling) at [52] and [55]; Australian Competition and Consumer Commission v Get Qualified (in liq) (No 3) [2017] ATPR 42-549; [2017] FCA 1018 (Get Qualified) at [37].

30    Where multiple separate penalties are to be imposed upon a particular wrongdoer, the ‘totality principle’ requires the Court to make a ‘final check’ of the penalties to be imposed on a wrongdoer, considered as a whole: see generally Ford at [55].

31    Co-operation with authorities in the course of investigations and subsequent proceedings can properly reduce the penalty that would otherwise be imposed. The reduction reflects the fact that such co-operation: increases the likelihood of co-operation in future cases in a way that furthers the object of the legislation; frees up the regulator’s resources, thereby increasing the likelihood that other contraveners will be detected and brought to justice; and facilitates the course of justice: see, eg, FWBII at [46]; NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 at 293-294.

Factual findings

32    In this section, I set out my factual findings based on the evidence led at the relief hearing. In addition, the Liability Reasons contain many findings that are relevant to the pecuniary penalty issue. I do not propose to set out all of those findings in this section. However, I do set out, below, some findings from the Liability Reasons that provide context for some of the evidence, discussed below, led at the relief hearing.

33    In the Liability Reasons, I found that the MSA-masking practice and the bulk withholding practice were engaged in deliberately and systematically by Meriton during the relevant period: see [8] and [141]. The MSA-masking practice was standard across the organisation and, from January 2015, was reflected in Meriton’s standard operating procedure for checking out a guest: see [8], [92], [96] and [132].

34    In [96] of the Liability Reasons, I quoted the relevant part of Meriton’s standard operating procedure for check out (as it stood from January 2015). The third of nine steps was as follows:

Ask guest if they enjoyed their stay, if positive pass a Trip advisor feedback card to guest requesting them to post feedback online and if negative mask guest email by adding MSA to the beginning of guest email address and discuss concerns.

(Emphasis added.)

35    As I noted in the Liability Reasons, the standard operating procedure for checking out a guest included a space for staff members to sign, indicating that they understood that disciplinary action would occur if they did not follow the standard operating procedure correctly.

36    In [152] of the Liability Reasons, I noted that in October 2015, an Australian Broadcasting Corporation program went to air that raised issues about Meriton’s practices in relation to TripAdvisor. Subsequently, on or about 28 October 2015, Meriton issued a press release headed “Meriton Group Statement”. In the statement, Meriton said that the masking of emails was “a policy designed to be used in ‘extreme’ circumstances only” and that, in a very large business such as Meriton, “occasionally you may get some employees who do not adhere to the strict company guidelines”. In his evidence at the liability hearing, Mr Chan accepted that it was “utterly misleading” to suggest that the suppression of email addresses was done other than in accordance with Meriton’s actual company policy.

37    In [156] of the Liability Reasons, I noted that in December 2015 there was an exchange of correspondence between Matthew Thomas, who was Meriton’s National Manager during the relevant period, and officers of the ACCC. On 2 December 2015, Mr Thomas sent an email to Ben Morawetz of the ACCC that included the following statement:

Just so you are aware when the issues was raise to my office on 21st October 2015, we immediately stopped all use of the Review Express (powered by TripAdvisor) product.

Our internal investigation found that it was obvious that over time, some staff had misunderstood or potentially (and purposely) abused the ability to exclude emails form the post-stay communication. This was always reserved for extreme cases.

(Errors in original; emphasis added.)

38    The evidence does not suggest that Meriton’s staff had “potentially (and purposely) abused” the ability to exclude emails from the post-stay communication. To the contrary, the masking of the email addresses of guests who complained was company policy.

39    At the hearing on relief, the ACCC relied on a number of Meriton’s public statements, both from the time when the issue first became public (October 2015) and the time when this proceeding was commenced (in late 2016) to similar effect to the statements set out in [36] and [37] above. The same comments apply to these public statements. In particular, the suggestion in a Meriton media release in late 2016 that the system of masking emails had been “overused or improperly used” by employees is contrary to the evidence; the employees were doing exactly what they were directed to do.

40    At the hearing on relief, Meriton relied on the Second Chan Affidavit. Mr Chan referred in this affidavit to two periods of time in which Meriton did not participate, or fully participate, in Review Express. The first was between 21 October 2015 and 25 November 2015, when Meriton voluntarily suspended its use of Review Express. The second was between 19 December 2015 and 11 March 2016, when TripAdvisor suspended Meriton from using Review Express. The fact that Meriton had been suspended by TripAdvisor was also the subject of evidence at the liability hearing: see the Liability Reasons, [154].

41    Mr Chan stated in [6] of the Second Chan Affidavit that “[s]ince 21 October 2015 Meriton has voluntarily implemented an administrative resolution to prevent any repeat occurrence of the conduct alleged”. He stated that the resolution included the issue of comprehensive company-wide policies relating to the management of complaints and a thorough review and overhaul of the system that had been in place. He referred to six documents that were said to record these policies. I make the following observations about these documents:

(a)    “AC-35” is a standard operating procedure for managing guest feedback, circulated to hotel managers on 3 November 2015. This document did not directly address the MSA-masking practice or Review Express. It did not, for example, say that the company policy of masking the email addresses of guests who complained had been stopped and, henceforth, front line staff should not do so.

(b)    “AC-43” is a standard operating procedure for exporting and sending emails to Review Express. It was distributed to management on 16 March 2016. The covering email contained the statement that the document was for “management view only”. The standard operating procedure included the statement at [7]: “Review all emails and amend any variations, misspelling or missing fields. If there is any misuse or manipulation of emails, record them, investigate and notify Matthew Thomas.” It also stated at [24]: “Log every email that comes back as undeliverable and amend any variations, misspelling or missing fields and resend.” This document is consistent with Meriton having stopped the policy of masking the email addresses of guests who complained. However, the document was not distributed to front line staff.

(c)    “AC-44” is another copy of the standard operating procedure for managing guest feedback. This was circulated to hotel managers and guest services managers (about 30 people in total) on 17 March 2016. The covering email, from Mr Chan, advised that, from 22 March 2016, Meriton would be resuming the TripAdvisor Review Express function. The email stated: “If there are major incidents occurring in your hotel we will still send out TA Review Express unless otherwise approved by head office.” The email also contained a “reminder” that the “Marketing Not Permitted” facility should only be used for the following reasons: the guest had been blacklisted; or the guest had specifically asked to unsubscribe from marketing campaigns. The email concluded: “[Meriton] Head [O]ffice and TripAdvisor are closely monitoring all emails and bounce backs[.] [If] any staff member is found manipulating/changing guest emails this will result [in] disciplinary action which may result [in] the termination of your employment”. These statements indicate that, by March 2016, Meriton had stopped the policy of masking the email addresses of guests who complained. However, the statement regarding major incidents, and specifically the reference to “unless otherwise approved by head office” perhaps suggests some equivocation regarding stopping the bulk withholding practice.

(d)    “AC-46” is a standard operating procedure for updating and checking registration cards, circulated on 27 January 2017. This did not refer specifically to the MSA-masking practice or Review Express.

(e)    “AC-57” is a standard operating procedure for changing a guest’s folio to “marketing not permitted”. This was circulated on 6 September 2017. It did not refer specifically to the MSA-masking practice or Review Express.

(f)    “AC-61” is a standard operating procedure for compliance with the Review Express program. The implementation date on the document is 1 December 2017. The annexure does not include a covering email indicating to whom it was circulated. The affidavit does not indicate what was done with this document, apart from stating that it was “generated”.

42    On 8 December 2015, Carol Nazha, an employee of Meriton with responsibility for dealing with customer feedback during the relevant period, sent an email to Mr Chan and four other people at Meriton stating that the use of Review Express would recommence the next day, and asking that this be communicated with teams at the meeting the next day. The email stated that: “All emails with the letters MSA, the number 9 or any other form of manipulation will be removed and the correct email will still be sent. Any email we are unsure of will be removed [altogether] from the sent list to decrease bounce back emails as much as possible.”

43    In March 2016, one instance of bulk withholding of emails occurred, in relation to Meriton’s Broadbeach property.

44    On 4 August 2017, Ms Nazha sent an email to all hotel managers and others attaching an updated standard operating procedure for managing guest feedback, and an updated standard operating procedure (SOP 43) for updating and checking registration cards and guest details. The latter document included the statement:

PLEASE NOTE:

Under no circumstances is any employee of Meriton to manipulate guest details for the benefit of the hotel, a colleague or themselves, Meriton Management are consistently running audits … for data accuracy and to capture any [breaches] resulting in misconduct.

Mr Chan said in re-examination that this wording was added in August 2017.

45    On 1 December 2017, Mr Chan sent an email to all staff as follows:

A reminder to all Meriton staff,

Further to our previous memorandum and in line with SOP: 43

It is completely unacceptable for any employee of Meriton to alter a guest’s contact details for the purpose of preventing a guest receiving a Review Express reminder email. Management has in place systems and audits to ensure compliance with the Review Express program.

Any such action by an employee is contrary to our company’s code of conduct, specifically section 6. Protection of Company Records. a) Employees shall neither falsify nor permit falsification of any company record.

Any staff found to be engaging in this sort of conduct will be dismissed without further warning.

46    Mr Chan accepted in cross-examination that this was the first occasion on which he had written in such emphatic terms to all of the staff at Meriton.

47    Surprisingly, given the attention it received in the Liability Reasons at [96], Mr Chan’s affidavit does not indicate whether and, if so, when the standard operating procedure for checking out a guest, referred to at [34] above, was revised or retracted. In response to a question from the Court, Mr Chan said that it had been revised, but he could not recall when. No document was produced indicating the form of the revision and when it took place. Nevertheless, I accept on the basis of Mr Chan’s oral evidence that the standard operating procedure for checking out a guest was revised, at some stage, to remove the requirement for front line staff to mask the email addresses of guests who complained.

48    I make the following observation about the evidence in the Second Chan Affidavit about steps taken by Meriton. Generally, the steps described by Mr Chan seem to proceed on the basis that the manipulation of emails had been the conduct of ‘rogue’ employees. This is consistent with the misleading public statements made by Meriton when the issue first came to light (in October 2015) and when this proceeding was commenced (in late 2016). But the fact is that the practice of masking email addresses had been carried out by staff at the direction of management (and with the threat of disciplinary action if they did not carry it out). In these circumstances, one might well have expected a clear written direction to have been given to staff, in or about October 2015, that the company had decided to stop its policy of masking the email addresses of guests who had complained so that they did not receive an email invitation through TripAdvisor’s Review Express system, and henceforth staff were not to mask the email addresses of such guests. However, a clear written direction to staff was not given until August 2017.

49    During the course of cross-examination, Mr Chan stated, for the first time, that an oral instruction had been given to hotel managers in October or November 2015 that the MSA-masking practice “had to be stopped”. However, his evidence about this (both in cross-examination and re-examination) was vague and lacking in detail.

50    On the basis of the evidence referred to above, and notwithstanding the reservations about Mr Chan’s evidence referred to in the preceding paragraph, I find that in or about October 2015, Meriton stopped the MSA-masking practice and the bulk withholding practice (save for one instance of bulk withholding in March 2016). It is likely that, at about this time, front line staff were informed orally that the company had decided to stop its policy of masking the email addresses of guests who complained, and henceforth they were not to do so. However, it was not until August 2017 that a clear written direction was given to staff.

51    The evidence of Mr Chan, both in his affidavit and during cross-examination, indicates that there were instances of manipulation of email addresses (including by adding the number 9 to the email address) after October 2015. However, unlike the period November 2014 to October 2015, this did not reflect Meriton’s company policy. The fact that this manipulation occurred does tend to suggest that Meriton’s efforts, prior to August 2017, to inform staff that it had stopped its previous masking policy were inadequate.

52    Meriton tendered documents that show that it provided extensive information to the ACCC in relation to its investigation.

53    Mr Chan gave evidence, which I accept, that he is unaware of any civil penalties having been imposed on Meriton for contravention of the Australian Consumer Law (or its predecessors).

54    The ACCC tendered the financial statements for Meriton for the years ended 30 June 2015 and 30 June 2016 and a draft financial statement for the year ended 30 June 2017. These show that Meriton is a substantial company. For example, for the 2015 financial year, its revenue was $63,296,773 and its profit before income tax was $12,041,753. For the 2016 financial year, its revenue was $79,097,214 and its profit before income tax was $22,962,568. It appears that the revenue from the serviced apartments is received (at least in part) by another company in the Meriton group. The ACCC tendered a one-page spreadsheet produced by Meriton that showed the number of reservations, the number of guests and the gross revenue for the 13 Meriton properties that were the subject of evidence at the liability trial in relation to the relevant period (see the ACCC’s submissions at [5] and [98], T92, T95). This document (subject to a minor correction that was the subject of correspondence between the parties) shows (in respect of all 13 properties over the relevant period): “net reservations” of 355,306; 748,450 guests; and gross revenue of $242,907,126.

Consideration

55    I will first address the number of contraventions and the maximum penalty. I will then address the mandatory considerations referred to in s 224(2) of the Australian Consumer Law and various other factors referred to in the cases and the parties’ submissions.

Number of contraventions and maximum penalty

56    A threshold issue concerns the number of contraventions of s 34 of the Australian Consumer Law that took place. This issue is determinative of the maximum penalty that could be imposed.

57    The ACCC submitted in its written submissions that each time Meriton engaged in the impugned conduct, whether by masking an email address or by the bulk suppression of email addresses, “it was likely (as intended) to create a more positive or favourable impression of the quality or amenity of a Meriton property on the TripAdvisor website”. The ACCC submitted that Meriton accordingly committed “thousands” of contravening acts and omissions, each attracting a penalty of up to $1.1 million. The ACCC submitted that the number of contraventions was so large that it was unhelpful to seek to identify the number (and, by multiplying the number by $1.1 million, the maximum penalty) with precision, referring to Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 254 FCR 68 at [143] and [145]; Coles at [18]; Reckitt Benckiser at [139]-[145]; and Get Qualified at [32]-[33]. In oral submissions, senior counsel for the ACCC submitted that each of the approximately 14,500 instances of the MSA-masking practice (the figure is based on the Liability Reasons at [106]) constituted a contravention, and each withholding of a group of emails constituted a contravention.

58    Meriton submitted in its written submissions that the ACCC’s submissions were contrary to assurances given to the Court and Meriton that only two contraventions were alleged by the ACCC, namely one contravention of s 18 and one contravention of s 34. Meriton referred to statements made by senior counsel for the ACCC at a case management hearing in the proceeding on 19 April 2017, approximately six weeks before the trial on liability. At that hearing, the ACCC sought leave to amend its concise statement, in particular, by amending the schedule to the concise statement so as to identify many more instances of the masking of emails and the bulk withholding of emails (both referred to in the schedule as the masking practice) than had previously been identified. The application for leave to amend the schedule was opposed in part (transcript, 19 April 2017, pp 13-18). In response, senior counsel for the ACCC submitted: “It’s one breach, or perhaps two – a breach of section 18 and a breach of section 34, based on the totality of that behaviour” (p 18). Towards the end of the case management hearing, senior counsel for Meriton sought to confirm the ACCC’s position, so that there would be no confusion later (p 31). Senior counsel for Meriton summarised what he understood to be the ACCC’s position. Senior counsel for the ACCC responded by stating: “there are two breaches alleged in paragraph 1 [of the originating application]. They are both systematic breaches, breaches of section 18 and section 34. That’s the case we bring … And, of course, only one of those attracts a pecuniary penalty. That’s the section 34 breach”.

59    Meriton submitted in its written submissions that: this is a case where multiple breaches were expressly eschewed; the ACCC chose to run its case on the basis that the system adopted by Meriton constituted one breach of s 34 and, accordingly, the maximum penalty which it is entitled to seek is $1.1 million; the distinction between one breach and many shaped the whole hearing; the principal matter in issue was the effect of Meriton’s conduct; the ACCC never sought to demonstrate that every time Meriton masked or withheld an address, that single act reduced the number of negative reviews or created a more favourable impression, etc; and they did that only in respect of the whole of the conduct treated as a single action. In oral submissions at the relief hearing, senior counsel for Meriton submitted that if Meriton had known that the ACCC was alleging that each act of masking and each instance of bulk withholding constituted a contravention, Meriton would have made enquiries of lay witnesses, and potentially called evidence from the individuals whose email addresses had been masked (or a sample of such individuals) as to whether they would have left a review. In this regard, senior counsel for Meriton referred to p 14 of the transcript of the case management hearing on 19 April 2017, where he had indicated that such evidence may need to be called. In response to a question from the Court as to whether Meriton would or might have conducted its case differently if there had been a prospect of 13 contraventions being found – one in relation to each property – senior counsel for Meriton said that neither expert approached the matter on a property by property basis and, unsurprisingly, findings were not made on a property by property basis. He submitted that further evidence would have been gathered in relation to causation, namely as to the effect of masking a smaller number of email addresses, or the effect if masking only took place at a single site. He submitted that the findings in the Liability Reasons were not made on a property by property basis and it would be unsafe to make such findings now.

60    In its written submissions in reply, the ACCC submitted that, at the case management hearing on 19 April 2017, the ACCC’s senior counsel was simply explaining that the ACCC intended to prove the nature and extent of Meriton’s misconduct by proving the instances of contravening conduct identified in the amended concise statement (including the amended schedule). The ACCC further submitted that: it was clear at all times that the ACCC intended to prove (as it did) many more than one instance of contravening conduct implemented throughout the relevant period and comprising numerous and repeated contravening acts and omissions; the ACCC did not, at the case management hearing or at any other time, provide any “assurance” or make any “representation” that it would seek to prove only one contravening act or omission giving rise to a maximum penalty of not more than $1.1 million; and, in any event, even if Meriton did labour under some misapprehension (which the ACCC did not accept was the case), no prejudice was suffered by Meriton and no estoppel arises. The ACCC disputed that Meriton would have run its case differently had it known that the ACCC was seeking to establish many thousands of separate contraventions.

61    In my view, although senior counsel for the ACCC referred to “systematic” implementation of a practice (p 18) and “systematic” breaches (p 31), the better view is that he conveyed that only one contravention of s 34 was sought to be established. However, the question that then arises is whether it is open to the ACCC now to contend (or for the Court to consider) that there were more than one contravention of s 34. A critical consideration in this regard is whether Meriton would suffer any prejudice. This turns, in particular, on whether Meriton would or might have run its case differently. For the following reasons, I do not consider that Meriton would suffer any prejudice.

62    First, some of the points raised on behalf of Meriton are directed to the ACCC’s contentions that a contravention of s 34 occurred each time an email address was masked and each time a group of emails was withheld. However, for reasons set out later in these reasons, I do not accept the ACCC’s contentions in this regard. It follows that these points (such as the prospect of calling the individuals whose email addresses were masked) largely fall away.

63    Secondly, the main issue at trial was the effect of the impugned practices – in broad terms, whether they had the effect of reducing the number of negative reviews, and whether they had the effect of improving the relative number of favourable reviews compared to unfavourable reviews. In circumstances where the TripAdvisor website is structured so that there is a separate ‘page’ for each property, the evidence regarding the effect of the impugned practices was necessarily whether the practices had the suggested effect in relation to each of the relevant properties. Mr Emmins examined in detail, by way of example, the Kent Street, Pitt Street and Broadbeach properties. But the overall effect of his evidence was that the same analysis applied to each of the other Meriton properties. Thus the parties did, in effect, address whether the impugned practices had the effect alleged by the ACCC in relation to each of the 13 Meriton properties. In light of this, I doubt that Meriton would have run its case any differently had there been a prospect of 13 contraventions being found against it.

64    Thirdly, and relatedly, regardless of the number of contraventions in issue, it was relevant to consider whether the impugned practices had the effect alleged at each of the 13 Meriton properties. This is because one of the mandatory considerations for the determination of the appropriate penalty is the nature and extent of the relevant acts or omissions. Thus, it was relevant to consider whether the impugned practices had the alleged effect at all, or only some, of the 13 Meriton properties. Meriton did not approach the case this way. It sought to prove that the impugned practices did not have the alleged effect at any of the 13 properties.

65    In light of these matters, I consider it unlikely that Meriton would or might have run its case differently had there been a prospect of 13 contraventions being found against it. In these circumstances, I do not consider that Meriton would suffer any prejudice if the Court were to consider whether there were 13 contraventions – one for each property – rather than one contravention of s 34, and I consider it open to the Court to consider whether there were 13 contraventions of s 34 notwithstanding the statements made on behalf of the ACCC at the case management hearing.

66    I note also that, in the context of an agreed penalty hearing, the Court is not constrained by the agreement of the parties as to the amount of the proposed penalty or by the parties’ agreement as to the number of contraventions. It is open to the Court to form a different view (subject, of course, to giving the parties appropriate notice). This is because the Court needs to be satisfied that the proposed penalty is an appropriate penalty and that the statement of agreed facts provides a proper basis upon which to proceed. By parity of reasoning, even in an adversarial context, the Court is not necessarily constrained by the positions adopted by the parties as to the amount of a penalty or the number of contraventions. Of course, this is subject to the proceeding being conducted fairly and appropriate notice being given if the Court is minded to depart from the basis upon which the parties have proceeded. For the reasons set out above, I consider it to be consistent with the fair trial of the proceeding for the Court to consider whether there was one contravention of s 34 in relation to each of the Meriton properties.

67    I now consider the number of contraventions of s 34 that took place.

68    As noted above, the ACCC contends that each instance of the masking of an email address, and each instance of the bulk withholding of a group of emails, constituted a separate contravention of s 34 of the Australian Consumer Law. As already indicated, in my view, the ACCC’s contention should not be accepted. The provision refers to engaging in conduct that is “liable to mislead” the public as to certain matters. As discussed in the Liability Reasons at [191], a distinction is drawn between “likely to mislead or deceive” (s 18) and “liable to mislead” (ss 33 and 34), with the latter applying to a narrower range of conduct. Under s 33 and, by parity of reasoning, s 34, what is required is that there be an actual probability that the public would be misled: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2014) 317 ALR 73 at [44]. In my view, the evidence does not establish that each instance of the masking of an email address was liable to mislead the public as to the relevant matters. If the conduct is defined so narrowly, there is insufficient scale for the Court to be satisfied that there was an actual probability that members of the public were misled as to the relevant matters. In relation to the bulk withholding practice, while it is possible that in some cases the bulk withholding of a group of emails constituted a contravention, it is not established that every case of bulk withholding constituted a contravention.

69    While I do not accept the ACCC’s contention, it does not necessarily follow that there was only one contravention of s 34. As already indicated, another possible analysis is that there were 13 contraventions – one in relation to each of the Meriton properties.

70    In my view, the evidence establishes that Meriton contravened s 34 of the Australian Consumer Law in relation to each of the 13 properties that were the subject of consideration in the Liability Reasons. As discussed already, one of the main issues at trial was the question whether the impugned practices had the effect alleged by the ACCC; in simple terms, whether the impugned practices reduced the number of negative reviews and improved the relative number of favourable reviews compared to unfavourable reviews. In circumstances where there is a separate ‘page’ for each property on the TripAdvisor website, the evidence as to whether the impugned practices had the alleged effect was necessarily dealing with the question of effect in relation to each of the Meriton properties. Thus, contrary to Meriton’s submissions at the relief hearing, I consider that the expert evidence did address whether the impugned practices had the alleged effect in relation to each of the 13 properties. That is because the experts approached the issue on the basis that there was no relevant distinction between the properties, and their opinions and analysis were applicable to each of the properties. In relation to the MSA-masking practice, there was evidence that this practice occurred in relation to all 13 properties (see [106] of the Liability Reasons). In relation to the bulk withholding practice, the evidence did not establish that this occurred at all of the 13 properties. It occurred, at least, in relation to the Broadbeach, Bondi Junction, Kent Street and Pitt Street properties (see [127] of the Liability Reasons). Thus, although not expressed in these terms, I consider my findings as to the effect of the MSA-masking practice at [162]-[183] of the Liability Reasons to apply to each of the 13 Meriton properties, and I consider my findings as to the effect of the bulk withholding practice at those paragraphs of the Liability Reasons to apply to, at least, the Broadbeach, Bondi Junction, Kent Street and Pitt Street properties.

71    Later in the Liability Reasons, at [204]-[216], I considered the question of causation, namely whether consumers were likely to be led into error by the impugned practices and whether there was a sufficient causal nexus between the conduct and any such error. Although not expressed in these terms, I consider my conclusions in relation to the MSA-masking practice to apply to each of the 13 Meriton properties, and I consider my conclusions in relation to the bulk withholding practice to apply to, at least, the Broadbeach, Bondi Junction, Kent Street and Pitt Street properties. Given the overlap between the MSA-masking practice and the bulk withholding practice, I consider it appropriate to treat the conduct as giving rise to a single contravention (rather than two contraventions) in relation to each of the Broadbeach, Bondi Junction, Kent Street and Pitt Street properties.

72    Accordingly, I conclude that Meriton engaged in conduct that was liable to mislead the public as to the characteristics and suitability for their purpose of the accommodation services it provided at each of the 13 Meriton properties, constituting 13 contraventions of s 34. The maximum penalty is therefore $14.3 million.

Nature and extent of the acts or omissions, and the circumstances in which the acts or omissions took place

73    The nature and extent of the acts or omissions, and the circumstances in which the acts or omissions took place, are described in the Liability Reasons. I note, in particular, the following findings:

(a)    the MSA-masking practice was standard across the whole of the organisation ([8], [92], [132]);

(b)    the bulk withholding practice was adopted by Meriton across all hotels and during the whole of the relevant period ([120]);

(c)    in relation to the MSA-masking practice, well in excess of 14,584 email addresses were masked ([106]-[108]);

(d)    in relation to the bulk withholding practice, requests to withhold email addresses were made approximately once a week and most requests were acceded to ([120]);

(e)    the impugned practices were engaged in deliberately and systematically throughout the relevant period ([8], [141]); and

(f)    the contravening conduct took place over a period of 11 months.

74    It is also important to note that the evidence indicated that the TripAdvisor website was the world’s largest travel website, attracting millions of consumers each month. Meriton’s conduct had the effect of reducing, in the minds of consumers, awareness of the prevalence of service disruptions at the Meriton properties. Further, Meriton’s conduct created an unduly favourable impression about the quality or amenity of Meriton’s serviced apartments.

75    In light of these matters, and the matters set out in the Liability Reasons generally, I regard Meriton’s contraventions of s 34 of the Australian Consumer Law as serious contraventions, requiring the imposition of a substantial penalty.

Loss or damage

76    The contravening conduct gave rise to loss and damage, by way of the loss of opportunity for consumers to adequately compare accommodation services and choose between them on a fully-informed basis, and the loss of opportunity for competitors (who were complying with the law) to gain custom from customers. In oral submissions, Meriton accepted that these types of loss and damage arose (T84).

77    The thrust of Meriton’s submissions on this issue was that there was no evidence that anyone had suffered any loss or damage and that this was a factor in mitigation of the penalty, relying on: Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) (2011) 279 ALR 609 at [79]; Australian Competition and Consumer Commission v Global One Mobile Entertainment Limited [2011] ATPR 42-358; [2011] FCA 393 at [135]; Singtel Optus at [58]; cf Coles at [61]. In the present case, it is true that the ACCC has not produced any evidence of actual loss (that is, beyond the loss of opportunity referred to above). But given the nature of the contravening conduct, and the context in which it occurred, it would be very difficult to produce such evidence. In these circumstances, I am not prepared to infer that no such loss or damage occurred. In particular, I am not prepared to infer that no competitor of Meriton suffered harm. The very purpose of the contravening conduct was to produce a commercial benefit for Meriton by way of increased sales (with a corresponding detriment, at least in most cases, for Meriton’s competitors). Accordingly, in the circumstances of this case, I do not regard this as a factor in mitigation.

78    The loss or damage described in [76] above is significant and, in my view, requires the imposition of a substantial penalty.

Whether the respondent has engaged in similar prior conduct

79    Meriton has not previously been found to have contravened the provisions of the Australian Consumer Law or to have engaged in any similar conduct. This is a substantial mitigating factor.

Size of contravener

80    Meriton is a substantial company, as indicated by the financial statements referred to above. There is no issue as to Meriton’s capacity to pay a large penalty. Further, the scale of the serviced apartment business operated by Meriton at the 13 properties is large. As noted above, the gross revenue from the 13 Meriton properties during the relevant period (albeit directed to another company in the group) was approximately $240 million. The scale of Meriton’s relevant business operation suggests that a large penalty is required for specific deterrence. The scale of the business is also relevant in considering the penalty needed to achieve general deterrence.

81    The ACCC submitted that regard should be had to the size of the Meriton group. The difficulty with this submission is that the evidence does not include any detailed information regarding the size of the Meriton group.

Deliberateness of contravening conduct

82    In the Liability Reasons, I found that the MSA-masking practice and the bulk withholding practice were engaged in deliberately and systematically (Liability Reasons, [8] and [141]). I also found that the practices were company policy (Liability Reasons, [157]). In its written submissions for the relief hearing, Meriton accepts that the contravening conduct was deliberate. This factor supports the imposition of a substantial penalty.

Involvement of senior management

83    The facts and matters referred to in the Liability Reasons make clear that Meriton’s senior management were aware of and sanctioned the practices (see, eg, [92], [120], [132] and [143]). In its written submissions for the relief hearing, Meriton accepted that the contravening conduct involved senior management. This is a factor that weighs in favour of the imposition of a substantial penalty.

Culture of compliance and corrective measures in response to contravention

84    The evidence does not instil confidence that Meriton had or has a corporate culture conducive to compliance with the Australian Consumer Law. Meriton has not adduced any evidence of the existence, or implementation, of any consumer law compliance programs, or Australian Consumer Law training of any sort, for its staff, whether during the relevant period or currently. Although Meriton decided, in or about October 2015, to stop the practices, it took inadequate steps prior to August 2017 to communicate to its staff that the company had decided to stop its policy of masking. It was not until August 2017 that Meriton gave a clear written direction to its staff. I do not regard the steps that Meriton has taken since the issue emerged in October 2015 to warrant any reduction in the penalty that would otherwise be imposed.

Co-operation

85    Meriton submits that it co-operated with the ACCC by providing a large amount of information and documents in the course of the ACCC’s investigation. However, I consider this to be substantially undercut by Meriton’s misleading statement to the ACCC, set out at [156] of the Liability Reasons. I therefore do not accept the submission made on behalf of Meriton at the hearing that it is entitled to “maximum credit” for co-operation with the ACCC.

86    I note that the ACCC submitted that Meriton misleadingly failed to disclose to the ACCC that TripAdvisor had suspended Meriton from using Review Express. (Meriton did disclose that it had voluntarily suspended itself from Review Express.) However, the evidence and submissions on this point do not enable me to reach a concluded view as to whether Meriton’s conduct was misleading. In any event, this point would seem to add little, given Meriton’s misleading statement to the ACCC referred to at [156] of the Liability Reasons.

87    In its written submissions, Meriton submitted that, from the commencement of the proceeding, it admitted that it engaged in the conduct described by the ACCC as the “masking conduct”. (This should probably be a reference to the “masking practice”, the expression used in the ACCC’s concise statement and amended concise statement.) However, I do not regard Meriton’s responses to the ACCC’s concise statement and its amended concise statement as containing a clear admission as to the practice alleged: see [6]-[8] and [19] of the response to the amended concise statement. It is true that in its outline of opening submissions filed shortly before the liability trial, Meriton admitted that it had engaged in both forms of conduct alleged by the ACCC and that it ought not have done so. However, that was fairly late in the course of the proceeding.

88    In light of the above, I do not consider that any discount is warranted for co-operation with the ACCC.

Course of conduct principle

89    I have considered whether Meriton’s acts or omissions should be treated as a number of ‘courses of conduct’. There was undoubtedly a connection between all of the acts that comprised the contravening conduct. Both the MSA-masking practice and the bulk withholding practice were intended to reduce the prospect of a guest who had complained, or a guest who had stayed at a Meriton property during a period of service disruption, posting a review on TripAdvisor. The MSA-masking practice was standard across the organisation and, from January 2015, incorporated into Meriton’s standard operating procedure for checking out a guest. In the circumstances, it is open to view the contravening conduct as constituting one course of conduct or two courses of conduct. However, even if the conduct should be so viewed, it would not be appropriate, in my view, to treat the notional maximum penalty as being $1.1 million or $2.2 million. Having regard to the facts and matters discussed above, this would fail to reflect the seriousness of the contraventions.

90    Nevertheless, in determining the appropriate penalty for the contraventions, it is relevant to have regard to the connection between all of the acts comprising the contravening conduct. This is not a case of 13 unrelated contraventions; rather, all of the contraventions arose from a single corporate policy in relation to TripAdvisor’s Review Express system, and that policy was implemented by the adoption of two practices. In the circumstances of this case, it is appropriate to impose a single penalty in relation to all of the contraventions, and to have regard, in determining the appropriate amount, to the connection between the acts that comprise the contravening conduct.

Comparable cases

91    Meriton submits that the closest analogous case is Aveling. While there are some similarities between the two cases, there are also many differences. Among other things, the scale of the contravening conduct in the present case is much greater. In these circumstances, I do not consider the (agreed) pecuniary penalty imposed on the first respondent in that case ($380,000) to provide any assistance for present purposes.

Conclusion on penalty

92    Taking the above facts and matters into account, and having regard to the primary purpose of deterrence (both specific and general), I consider the appropriate penalty for Meriton’s contraventions of s 34 of the Australian Consumer Law to be $3 million. The scale of Meriton’s relevant business operations was large, the contravening conduct occurred on a large scale, and the TripAdvisor website, where the misleading impression was created, attracted a very large number of consumers. In these circumstances, I consider that a large penalty is required to achieve the objects of specific and general deterrence. There must be a sufficient sting to achieve the object of specific deterrence. As to general deterrence, a substantial penalty is required to make clear to corporations engaging with the internet and online sites that it is not acceptable to contravene the Australian Consumer Law. Because so many consumers use the internet and online sites to gather information about products and services, it is imperative that corporations engaging with the internet and online sites comply with the Australian Consumer Law.

93    I consider a penalty of the above amount to be proportionate to the facts and circumstances. I also consider such a penalty to be appropriate having regard to the totality principle.

94    The penalty proposed by the ACCC ($20 million) was premised on there having been a larger number of contraventions than I have found to be the case. That figure is greater than the maximum that I have found to apply. The penalty proposed by Meriton ($330,000 to $440,000) is premised on the maximum penalty being $1.1 million. Further, it does not reflect the seriousness of the contravening conduct, and would not be sufficient to achieve the objects of specific and general deterrence.

Injunction

95    There is no substantial issue between the parties as regards an injunction. The ACCC put forward proposed wording for an injunction. Meriton responded with proposed changes to the wording. The ACCC accepts the proposed changes. Accordingly, I will make an injunction in the following terms:

Meriton whether by itself, its servants, agents, affiliates or howsoever otherwise, for a period of three years from the date of this order, in trade or commerce, be restrained from filtering, selecting or limiting the guest email addresses it supplies to TripAdvisor in relation to its use of TripAdvisor’s Review Express service, unless a guest consents to Meriton withholding, or requests Meriton to withhold, his or her email address from TripAdvisor, or such conduct accords with TripAdvisor’s own published rules or guidelines for the submission of email addresses.

Compliance program

96    The ACCC seeks orders for Meriton to establish and maintain for a period of three years a compliance program. The terms of the proposed compliance program are set out in an annexure to the ACCC’s proposed orders. Meriton does not oppose the making of an order for a compliance program, but contends that it should be limited to the serviced apartment operations of Meriton. Senior counsel for Meriton stated that other substantial business operations are conducted through the same corporate entity, and the issues raised by the proceeding are not necessarily applicable to those other business operations. I accept this submission and propose to limit the compliance program to Meriton’s serviced apartment operations. I have also adopted two minor amendments proposed by Meriton to the terms of the compliance program.

Corrective publication order

97    The ACCC seeks an order, pursuant to s 246 of the Australian Consumer Law, that Meriton:

(a)    cause to be published on the home pages of all websites controlled by Meriton, a corrective notice in the terms of an annexure to the ACCC’s proposed orders, and ensure that such notice:

(i)    appears immediately upon access by a person to the home page of any such websites; and

(ii)    appears in an automatically generated pop-up window or message box whereby a member of the public is required to close the window or message box in order for it to disappear from the screen; and

(b)    cause to be placed in all Meriton properties a hard copy corrective notice in the terms of the same annexure to the ACCC’s proposed orders, on the front reception or check-in desk in a prominent position that is visible to guests checking in or out of the premises.

98    Meriton opposes the making of such an order.

99    In seeking the order, the ACCC relies on s 246(2)(c) and (d) of the Australian Consumer Law. Section 246 provides in part:

246    Non-punitive orders

(1)    A court may, on application of the regulator, make one or more of the orders mentioned in subsection (2) in relation to a person who has engaged in conduct that:

(a)    contravenes a provision of Chapter 2, 3 or 4; or

(b)    constitutes an involvement in a contravention of such a provision.

(2)    The court may make the following orders in relation to the person who has engaged in the conduct:

…

(c)    an order requiring the person to disclose, in the way and to the persons specified in the order, such information as is so specified, being information that the person has possession of or access to;

(d)    an order requiring the person to publish, at the person’s expense and in the way specified in the order, an advertisement in the terms specified in, or determined in accordance with, the order.

…

100    The principles applicable to the making of (what it is convenient to refer to as) a corrective publication order were considered by the Full Court of this Court in Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1. Stone J, with whom Moore and Mansfield JJ relevantly agreed (at [1] and [17]), discussed the applicable principles at [48]-[58], including by reference to the judgment of Tamberlin J in Australian Competition and Consumer Commission v On Clinic Australia Pty Ltd (1996) 35 IPR 635 at 640, and the judgment of French J in Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114.

101    Having regard to the principles discussed in those cases, I do not consider it appropriate to make an order as sought by the ACCC. The ACCC seeks an order for the publication by various means of a notice in the form annexed to its proposed orders, headed “Consumers misled by Meriton”. This notice essentially summarises the outcome of the present proceeding, describing the practices engaged in by Meriton that were found to contravene the Australian Consumer Law. The contravening conduct occurred some time ago. While the reviews posted on TripAdvisor during the relevant period are presumably still available to be viewed, they are much less prominent given that many reviews will have been posted since then and more recent reviews are generally displayed first. The reviews posted during the relevant period will also form a smaller proportion of the overall number of reviews about a property than they did during the relevant period. In these circumstances, any residual effect of the contravening conduct is likely to be quite limited. Further, the proposed methods of publication are somewhat removed from the place where the misleading impression was given, namely the TripAdvisor website. For these reasons, in the circumstances of this particular case, I do not consider it appropriate to make a corrective publication order.

102    I note for completeness that, in support of the proposed order, the ACCC relied on statements made on Meriton’s website regarding TripAdvisor awards it had received. However, the evidence regarding this matter (in particular, the current state of the website) was incomplete. I am not persuaded that this provides a basis to make an order as sought by the ACCC.

Conclusion

103    For the above reasons, I will make declarations as set out in [16] above, order Meriton to pay a pecuniary penalty of $3 million, make an injunction as set out in [95] above, and make an order for a compliance program as described in [96] above. In relation to costs, I will provide an opportunity for the parties to file submissions and any additional material upon which they rely.

Associate:

Dated:    31 July 2018