Federal Court of Australia

Fewstone Pty Ltd v Australian Competition and Consumer Commission [2026] FCAFC 104

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant pay the respondent’s costs of the appeal.

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

REASONS FOR JUDGMENT

THE COURT

Introduction

1    This appeal concerns the quantum of civil penalties for particular contraventions of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (ACL).

2    The appellant (City Beach) is a retailer of clothing, shoes and accessories and conducts its business in Australia and internationally. City Beach is a significant retailer and its business is a substantial one. City Beach operates approximately 70 retail stores within Australia, as well as an on-line business. For the 2022, 2023 and 2024 financial years, its annual revenue varied between $314 million and $331 million, and its net profit was $26.6 million, $21.5 million and $17.6 million respectively.

3    As part of its retail business, City Beach sold what are described as “novelty products”, being relatively cheap items such as toys and gadgets. Many of these products contained button batteries, being small circular batteries. In the period from 22 June 2022 to 24 October 2024 (the Relevant Period), City Beach sold many products which did not comply with the Consumer Goods (Products Containing Button/Coin Batteries) Safety Standard 2020 (the Safety Standard) or the Consumer Goods (Products Containing Button/Coin Batteries) Information Standard 2020 (the Information Standard) in contravention of s 106(1) of the ACL. We will refer to those standards together as the Mandatory Standards, being the term used below.

4    Button batteries can be very dangerous for young children, who may suffer significant injury or death if a button battery is swallowed or otherwise ingested. The Safety Standard provides, in effect, that a button battery in a consumer good must not release during reasonably foreseeable use or misuse and the battery compartment must be designed to ensure it is resistant to being opened by young children. The Information Standard provides that consumer goods containing a button battery must have prescribed warnings on instructions and packaging. If goods are not packaged, the warning must be on a sticker or tag attached to the product. The Information Standard provides important protection for families, because without that information, parents or other family members may not be aware that the product has a button battery, or that there is anything potentially dangerous about the product.

5    As described in more detail below, City Beach’s contraventions of s 106(1) of the ACL were very serious. In accordance with the admitted facts (and by reference to the detailed schedule of products), during the Relevant Period City Beach sold 57,278 non-compliant products, with 54,361 of those products being non-compliant with both the Safety Standard and the Information Standard. A further 2,459 of these products were non-compliant with the Information Standard only, and 458 of the products were non-compliant with the Safety Standard only.

6    Those sales occurred, inter alia, because City Beach had no program whatsoever to prevent the sale of non-compliant button battery products, and did not even know that there were relevant safety standards for products (including for products with button batteries) or that it was meant to ensure compliance with those standards. This was notwithstanding the public campaign by the ACCC to promote awareness of the Mandatory Standards, and notwithstanding that on a number of occasions persons within City Beach were informed by suppliers or state regulators about the Mandatory Standards and that City Beach was selling products that contravened the Mandatory Standards. Those matters did not come to the attention of the City Beach directors or perhaps the most senior management, seemingly because there was no process at all within City Beach for important information of that sort to be passed up to those in charge of the business.

7    These matters, and other matters discussed below, are unacceptable for a major retailer operating in Australia.

8    For most of the contraventions, the maximum penalty per contravention is, in effect, $50 million, having been increased from $10 million with effect from 22 November 2022. The number of contraventions is very large, and so the total maximum penalty is extremely large. Before the primary judge, the ACCC sought a total pecuniary penalty of $14 million. City Beach proposed a pecuniary penalty of $3.15 million. The primary judge imposed a penalty of $14 million.

9    On this appeal, City Beach contends that the penalty of $14 million is manifestly excessive and that a penalty of $3.15 million is “more than adequate”. For reasons set out below, we disagree.

Additional relevant factual matters

10    In this section, we set out some further relevant factual matters. Other relevant factual matters are referred to in the discussion under particular grounds of appeal. Most of the factual matters are drawn from the Statement of Agreed Facts and Admissions. One feature of that document was that it summarised key correspondence, and that correspondence for the most part was otherwise not in evidence. That is not a practice to be encouraged. A summary of correspondence may strip away some of the nuances of that correspondence, or fail to capture matters of context.

11    Prior to receiving the ACCC’s letter on 30 August 2023, City Beach had no internal processes, procedures or systems designed to ensure compliance with the Mandatory Standards. City Beach was not aware of the Mandatory Standards, and was not even aware that it had any obligation to ensure compliance with any applicable safety standards for consumer products. Rather, it incorrectly believed that any obligation to ensure compliance with applicable product safety standards lay with the manufacturer of those products.

12    We note that these circumstances are somewhat striking. One would expect that any significant business, particularly a business of the size of City Beach, operating in Australia today would take appropriate steps to obtain proper professional advice as to its legal obligations and the requirements of the regulatory environment in which it operates. That is, in effect, a necessary aspect of doing business. It is hardly a surprising proposition that there might be quality or safety standards applying to goods sold in a retail business, and that the retail business may be responsible for ensuring that goods contravening those standards are not sold. It is one thing for a person to make a mistake or for a system to fail in some respect. It is another thing entirely for there to be no system at all because a business has not taken the requisite steps to understand the regulatory requirements applying to that business. This failure by City Beach was egregious, and contributes to the characterisation of the contravening conduct as very serious conduct.

13    City Beach also received various warnings that it was selling non-compliant button battery products.

14    In May 2022, a senior member of City Beach’s team responsible for scouting products from manufacturers or suppliers for sale in City Beach’s retail outlets (Buying Team) was contacted by email by one of City Beach’s suppliers of novelty products who observed (optimistically, as it turns out) that the Buying Team member “may be aware of new compliance regulations regarding button cell batteries” and noted that a few of the products previously sold by that supplier to City Beach would not be compliant with the Information Standard and/or the Safety Standard. The email provided some instructions as to what to do with such products, and provided a link to the ACCC’s Product Safety Australia webpage containing information about the Mandatory Standards.

15    In June 2022, an assistant Buying Team member received two emails from a different supplier which referenced the Mandatory Standards, stated that the supplier was taking steps to ensure its products complied, stated that one previous product did not comply with the Information Standard, and requested details of the stock levels of that product so that the supplier could provide replacement labels for the product.

16    None of this was escalated to senior management, and no action was taken to ensure on-going compliance.

17    On 15 September 2022, NSW Fair Trading sent a letter to the City Beach store at Tuggerah, New South Wales (emailed to a City Beach Regional Manager) containing a formal warning that a product sold at that store did not comply with the Information Standard. That letter was acted on, in the sense that stock of the product was removed from the store floor, but nobody notified City Beach senior management of the letter, and there was a failure to take appropriate action to ensure that future orders of the same product were not placed on the floor or sold to consumers.

18    On 1 December 2022, NSW Fair Trading sent a letter addressed to the City Beach store at Charlestown, New South Wales. This letter was emailed to City Beach’s Head of Commercial and Compliance. The letter identified that certain button battery products were being sold at the Charlestown Store which were non-compliant with the Information Standard. The letter comprised a formal warning. This letter was not brought to the attention of the directors of City Beach. The Statement of Agreed Facts and Admissions does not reveal whether this correspondence was brought to the attention of any other members of senior management, or shed any light on why a letter received by City Beach’s Head of Commercial and Compliance did not cause City Beach to know at least from this time of the existence of the Mandatory Standards and the need for City Beach to take steps to comply with them.

19    On 30 August 2023, the ACCC first contacted City Beach by way of a letter addressed to City Beach’s head office. It outlined the ACCC’s concerns about City Beach’s potential non-compliance with the Mandatory Standards, and under the heading “What you need to do”, the letter requested City Beach to:

(a)    conduct a risk assessment of its products and advise the ACCC of the outcome of its risk assessment and, where appropriate, any steps City Beach planned to take to reduce the safety issues outlined in the letter; and

(b)    take action to address the safety issue, including by ensuring its products complied with the Mandatory Standards and submitting a voluntary recall via the online form linked in the ACCC’s letter where they did not.

20    The Statement of Agreed Facts and Admissions records that this letter was the first time City Beach’s senior management became aware of the existence and application of the Mandatory Standards, that a regulator held concerns in relation to City Beach’s compliance with the Mandatory Standards, and that City Beach may have been selling products which were not compliant with the Mandatory Standards. Why that did not occur as a result of the Head of Commercial and Compliance receiving the 1 December 2022 letter from NSW Fair Trading was not explained.

21    On 6 October 2023, the Queensland Office of Fair Trading sent an email to a Buying Team member in relation to an inspection of City Beach’s store in Queen Street, Brisbane. This identified a product being sold which was not compliant with the Information Standard, and strongly suggested that City Beach check all other products containing button batteries. We note that this letter was after City Beach had received notification from the ACCC on 30 August 2023.

The reasons of the primary judge

22    The reasons (PJ) of the primary judge adopt a conventional form. Her Honour first sets out the relevant facts. Commencing at PJ [65], her Honour then summarises the relevant principles. With one exception (concerning the section headed “Utility of previous penalty decisions” at PJ [86]-[91]), there is no criticism on this appeal of this summary of the relevant principles.

23    From PJ [104], the primary judge makes observations about the application of the relevant factors. Her Honour considers various factors including the nature and extent of the contraventions, the benefit received and loss and damage caused, the circumstances in which the conduct occurred, whether there is a corporate culture of compliance, cooperation, contrition, and whether City Beach has engaged in previous contraventions. Her Honour makes observations about each of these factors in light of the circumstances in the present case.

24    From PJ [149], there is a consideration of the appropriate penalty under the heading “Discussion”. Having identified the penalty proposed by each party, the primary judge makes the following observation at PJ [151]:

In conducting the exercise of instinctive synthesis, each relevant factor must be weighed. In this case, there are several critical aspects deserving of substantial weight.

25    In the paragraphs that follow, her Honour gives particular emphasis to certain aspects of the present case, such as the seriousness of the conduct, certain aggravating factors, and the size and resources of City Beach. Her Honour then concludes at PJ [160] that the appropriate penalty to be imposed is $14 million.

26    It is apparent from this structure and from the observations in PJ [151] set out above that the primary judge had regard to, and weighed, all of the relevant factors identified in her Honour’s judgment. However, her Honour also selected particular aspects to which she gave “substantial weight” and which were utilised to explain the decision which she reached. The identification of matters to be given “substantial weight” does not mean that the other factors were not considered or that they were not taken into account in the process of instinctive synthesis. It simply means that her Honour chose to explain the outcome of that process by emphasising certain factors that were particularly persuasive, as recorded at PJ [152]-[159].

27    A process of instinctive synthesis, as the name suggests, is not amenable to precise or mathematical description. In describing the outcome of that process, it is entirely orthodox for the primary judge to identify factors that were of particular significance in the relevant assessment. No submission to the contrary was made on the appeal. In oral submissions, counsel for City Beach accepted that it was not necessary for the primary judge to identify the weight that was given to every single factor, and her Honour was entitled to emphasise that which was important in the assessment process.

28    The particular factors which the primary judge emphasises, at PJ [152]-[159], are as follows.

29    First, at PJ [152], the primary judge refers to the importance of general deterrence, and the importance that any pecuniary penalty is more than what would be an acceptable cost of doing business.

30    Her Honour then, at PJ [153], refers to the danger to children of the products sold, noting that those who supply such products “need to be put on notice that ignorance of the Mandatory Standards will not suffice as an excuse.”

31    The primary judge then observes at PJ [154] that, given the extensive nature of the conduct over about two years, the contraventions “are very serious”. Her Honour refers to the sale of over 54,000 products that failed to comply with the Safety Standard, and observes that many of them “were marketed for or targeted at children.” We will return to this particular observation. Her Honour also refers to the sale of over 56,000 products that failed to comply with the Information Standard, “many of which were also marketed or intended for children”.

32    Her Honour then refers to the maximum penalty, observing that the theoretical maximum penalty is “far beyond the range of what is required to secure deterrence and would be oppressive”. Her Honour then states, at PJ [155]:

However, just because the maximum penalty does not provide a useful yardstick, it would be an error to assess the need for deterrence, and hence the appropriate penalty, based only on the extent of the benefit obtained, which the evidence showed was not significant in this case.

33    Her Honour then observes, at PJ [156], that the steady increase in the maximum penalty indicates that the penalty “is not tethered to the extent of the contravener’s gain”.

34    The primary judge then refers, at PJ [157], to what she describes as several aggravating factors, which include the absence of any systems being in place prior to the detection of the contraventions to ensure compliance with the ACL, the failure of staff to escalate serious compliance issues to senior management when those were notified to City Beach, the continued sale of products after the ACCC raised its concerns with senior management, and the continued sale of products after the delayed issuing of recall notices. Her Honour observes:

These incidents demonstrated pervasive failures by City Beach to inform itself of its obligations under the ACL and to comply with its obligations as a retailer of products which may cause serious harm. They also demonstrate a lack of appreciation by City Beach of the manner in which its conduct has put children at risk of physical harm.

35    The primary judge then observes, at PJ [158], that City Beach’s cooperation, while commendable and relevant, does not demonstrate contrition because the ACCC’s case on liability was compelling.

36    At PJ [159], the primary judge makes observations as to the size of City Beach, noting that it had significant turnover and profits. Her Honour then observes:

Its failure to implement compliance programs prior to detection indicates an ongoing failure of corporate compliance and a continuing lack of regard for its obligations under the ACL. It is evident from the lack of compliance programs and processes, and the directors’ ignorance of the Mandatory Standards, that City Beach did not direct resources to the creation or implementation of a compliance program.

37    The primary judge then observes that the appropriate penalty is $14 million, noting that this is less than 1.5 times the maximum penalty for a single contravention for the period until 10 November 2022, and less than 30% of the maximum penalty for a single contravention after that date. Her Honour then makes the following observations at PJ [161] – [162], which we set out in full because they are the subject of two grounds of appeal:

161    While this penalty equates to more than half of City Beach’s average annual profit, it does not reach a level of undue severity or oppressiveness having regard to the importance of ensuring that City Beach and other retailers are properly deterred from neglecting to comply with the requirements of the Mandatory Standards so as to ensure the safety of children.

162    In my view, it appropriately balances the various factors, particularly having regard to the seriousness of the contraventions and to the risk created by those contraventions. I am also satisfied that, having regard to the totality principle, the penalty of $14 million is just and appropriate.

The nature of an appeal of this type

38    Having regard to the grounds of appeal in the present case, it is appropriate to say something about the nature of an appeal from a decision fixing a civil penalty. The relevant principles were not in dispute in the present case and are well known, but it is worth restating them in summary terms.

39    It is recognised that civil penalties are imposed primarily, if not solely, for the purpose of deterrence: Australian Building and Construction Commissioner v Pattinson (2022) 274 CLR 450; [2022] HCA 13 (Pattinson) at [15] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ; Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482; [2015] HCA 46 (DFWBII) at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ. The object of deterrence reflects both the need to deter repetition of the contravening conduct by the contravenor (specific deterrence) and to deter others who might be tempted to engage in similar contraventions (general deterrence): Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 (TPG) at [65] per French CJ, Crennan, Bell and Keane JJ; DFWBII at [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ and [110] per Keane J. The Court must seek 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 relevant statute: Pattinson at [15] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ, quoting Trade Practices Commission v CSR Ltd [1991] ATPR 41–076; [1990] FCA 762 at [50] per French J. A penalty should nonetheless be proportionate in the sense of striking “a reasonable balance between deterrence and oppressive severity”: Pattinson at [41], [46]-[47] per Kiefel CJ, Gageler, Keane, Gordon, Steward and Gleeson JJ. 

40    Determining an appropriate civil penalty usually involves a difficult and complex process of multi-factorial decision-making, where the result is arrived at by a process of “instinctive synthesis”: Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (2016) 340 ALR 25; [2016] FCAFC 181 (Jagot, Yates and Bromwich JJ) (Reckitt Benckiser) at [44], citing Wong v R (2001) 207 CLR 584; [2001] HCA 64 at [74]-[76] (Wong v R) and Markarian v R (2005) 228 CLR 357; [2005] HCA 25 at [37]. In Wong v R at [74]-[75], Gaudron, Gummow and Hayne JJ observed that to proceed by applying increments to, or decrements from, a predetermined range of sentences involved an error of principle, because (citations omitted, emphasis in original):

it does not take account of the fact that there are many conflicting and contradictory elements which bear upon sentencing an offender… [T]he task of the sentencer is to take account of all of the relevant factors and to arrive at a single result which takes due account of them all. That is what is meant by saying that the task is to arrive at an “instinctive synthesis”. This expression is used, not as might be supposed, to cloak the task of the sentencer in some mystery, but to make plain that the sentencer is called on to reach a single sentence which, in the case of an offence like the one now under discussion, balances many different and conflicting features.

41    The determination of a civil penalty is a discretionary decision, attracting the principles in House v R (1936) 55 CLR 499; [1936] HCA 40 at 504-5 (House v R). It is not enough that the appellate court considers that, if they had been in the position of the primary judge, they would have taken a different course. What is required is a particular type of error, being that the judge acts upon a wrong principle, allows extraneous or irrelevant matters to guide him or her, mistakes the facts, or does not take into account some material consideration. Further, if the result is unreasonable or plainly unjust, the appellate court may infer that there has been some failure to exercise the discretion reposed in the primary judge, even though the nature of error may not be apparent.

42    The requirements were put succinctly by the plurality in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar (2008) 237 CLR 66; [2008] HCA 42 at [137]-[138] (per Gummow A-CJ, Kirby, Hayne and Heydon JJ) as follows (citations omitted):

[T]he question of what weight the relevant factors should be given or what balance should be struck among them is for the person on whom the discretion is conferred, provided no error of law is made, no error of fact is made, all material considerations are taken into account and no irrelevant considerations are taken into account, subject to the possibility of appellate intervention if there is a plain injustice suggesting the existence of one of the four errors just described even though its nature may not be discoverable, or if there is present what has come to be known as “Wednesbury unreasonableness”.

43    In Reckitt Benckiser, at [51]-[52], the Full Court made the following observations, which are relied on by City Beach in the present case:

[51]    Error may be specific, in the sense of apparent on the face of the reasons given, such as by [the House v R errors]…

[52]    Alternatively, error may be inferred from a result that cannot have been arrived at without some kind of operative error. The influence of the reasons given for the result arrived at on this process will vary. Reasons are not to be ignored, but nor do they necessarily confine in a rigid or inflexible way the scope of the appellate inquiry. It may be legitimate to have regard to what was said and not said in order to identify how the asserted erroneous result was reached. But for error to be inferred from the result, the result must be one which was not open on the evidence or facts found or agreed.

Consideration of the grounds of appeal

44    City Beach’s Notice of Appeal contains 11 grounds. All of them are pressed. They are somewhat disparate – they are not variations on a theme. The appeal grounds for the most part focus on somewhat narrow alleged errors. This atomistic approach by City Beach has the tendency to fail to grapple with the overall position and the overall seriousness of the conduct.

45    Given the large number of distinct grounds, we proceed by considering each ground separately – the arguments on each side and our conclusion – before proceeding to the next ground.

Ground 1

46    Ground 1 assumed a central role on City Beach’s appeal. It is in the following terms:

In determining the amount of the penalty, the primary judge erred by failing to have regard to the amount of the financial benefits to the Appellant from the contravening conduct (J[114]) as one of the “critical aspects deserving of substantial weight” or otherwise: J[151]-[160].

47    In order to understand the ground, it is necessary to focus on what the primary judge did. It is plain enough that the primary judge had regard to the amount of the financial benefits to City Beach from the contravening conduct, and to the fact that the direct revenue and profit from sale of the contravening products was relatively modest. At PJ [62]-[64], her Honour identified, for each of the relevant financial years, the revenue and profit attributable to the sale of non-compliant products. For the 2022 – 2024 financial years, that profit was $573, $28,071 and $5,724 respectively, totalling $34,368. Her Honour gave further consideration to this in the section headed “Consideration of Relevant Factors”. In that section, at PJ [114], under the sub-heading “Benefit received and loss and damage caused”, her Honour observed:

City Beach is a significant commercial enterprise and during the contravening years, its revenue exceeded $300 million per annum and its profit was between $21.5 million and $17.6 million. However, City Beach did not make substantial revenue or profit from the sale of the non-compliant products for the period up to 30 June 2024, with the revenue made being only $542,314 and direct profit being only $34,368.

48    At PJ [151], the primary judge observed that each relevant factor must be weighed, which would include the factor identified at PJ [114] set out immediately above. City Beach does not suggest otherwise. Her Honour then returned to the topic in the section dealing with the “critical aspects deserving of substantial weight”. At PJ [155], her Honour observed that it would be an error to assess the need for deterrence, and hence the appropriate penalty, based only on the extent of the benefit obtained, “which the evidence showed was not significant in this case”. At PJ [156], her Honour observed that the steady increase in the maximum penalty, as well as the structure of s 224(3A) itself, “indicates that the penalty is not tethered to the extent of the contravener’s gain.” In the course of oral submissions, City Beach agreed (T5.22 – 26) that there was no error in this last statement.

49    In oral submissions, City Beach clarified that it was not suggesting that the primary judge did not have regard to the modest direct benefit. Nor is it suggested by City Beach that the primary judge was required to explicitly weigh the modest benefit against other factors or considerations and explain how they interrelate. Rather, the contention as ultimately clarified in oral submissions is a contention that, the primary judge having expressed that her reasoning process for the purposes of an instinctive synthesis was to have regard to “several critical aspects deserving of substantial weight” (at PJ [151]), her Honour erred in not considering the modest direct benefit from sale of the contravening products as a “critical aspect”.

50    Even that requires further elucidation, because the primary judge did consider the modest direct benefit in the very section outlining the “several critical aspects deserving of substantial weight”. It was considered at PJ [155] and again at PJ [156]. Rather, the submission appears to be that her Honour did not consider it in the right way – i.e. it was only considered in rejecting that the penalty needed to be “based only” on the extent of benefit obtained, and in saying that the changes in the maximum penalty indicates that the penalty is not “tethered to” the extent of the contravenor’s gain. City Beach’s contention is that the modest benefit needed to be considered as a critical aspect in its own right.

51    As ultimately clarified, it is somewhat difficult to distinguish City Beach’s submission from a submission that the primary judge did not give the modest direct benefit sufficient weight in the overall analysis. However, an alleged failure to give a particular factor sufficient weight in the process of instinctive synthesis is not a House v R error.

52    In seeking to characterise the alleged error as an error of principle rather than an error in weighing a relevant factor, City Beach submitted that, whilst there was no requirement to identify critical factors, if the primary judge chose to identify critical factors as part of her analysis, then the profit earned from the contravening conduct necessarily belonged amongst the critical factors. City Beach referred to the emphasis given in the authorities to the importance of the penalty being significant relative to the benefit derived from the conduct so that contravening the statute is viewed as an economically irrational choice. City Beach submitted that this approach “drives a necessary focus on the contravenor’s benefit (or anticipated benefit) from the contravening conduct as a central consideration in determining the amount of penalty necessary to create the required ‘economically irrational choice’.”

53    The ACCC submitted that the error alleged by City Beach is simply not a House v R error, and is nothing more than a contention that the primary judge did not give sufficient weight to a factor she otherwise considered. The ACCC referred to the observations of the Full Court in viagogo AG v Australian Competition and Consumer Commission [2022] FCAFC 87 (viagogo). In that case, viagogo submitted that the primary judge had focussed on revenue and not given weight to the modest profit earned by viagogo, such that the overall penalty was “so disproportionate relative to the relevant profit as to be manifestly excessive.” The Full Court (Yates, Abraham and Cheeseman JJ) observed, at [161]-[162] (citations omitted):

161    First, while there are authorities which, in assessing penalty, relate specific deterrence to the profit derived from contravening conduct, they should not be construed as laying down an immutable principle that the appropriate penalty to secure specific deterrence is necessarily pegged to, or limited by, the amount of profits derived from the contravening conduct. Nor should the authorities be construed as requiring, in point of principle, that there be some linear relationship between the appropriate penalty and profit or that the penalty should only exceed the profit by a certain amount. Profit is merely one factor that may be relevant among many others. In many cases, including the present, reported profit may not reflect the objective seriousness of the contravention. Objective seriousness is frequently more a function of the character of the conduct, the harms caused (monetary or otherwise) by the conduct, and the deliberateness of the conduct. Indeed, reported profit may not even be the most useful measure of benefits accruing to the contravenor and such benefits may include growth of the business, market recognition, advancement over competitors, and savings in compliance costs.

162    Secondly, there will be cases in which the claims of deterrence (general and specific) are so strong as to warrant a penalty that would upset any calculation constrained by profitability. That is because those engaged in trade or commerce should be deterred from conducting themselves according to the cynical cost benefit calculus where the risk of the penalty is weighed against the profits to be made from the contravention…

54    Counsel for the ACCC observed, in a submission with considerable force, that were it otherwise, the Court would be unable to impose significant penalties for conduct which was dangerous to the community but unprofitable.

55    Echoing the observations in viagogo, the ACCC also submitted that the benefit from the contraventions in the present case must include the avoided costs of compliance.

56    In our view, City Beach has not established any relevant error and Ground 1 is not made out.

57    First, there is no principle that the direct revenue and profit must be a significant consideration, and no principle that, if the Court proceeds by considering “critical factors”, direct revenue and profit must be among them. City Beach’s complaint, properly understood, is merely a complaint as to the weight that the primary judge gave to the direct revenue and profit from the contravening conduct. That is not a House v R error.

58    If the penalty is less than the amount of profit earned from the contravening conduct, there may (depending on the circumstances) be a failure to meet the objectives of both specific and general deterrence. Otherwise, relevant entities may perceive that they can profit from wrongdoing and will not thereby be deterred. As observed by the plurality in Pattinson at [66], the theory behind the relevant civil penalty provisions is that the financial disincentive involved in the imposition of the penalty will encourage compliance with the law by ensuring that contraventions are viewed by the contravenor and others as an economically irrational choice.

59    However, the converse is not necessarily true. A penalty does not fail to meet the relevant objective merely because it is greater (or even very much greater) than the profit earned from the contravening conduct. If the contravening conduct is objectively very serious and otherwise deserving of a significant penalty to meet the objectives of deterrence, it does not cease to be objectively serious and deserving of a significant penalty merely because little or no profit was earned. A lack of profit from the conduct may well be a relevant matter to be taken into consideration in a particular case. However, it is not necessarily a significant or critical factor, and was not a significant or critical factor in the present case.

60    We agree with the observations of the Full Court in viagogo that reported profit may not reflect the objective seriousness of the contravention, and that objective seriousness is frequently more a function of the character of the conduct, the harms or potential harms (monetary or otherwise) from the conduct, and the deliberateness of the conduct. We also agree with the observations in viagogo that profit is merely one factor that may be relevant among many others and that the authorities should not be construed as requiring, in point of principle, that there be some linear relationship between the appropriate penalty and profit or that the penalty should only exceed the profit by a certain amount.

61    In that regard, the primary judge was correct to observe that the relevant penalty is not tethered to the amount of profit from the contravention. In its written submissions, City Beach submitted that its proposed penalty of $3.15 million would still be “more than 7 times the revenue and almost 100 times the profits” and that this appeared to be “more than adequate to create the necessary economically irrational choice.” Such an approach erroneously seeks to constrain the appropriate penalty by some mathematical relationship with the direct profit from the contravention. The sale of a very dangerous but very cheap product contravening a safety standard may be a paradigm example of a circumstance where the appropriate penalty may bear no relevant relationship to the profit, actual or potential, because of the heightened need to deter corporations from ever selling such a product, or from failing to have systems and processes in place to protect against such products being supplied to consumers.

62    In the present case, the conduct was very serious indeed. City Beach is a substantial retailer, of significant size and with substantial revenue and profits. City Beach had no policies or systems at all to prevent non-compliant button battery products from being sold because City Beach had not taken the necessary steps to even ascertain that it was responsible for complying with product safety standards. Remarkably, this situation persisted even after people within City Beach, including the Head of Commercial and Compliance, were told that City Beach was selling button battery products in contravention of the Mandatory Standards. City Beach sold more than 57,000 products that contravened one or both of the Mandatory Standards (and more than 54,000 contravening both the Safety Standard and the Information Standard), potentially putting tens of thousands of children at risk of injury or death, a risk that may be continuing. As set out below, City Beach was slow to undertake a voluntary recall, such that products were in the community longer than necessary, and continued to sell products even after being notified of the problem by the ACCC. These objective circumstances call for a very significant penalty. That penalty should not be watered down to something that is not a very significant penalty merely because City Beach derived little direct profit from the sale of the products.

63    Further, to focus on the direct profit from the sale of the contravening products may overlook two further matters relating to the benefit obtained. The first is the potential role that those products may have as part of the overall retail offering which makes it attractive for customers to shop at City Beach and potentially spend money on higher margin items. The very fact that City Beach earned only $34,368 direct profit from the sale of more than 57,000 items may suggest that the role of novelty items in a City Beach store is not to provide a major source of profit in their own right.

64    The second matter is that part of the benefit from the conduct was the avoidance of proper compliance costs. It is likely that the costs of a proper approach to compliance, including the costs of obtaining relevant professional advice as to the legal and regulatory requirements and the design and implementation of an appropriate compliance program, as well as the costs of implementing that program, would dwarf the $34,368 in direct profit earned.

65    Thus the direct profit may not reflect the full benefit of the conduct. There are no agreed facts or evidence one way or the other on these topics, but they underscore the limited role that the direct profit from the sale of the contravening items may have in constraining an otherwise appropriate penalty.

66    It follows that not only is there no House v R error, because there is no principle that required the primary judge to treat the modest direct profit from the sale of the contravening products as a critical factor (or to include it in a list of critical factors when her Honour decided to proceed by considering critical factors), but there is no error more generally. The approach of the primary judge was correct. Her Honour was correct to take the direct profit into account in the way that her Honour did, but not to give it significant weight as a “critical factor” in its own right. No error has been demonstrated in the resulting penalty on the basis of Ground 1.

Grounds 2 and 3

67    Grounds 2 and 3 can sensibly be considered together, because they both concern a single paragraph of the primary judgment, being PJ [161]. This paragraph, and the immediately following one, have been set out earlier.

68    Ground 2 is that the primary judge erred, in PJ [161], by considering whether the penalty is oppressive by reference to the average annual profits of City Beach alone, rather than by reference to all relevant factors.

69    It was submitted by City Beach that deterrence and oppressiveness are two sides of the one coin, and that a penalty that exceeds what is necessary to achieve deterrence is oppressive. City Beach submits that, in light of that, it is necessary to consider all relevant matters in considering whether a penalty is oppressive, not just a single matter of average annual profit.

70    In the course of oral submissions, counsel for City Beach accepted that it cannot be necessary for a Court to expressly weigh every single relevant factor in a consideration of whether a penalty is oppressive, and said that City Beach’s main complaint was that the consideration of oppression did not take into account the modest profit earned by City Beach from the contravening conduct.

71    The ACCC submits that the primary judge undertook a consideration of all relevant factors and, having done so, was not required to go back and repeat that exercise under the rubric of potential oppression. Rather, it was part of the same exercise.

72    In our view, Ground 2 mischaracterises the approach of the primary judge. The primary judge did not consider the issues of oppression in a manner divorced from the factors weighed by her Honour in considering what was an appropriate level of penalty for the purposes of deterrence. Rather, her Honour considered that question as a combined question. In referencing City Beach’s profit at PJ [161], her Honour was simply using that as a useful means of identifying the scale of the penalty: i.e. the penalty was a significant one because it was more than half of City Beach’s average annual profit. Notwithstanding the scale of the penalty, her Honour concluded that it was not oppressive having regard to the importance of ensuring that City Beach and other retailers are properly deterred from neglecting to comply with the requirements of the Mandatory Standards so as to ensure the safety of children. That was appropriately a matter of focus.

73    That the primary judge did not only consider City Beach’s average annual profit in determining the combined question of deterrence and oppression is clear from the commencement of the very next paragraph (PJ [162]), which says:

In my view, [a $14 million penalty] appropriately balances the various factors, particularly having regard to the seriousness of the contraventions and to the risk created by those contraventions.

74    We reject Ground 2.

75    Ground 3 is a criticism that, in observing at PJ [161] that the penalty was “more than half of City Beach’s average annual profit”, the primary judge erred in considering the average profit in the 2022, 2023 and 2024 financial years without having regard to the fact that the contraventions occurred only for the final 8 days of the 2022 financial year and, if that financial year was excluded, the $14 million penalty was significantly more than half of City Beach’s average annual profit in FY23 and FY24, such that the primary judge’s statement that it was “more than half” was factually incorrect. If FY22 is included, the average profit over the three years is $21.9 million. If FY22 is excluded, the average profit over the two years reduces to $19.5 million.

76    Ground 3 can be dealt with quite shortly. First, nothing turns on this minor difference. The point being made by the primary judge in PJ [161] is that a penalty of $14 million is significant when compared to City Beach’s annual profit. Secondly, and more generally, there is simply no basis for excluding the 2022 financial year. When considering an entity’s financial resources, it is commonplace to consider financial results from years other than the particular year in which the contraventions occurred. For example, if the contraventions occurred only in 2023, it might nevertheless be sensible to consider financial performance over a multi-year period including 2023 to obtain a more reliable indication of the size and resources of the entity concerned. That is because, if a narrow time window is adopted, the corporation may have had an anomalous financial performance in that period. In those circumstances, taking an average profit for a three year period is sensible, and there is no reason for excluding the profit from the 2022 financial year whether or not a substantial part of the contraventions occurred in that year, or even if no contraventions occurred in that year.

77    Ground 3 has no substance and we reject it.

Ground 4

78    Ground 4 is that the primary judge erred in finding that the decision in Australian Competition and Consumer Commission v Mercedes-Benz Australia / Pacific Pty Ltd (2022) 163 ACSR 645; [2022] FCA 1059 (Mercedes-Benz) is “a more appropriate comparable case” than Australian Competition and Consumer Commission v Decathlon (Australia) Pty Ltd [2021] FCA 964 (Decathlon) (PJ [89]) and “provides strong support for the quantum of penalty sought by the ACCC” (PJ [91]).

79    In a section of the judgment headed “Utility of previous decisions”, the primary judge observed, at PJ [86], that City Beach had submitted that comparable cases give some broad guidance to the appropriate penalty, and that City Beach placed particular reliance on Decathlon as a “closely analogous” case. Her Honour rejected Decathlon as an appropriate comparable case, on the basis that a number of objective circumstances in that case were different from the present case, and the maximum penalty was different. Her Honour noted that the ACCC relied upon Mercedes-Benz as an appropriate comparable case, where the Court (Middleton J) approved an agreed penalty of $12.5 million. At PJ [91], her Honour observed that:

(a)    Mercedes-Benz involved a risk of serious injury or death to the occupants of 27 vehicles, compared to risk of serious injury or death to the potentially very large number of young children who may have access to the more than 57,000 products sold in the present case;

(b)    the contravenor in both cases received little or no financial benefit;

(c)    the contravenor in each case cooperated with the ACCC; and

(d)    the maximum penalty per contravention in Mercedes-Benz was only $10 million.

80    Her Honour observed that the outcome in Mercedes-Benz “provides strong support for the quantum of penalty sought by the ACCC” (PJ [91]). The reasoning appears to be that if the fewer affected consumers and lower maximum penalty in Mercedes-Benz gave rise to a $12.5 million penalty, that indicated that the ACCC’s suggested penalty was not excessive.

81    City Beach complains about this reasoning. However, its approach in this Court is not to deprecate the reliance by the primary judge on previous penalty decisions, but rather to contend that her Honour chose the wrong previous decision to rely upon. City Beach suggests that Mercedes-Benz is not an appropriate comparable because it concerned different conduct (being deficiencies in statements made by the company’s call centre to consumers during a product recall), came after the giving of an enforceable undertaking, and was an agreed penalty.

82    City Beach submits that Decathlon is a comparable case, but does not provide a clear explanation of this, including because most of the things relied upon by City Beach in its written submissions (at [24]) are in fact points of distinction, or circumstances not said to be similar to the circumstances of the present case. For example, City Beach says that the contraventions in Decathlon occurred over a four-year period, “being approximately twice as long as the period of City Beach’s contraventions”. In reality, City Beach’s submission appears to be that some of the circumstances in Decathlon are more serious than the circumstances in the present case, but Decathlon received a lighter penalty. That does not support the use of Decathlon as an appropriate comparable. It suggests that the process of instinctive synthesis in that case was a different one.

83    City Beach does not explain how its criticisms raise a relevant House v R error, or the nature of that error. It does not, for example, identify any error of principle or error of fact.

84    In response, the ACCC relies on the principle that previous penalty decisions are of limited assistance in the penalty-setting process. The ACCC submits that City Beach has not identified any relevant error of principle. The ACCC submits that the primary judge made only limited use of Mercedes-Benz, as being a case in which a substantial penalty was imposed notwithstanding limited benefit was received from the contravention, and notwithstanding that no person was harmed by the conduct.

85    In dealing with this ground, it is relevant to make some observations about the use of earlier penalty determinations.

86    It is well recognised that previous penalty decisions may provide little assistance in engaging in the required penalty-setting exercise.

87    In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 (Keane CJ, Finn and Gilmour JJ), the Full Court observed (at [60]):

[T]he Court is not assisted by Optus’ citation of penalties imposed in other cases, where the combination of circumstances were different from the present, as if that citation is apt to establish a “range” of penalties appropriate in this case. As Middleton J rightly said in ACCC v Telstra Corporation Ltd (2010) 188 FCR 238; [2010] FCA 790 at [215]:

It is apparent that there are many difficulties in simply referring to penalties previously imposed for contraventions of legislation in widely differing circumstances or in circumstances where some of the factors are similar but others dissimilar to those of the present proceeding…

88    In Director of Consumer Affairs Victoria v Alpha Flight Services Pty Ltd [2015] FCAFC 118 (Barker, Katzmann and Beach JJ), the Full Court observed (at [76], certain citations omitted):

[T]here is little to be gained by considering penalties imposed in other cases which turned upon their own facts and, indeed, where “agreed” penalties had been reached… It is difficult to see what can be gained from reviewing or considering the quantum of “agreed penalties” in cases such as Australian Competition and Consumer Commission v Cotton On Kids Pty Ltd [2012] FCA 1428 and Australian Competition and Consumer Commission v Smash Enterprises Pty Ltd [2011] FCA 375…

89    In Australian Competition and Consumer Commission v Yazaki Corporation (2018) 262 FCR 243; [2018] FCAFC 73 (Allsop CJ, Middleton and Robertson JJ) at [237], the Full Court observed (citations omitted):

[T]here is little utility in reference to other cases decided at a different time, in different circumstances and with different facts. In this latter connection, Yazaki referred to a number of cases said to give some guidance as to the appropriate penalty to impose… These cases all involved an “agreed penalty” submitted by the parties and involved different circumstances and facts. It is not necessary to give any particular attention to any of the cases referred to by Yazaki for the purposes of this appeal.

90    In Flight Centre Ltd v Australian Competition and Consumer Commission (No 2) (2018) 260 FCR 68; [2018] FCAFC 53 (Allsop CJ, Davies and Wigney JJ), the Court observed at [69] that there is little utility in referring to other cases with different facts, and that “One does not work back or forward from other more or less serious cases”. It was, however, observed that “Comparables may give some broad guidance”. The Full Court also noted at [70] that referring to other decisions does not involve the consideration of “parity”, and that this is inapposite use of criminal sentencing conceptions apt for co-offenders.

91    In Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) (2007) 161 FCR 513; [2007] FCAFC 146 (Moore, Dowsett and Greenwood JJ) at [67], after referring to a large number of previous penalty decisions cited by the ACCC, the Full Court observed that:

Having considered all of these authorities, the Court is confirmed in the view that there is little to be gained in undertaking in these reasons a detailed comparative analysis of the conduct of each corporation in the identified cases, the extent to which particular officers of those corporations engaged in the contravening conduct or the scale and dimension of the conduct. The constellation of circumstances, essential character of the conduct and the factors to be weighed by the Court are inevitably sufficiently different in each case that previous determinations ultimately provide little utility in precisely informing the appropriate pecuniary penalty to be imposed in any particular contravention.

92    However, the Full Court went on in the next paragraph to refer to the possibility that previous determinations in relation to a particular type of contravention may provide “a high level broad range” within which an appropriate penalty may be imposed.

93    Even the notion of a “high level broad range” may need to be treated with some caution, in light of more recent High Court authority (e.g. Pattinson) which emphasises the consequences of the singular objective of deterrence. That singular objective may, in a particular case, limit the role of the seriousness of the particular conduct. For example, the history of prior contraventions might be more influential than the severity of the instance of conduct, or the circumstances of the contravenor might be more significant than the circumstances of the contravention: Pattinson at [59], [60]. The fixing of a penalty by reference to some “high level broad range” referable to particular types of conduct has at least the potential to impermissibly distract attention from the correct analysis.

94    In McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29 (North, McKerracher and Jagot JJ), the Full Court observed, at [23]-[25]:

23    The appellants’ reliance on the penalties imposed in other cases is also misconceived. In Hili v R; Jones v R (2010) 85 ALJR 195 [(2010) 242 CLR 520] (Hili) the High Court (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) said:

[48]    Consistency is not demonstrated by, and does not require, numerical equivalence. […]

[49]    The consistency that is sought is consistency in the application of the relevant legal principles.

24    While this observation concerned federal offences, the underlying principle emerges from the nature of the sentencing discretion. As observed in Hudson v R [2010] VSCA 332 [(2010) 30 VR 610] (Hudson) in a joint judgment of the Victorian Court of Appeal (Ashley, Redlich and Harper JJA):

[29]    “Like” cases can only, at best, provide a general guide or impression as to the appropriate range of sentences.

[…]

[31]    A detailed examination of “like” cases to implicitly suggest that a particular sentence is the correct one or that the sentence should fall within a very narrow band, is not permissible.

95    Some of these authorities express particular reservations about the use of previous agreed penalties as a comparable. It is appropriate that there be such reservations. Previous agreed penalties are even less helpful in the penalty setting exercise. Agreed penalties are the product of a process of negotiation, where unidentified and unknowable factors may have contributed to the outcome. Although the penalty has to be approved by the Court, that exercise is a different exercise involving different criteria from the process of the Court itself determining an appropriate penalty.

96    In NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285; [1996] FCA 1134 (NW Frozen Foods), Branson and Sackville JJ observed, at pp 290-291 (Carr J agreeing at p 299) that given the public interest in promoting the negotiated resolution of civil penalty proceedings, and that the fixing of the quantum of a penalty is not an exact science, the task of a court in approving an agreed penalty is not necessarily to ask itself whether it would independently have come to the precise quantum proposed by the parties. At p 291, their Honours explained that there is an important public policy involved, being that when corporations acknowledge contraventions, very lengthy and complex litigation is frequently avoided, freeing the courts and the ACCC to deal with other matters. That would be jeopardised if corporations were to conclude that proper settlements were clouded by unpredictable risks. Their Honours observed that:

A proper figure is one within the permissible range. A 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.

97    The approach in NW Frozen Foods was endorsed by the Full Court in Minister for Industry, Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] ATPR 41-993; [2004] FCAFC 72 (Mobil Oil), and more recently by the High Court in DFWBII. In DFWBII, the High Court considered criticisms of the approach in NW Frozen Foods and Mobil Oil and rejected those criticisms.

98    A previous agreed penalty therefore has a limited role as a guardrail or comparable for a subsequent penalty-setting exercise, even as part of indicating a “high-level broad range” of appropriate penalties. Certainly, any attempt to compare and contrast the particular circumstances of the individual cases to see whether the agreed penalty supports a particular level of penalty in a contested hearing is likely to be an exercise in futility, and to risk the penalty-setting process miscarrying.

99    That does not mean that it is necessarily an error to refer to prior decisions. It depends on the use that is made of those decisions.

100    As noted earlier, City Beach does not deprecate the use of previous penalty decisions. Its complaint is a different one: that the primary judge should have given significant weight to the Decathlon decision because it is a more analogous decision. As noted above, City Beach does not identify the basis on which it contends that Decathlon is closer to the present case, rather than its apparent contention that Decathlon involves more serious matters than the present case. Nor does it identify how the weight that the primary judge gave to Mercedes-Benz involved a House v R error.

101    In our view, the correct approach is that neither decision carries any meaningful weight. The Decathlon case, relied upon by City Beach, has little utility in guiding the quantum of an appropriate penalty, and is distinguishable from the present case in any event. However, the difference between the correct approach and the approach of the primary judge appears to be of no consequence. It has no operative effect. Neither of the cited decisions is referred to in the section of the judgment where the primary judge fixes the appropriate penalty, being the section with the heading “Discussion” commencing at PJ [149] where the primary judge explains her reasoning process. Further, the result reached by the primary judge involves an appropriate application of the various factors, including the matters identified in PJ [151]-[162]. As considered below, there is no demonstrated error in the primary judge declining to fix a penalty lower than $14 million.

102    Even if any error exists, it would therefore be in the category of case where there is no sound basis for considering that in the absence of error the primary judge would not have come to the same conclusion in any event and, otherwise, the error has not resulted in any miscarriage of justice: Huntsman Chemical Company Australia Pty Ltd v Narellan Pools Pty Ltd [2011] FCAFC 7 at [41] (Moore, Flick and Yates JJ); Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397; [2007] FCAFC 70 at [90] (Black CJ, Emmett and Middleton JJ).

103    We therefore reject Ground 4.

Grounds 5 and 6(b)

104    Grounds 5 and 6(b) can be considered together. Ground 5 is that the primary judge erred (at PJ [118]) in finding that City Beach did not take steps to voluntarily recall products until told by the ACCC on 12 February 2024 that it expected such a recall to occur. City Beach says that this finding is not open on the evidence and was made without regard to the fact that, after receiving the first letter from the ACCC dated 30 August 2023, City Beach:

(a)    identified non-compliant products and informed the ACCC of that;

(b)    requested the approval and direction of the ACCC to conduct a voluntary recall for all identified non-compliant products (PJ [30]); and

(c)    was told by the ACCC that it would provide City Beach with some guidance regarding a voluntary recall.

105    Ground 6(b) is that the primary judge erred by finding that City Beach’s “lack of urgency in seeking to recall the non-compliant products is condemnable” (PJ [120]).

106    City Beach’s complaint is that it took steps to identify and remove from sale products which did not comply with the Mandatory Standards, and that it also requested the approval and direction of the ACCC to conduct a voluntary recall and was waiting for a response from the ACCC, and that these matters have been ignored.

107    It is somewhat difficult to understand City Beach’s complaint in this regard. The relevant circumstances are as follows:

(a)    In its first letter of 30 August 2023, the ACCC, under the heading ‘What you need to do’, identified that City Beach should undertake an assessment of its products and take action to address any safety issue, including by submitting a voluntary recall via the online form linked in that letter.

(b)    Following that letter, City Beach took various steps including engaging in a process to identify non-compliant products.

(c)    It may be accepted that City Beach needed to identify non-compliant products before it could voluntarily recall such products. However, that was a process that needed to be undertaken urgently in the circumstances.

(d)    On 14 September 2023, City Beach provided an email response to the ACCC providing details of the compliance status of the listed products and the remediation steps being taken by City Beach. Notwithstanding this email, City Beach did not commence a voluntary recall.

(e)    On 27 October 2023, the ACCC again wrote to City Beach reiterating the ACCC’s concerns about City Beach’s potential non-compliance with the Mandatory Standards and providing further information about the Mandatory Standards. In that letter, under a heading ‘What you need to do’, the ACCC, inter alia, stated that the ACCC expected City Beach to take immediate action to address the issue including by conducting a voluntary recall, and provided a link to the ACCC’s recall guidelines.

(f)    Rather than immediately conducting a voluntary recall, City Beach responded to the ACCC’s letter on 21 November 2023, including by:

(i)    attaching and referencing documentation detailing the outcome of its internal investigations and listing each non-compliant product; and

(ii)    requesting the approval and direction of the ACCC to conduct a voluntary recall for all identified non-compliant products.

(g)    Notwithstanding this identification of the non-compliant products, City Beach did not commence any voluntary recall.

(h)    The ACCC did not respond in a formal way to the 21 November 2023 letter for nearly three months.

(i)    On 2 February 2024, the ACCC sent an email saying that it was continuing its investigation, was considering the information provided in the November letter, and anticipated sending a request for further information in the near future and also providing “some guidance regarding conducting a voluntary recall”.

(j)    On 12 February 2024, the ACCC wrote a letter to City Beach saying that the ACCC expected City Beach to take immediate action to address non-compliance with the Mandatory Standards, including by conducting a voluntary recall, and provided further information as to how to conduct such a recall, including by providing a link to further information available on the Product Safety Australia website.

(k)    Between 12 February 2024 and 28 February 2024, City Beach worked with the ACCC to prepare to commence its voluntary recall, and commenced that recall on 1 March 2024.

108    In light of these matters, it is apparent that City Beach could have commenced a voluntary recall months earlier than it did. Counsel to City Beach did not cavil with the proposition that the voluntary recall could have happened sooner.

109    The submissions of City Beach refer to evidence that City Beach was waiting on advice from its lawyers, who were in contact with the ACCC, as to how properly to undertake a voluntary recall because it did not want to do it incorrectly, and that City Beach’s lawyers awaited guidance from the ACCC. City Beach makes the following submission:

The primary judge’s finding at J[118] overlooks these material facts and proceeded on the erroneous basis that City Beach was waiting for “permission” from the ACCC before it conducted the recall (J[119]) when in fact it was working with the ACCC in relation to the recall and waiting on advice from the ACCC.

110    However, none of this undermines the findings of the primary judge. Merely identifying the carrying out of certain steps, and identifying that City Beach was waiting for advice from the ACCC, does not contradict the findings of the primary judge. There is no suggestion in the evidence that the ACCC communicated to City Beach that it should wait for ACCC advice before conducting a voluntary recall. On the contrary, the ACCC had written to City Beach indicating that the ACCC expected City Beach to take immediate action, including a voluntary recall, to address the issue.

111    For months prior to 1 March 2024, City Beach was aware that it had sold numerous potentially dangerous button battery products that did not comply with the Safety Standard and the Information Standard. Merely ceasing to sell such products did nothing about the thousands of products that were already in the community, including in family homes. There was an obvious and compelling urgency in identifying relevant products and in conducting a voluntary recall. Delaying that recall for months was inexcusable.

112    No error has been demonstrated in the approach of the primary judge on this topic.

Ground 6(a)

113    Ground 6(a) concerns the observation of the primary judge at PJ [120] that City Beach appears “even now, to not appreciate the gravity of the risk to children which arose from its unlawful conduct”.

114    In its written submissions, City Beach links this ground to its Ground 5: i.e. because of the alleged error in connection with Ground 5, the primary judge wrongly characterised the voluntary recall program as involving a material delay, and therefore wrongly characterised City Beach’s conduct as not appreciating the gravity of the risk to children resulting from the products.

115    However, we find no error in connection with Ground 5.

116     City Beach also focusses on the specific words “even now” in PJ [120]. City Beach says there is no basis for that conclusion in light of the detailed steps which City Beach has taken to rectify the problem after it became aware that it had sold button battery products contrary to the Mandatory Standards. Those steps are listed in City Beach’s written submissions, and include matters such as implementing a new quality assurance process, issuing a training guide to its Buying Team, implementing a point of sale block in the point of sale system, requiring that buyers obtain a product sample for every button battery product sold, requiring regional managers to check any legislative and/or regulatory directives that apply to their store, engaging its lawyers to provide an annual education seminar, engaging its lawyers to develop further policies and procedures to promote compliance, and consenting to a compliance program.

117    However, these matters are conventional matters that one would expect to be implemented by a responsible retailer, particularly by an entity that had no legal or regulatory compliance program at all in connection with product safety standards. They do not contradict or undermine the reasoning of the primary judge, which was based on the delay in implementing the voluntary recall and the insistence by City Beach that its conduct did not amount to operative delay.

118    City Beach’s submissions on its voluntary recall both at trial and on appeal indicate that City Beach has, even to this day, not fully appreciated the serious risk that children were exposed to by its conduct and the resulting urgency in conducting a voluntary recall of the products. The primary judge was right to observe this. No error has been demonstrated.

Ground 7

119    Ground 7 is another ground dealing with the factual findings of the primary judge. In the Notice of Appeal, the ground takes the following form:

In finding that:

a.    the Appellant sold 14 product lines that failed to comply with the Safety Standard and 11 product lines that failed to comply with the Information Standard after commencing a voluntary recall on 1 March 2024: J[122];

b.    the Appellant continued to contravene the Mandatory Standards by way of the sales of the June Products and the January Products which is “of real concern” and “supports a higher penalty being imposed”: J[124]; and

c.    “the continued sale of the products after the ACCC raised its concerns with senior management, and the continued sale of the products after the delayed issuing of recall notices” was an “aggravating factor” and one of the “critical aspects deserving of substantial weight” in determining the penalty: J[151] and [157];

the primary judge erred in not having regard to fact that:

d.     only 18 individual products were sold by the Appellant after the commencement of the voluntary recall: J[41]; and

e.    the June and January Products were not sold by the Appellant after the ACCC’s first letter dated 30 August 2023 (save for one of the four January Products).

120    It is relevant to understand the background to Ground 7. In setting out the relevant factual matters, the primary judge made the following findings:

(a)    On 26 July 2024 (i.e. after the voluntary recall), City Beach identified the existence of two non-compliant products which had previously been sold by City Beach and which had not been identified to the ACCC, defined as the June products: PJ [35]. It is common ground before this Court that the June products were not sold after 30 August 2023.

(b)    On 28 January 2025, City Beach identified four additional non-compliant products (defined as the January products) that had been acquired and offered by City Beach between December 2022 and March 2024: PJ [40]. It is common ground before this Court that one type of these products was sold after August 2023, but the others were not.

(c)    On 28 January 2025, City Beach also identified that, despite the various systems put in place by City Beach, 18 non-compliant products had been sold after the commencement of the voluntary recall (defined as the post-recall products): PJ [41].

(d)    Subsequently, a further sale of a non-compliant product occurred in August 2025 (defined as the August 2025 sale): PJ [46].

(e)    Although City Beach advised the ACCC on 21 November 2023 that it had issued directions to all City Beach stores to remove all non-compliant products, 41 product lines that failed to comply with the Safety Standard and 43 product lines that failed to comply with the Information Standard were sold after that date: PJ [121].

(f)    Despite City Beach commencing a voluntary recall on 1 March 2024, City Beach sold 14 product lines after this date that failed to comply with the Safety Standard and 11 product lines that failed to comply with the Information Standard, despite having issued a recall notice for those product lines. Products in these product lines continued to be supplied by City Beach until 24 October 2024, and one product was supplied in the August 2025 sale: PJ [122].

121    At PJ [124], the primary judge observed as follows:

Although I accept that City Beach did not intend to continue contravening the Mandatory Standards by way of the sales of the June products, the January products and the August 2025 sale, and took steps to remedy the continuing contraventions once detected, the fact that the continuing contraventions occurred is of real concern, and supports a higher penalty being imposed on City Beach for the purpose of specific deterrence.

122    At PJ [157], the primary judge identified “the continued sale of products after the ACCC raised its concerns with senior management” (i.e. after 30 August 2023), and “the continued sale of products after the delayed issuing of recall notices” (i.e. after 1 March 2024) as two of the aggravating factors relevant to the calculation of an appropriate penalty.

123    In its written submissions, City Beach makes two separate complaints pursuant to this ground. First, City Beach complains that the reference in PJ [122] to 14 product lines failing to comply with the Safety Standard and 11 product lines failing to comply with the Information Standard fails to put the matter in a proper context, by failing to identify that only 18 individual contravening products had been sold.

124    Unsurprisingly, City Beach did not include this point in its oral submissions. The point has no merit. The sale of button battery products that fail to meet the Mandatory Standards, notwithstanding the focus that should have been on ensuring compliance with those Mandatory Standards, was properly regarded by the primary judge as an aggravating factor. That the number of products sold after 1 March 2024 was “only” 18 is not a matter that changes the complexion of that conclusion in any relevant way. The sale of 18 non-compliant products after 1 March 2024 is itself a serious matter. Further, there were numerous other contraventions prior to 1 March 2024 in any event. City Beach appears to seek to minimise the seriousness of selling non-compliant and dangerous button battery products that could injure or kill children, through the product releasing the button battery too easily or through family members not being provided with necessary information about the presence of a button battery and its dangers so as to avoid risk.

125    The second complaint is that the primary judge made a factual error in PJ [124] in that the June products were not continuing contraventions (their sale having ceased prior to the ACCC’s letter of 30 August 2023) and most of the January products were not continuing contraventions (for the same reason). City Beach says that this error is of significance, because of the observation of the primary judge that “the fact that the continuing contraventions occurred” supports a higher penalty being imposed.

126    Although the primary judge made a minor error in referring to the June products in PJ [124], that error was neutral to the result because if her Honour was making a comprehensive and accurate list of relevant contraventions then her Honour would have included the products identified in sub-paragraphs [120](c) to (f) above, which would have made up for the June products (and the relevant January products that were not within the relevant time period). On any view, there were numerous continuing contraventions. No error has been demonstrated in the operative conclusion in PJ [124] that the fact that the continuing contraventions occurred is of real concern, and supports a higher penalty being imposed on City Beach for the purpose of specific deterrence.

127    We reject Ground 7.

Grounds 8 and 9

128    Grounds 8 and 9 can be considered together.

129    In Ground 8, City Beach contends that the primary judge erred in finding that the non-compliant products, or many of them, were marketed to children and targeted at children (PJ [111], [112] and [154]), when that finding was not open on the evidence.

130    In Ground 9, which is further to Ground 8, it is said that the primary judge erred in finding that:

(a)    City Beach’s answer to a question from the ACCC which concluded with the words “as marketed by City Beach to consumers” amounted to any admission by City Beach that it had marketed those products to anyone; and

(b)    The fact that some of the packaging of the products included a statement as to the suitable age range established that the products were targeted at children.

131    In the course of oral submissions, this ground was refined and explained. Counsel for City Beach explained that the concern was not with the Court approaching the matter on the basis that the sale of products generally created a risk to young children. Rather, it was submitted that what the primary judge was doing in the paragraphs identified was making a very serious finding that the products were marketed or directed at children up to five years old. The concern appears to be that the primary judge made a finding as to something nefarious – deliberate targeting or marketing to the very young – which finding was not justified on the evidence.

132    In our view, this involves a misunderstanding as to the reasoning of the primary judge. The risk posed by button batteries is to toddlers and other young children (children under five). As acknowledged by counsel for City Beach, that risk is, in one sense, present whenever a non-compliant button battery product is in any household with young children, because even if the product is a product designed for adults, a young child could obtain access to the product (particularly when the adults are not informed that the product is potentially dangerous for that child). However, the risk is enhanced if the product is likely to be purchased for, and given to, a young child, or even to slightly older children who might be siblings of a young child and might share the product with a young child or leave the product accessible to that child.

133    In that context, we read the primary judge’s references to the products being “marketed to” or “targeted at” children not as findings about some moral failing or bad conduct by City Beach, but rather as directed to the practical question of whether the products are the type of products that are more likely to find their way into the hands of a young child. In that sense, the sale of a contravening child’s toy is objectively more serious than the sale of a contravening adult product simply because it exposes young children to higher risk.

134    The primary judge did not refer to the products being marketed to or targeted at “young children”, but just “children”. As her Honour observes at PJ [112], it is plain from some of the products themselves (including their packaging and statements as to the product age range) that they are targeted at children, in the sense that both the product and packaging appear to be designed to be attractive to children.

135    For example, the product referred to at PJ [112] is a set of two invisible ink pens. The packaging contains the words:

Write secret messages only you & your friends can see!

Fun – Discover – Learn. Essential spy tools.

Ages 6+

136    Such a product can readily be seen to be marketed to and targeted at children. That does not mean that City Beach engaged in any active promotion of the product. It does not mean that there was an advertising campaign. It simply means that the packaging of the product itself is designed to market the product in that way. The product is marketed to and targeted at children by being on display in a retail environment, bearing its packaging.

137    This is merely one of many products similarly apparently designed to appeal to children. For example, the relevant products include:

(a)    a Batman bat signal, which projects the well-known Batman bat logo;

(b)    a set of “pocket laser guns”, with “8 sound effects”;

(c)    various Jibbitz, being decorative clip-on decorations for children’s crocs (i.e. shoes);

(d)    various games that appear to be designed for children;

(e)    various mascots for attaching to a bag, including My Little Pony, Teenage Mutant Ninja Turtles, Peppa Pig and Yoda;

(f)    a helicopter spinning toy;

(g)    a set of miniature toy skateboards;

(h)    a flying disc ball; and

(i)    a spinning top.

138    Those products appear to be marketed to and targeted at children. That is the effect of their packaging. That conclusion is reinforced by the relevant age ranges identified by City Beach, the vast majority of which specify an age range commencing at between 3 and 8 years. To observe these matters is not to suggest that there is anything nefarious per se about selling products targeted in that way. However, when considering the appropriate penalty for contraventions involving the sale of tens of thousands of non-compliant button battery products, with no process at all in place to ensure compliance with the Mandatory Standards, it is entirely unsurprising that the primary judge might choose to emphasise that many of the products were marketed to or targeted at children. That observation is plainly correct having regard to the packaging and the age recommendations.

139    That conclusion also does not depend upon the form of the response that City Beach gave to a request from the ACCC.

140    We reject grounds 8 and 9.

Ground 10

141    Under Ground 10, City Beach complains about the primary judge’s approach to the topic of cooperation. City Beach submits that the primary judge failed to have regard to the significance of City Beach’s cooperation and therefore erred at PJ [146] in concluding that its cooperation should be given “little weight”.

142    The weight to be given to cooperation is a matter for the primary judge. To give too little or too much weight to City Beach’s cooperation is not a House v R error. Some error of fact or principle must be identified. It is difficult to discern any such error in the present case.

143    The primary judge identified cooperation with the ACCC as one of the relevant factors that she was required to consider. At PJ [158], in the section dealing with the critical aspects deserving of substantial weight, her Honour observed:

Fourthly, while co-operation is commendable and relevant, it does not, in this case, demonstrate contrition because the ACCC’s case on liability was compelling. Nor does it demonstrate a willingness on City Beach’s part to remediate its internal corporate culture to a satisfactory standard having regard to the events which transpired after August 2023. In short, the penalty proposed by the ACCC will achieve the objective of specific deterrence in a way that the penalty proposed by City Beach would not.

144    Thus the primary judge acknowledged that cooperation was relevant, and that it was a positive factor to be taken into account. Her Honour went on to explain why it was not a matter warranting a significant reduction, because having regard to other circumstances it did not demonstrate contrition and it did not demonstrate a willingness to remediate the internal corporate culture to a satisfactory standard.

145    In Construction, Forestry, Maritime, Mining and Energy Union v Fair Work Ombudsman (2023) 297 FCR 438; [2023] FCAFC 40 (Bromberg, Moshinsky and Bromwich JJ), the Full Court was dealing with a circumstance not unlike the present case where the appellant was concerned about the failure of the primary judge to acknowledge the significance of certain aspects of cooperation. The Full Court observed (at [170], [177]):

170    The real complaint now made is about the evaluation of the cooperation by the primary judge as part of the exercise of the penalty imposition discretion, an inherently difficult thing to challenge as but one of the factors going into the mix, not being a mere mathematical exercise of addition or subtraction. In particular, it is difficult to characterise any particular feature of a case as constituting a mandatory relevant consideration, or a forbidden irrelevant consideration, as opposed to being something that is found to carry greater or lesser significance in the exercise of the discretion. It is essentially evaluative in nature, being a particularly difficult area for appellate intervention.

…

177    The appellants’ arguments amount to no more than indicating that the primary judge could have reached a different conclusion as to cooperation and that, in doing so, other features could have been expressly taken into account in addition to those his Honour considered to be important enough to articulate. Cooperation was but one factor to be taken into account in the weighing of the competing considerations. His Honour, having been the docket judge for some time, was entitled to confine consideration to those features of this aspect that were expressly identified by him as having a material bearing on the exercise of his discretion. No error has been established by his Honour not saying more about other features, or by not giving more or less weight to the features that were identified. These grounds of appeal must fail.

146    Similar observations could be made about the arguments of City Beach in the present case.

147    The distinction between cooperation evidencing contrition and cooperation evidencing capitulation has been recognised: Mornington Inn Pty Ltd v Jordan (2008) 168 FCR 383; [2008] FCAFC 70 at [77]-[78] (Stone and Buchanan JJ). The primary judge applied that principle in the present case. Her Honour was also entitled, consistently with proper principle, to identify the ongoing contraventions after August 2023 and the delay in undertaking a voluntary recall as matters going to the extent of any contrition: PJ [146], [158].

148    The circumstances of the present case do not reveal a contravenor mortified that the conduct has occurred and moving with urgency and maximum priority to take all steps to remedy the situation immediately and ensure such conduct never occurs again. Her Honour was entitled to take these matters into account when considering the weight to be given to the cooperation of City Beach. In considering the weight to be given to cooperation in the utilitarian sense of saving cost and trouble, her Honour was also entitled to consider whether liability was somewhat inevitable: PJ [145].

149    No relevant error has been demonstrated in the approach of the primary judge. We reject Ground 10.

Ground 11

150    Ground 11 relies upon the last ground in House v R: that the penalty is manifestly excessive such that the exercise of discretion can be seen to have miscarried.

151    We can deal with Ground 11 relatively shortly. We consider that the penalty imposed of $14 million is plainly not manifestly excessive in the circumstances of the present case. When one has regard to:

(a)    the maximum penalty, which for many of the contraventions is $50 million per contravention;

(b)    the significant size of City Beach, as indicated by the number of stores, its annual revenue and its annual profit;

(c)    the extraordinary failure of City Beach to have any system whatsoever in place to ensure that City Beach complied with its obligations in relation to the sale of button battery products, or even to know that it had obligations under product safety standards;

(d)    notwithstanding the notifications from suppliers and other regulators that City Beach was selling non-compliant button battery products, the failure (or absence) of any internal processes to bring these matters to the attention of the most senior management and for City Beach to take action to stop the sale of non-compliant products;

(e)    the very large number of non-compliant button battery products sold, and the fact that many of those products were likely to be used by and available to children, including very young children;

(f)    the very significant safety risk that this posed to thousands or potentially tens of thousands of young Australian children;

(g)    the delay of City Beach in conducting a voluntary recall;

(h)    the ongoing contraventions that occurred after 30 August 2023; and

(i)    the failure of City Beach to recognise the seriousness of its conduct,

it is readily apparent that a very significant penalty indeed is warranted, both for the purpose of specific deterrence and for the purpose of general deterrence. The penalty fixed by the primary judge was not excessive at all, let alone so manifestly excessive as to demonstrate a failure in the exercise of discretion.

152    We reject Ground 11.

Conclusion

153    The appeal should be dismissed, with costs.

Associate:

Dated:    19 August 2026